The oil sector takes its next hit: Coronavirus on offshore rigs

It has shown up on cruise ships, in government buildings, and at offices, churches, and nearly everywhere else humans gather. Add to this list: offshore oil rigs.

On Wednesday, Norwegian state oil company Equinor said a worker on the Martin Linge offshore installation off the country’s west coast had tested positive for coronavirus. The worker has been in isolation in his cabin since March 9, and two more people were currently being tested, the company said.

“Measures to prevent further contamination for offshore installations has been introduced,” the company said in a statement. “It has not been decided when the person will be brought ashore.”

The timing couldn’t be worse, coinciding with the demand shock created by coronavirus and paired with a spiraling price-war between Russia and Saudi Arabia that has produced the most spectacular threat to the oil industry in decades. For Norway, that could mean pausing what has been a remarkable rebound in the country’s offshore oil drilling—even amid rising concern about climate change.

On Wednesday, Equinor said operations would slow at the Martin Linge field, which currently has 776 people working on the field across multiple rigs. The field is scheduled to start production at the end of this year. The announcement came the day after the Norwegian Oil and Gas Association issued guidelines for potentially-affected workers traveling to offshore installations on the Norwegian Continental Shelf.

Meanwhile, the Anglo-Dutch major Shell has also confirmed that an oil worker at its onshore operations near Aberdeen, a hub for the offshore oil industry in the North Sea off the coast of Scotland, has also tested positive.

“Currently, all Shell UK offices are open and we have a robust cleaning programme which is proportionate to the current risk level,” said a Shell spokesperson. “However, we have business continuity plans in place to ensure the sustainability of our supply chain and our ability to meet the needs of our customers and partners if the situation develops further.”

Oil rigs—like cruise ships—are confined spaces, with plenty of movement by multinational staff on and off the rig, usually by helicopter between onshore bases in Norway and Scotland. By Wednesday afternoon, Norway had 277 cases, while the Norwegian health ministry recommended cancelling all events with more than 500 people. Scotland has found 36 cases.

The cases could also put a further dent in what—until as recently as earlier this year—looked like a comeback story for the region. In 2019, Norway marked a wave of fresh offshore drilling, including exploratory drilling for new sources of oil, and the opening of a historic new field that could extend the country’s oil industry by decades. That appeared to signal a turnaround for a region of “mature” oil fields that were expected to gradually fade away as major oil producer centers.

In January, energy consultancy Wood Mackenzie forecast that the “exploration renaissance” the region saw last year would continue through 2020, with new rigs being drilled at levels last seen before the price slump of 2016, as the U.S. shale boom flooded the world with surplus oil.

Like much of the world’s oil projects, the pace of that development will now be in doubt after Monday’s price plunge, which saw Saudi Arabia’s vow to turn on the taps compound the affect of flagging demand due to the coronavirus pandemic. On Monday, Brent crude futures closed at at a 4-year low of $33.40/barrel. On Wednesday, prices were down more than 1% on the day, at $36. 16/barrel.

That leaves the question of what various players in the region can afford. Equinor, as a state company, has said its “break even” cost on some of its newer projects could be as low as $21/barrel. But that won’t work for most in the region: The North Sea has been increasingly dominated by smaller companies as the major oil companies have sold off $20 billion worth of assets in just the last three years, according to Wood Mackenzie.