The COVID-19 lockdown has led to low oil and gas demand and a decline in global energy prices which affected the growth in the Asia-Pacific region.
Several companies in the Asia-Pacific region have realigned their capital spending during 2020, leading to delays in some pipeline and LNG projects in the region, according to a report by the analytics company GlobalData. Reduced LNG imports from some of the top consumers such as Japan, China and India have further dented the growth of the midstream sector in the region.
Major pipeline and LNG operators have reported lower financial year performances in 2020. Consequently, midstream operators such as Royal Dutch Shell Plc, Total SE and BP Plc have reduced their capex by more than 20 per cent to ensure steady cash flows.
Oil and gas analyst at GlobalData Haseeb Ahmed comments: “The rising ambiguity around the current economic scenario is deterring the prospective investors. One of the go-to strategies for several LNG operators has been downsizing the overall capital expenditure (capex) for 2020. For example, Woodside’s decision to cut the planned total capex in 2020 has led to a delay in final investment decisions (FIDs) on Pluto Train 2 LNG, Browse–North West Shelf pipeline and Scarborough–Pluto pipeline developments in Australia. Withdrawing the capex plans ensured that these companies had sufficient working capital, but it might dent their profitability in the long run”.
Ahmed concludes: “The oil and gas sector has undergone significant losses, pushing companies to take desperate measures such as reducing capex or delaying FIDs. However, on the brighter side, the global LNG supply glut along with low LNG prices will encourage new countries such as Myanmar, Vietnam and Sri Lanka to speed up LNG importing infrastructure. These new entrants will possibly contribute to the future LNG industry growth in the APAC” .