Upcoming oil and gas pipeline projects delayed by Covid-19

Understanding Delays in Oil and Gas Pipeline Projects

The global oil and gas industry has been hit hard by the fall in oil and gas prices, demand destruction and a weak global economic outlook, primarily due to the Covid-19 pandemic. The oil and gas pipelines segment is no exception, with several major upcoming pipeline projects such as Liberty Oil and Red Oak in the US stalled due to adverse market conditions. Phillips 66, the operator of both these pipelines, suspended additional capital spending on these projects mainly due to low oil prices and the future of these projects depends on future customer volume commitments and expected project returns. Other pipeline operators in the US such as Pembina Pipeline Corp and Harvest Midstream Co are also either stalling or delaying their projects due to the Covid-19 pandemic and economic slowdown.

Pipeline operators from other parts of the globe have also started announcing project delays. Argentina’s Energy Ministry has suspended auctions to build Vaca Muerta–Buenos Aires natural gas pipeline due to a worsening economic scenario in the country. With no certainty of the project moving ahead, it is likely to be stalled. Nigerian Gas Co Ltd has put its Obiafu-Obrikom-Oben pipeline project on hold as the contractor company is unable to ship equipment from port to the construction site due to the Covid-19 pandemic.

In addition to delaying and stalling of the projects, to tide over the current situation, pipeline operators are also taking measures such as reducing capex, suspending work or reducing staff at project construction sites. Sinopec has reduced its 2020 capital expenditures by 2.5%, which is expected to have considerable impact on refining units and related facilities such as pipelines and storage Facilities. Energy Transfer Partners has suspended most of the construction activities on Mariner East Pipeline project in Pennsylvania.