There might be a decline in the global planned and possible floating production, storage and offloading (FPSO) projects in 2020, due to the outbreak of the deadly coronavirus disease which could dampen over $30bn worth of investments analysis show.
The World Energy report reveals that out of 28 FPSO vessels that are under construction in 2020, 22 are being built at shipyards in China, South Korea and Singapore, in a region most affected by the dreaded disease.
15 FPSO vessels are being built in China while seven are under construction in COVID-19 hotspot South Korea as well as in Singapore.
However, Norway based, independent energy research and business intelligence company Rystad Energy expects the outbreak of the coronavirus known as COVID-19 to cause extensive staffing and supply shortages in these countries that will in turn delay project deliveries by at least three to six months.
“Although operators and contractors are looking into ways to make up for some of the time that will be lost by fast-tracking other stages of development, we anticipate first oil or gas for these projects will face clear delays,’’ says Audun Martinsen, Rystad energy partner and head of Oilfield Service Research.
Rystad Energy noted that if the epidemic escalates, the delays could increase to nine or even 12 months, especially taking into account the restricted time windows for heavy transport, installation and hook-up.
The average development time for an FPSO is 36 months, meaning that companies could face a 30 percent delay.
“Our current assessment forecasts that COVID-19 could result in global E&P investments falling by around $30 billion in 2020 – a significant hit to the industry,” Martinsen said, adding that some of these investments are likely to come back in 2021.
China’s construction industry is facing pressures because most building sites are in urban areas and remain shut down, with workers and contractors, who come from all over China, having more trouble returning to work, according to World Cement Association CEO Ian Riley, reported by the Financial Times.
He said while demand for cement is typically lower in the first quarter, production recovery will be slower this year, as oil and gas projects face new logistical issues in transporting material.
The association expects the Chinese government to implement stimulus measures to boost spending on infrastructure once virus spread is better controlled which could concentrate annual demand in the second half, potentially leading to supply shortages and higher cement prices, says the Times.
Chinese President Xi Jinping said that big projects, especially those in manufacturing, should start construction on time, adding that boosting consumption was a key hedge against the epidemic’s impact, Reuters reported on Feb. 15.
Fears of the coronavirus in China spreading there and globally are affecting the world markets most especially in the oil and gas industry while the construction sector is bracing for slowing economic growth, at least in the short term.
The epidemic, which is centred in Wuhan in Hubei province, has already killed more than 2,000 across the country and beyond, with the bulk of fatalities and the 80,000 infected people in the province.
