COVID-19's Impact on the Global Energy and Power Industry - Survey Results
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Energy and Power Companies Have Responded Conclusion New operational risks could creep into a business, whether driven by rapid change or insufficient measures to mitigate the Operational Limits Cost Control Recovery currently challenging situation. Two-thirds of energy and Energy and power companies were In the large majority of cases (>85%), Approximately a third (31%) of energy (oil, power companies did not only considering implementing companies were not chasing gas, petrochemicals, and derivatives) and expect maintenance and carefully selected, and risk opportunities to re-optimize their Each of these emerging operational power companies have experienced “no mechanical integrity/fit for managed, temporary cost businesses and were instead focused risks is predictable and manageable. disruption” since COVID-19 emerged as a service assessments to become reductions to mitigate short-term on defensively safe-parking For example, deferment of non- global threat earlier this year. operational risk constraints that cashflow constraints. operations. Limited operators were essential maintenance may be managed drive business disruption. marketing new products, repurposing with a rigorous risk-based selection equipment, and renting external maintenance program with increased Capex reduction/delay was the facilities to minimize disruption or focus on risk accumulation. most commonly considered respond to sudden consumer demands. mitigation, with more than half of More than a tenth (13%) of companies planning this or already energy and power companies said doing so. Non-essential maintenance With greatly increased remote the current year-to-date financial reduction/delay was the second most working, now is a good time to reflect More than a third (38%) of companies, impact had exceeded commonly deployed cash saving on lessons learned from large industry however, experienced disruption in April $100 million; 10% expect the mitigation, with more than half of Almost all companies had segregated losses and ensure the quality of 2020, according to Marsh JLT Specialty’s overall 2020 financial impact to companies saying it was at least likely staff and changed working supervision remains high following recent survey of global energy and power exceed $500 million. they would reduce these activities patterns (including remote working). the relocation of plant engineers. companies. Another 28% witnessed for 2020. Overtime for operations personnel had disruption from January 2020. typically been increased. Nearly half (41%) of surveyed Companies were planning for the worst, operators had been impacted Critical maintenance was being but so far the issues haven’t been as bad by customer demand. protected, however, with almost 60% as they expected. As part of their cost However, companies cited their of companies saying this was not even reduction measures, some maintenance North American power and renewables Very few (3%) operators critical suppliers’ capabilities to considered. Most companies were deferments and reductions have been companies most commonly experienced reported process safety deliver and logistics limitations as adhering to turnaround schedules, with made. Companies should proceed with no disruption or disruption only since incidents that could be most likely to impact them next, around two-thirds not even considering caution, however, as loss data shows April 2020. attributed to COVID-19. None although most had not yet been planned delays. a strong correlation between reduced of the responses were API-754 affected by suppliers. The impact maintenance and higher loss incidents. tier 1 or tier 2 classified process of storage of raw materials and/ safety incidents. or products had not yet peaked Meanwhile, Western European and and was reported as the cause of Some companies were making integrated national or international oil Around half of companies were at least Arguably, this underlines the industry’s disruption most likely to become headcount reductions on non- companies were most likely to have reviewing, with a plan to reducing, tendency to be overly optimistic when more severe. critical roles outside of process experienced earlier disruption, as far their minimum staffing level assessing capex reductions’ potential operations, although a greater number back as January 2020. requirements in operating areas, negative impact as well as its ability to were not considering this. with some already doing so. protect critical maintenance activities. Although underpinned by good Most operators did not intentions, history shows that increased Large companies (measured by combined expect technical operating losses may follow. production size) were most commonly not limits to cause business disrupted, while small- and medium-size disruption. This demonstrates Related resources operators were affected most often. strong industry turndown • Rethinking Business Interruption Risks capabilities, with operators finding •1 00 Largest Losses ways to circumvent engineering •M anaging the Defeat of Safety Instrumented System Trips and Alarms constraints on large process When respondents were asked how long they •P re-startup Safety Review equipment. expected the disruption to last from April 2020, the most common response was 4-6 months (22%), followed by 7-9 months (19%) and 10-12 months (13%). Only 3% said it would last three months or less. 1 In April 2020, Marsh JLT Specialty’s Energy and Power Spot Poll surveyed energy (oil, gas, petrochemicals, and derivatives) and power companies to understand how the industry was responding to, and mitigating the effects of, the sudden reduction in energy demand COVID-19’s Impact on the Global Energy and Power Industry and the drop in oil price. Respondents ranged from small to very large operators, headquartered across the world. Marsh JLT Specialty
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