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Coronavirus Outbreaks Threaten Oil Majors' Biggest Projects

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05/28/2020 | 11:20am EDT

By Sarah McFarlane and Vipal Monga

Oil majors including Chevron Corp., Exxon Mobil Corp., Royal Dutch Shell PLC and Total SA are scrambling to cope with coronavirus outbreaks among their workers that could threaten the profitability of some of their largest projects.

Even as many parts of the world begin to emerge from Covid-19 lockdowns, work camps and oil platforms in remote locations, where employees live and work in close quarters, remain vulnerable to viral eruptions.

Shell, on Wednesday, evacuated seven workers from an offshore platform in the Gulf of Mexico for Covid-19 testing. "Five individuals working on a Shell-operated platform in the U.S. Gulf of Mexico have tested positive for Covid-19," a Shell spokeswoman said, adding the company had been testing workers before offshore postings as of May. 20.

In recent weeks, hundreds of workers at remote oil and gas sites have been infected with Covid-19 including in the Gulf of Mexico, the North Sea, Mozambique, Canada and in Kazakhstan at one of the world's largest oil fields.

The outbreaks add to the challenges oil companies face as they try to recover from a devastating rout that saw crude prices more than halve in the wake of world-wide lockdowns that choked off demand.

Companies say the recent outbreaks have caused only limited interruptions. Still, they have had to bear additional costs related to staff safety and project delays, said Espen Erlingsen, head of upstream research at Norway-based consulting firm Rystad Energy.

"Future revenue will be affected by this as they're not able to execute planned activities," he said. "The main concern is how it's influencing their cash flow."

In Kazakhstan, more than 900 oil workers have been infected with coronavirus at the giant Tengiz oil field, according to state media reports. The field, which produces around 600,000 barrels a day, or 0.6% of global oil output, is operated by a consortium led by Chevron.

Workers were being tested when they left the field to return home and staff at the site have been reduced by two-thirds to around 10,000 workers over the last two months, said Chevron Chief Executive Mike Wirth at the company's annual meeting on Wednesday.

"Production continues uninterrupted and we remain focused on maintaining safe and reliable operations," a Chevron spokeswoman said.

Outbreaks at large oil projects could lead to production cuts, said Chris Midgley, head of analytics with S&P Global Platts. In Russia, oil company Rosneft, and gas producer PAO Gazprom have reported outbreaks in Siberia, forcing them to quarantine workers and close airports.

"If this escalates, it's a big risk," said Mr. Midgely.

Some regulators have been concerned for some time about outbreaks at remote sites. The U.S. government discussed mandated shutdowns of oil rigs in the Gulf of Mexico this spring but no action was taken.

In Africa, Total shut a liquefied natural gas project in Mozambique on the Afungi Peninsula after workers tested positive for the virus in April. Only essential staff remain on site, a spokesman for Total said.

BP PLC said in April that it had delayed its liquefied natural gas plans -- including the expansion of its Tangguh project in Indonesia and the startup of its export facility offshore Mauritania and Senegal -- due to Covid-19, as reduced staff numbers on sites slowed progress.

Exxon-owned Imperial Oil Ltd. has been battling an outbreak at its Kearl Lake Canadian oil sands project in northern Alberta. Roughly 100 infections spread out over four Canadian provinces have been linked to the work camp by health authorities.

The virus spread at Kearl Lake despite measures the company has taken since March to limit outbreaks. Imperial has tried to distance workers by cutting the number of passengers on flights to the camp and shuttle buses to leave empty seats between them. The company also cut its staff at the site to 1,500 essential workers, down from roughly 4,000.

An Imperial company spokesman said almost all the infected have recovered, and there are no active cases remaining at Kearl.

Work camp and offshore rig operators can limit viral spread if they are able to test all workers effectively and maintain proper social distancing and sanitation, said Conor Browne, a biosecurity consultant based in Belfast. But the close working conditions can also cause disease to spread quickly if an infection invades. "When the infection gets in, you've got a big problem," said Mr. Browne.

Norway's largest company, energy giant Equinor ASA -- formerly known as Statoil -- made efforts in April to keep its expansion of the Snorre project on the Norwegian continental shelf on track. Using the world's largest floating crane to move equipment onto the platform with specialist workers, crews kept their distance by building a tent to temporarily house the crane workers.

Equinor has also cut personnel offshore to enable social distancing after a staff member working on the Martin Linge oil and gas field in the North Sea was airlifted to land with symptoms and tested positive in March. The company decided to reduce the number of people working offshore, cutting offshore Norway personnel to 4,000 from 6,000 within a few days. It hasn't had any other offshore cases in Norway.

For workers on platforms, day-to-day life changed immediately as offshore rotations extended to three weeks instead of two. Communal areas were deemed off limits.

Workers were creative about how they coped with the chang. With gyms closed, exercise bikes were moved onto helipads, which were also turned into a space for running and yoga classes. Fishing became even more popular and Saturday night bingo was transmitted via radio into everyone's cabins.

"A tape measure was probably one of the most important tools we had in the first days," said Jez Averty, Equinor's senior vice president for operations in the southern North Sea.

--Collin Eaton contributed to this article.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Vipal Monga at vipal.monga@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
AMP LIMITED -2.28% 1.715 End-of-day quote.-10.44%
BP PLC 0.28% 290.8 Delayed Quote.-38.34%
CHEVRON CORPORATION 3.01% 85.23 Delayed Quote.-29.28%
EXXON MOBIL CORPORATION 3.12% 42.65 Delayed Quote.-40.73%
GAZPROM 1.14% 201.7 End-of-day quote.-21.33%
LAND CO., LTD. 0.00% 10 End-of-day quote.-16.67%
LINE CORPORATION -0.54% 5500 End-of-day quote.2.80%
LONDON BRENT OIL 1.98% 43.24 Delayed Quote.-34.38%
PUBLIC JOINT STOCK COMPANY GAZPROM 1.30% 5.622 Delayed Quote.-31.67%
ROYAL DUTCH SHELL PLC 1.38% 14.134 Delayed Quote.-45.98%
SEA LIMITED -1.67% 121 Delayed Quote.205.94%
SHUTTLE INC. -2.49% 9.8 End-of-day quote.-19.67%
THE GLOBAL LTD. -3.30% 205 End-of-day quote.-56.48%
THE LEAD CO., INC. -1.71% 345 End-of-day quote.-11.54%
THE NEW HOME COMPANY INC. 2.16% 3.31 Delayed Quote.-30.47%
TOTAL S.A. 0.48% 33.32 Real-time Quote.-32.28%
WORLD CO., LTD. -5.40% 1420 End-of-day quote.-47.23%
WTI 2.42% 40.565 Delayed Quote.-33.37%
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