Impact of COVID-19 on the Global Hydraulic Fracturing Market
Oil price volatility has always been a challenging element in the oil & gas industry. Oil prices have been declining in the last three to four years. However, the recent COVID-19 pandemic led disruptions to oil demand and had a severe impact on financial markets. The COVID-19 crisis is affecting a wide range of industries, including energy & power, automotive, and chemical. However, due to lockdowns, people and goods are not moving around, resulting in a heavy blow to the demand for transport fuels. China is one of the largest importers of oil and has shown a steep fall in demand, which has led to significant implications for the global oil & gas market. The Organization of the Petroleum Exporting Committee (OPEC) issued guidelines for oil producers to cut oil production by 1.5 million barrels. This guideline had to be followed by other countries as well. However, few countries continued to produce oil at the same level, resulting in a steady production level compared to a fall in oil requirements. This resulted in a huge gap in the industry due to global lockdown by most countries because of the outbreak. The COVID-19 crisis resulted in an unprecedented fall in oil prices, reaching negative. The sudden cut in oil production has strategic challenges that must be faced by leading oil and gas companies.
Crude Oil Production in the US (2012–2021)The market for hydraulic fracturing technology has also been affected due to reduced upstream activities. Hydraulic fracturing is an oil and gas well development process, which generally involves injecting water, sand, and chemicals under high pressure into a bedrock formation through the well. The hydraulic fracturing process is intended to create new fractures in the rock and increase the size, extent, and connectivity of existing fractures. However, due to the COVID-19 pandemic, the operations of oil and gas exploration could be stopped to a certain extent. If the production stops further, the oil wells would be sealed, which might risk the loss of the asset permanently. This would lead to huge losses and lower than zero dividends by the oil companies to the pension funds, especially in North America and Europe. On 15th May 2020, Energy Information Administration (EIA) announced its forecast pertaining to crude oil production fall in the year 2020 and 2021 due to the falling demand for petroleum products because of the pandemic situation. EIA forecasts that the US crude oil production would average 11.7 million barrels per day in 2020 and 10.9 million barrels per day in 2021. These levels would be lower than the 2019 average of 12.2 million barrels per day.
Source: US Energy Information Administration and Short-Term Energy Outlook (STEO)
Source: Primary Experts, Secondary Sources, and MRFR Analysis