Saudi Aramco’s production U-turn will not hit the demand for oilfield services and equipment in the kingdom, analysts have said.
Shares of major oilfield services companies dropped last week after Aramco, the world’s largest oil exporting company, scrapped plans to boost production capacity to 13 million barrels per day by 2027, from 12 million bpd currently.
Analysts say Aramco’s decision may have been influenced by factors such as escalating costs of developing new projects, ample spare capacity and weakening demand outlook for crude amid growing adoption of renewable energy and electric vehicles.
At the moment, Saudi Arabia is only producing 9 million bpd as part of Opec+ supply cuts aimed at stabilising the oil market.
The announcement comes as oilfield services companies, which assist energy producers in drilling new oil and gas wells, are increasingly turning to the Middle East region to drive future growth, especially with the US shale sector facing a slowdown.
Analysts say Aramco will most likely defer expansion projects at the Safaniya and Manifa offshore oilfields in the Arabian Gulf. The company did not immediately respond to a request for comment.
Safaniya, 200km north of the city of Dhahran, is the world's largest offshore oilfield in terms of recoverable resources.
Aramco was close to selecting preferred bidders for two large onshore engineering, procurement, and construction (EPC) contracts at Safaniya, worth $5 billion, according to media reports last month.
Several oilfield services firms have a large exposure to the kingdom’s jack-up rig market. These rigs are used to drill wells in shallow waters.
“We think the market overreacted and the jack-up rig count will likely remain stable to modestly up in 2024, and other projects, including Marjan, Berri and Zuluf, will continue to move forward,” said James West, senior managing director at Evercore ISI.
Saudi Arabia was deploying 88 rigs as of January, up from 79 in the same period last year, according to Baker Hughes data.
Aramco, which plans to increase the Marjan and Berri fields’ output capacity by 550,000 bpd by next year, may adjust its capital expenditure target lower or increase spending on natural gas, Mr West said.
Aramco has said it would update its capital spending guidance when its full-year 2023 results are announced in March.
The company's capital expenditure numbers have consistently increased over the past few years amid a growing focus on downstream operations and gas production.
Before reducing its output target, Aramco was expecting its capital expenditure for last year to be in the range of $45 billion to $55 billion, up from $37.6 billion in 2022. It stood at $31.9 billion in 2021 and $26.9 billion in 2020.
“We remain confident the long-duration offshore and international upcycle will continue and drive significant growth opportunities for oilfield services companies in 2024 [and beyond],” Mr West said.
The Big Three of oilfield services – Schlumberger, Halliburton and Baker Hughes – recorded strong fourth quarter results, with higher oil prices boosting drilling activity in the US and international markets.
The companies are optimistic about the Middle East, where several national oil companies are planning to significantly increase their production in the next few years.
Schlumberger, whose shares fell nearly 10 per cent following Aramco’s announcement on January 30, said it was working “very closely” with the state-run energy giant and that, as per its understanding, only two offshore oil expansion projects that have not yet begun would be suspended.
“Our forecast for significant growth for 2024 in the kingdom remains intact,” said Olivier Le Peuch, the company's chief executive.
“The combination of our revenue mix in the kingdom, which is weighted toward onshore and the expanding gas market, and our unique market position in other countries in the Middle East will continue to support the multi-year growth cycle in the region.
“Global energy demand continues to increase, and international production is expected to play a key role in meeting supply through the end of this decade.”
Halliburton and Baker Hughes declined to comment.
Expansion plans
Meanwhile, other Middle Eastern countries are pressing forward with plans to increase production.
UAE’s Adnoc is investing in its major onshore and offshore oilfields to increase crude production to 5 million bpd by 2027. The Abu Dhabi-based energy company also aims to reach gas self-sufficiency by 2030.
Kuwait plans to bring its oil production up to 3.2 million bpd by next year and 4 million bpd by 2035. It also aims to double its gas production in the longer term.
To achieve these goals, the Gulf country plans to invest $43 billion in oil and gas projects until 2027.
Iraq, Opec’s second-largest producer, is looking to boost its output to 7 million bpd by 2030.
“We saw several final investment decisions [in Iraq] last year and two new bid rounds opened,” said Alexandre Araman, principal analyst, Middle East upstream, at Wood Mackenzie. “Gas is also a priority with aggressive growth target, mainly thanks to projects to capture flared gas.”
Iraq remains the second-biggest country in terms of flaring after Russia, Mr Araman told The National.
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More coverage from the Future Forum
The specs: 2019 Mini Cooper
Price, base: Dh141,740 (three-door) / Dh165,900 (five-door)
Engine: 1.5-litre four-cylinder (Cooper) / 2.0-litre four-cylinder (Cooper S)
Power: 136hp @ 4,500rpm (Cooper) / 192hp @ 5,000rpm (Cooper S)
Torque: 220Nm @ 1,480rpm (Cooper) / 280Nm @ 1,350rpm (Cooper S)
Transmission: Seven-speed automatic
Fuel consumption, combined: 4.8L to 5.4L / 100km
Match info
Karnataka Tuskers 110-3
J Charles 35, M Pretorius 1-19, Z Khan 0-16
Deccan Gladiators 111-5 in 8.3 overs
K Pollard 45*, S Zadran 2-18
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Results
3pm: Handicap (PA) Dh40,000 (Dirt) 1,000m; Winner: Dhafra, Antonio Fresu (jockey), Eric Lemartinel (trainer)
3.30pm: Maiden (PA) Dh40,000 (D) 2,000m; Winner: Al Ajayib, Antonio Fresu, Eric Lemartinel
4pm: Handicap (PA) Dh40,000 (D) 1,700m; Winner: Ashtr, Abdul Aziz Al Balushi, Majed Al Jahouri
4.30pm: Handicap (TB) Dh40,000 (D) 1,700m; Winner: Falcon Claws, Szczepan Mazur, Doug Watson
5pm: Sheikh Dr Sultan bin Khalifa Al Nahyan Cup – Prestige Handicap (PA) Dh100,000 (D) 1,700m; Winner: Al Mufham SB, Al Moatasem Al Balushi, Badar Al Hajri
5.30pm: Sharjah Marathon – Handicap (PA) Dh70,000 (D) 2,700m; Winner: Asraa Min Al Talqa, Al Moatasem Al Balushi, Helal Al Alawi
More from Neighbourhood Watch:
The%20specs
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ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
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The five pillars of Islam
Specs%20
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What is an FTO Designation?
FTO designations impose immigration restrictions on members of the organisation simply by virtue of their membership and triggers a criminal prohibition on knowingly providing material support or resources to the designated organisation as well as asset freezes.
It is a crime for a person in the United States or subject to the jurisdiction of the United States to knowingly provide “material support or resources” to or receive military-type training from or on behalf of a designated FTO.
Representatives and members of a designated FTO, if they are aliens, are inadmissible to and, in certain circumstances removable from, the United States.
Except as authorised by the Secretary of the Treasury, any US financial institution that becomes aware that it has possession of or control over funds in which an FTO or its agent has an interest must retain possession of or control over the funds and report the funds to the Treasury Department.
Source: US Department of State
PROFILE OF HALAN
Started: November 2017
Founders: Mounir Nakhla, Ahmed Mohsen and Mohamed Aboulnaga
Based: Cairo, Egypt
Sector: transport and logistics
Size: 150 employees
Investment: approximately $8 million
Investors include: Singapore’s Battery Road Digital Holdings, Egypt’s Algebra Ventures, Uber co-founder and former CTO Oscar Salazar
JAPANESE GRAND PRIX INFO
Schedule (All times UAE)
First practice: Friday, 5-6.30am
Second practice: Friday, 9-10.30am
Third practice: Saturday, 7-8am
Qualifying: Saturday, 10-11am
Race: Sunday, 9am-midday
Race venue: Suzuka International Racing Course
Circuit Length: 5.807km
Number of Laps: 53
Watch live: beIN Sports HD
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
The specs
Engine: Dual 180kW and 300kW front and rear motors
Power: 480kW
Torque: 850Nm
Transmission: Single-speed automatic
Price: From Dh359,900 ($98,000)
On sale: Now
UAE currency: the story behind the money in your pockets
Company%C2%A0profile
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MATCH INFO
Uefa Champions League, last 16, first leg
Liverpool v Bayern Munich, midnight (Wednesday), BeIN Sports
Squid Game season two
Director: Hwang Dong-hyuk
Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
Rating: 4.5/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
