Financial disruptions could undermine energy industry’s ability to ramp up output
BAKU, Azerbaijan, May 1
By Leman Zeynalova – Trend:
Financial disruptions could undermine the energy industry’s ability to ramp up production, Trend reports citing the Global Energy Review of the International Energy Agency (IEA).
“Energy security has been put to the test in new ways by the crisis, including in oil and gas markets. Simultaneous supply and demand shocks have sent oil markets into turmoil. Oil plays a central role in global macro finance, both as a share of international trade and as a critical source of government revenues for several major producers,” reads the report.
IEA said that lockdown measures have caused unprecedented demand declines, whose speed and magnitude greatly exceed the normal market flexibility of supply.
“As a result, even with attempts at coordinated management, a disorderly production shutdown is likely in some places. The consequent macroeconomic and financial disruptions could undermine the industry’s ability to ramp up production as the world economy and oil demand recover.”
The supply of natural gas is critical to operations in all sectors, including industry, residential and services heating, and electricity supply, according to IEA.
“Due to large investments in recent years and the slump in demand because of Covid‑19, global gas markets are abundantly supplied and storage levels are very high. At the same time, intense financial strain is hurting the industry, including companies who own and operate critical infrastructure facilities.”
IEA believes that policymakers and regulators need to ensure that operational, maintenance and safety expenditures are prioritised and appropriately maintained.
“US LNG has played a major role in improving energy security and market efficiency in several regions, but the ongoing challenging market conditions risk significant shut-in of US LNG facilities.”
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