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Conservative strategies being used by American pipeline operators in wake of COVID impact

capital spend guidance for US pipelines graph

The COVID-19 pandemic has significantly impacted the US pipeline sector and operators are left with little choice than to adopt strategies to save cash.

As a result, several pipeline companies in the country continue to delay or stall pipeline projects or reduce capital expenditure. In hindsight, pipeline operators are also analyzing the impact of COVID-19 on their operations and investments and are likely to remain focused on key growth projects that would ensure business sustainability, says GlobalData

Haseeb Ahmed, Oil and Gas Analyst at GlobalData, comments: "Several pipeline operators in the US have stalled or delayed their upcoming projects. Phillips 66, one of the owners of Red Oak and Liberty oil pipelines, has currently stalled progress on these pipelines, which may push the start year of these projects to 2024 and 2025 respectively, from the initially planned 2021."

Pipeline companies in the US have resorted to reducing capex to keep cash flows up and running. Enlink Midstream has reduced 40% of its capex for the year 2020, besides laying-off a fifth of its workforce. Plains All American also reduced a fifth of its capex for the year 2020 amidst the pandemic. 

Ahmed concludes: "Since fuel consumption has taken a huge dent, owing to the lacklustre performance of transportation and tourism sectors, pipeline companies are forced to come up with novel strategies to avoid the chances of bankruptcy. Diversifying businesses or investing in disruptive technologies are some of the alternatives that these companies might adopt to bail out from the current crisis. However, with the pandemic showing hardly any signs of abatement, the pipeline operators, can encounter an uphill task to fully recover from its devastating impacts."

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