Oil And Gas Exploration And Production Companies Estimate Losses Of Up To $1 Trillion In Revenues This Year 2020

In addition to the severe crisis established in global public health, Covid-19 has also created a huge economic crisis in the oil and gas sector. A new study indicates that with the decline in demand for derivatives in the international market, the revenues of oil and gas exploration and production (E&P) companies may see a reduction of approximately US$ 1 trillion in 2020.

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The analysis was carried out by the Norwegian consulting firm Rystad Energy. The estimated decline is 40% in revenues compared to last year, as in 2019 E&P companies totaled US$ 2.47 trillion, and for this year the forecast is that they will reach only US$ 1.47 trillion. The consulting firm had predicted a scenario before the Covid-19 pandemic where E&P companies would have a revenue of US$ 2.35 trillion in 2020.

The estimate for 2021 is not different, where revenues that were previously forecasted to reach around US$ 2.52 trillion also suffered a significant reduction, coming in at US$ 1.79 trillion. Rystad Energy’s upstream analyst, Olga Savenkova, further states: “This decline not only harms the solidity of companies and reduces the money available for investments and dividends, but also significantly reduces the government’s tax revenue. It will be a challenge for oil-dependent states, such as Russia and many Middle Eastern countries, to sustain their budgets.”

Rystad’s consultancy also conducted a new analysis for upstream spending in 2020. The expectation is that investments in this area will be reduced to a total of US$ 410 billion this year, compared to US$ 530 billion that were invested in 2019.

Finally, Rystad concludes: “We see a growing sentiment of decarbonization among E&P players and investment banks, with major players aiming to achieve carbon neutrality. As a result, the current low appetite for new sanctions on projects may mean that the ‘peak oil’ will arrive sooner than we thought just a few months ago.”