Shattered by the global pandemic, the oil & gas industry is facing its worst ever crisis, an overstocked supply market and a steep decline in demand. Choking economic activity over the last few months is sending shockwaves of disruption through the industry. From prices dipping to subzero to oil producers in the first time in history having to pay to dispose excess stocks, the industry has seen the worst. In this crisis of unimagined magnitude, CAPEX spending is worst hit. As business confidence plummets rapidly, major oil companies have already slashed planned CAPEX spending by almost US$89 billion in 1st quarter 2020. Travel bans, manufacturing shutdown of all non-essential plants, closure on offices have wielded the most severe demand shock. A mistimed price war between Russia and Saudi Arabia following Russia's decision to pull out of a joint production cut agreement additionally aggravated the demand supply imbalance. China in early February during the heat of the pandemic banned entry of oil tankers while tightening the lockdown measures. OPEC talks to cut back on production failed as Russia refused to cooperate. Saudi Arabia during this period offered US$6 to US$9 discount per barrel for European, Asian, and U. S customers. As a culmination of these factors, the world witnessed negative oil prices become a shocking reality. As rising stockpiles overwhelmed storage facilities, the amount of oil stored on massive tankers on sea skyrocketed to over 160 million barrels in April 2020 as compared to the less than 100 million in April 2009 during the Great Recession. Oil consumption in April 2020 fell by 28 million barrels per day (mbd) and for the whole year 2020 the decline is estimated at 9.8 mbd.

The entire O&G value chain is feeling the pain as upstream, midstream and downstream operations collapse under a domino effect. Against this backdrop, the global market for Subsea Systems is forecast to witness severe short-to-medium term pain before reaching a revised market size of US$14.5 billion by the year 2027. As financial losses build-up for oil companies, CAPEX investments will also witness a parallel blow reducing opportunities for subsea systems that aid in processing and production of hydrocarbons from offshore wells. Currently for most oil giants worldwide higher prices are needed to breakeven. Breakeven prices for Saudi Arabia, UAE, Iraq, Azerbaijan, Kuwait, Kazakhstan, and Russia include US$85, US$65, US$64, US$51, US$49, US$42, and US$40 respectively. A Hiatus in growth is therefore seen as inevitable until capital availability recovers for Deepwater offshore drilling for hydrocarbon extraction. The virus led recession will likely delay the recovery further.

The market will nevertheless bounce back as the economic climate improves, since the goal of energy independence is an evergreen force driving countries to extract oil from the ocean depths. Continued political unrest makes reliance on conventional oil wells in the Middle East very undesirable and a growing number of oil enterprises will continue to lean towards deeper water plays as geo-political issues make Iran and Iraq etc. unpredictable environments for investors. Rise of enhanced oil recovery (EOR) technologies is another major factor that has contributed immensely to the growth of offshore exploration activities over the last decade. Since most oilfields are present 400 meters and 1,500 meters below the sea level, success of Deepwater resource extraction depends largely on innovations in subsea equipment. New generation subsea equipment will therefore play a key role in increasing the productivity, integrity and safety of subsea production processes. Subsea environment requires the use of a range of sophisticated technologies and systems that enable processing and production of hydrocarbons from offshore wells without the need for surface production activity. Major activities undertaken are down hole and seabed oil/gas/water separation, seabed and down hole multi-phase pumping, gas compression, and flow assurance. Primary benefits of using subsea systems include improved recovery of oil and gas stocks, lowered costs pertaining to surface production, reduced chances of gas hydrate formation in flow lines, increased Net Present Value (NPV), and overall higher production.