Page 7 - LatAmOil Week 01 2021

LatAmOil COMMENTARY LatAmOil

Their stakes were eventually bought out by import quotas for 2021 and news that OPEC+ is
Woodside Petroleum (Australia), the project’s arguing over a possible relaxation of oil produc-
operator. tion curbs all suggest that China could launch
The same factors also forced the cancellation another wave of oil buying this year, especially
or rescheduling of licensing rounds in multiple in the run-up to the Lunar New Year.
countries, including but not limited to Nigeria, India, meanwhile, struggled to contain the
Liberia and Angola. Likewise, they led Somalia spread of the virus last year, and its difficulties
and other countries to conduct their bidding led to the introduction of widespread and severe
rounds online rather than in person. social quarantine measures. The country has
The delays and disruptions also coincided reported more cases of COVID-19 infections
with an upsurge in Western concern over cli- than any other country outside the US, and
mate change – and mounting calls for banks of widespread national and local lockdown meas-
all kinds to restrict lending for projects involv- ures caused refinery run rates to collapse in the
ing fossil fuels. These developments have made middle of the year.
some African officials more eager than ever to While demand recovered towards the end
get the oil and gas sector back on track, so as to of the year, the wider industry anticipates that
maximise hydrocarbon revenues in advance national demand levels will contract in 2020
of the anticipated transition to less carbon-in- for the first time in two decades. This should
tensive technologies. Officials in Nigeria, for position the country to see a strong recovery in
instance, have said they want members of Parlia- oil consumption this year, but much is likely to
ment to pass the Petroleum Industry Bill (PIB) depend on the government’s ability to distribute
that was submitted for consideration in August recently approved vaccines effectively.
as quickly as possible so that the country does New Delhi has already come under fire for
not lose out on any more oil and gas earnings. its poor handling of the national lockdown, as
well as its use of specially run trains to shuttle
Asia: Engines of growth stranded migrant workers back to their villages.
While all eyes have been on OPEC+ and deci- The latter strategy effectively rendered the first
sion to maintain production curbs this week, the null and void.
oil market’s longer-term prospects for recovery
are tied to the economic fortunes of the world’s Europe: North Sea remains profitable
demand centres. The mature North Sea region has a reputation
China and India have long been hailed as for comparatively high production costs. But
the future growth engines of global oil demand. operators worked hard after the 2014 oil price
Prior to the coronavirus (COVID-19) pan- crash to cut expenses, which made the sector The oil market’s
demic, the Paris-based International Energy more resilient in the face of the 2020 market longer-term
Agency (IEA) projected that the two countries collapse.
would drive global oil demand growth until As such, most North Sea production prospects for
2040. (India is set to overtake China as the latter remained profitable even at the height of the
reaches peak demand around 2030, though.) market crisis in April. This said, the downturn recovery are tied
The IEA’s prediction is likely to hold, despite has led to a significant drop in investment, par-
the dramatic impact the pandemic has had ticularly in the UK. to the economic
on the world’s energy landscape. As such, the Prior to the coronavirus pandemic, UK oper- fortunes of the
success of China and India’s post-COVID-19 ators were expected to take final investment
economic recovery efforts will go a long way decisions (FIDs) on 14 upstream projects this world’s demand
in helping to support oil prices this year. Both year. All but one – namely, Apache’s approval
countries are likely to see firm growth in oil of the Gair oilfield before the market crisis took centres
demand in 2021, though their responses to last hold – were delayed.
year’s oil prices collapse were very different. The number of wells sunk in UK waters more
China fared better than most other econo- than halved this year, with exploration drilling
mies in 2020, managing to suppress the spread seeing the biggest decline. The lull in activity
of the virus quickly. And despite Chinese eco- will weigh down on production numbers in the
nomic activity remaining relatively subdued for years ahead.
much of the year, importers ramped up their The UK government provided support to the
crude purchases to record highs. In a bid to industry in the form of its job furlough scheme
capitalise on bargain-basement prices, China this year but has not offered any tax relief. It has
imported an average of 11.09mn barrels per also delayed publishing its “transformational”
day in the first 11 months of last year, up from sector deal, promised by the UK Conservative
10.11mn bpd in the same period of 2019. Party in its 2019 election manifesto, which aims
The surge stressed the country’s import to support the industry through the energy
storage and handling capacity, with queues of transition.
tankers reportedly moored off Chinese ports Norway, in contrast, provided the industry
for weeks on end. The country’s buying frenzy with some NOK100bn ($10.6bn) in tax relief in
eased somewhat towards the end of the year, as June, in a bid to help companies stay afloat and
the backlog of imports was cleared and private continue investing. The country’s willingness to
refiners ran out of import quotas. provide so much support is hardly surprising,
However, a raft of new storage capacity in given the major role that oil and gas plays in the
the works, Beijing’s decision to award higher Norwegian economy.

Week 01 07•January•2021 www. NEWSBASE .com P7