Abstract
The oil and gas supply chain (OGSC) significantly impacts numerous operations in multiple industries. However, lately, it encountered myriad disruptions like global oil supply and demand mismatch due to COVID-19. Therefore, the case studies the oil and gas supply chain in Egypt during COVID-19 as Egypt is Africa's largest oil exporter outside of the Organization of Petroleum Exporting Countries (OPEC) and the continent's third-largest natural gas exporter, and its economy is heavily reliant on the oil industry. The unique organizational structure that makes up the OGSC in Egypt is fully controlled by the Egyptian Ministry of Petroleum, which deals with all the disruptions that occur in the Egyptian petroleum sector differently. The case investigates the disruptions that OGSC faced in Egypt due to the pandemic and provides researchers with an understanding of the challenges in the sector and the proposed solutions by the sector in Egypt, in addition to the recommendations provided by experts in the sector.
TopEffect Of Covid-19 On The Oil And Gas Industry Globally
The oil and gas industry has faced a two-pronged crisis: the oil price war between Russia and Saudi Arabia and the impact of COVID-19 that caused a dramatic drop in worldwide demand. The oil price war occurred when “Organization of Petroleum Exporting Countries” (OPEC) and Russia failed to reach an agreement on output cutbacks, which was reached in an attempt to stabilize sliding prices. To stabilize sliding prices, OPEC, and its partners (OPEC+) decided to reduce its combined output by 9.7 million barrels per day in May and June from the agreed baseline (OPEC, 2020). The arrangement comes at a time when the global crude oil market has cruder than it can utilize or potentially store. Moreover, as a result of the industrial slowdowns and the travel restrictions set due to the COVID-19 crisis, the global oil supply, and demand mismatch was developing in tandem with the reduced demand for chemicals and refined products (Abegunde, 2020).
The viral COVID-19 pandemic was first reported in December 2019 in Wuhan City, Hubei Province, People’s Republic of China (WHO, 2020). Covid-19 had already spread beyond China’s borders by the beginning of 2020. It was declared a public health emergency of worldwide concern by the World Health Organization on the 30th of January 2020, and a global pandemic on the 11th of March 2020 (WHO, 2020). The virus eventually spread to a reported all nations and territories throughout the world. COVID-19 has caused widespread disruption in all economic sectors and businesses throughout the world. Lockdown procedures are executed throughout the world as a health policy to reduce the impact of the pandemic’s spread because of the disruptions (El Baz & Ruel, 2021).
The pandemic has put pressure on the international oil sector in a multitude of ways. Oil prices plunged during the onset of the pandemic due to a dramatic drop in worldwide demand, particularly due to the effect of COVID-19 on the economy of key crude users: the EU, China, and the US. Consequently, on Sunday, the 12th of April 2020, the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting was conducted via videoconference (OPEC, 2020). All the countries that took part in the event agreed to adjust their entire crude oil production by 9.7 million barrels per day beginning the 1st of May 2020, for two months ending the 30th of June 2020. The entire adjustment agreed upon over the next six-month period, from the 1st of July 2020 to the 31st of December 2020, will be 7.7 mb/d. It will be followed by a 5.8 mb/d adjustment for 16 months, from the 1st of January 2021 until the 30th of April 2022 (OPEC, 2020; WEF, 2021).
Key Terms in this Chapter
Oil and Gas Supply Chain: The oil and gas industry is supported by a global supply chain that comprises local and international transportation, trading, shipping, ordering, and inventory visibility and management. Material handling, import/export facilities, and the distribution of refined energy products from points of origin to market are other supply chain components. The supply chain is typically separated into three segments. The upstream division is responsible for the discovery and production of crude petroleum. The midstream section is in charge of energy commodity processing, storage, and transportation. In addition, the downstream category includes oil refineries, retail shops, and natural gas transportation firms.
Brent Crude: Brent crude is the most traded oil benchmark, and it is defined as crude primarily drilled from North Sea oilfields. This oil is commonly used because it is sweet and light, making it simple to convert into diesel fuel and gasoline. This, combined with the relative simplicity of transporting it due to its production at sea, explains why it is so widely trafficked.
LNG: Liquefied natural gas (LNG) is natural gas that has been transformed into a liquid state for ease and safety of transportation. Natural gas is cooled to around -260 degrees Fahrenheit, resulting in a transparent, colorless, and non-toxic liquid that may be transferred from locations with a substantial supply of natural gas to areas where there is a greater demand for natural gas. Natural gas takes up 1/600th of the space in its liquid condition, which means it is shrunk 600 times, making it considerably easier to ship and store when pipeline transport is not possible.
Downstream: The procedures involved in transforming oil and gas into final products are referred to as downstream operations. Refining crude oil into gasoline, natural gas liquids, diesel, and several other energy sources is one of them.
Concession: A government grant that allows a corporation to explore for and develop oil, gas, or mineral resources within a strictly specified geographic region, usually beneath government-owned lands or lands where the government holds the rights to produce oil, gas, or minerals. The grant is usually given to a corporation in exchange for a bonus, license fee, royalty, or production sharing supplied to the host government for a set period.
OPEC: According to OPEC The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, founded at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.
Upstream: Upstream refers to the stages of activities in the oil and gas industry that entail exploration and production.
Integrated Oil and Gas Company or Petroleum Complex: In contrast to organizations that specialize in just one phase, an integrated oil, and gas company is a commercial entity that engages in the exploration, production, refining, and distribution of oil and gas.