The year 2020 has been challenging globally as the coronavirus lingering. In March, COVID-19 was declared by the World Health Organisation as a pandemic, which affected many sectors, including oil and gas. As the measures to curtail the virus spread, countries around the world implemented movement restrictions, resulting in an extreme decline in the fuel demand, especially from the transportation sector. With the oversupply, oil and gas price experienced unprecedented volatility.
The COVID-19 pandemic has brought a bleak period for the oil and gas industry, especially in the first quarter of 2020 where the crude oil price went below zero for the first time in history. The other impacts of the COVID-19 pandemic on the oil and gas industry were the halt of several projects and the closing of oil refineries. The bleak future for the drilling rig market was shown in the ASEAN countries where deep-water projects faced delays due to the shortage of workers during the lockdown period.
It is not all negative. The response to the COVID-19 pandemic is evolving quickly in the oil and gas sector. After the shock of plunging oil and gas prices, several governments immediately took advantage of the situation.
The oil and gas sector has gradually recovered since the end of the second quarter of 2020, after several countries cut their oil output. Organization of the Petroleum Exporting Countries (OPEC) nations and their allies (OPEC+) announced to adjust their crude oil production by reducing 9.7 mb/dfor May and June. This 23 per cent reduction was then being extended to another month after careful review in an attempt to balance the global oil market. From August to December 2020, the production cut was slowly scaled back to 7.7 mb/d as agreed in the April statement.
The low economic activity due to the second wave of COVID-19 and its new variant in several countries contributed to the volatile fuel demand and price in the second half of 2020. However, there is still hope in the oil and gas sector. Taking the pandemic impact into consideration, the 6thASEAN Energy Outlook (AEO6)examines oil and natural gas consumption ASEAN will still be increasing for the next 20 years. Despite this uncertain future, the slow recovery has been seen in ASEAN oil and gas sector at the end of 2020. Both government and industry played key roles in addressing the challenges by providing adequate policy measures.