30 Jun 2020
Posted in Oil & Gas
MENA oil and gas pipeline sector still reeling from impacts of weak demand and COVID-19
The Middle East and African (MENA) oil and gas pipelines sector has been impacted due to low oil prices and weak demand as a result of COVID-19. The pandemic has affected the progress of several projects, forcing operators to opt for alternative strategies such as delaying project completion or reducing capital expenditures. While these approaches may provide a temporary solution, MENA operators should look to adopt more robust strategies such as focusing more on remote operations through automation and digitalization or having contingency plans to ensure minimal impact on critical operations, to bail them out of any such future crisis, says GlobalData, a leading data and analytics company.
Haseeb Ahmed, Oil and Gas Analyst at GlobalData, comments: “One of the primary strategies that a majority of pipeline operators have been falling back on, is to halt or delay any avoidable current or upcoming projects. With uncertainty looming large on the prospective projects, pipeline companies are compelled to make tough decisions to keep the operations running.”
The contractor of the Niger-Benin pipeline has halted all construction activities pertaining to the project. It is unclear when the project might start commercial operations. On similar lines, construction work on the 272 km South Pars Phase 11 (I & II) pipelines has been delayed due to COVID-19. This is likely to push the start year of the project by a year to 2023.
Besides stalling or delaying project progress, pipeline companies in the region are seeking financial assistance or reducing capital expenditures. The Algerian state-owned pipeline company, Sonatrach is in discussion with foreign investors for funds to carry out its upcoming projects. Saudi Aramco, on the other hand, is adopting the strategy of reducing capex by nearly 26% for the year 2020.
Ahmed concludes: “The oil and gas pipeline sector might potentially be rife with consolidations, as the current crisis could push small and medium-sized companies to the brink of extinction. Although pipeline companies are making enormous efforts to tide over the current situation, it might take longer to recoup, given the recurring nature of the pandemic and its scale of the impact on the oil and gas sector.”