© Reuters. FILE PHOTO: Engineers speak next to pipes on a pipeline construction site of the Sakhalin 2 project north of Yuzhno-Sakhalinsk
By Olga Yagova, Libby George and Bozorgmore Sharafedin
MOSCOW / LAGOS / LONDON (Reuters) – The coronavirus pandemic has disrupted the maintenance of oil and gas projects and refineries from the Russian Far East to the coast of Canada and caused problems for an industry that is already experiencing falling prices, analysts say.
Locks to stop the spread of COVID-19, the flu-like infection caused by the virus, have affected spare parts supplies and prevented maintenance workers from doing their jobs.
Regular repairs are required to keep the wells pumped, the pipelines and refineries functioning, and the ships moving. Without maintenance, the risk of malfunctions or unplanned downtimes and delays increases, which later increases labor costs – partly because maintenance has to be accelerated when the locks go down and partly because the systems have the optimal time and weather for have lost work the source of the northern hemisphere.
“If the virus and quarantine measures have been eased and it is safe to get back to work, it does not mean that the same work can be done with the same intensity, as the weather windows can be overlooked and maintenance can even result next year, ”said Matthew Fitzsimmons, vice president of the Oilfield Service team at research firm Rystad.
In the meantime, companies serving the oil industry are suffering from the lack of work.
"Many service companies are not getting the revenue they otherwise expected for 2020. This will have a huge impact on the health of the service industry," said Fitzsimmons.
A big headache
According to Rystad, oil and gas companies involved in exploration and production spent an average of $ 80 billion a year on maintenance between 2015 and 2019.
Industry typically uses slower demand times to perform repair jobs. Since oil prices have almost halved since the beginning of the year, this is not an ordinary low. Companies, many of which are burdened with high debts, reduce all but the most important work.
Some units have been shut down for maintenance, but work has never started, according to Amanda Fairfax, a downstream oil market analyst at Genscape, a company that uses camera cameras to monitor refinery activities.
"They do not want to invest the investment in the maintenance project, nor do they want to have as many contract workers on site as the additional influx of workers could endanger people who must remain as essential personnel in the refinery." " She said.
A large maintenance program in the Russian Far East Sakhalin-2 project is delayed because the company was unable to receive pre-ordered machines, two sources told Reuters.
"There was a big headache for parts made in China. After the corona virus broke out, the supplier informed us that our order could not be delivered. There are attempts to replace it, but time has been lost," said a source the industry versus Reuters.
Sakhalin Energy told Reuters that the company is working on a long-term maintenance plan that is constantly being revised.
"All work will be carried out in accordance with current plans, safety instructions and quarantine measures required by government agencies," the company representative said in an email.
His neighbor, the Sakhalin-1 project operated by ExxonMobil (NYSE :), also announced earlier this month that it would adjust the schedule and scope of work at the plant.
"To ensure the safety of our personnel, we focus on the activities that can be safely carried out in the current COVID 19 situation and are critical to our continued economic and operational resilience," said ExxonMobil.
Reuters has identified almost a dozen companies whose maintenance and development plans have been affected by locks.
(Graphic: Effects of Covid-19 on oil projects – https://fingfx.thomsonreuters.com/gfx/ce/rlgvdwoklpo/Woodmac.JPG)
THE ITALIAN CONNECTION
The blockage in Italy, which has suffered one of the worst virus outbreaks worldwide, has had an impact across the energy sector as the country is a leading valve manufacturer.
An industry source in Milan told Reuters that until recently, less than 10 percent of Italian manufacturers remained active and had difficulty delivering strategic valves to overseas customers.
Italy eased the blockage of corona viruses in early May and gave factories the green light to restart production lines.
An energy company in Nigeria said it hoped to get valves from its Italian supplier once they came first at the start of the shutdown, the source said. Others, however, are less optimistic.
A maintenance and development process on an onshore field in Nigeria was delayed for months because the local oil company was unable to get the equipment on time, a company source told Reuters.
Oil companies across Nigeria are also struggling to get workers to where they are needed due to closures, which vary from state to state, and regulations by the Oil Regulatory Agency that limit the number of workers at an oil site also make it difficult to operate. The Rivers State, which houses the Port Harcourt oil center, is so severely closed that the governor arrested 22 oil workers who landed there, although the federal government allowed them to travel.
The movement restrictions of the rivers have also included pipes and other needed materials that are needed on oil fields outside the state, industry sources told Reuters.
(Graphic: Effects of Covid-19 on European refineries – https://fingfx.thomsonreuters.com/gfx/ce/xegpbkoyavq/gsc_EUrefinery_impacts_map_covid_03302020.png)