Brazil’s energy industry regulator ANP announced it would suspend all oil and gas tenders scheduled for this year amid growing economic uncertainty caused by the global spread of the novel coronavirus.
Reuters reports that the decision was prompted by the Mines and Energy Ministry of the country, which earlier decided to stop all pre-tender procedures - including document and contract drafting - because of the economic situation. The timing of the tenders will move forward when the uncertainty subsides.
In January this year, Petrobras boasted that it had, for the first time in its history, produced more than a billion barrels of oil in 2019. and it had plans for more after it settled its dispute with the government regarding the so-called transfer-of-rights area in the pre-salt offshore zone that could contain as many as 15 billion barrels.
Now, with demand for oil crushed under the coronavirus pandemic and excessive supply that is still growing, production increases are being shelved across the world’s oil regions.
Earlier this month, the head of the International Energy Agency, Fatih Birol, warned that oil demand could plunge by 20 million bpd because of the pandemic. This was the same figure that Vitol’s chief executive gave to Bloomberg in response to a question on how much oil demand could fall by because of the outbreak.
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IHS Markit said last month that the world was in for the most significant decline in oil demand in the history of oil. Now, the market research company has warned that supply would need to fall by as much as 10 million bpd for any semblance of a market rebalancing to take place.
“If there is no international agreement to curtail oil production then brutal unadulterated market forces will bring the oil market into balance. The laws of supply and demand are fierce in extreme conditions,” IHS’s head of oil markets, Jim Burkhard, told World Oil.
No wonder then, that Petrobras cut its production by 200,000 bpd earlier this year in response to the demand shock. A temporary suspension of oil and gas tenders is the logical next step in the damage control efforts.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.