Impact of low oil prices and coronavirus on Africa's upstream sector

Cut, cut cut! A cry ringing out across the industry in response to perhaps the biggest crisis it has faced. In Africa we expect 33% cuts to capex in 2020. Similar cuts to operating costs are also targeted by producers to stay cash-flow neutral. Unlike last time though, nothing is sacrosanct as some operators will even wield the axe on committed spend as well as the traditional discretionary variety. But the Coronavirus pandemic presents a growing problem. Africa’s upstream sector is reliant on complex supply chains across many countries, providing transmission pathways for the virus. Social distancing measures are designed to break these chains of transmission. Production remains intact for now, but as more restrictions are added on the movement of people and equipment, the harder it will become for producers to maintain production. Slowly but surely, day-to-day business continuity is becoming increasingly difficult, and the fear is that some projects may eventually grind to a halt.