Yemisi Izuora
Oil and gas exploration and production companies, E&P, may lose a staggering $1 trillion in revenues in 2020, according to analysis by research firm Rystad Energy.
The E&P industry, which includes oil majors, made $2.47 trillion in revenues globally last year, the firm said but feared that this year it is projected to bring in $1.47 trillion, reflecting a 40 per cent decline year-on-year.
It comes as the coronavirus pandemic and ensuing lockdowns cripple demand and force companies to slash spending and cancel projects. Before the virus began to hit economies, Rystad projected E&P revenues for 2020 to reach $2.35 trillion.
Returns for 2021 are now also projected lower, at $1.79 trillion compared to a forecast of $2.52 trillion before the pandemic.
The slashed revenues, a similar story for most industries amid the worst economic downturn since the Great Depression, have clearly manifested themselves in the industry’s equity market position.
The energy sector is shrinking so dramatically that it has become the second-smallest group in the whole S&P index.
The industry now represents just 3 per cent of the index, compared to 15 per cent a decade ago and 30 per cent in 1980.
The International Energy Agency predicts a record demand loss of 9.3 million barrels per day (bpd) in 2020, as all but essential businesses across many major economies are forced to remain closed and millions of residents shelter in place for an indefinite period of time.
Air travel has dropped by 95 per cent in the U.S. year-on-year, a reflection of the global travel industry as a whole.
The price of global oil benchmark Brent crude is down more than 60 per cent year-to-date to its lowest in more than 20 years, and this month saw an oil futures contract turn negative for the first time in history as the world runs out of storage space, forcing producers to take rigs offline and shut in production.
