China’s pre-FID projects at stake amid uncertainty due to COVID-19 outbreak

Source: press release, 11 May 2020

China’s petrochemical capacity and capital expenditure of pre-construction projects by provence (source: GlobalData, Oil and Gas Intelligence Center)
China’s petrochemical capacity and capital expenditure of pre-construction projects by provence (source: GlobalData, Oil and Gas Intelligence Center)

Reduced demand due to COVID-19 outbreak and the subsequent economic slowdown have forced China’s petrochemical players to re-work on their investment strategies. As a result, several pre-final investment decision (FID) projects are at risk, according to GlobalData, a data and analytics company.

John Paul Somavarapu, Oil and Gas Analyst at GlobalData, comments: “The outbreak can alter the FID plans of petrochemical players in China. The execution of organic growth plans may be impacted and could lead to non-completion of projects within scheduled time and cost.”

Investment in projects, which are under initial stages of development, are expected to be hit hard, as uncertainty over the market growth prevails. Companies are likely to be more cautious and take disciplined approach for capital deployment in these challenging times.

He adds, “The companies will work closely with all the stakeholders to reduce the negative impact of the COVID-19 outbreak and optimise development plans in line with future market trends.”

“COVID-19 outbreak is expected to have significant impact on Chinese economic growth in 2020, as the pandemic and resulting lockdown has dampened economic activity in the country. The pandemic has brought economic growth to a standstill. But the road to recovery looks more promising from 2021, as the China is taking a series of measures for revival,” Somavarapu concludes.