Experts estimated the FEC losses caused by the coronavirus pandemic and the drop in oil prices. According to the study published on April, 28 by the «Skolkovo» Moscow School of Management Energy Center «Coronacrisis: the COVID-19 impact on the fuel and energy sector in the world and in Russia» the Russian economy may lose up to 13% per year only caused by the coronavirus pandemic affect on oil and gas and energy companies. Meanwhile the study says it is thanks to the crisis that the main technological directions of the energy transition will gain a new impetus. Including the «second breath» that the decentralized (distributed) power generation will receive.

According to the Skolkovo study, the global crisis caused by the COVID-19 infection spread «it is not a common cyclical recession, but a shock that could lead to a serious change in organization of the world economy, social structure and energy markets. It is likely to be the deepest economic recession since the Great Depression of the 1930s».

For the FEC industries, according to the «Skolkovo» experts, the coronacrisis strikes triple:

• direct COVID-19 impact on the FEC enterprises' employees and on the enterprises’ stability;
• consequence of various restrictive measures against coronavirus, on the one hand leading to supply chain failures and on the other hand - to a sharp decline in economic activity and reduction in energy demand;
• tough price competition triggered by the falling demand and, as a result, a sharp prices' crash.

«Skolkovo» experts estimated that a radical fall in energy demand and prices caused by the COVID-19 pandemic will lead to a 5-13% fall in GDP for Russia, depending on the pace of developments. According to the study, the GDP will decline following the reduction of investment programs, orders to the related industries and budget payments from oil and gas and energy companies. Oilmen will suffer the most, but the problems threaten the others as well: gas companies may face the problems raising funding for new projects, electric and heat power producers — working capital shortage and an accidents’ increase.

The world economy recovery after the pandemic also poses additional threats to the Russia's FEC. Meanwhile, according to the study, it is thanks to the crisis that the main technological directions of the energy transition — decarbonization, decentralization and digitalization — will gain a new impetus. Including the «second breath» that the distributed power generation will receive.

«The importance of the power generation decentralization during the quarantine is fully evident — almost the whole world has moved to remote work mode in a couple of weeks and the requirements for reliability of the power supply to the households and medical institutions is beyond comparison», the study says. According to the experts, the distributed power generation has already demonstrated a markedly higher growth rate in recent years compared to the centralized power generation. The mass shift to work from home during the quarantine could trigger a substantial increase in investments to the distributed power generation. «In this case the demand will increase in the market of microgrids — home power plants, energy storage systems, control systems and a variety of consumer services of the distributed power generation».

According to the «Skolkovo» experts, thanks to the crisis, the Russian oil and gas sector will have every reason to reevaluate the prospects of the industry and develop a new model of development in decarbonization conditions. «In this sense, the increased volatility of the oil market may even accelerate the investments' inflow in the renewable energy and low-carbon technologies — instability discourages investors and forces them to look for other objects for investment» — said the experts.

«The oil and gas sector experiencing the deepest crisis now, stands at the parting: depending on the change in the consumer behavior and demand dynamics, in the long term by 2025 the demand will either return to normal, and in this case another price cycle and new escalation of all problems are expected against the background of underinvestment, or an accelerated rate of energy transition will be carried out and the peak of oil demand may be passed as early as in 2020», the study states.

The study of the «Skolkovo» Moscow School of Management Energy Center «Coronacrisis: the COVID-19 impact on FEC in the world and in Russia.»