Tenders to fall to lowest in 20 years

New analysis says cuts to oil and gas investment budgets will result in a major reduction in greenfield tenders for contractors to compete for.

A new report from Rystad Energy said while the total value of greenfield tenders worldwide in 2020 was as much as US$132 billion ($205 billion),that number has nearly halved since the COVID-19 pandemic with only about US$60 billion ($93.23 billion) available for contractors to compete for.

Rystad estimated about US$60 billion in engineering, procurement, construction and installation (EPCI) contracts scheduled to be awarded this year have been postponed.

In Australia, oil and gas heavyweights including Santos and Woodside have deferred billions of dollars’ worth of work on major projects as a result of both the coronavirus pandemic and the oil price slump.

Rystad estimated tendering activity would only show a marginal recovery in 2021, with the analyst expecting its value to hit about US$74 billion ($114.98 billion).

“Even many contracts that have already been awarded are at risk of being terminated, with operators initially reaching out to contractors to reduce prices,” said Rystad Oilfield Services Analyst Chinmayi Teggi.

“Given the massive efficiency efforts during the 2015 and 2016 downturn, which have already improved cost margins, we believe there is little possibility that contractors will be able to accommodate significant price reductions in the near term.”

Several floating production, storage and offloading (FPSO) vessel projects in South America and Africa have been delayed, as well as major LNG projects in Qatar and Mozambique.

Ms Teggi said many firms were closing facilities in order to ride out the economic downturn.

“Those with enough financial strength or a sufficiently diversified portfolio will be well positioned for a bounty of new orders once the market gets back on its feet,” she said.

For more information visit the Rystad Energy website.

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