Impact of COVID-19 on the Global Well Test Market
The growth of the oil & gas industry has been hampered to a great extent by the global pandemic crisis. Global oil demand is likely to reduce due to travel restrictions and broader economic activity. As per the International Energy Agency (IEA), the global oil demand is likely to by fall around 99,000 barrels a day in 2020 from 2019. Moreover, oil price volatility has always been a challenging element in the oil & gas industry. Oil prices have been on a decline in the last three to four years. However, the recent COVID-19 outbreak has led to disruptions in oil demand, resulting in a severe impact on financial markets. The COVID-19 crisis is affecting a wide range of industries, including oil & gas, coal, and renewables. However, due to the global lockdown, people and goods are not moving around, resulting in a reduced demand for transport fuels. China, being the largest importer of oil, has witnessed a steep fall in demand. This has led to major implications for the global oil & gas market. Complex upstream projects, including well test and well intervention, are likely to be notably affected as these operations depend largely on a global supply chain of expertise and equipment. Therefore, there have been delays in enhanced oil recovery and exploration development projects. Project delays have not only led to high costs but also are being offset by an expected decline in oilfield services.
FIGURE: CRUDE OIL PRODUCTION IN THE US, 2012-2021 (Million Barrels/Day)
The global market for well test processes has also been affected due to reduced activity in the upstream sector. The operations of well test companies could be stopped to a certain extent. However, if the production stops for a longer period, the oil wells would have to be sealed, which might result in the permanent loss of the asset. This would lead to huge losses and lower to zero dividends by the oil companies to the pension funds, especially in North America and Europe. On 15th May 2020, the 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. The 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 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)