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The coronavirus pandemic has disrupted maintenance at oil and gas projects and refineries from Russia’s Far East to the coast of Canada, storing up problems for an industry already reeling from slumping prices, analysts say.
Lockdowns to stop the spread of COVID-19 have snarled the supply of spare parts and prevented maintenance workers from doing their job.
Regular repairs are needed to keep wells pumping, pipelines and refineries functioning and ships moving. Without maintenance, the risk of glitches or unplanned outages increases and delays risk driving up the cost of work later — partly because there will be a rush to do maintenance when lockdowns ease, and partly because plants have lost the optimal timing and weather for work during the northern hemisphere spring.
“When the virus and the quarantine measures have been eased and it is safe to get back to work, it doesn’t mean the same work can be done with the same intensity because the weather windows could be missed and that can push maintenance even to the next year,” said Matthew Fitzsimmons, vice president of the oilfield service team at research firm Rystad.
In the meantime, companies that service the oil industry are being hit by the lack of work.
“A lot of service companies are not getting the revenues they had otherwise expected in 2020. That is going to have a huge impact on the health of the service industry,” said Fitzsimmons.
Oil and gas companies involved in exploration and production spent an average of $80 billion a year on maintenance between 2015 and 2019, according to Rystad.
The industry often takes advantage of slow demand to do repair work but with oil prices nearly halved since the start of the year, this is no ordinary trough. Companies, many of them lumbered with high debts, are slashing all but the most essential work.
Some units were shut down for maintenance but the work never started according to Amanda Fairfax, downstream oil market analyst at Genscape, a firm that monitors refineries activities. “They don’t want either to invest the capital expenditure into the maintenance project or they don’t want to have as many contract workers on sites as the additional influx of workforce might compromise people who have to remain at the refinery as essential personnel,” she said.
A large maintenance program in Russia’s Far East Sakhalin-2 project faces delays as the firm could not get pre-ordered pieces of machinery, two sources said.
“There was a major headache with parts manufactured in China. After the coronavirus outbreak there, the supplier told us it couldn’t deliver our order. There are attempts to replace it, but the time has been lost,” an industry source said.
