Impact of COVID-19 on the Global Subsea Control System Market
Due to the increasing demand for oil and gas, the exploration and production activities are moving more towards offshore areas in the harsh environment of the world’s oceans. In this case, the equipment used during the exploration process must be reliable to withstand the harsh. In recent years, the demand for subsea control systems and related wellhead control equipment has been growing. However, increasing oil and gas exploration activities and the sale of subsea control systems have been affected on a great scale due to the COVID-19 outbreak. The oil & gas industry is experiencing huge cuts in investments. It is predicted that the industry would cut investments by billions of dollars due to delays in offshore installations that are currently being faced at yards in Asia.
Oil prices have been declining in the last three to four years. However, the recent COVID-19 pandemic has caused disruptions in the oil demand and had a severe impact on financial markets. The prices slid by approximately 25% in the first quarter of 2020. This has resulted in lower investments by leading oil & gas companies, especially the shale gas operators in the US. Moreover, China, being the largest importer of oil, has shown a steep fall in demand. This has led to major implications for global oil & gas markets. The Organization of the Petroleum Exporting Committee (OPEC) issued a guideline for oil producers to cut oil production by 1.5 million barrels. This guideline had to be followed by other countries as well.
FIGURE: CRUDE OIL PRODUCTION IN THE US (2012-2021)
The global market for subsea control systems has also been affected due to reduced activity within the offshore wells in deep water and ultra-deep-water location. The operations of the subsea production control system companies could be stopped to a certain extent. However, if the production stops further, the oil wells would be sealed, which might be a risk to lose the asset permanently. This would lead to huge losses and lower to zero dividends by the oil companies to the pension funds, especially in the North America and European regions. On 15th May 2020, the Energy Information Administration (EIA) announced its forecast pertaining to crude oil production fall in 2020 and 2021 due to the falling demand for petroleum products because of the pandemic situation. EIA forecasted 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 are lower than the 2019 average of 12.2 million barrels per day.
Source: Primary Experts, Secondary Sources, and MRFR Analysis
Source: US Energy Information Administration, Short Term Energy Outlook (STEO)