The Global Oil & Gas Industry has been reeling under immense pressure of the extremely adverse impact of COVID-19. The upstream operations, which had not fully recovered from the previous oil shock of 2014 have now been hit hard by the double whammy of depressed oil prices and shrinking demand. The situation is ‘unprecedented’ and will require focussed action from operators, service providers and the government to tide over the current crises.
Post lockdown in India on 24 March 2020, the Indian Oil & Gas Industry has had to navigate through a mesh of challenges ranging from measures to ensure workforce safety to managing resource movement within lockdown rules. However, what has been commendable is the strong resolve and determination of all the major stakeholders who have risen to the challenge and ensured continuity of business operations. Government by awarding the status of essential services to the sector, has also played a vital role in supporting field operations.
To address some of these challenges, the Federation of Indian Petroleum Industry (FIPI) joined hands with I-ten Media and Boston Consulting Group, to organize a webinar on ‘Impact of COVID 19, Lockdown & Depressed Oil Price Scenario on Upstream Operators and Service Providers’. The objective of the webinar was to provide India’s Oil & Gas Upstream Operators and Service Providers with an opportunity to share the challenges of managing the current situation and to highlight the key areas where Government support and intervention was required. The esteemed panellists included Dr. Rajesh Kumar Srivastava, Director Exploration – ONGC, Dr. P Chandrasekaran, Director Exploration & Development – OIL, Mr. P Elango, MD – HOEC Ltd. , Mr. Sai Subramanian, President Rajasthan Operation – Cairn Oil & Gas Vedanta Ltd., Mr. Rajeev Kumar, Director Regulatory Affairs & Upstream Business Development – BP India and Mr. K Gautam Reddy, MD India & Bangladesh – Schlumberger.
The session was moderated by Mr. Kasutav Mukherjee: India Energy Practice Lead, MD and Senior Partner, Boston Consulting Group. The opening address was delivered by Dr R K Malhotra, Director General, FIPI. Dr. Malhotra at the very outset laid out some of the key challenges being faced by the sector in terms of risks to workforce health & safety, restrictions owing to COVID-19 lockdown, and the impact of low oil prices due to subdued demand. He also complimented the effort & determination of the industry to ensure continuity of business operations under such challenging times. He reiterated the continued support from FIPI for the industry and assured continuous engagement with the Government to ensure a more supportive policy framework, targeted towards long term industry growth.
During the panel discussion it was pointed out that the recovery in oil prices may not be that quick and demand is expected to pick up at a slow pace. Major CAPEX cuts upto 25 – 30%, have been undertaken by majors across Europe & USA. Further production cuts upto ~28% are also expected by end of calendar year 2020. Panellists highlighted that the COVID-19 lockdown had not only created challenges in terms of resource deployment, but also higher costs owing to increased safety norms.
There was consensus among the panellists that immediate support was needed from the Government in terms of reduction in taxes and cess, funding support specifically for smaller independent operators and improved policy framework. A need was also felt for increased collaboration between the Operators and Service Providers to come up with innovative risk sharing partnership models and to invest in niche technologies to address the individual needs of the operators. Liquidity concerns were echoed by all the panellists and each pointed towards an increased need for a capex prioritization framework focused at long term sustainability of the industry. Some of the upstream operators have engaged in price negotiations for key consumables such as polymers, to reduce their OPEX spend. The panellists also emphasized the need of frequent employee engagement and increased safety measures to ensure the well-being of the employees on ground.
The webinar received an overwhelming response and was attended live by over 300 participants. The webinar saws attendance of large number of Operators and Service Providers from the Upstream industry and senior Government Functionaries, Regulators and Media were also present at the event. The panel discussion was not only engaging, but also proved to be invaluable in terms of the great ideas shared by the panellists to address the current scenario.