Saudi Arabia’s exploration and production (E&P) investments are projected to rise significantly, from $3 billion in 2021 to $7 billion in 2025. This represents a compound annual growth rate (CAGR) of 13 percent, according to a report by financial firm Aljazira Capital.
By 2025, the Kingdom is expected to account for 67 percent of the MENA region’s total E&P expenditure. This dominance is largely attributed to the multiple rig contracts awarded by the state-owned oil giant, Saudi Aramco. These contracts have substantially boosted Saudi Arabia’s drilling expenditure.
Globally, the onshore drilling sector continues to dominate the industry. E&P companies spent $23.1 billion on onshore drilling in 2021. This represents 70 percent of the total drilling expenditure in 2021. Offshore drilling accounts for the remaining $9.9 billion.
Offshore vs. onshore drilling in Saudi Arabia
However, in Saudi Arabia, the offshore drilling segment leads in terms of expenditure, capturing 53 percent of the region’s total, equivalent to $1.6 billion. Onshore drilling, despite having 3.2 times more rigs than offshore, accounts for only 30 percent, or $1.4 billion, of the Kingdom’s total drilling spend.
Read more: Saudi Aramco reports Q1 2024 net income of $27.2 billion
Onshore rig growth and drivers
This disparity is partly due to the onshore rigs being severely impacted by the 2015 oil price crash and the COVID-19 pandemic, which led to the suspension of many contracts. Nevertheless, active onshore rig counts are expected to increase from 193 in 2019 to 268 by 2025, representing a CAGR of 5.6 percent. This growth will be supported by Aramco’s commitment to maintaining crude oil capacity at 12 million barrels per day. It will also be supported by increased drilling for unconventional resources, such as the Jafurah field, the report said.
Offshore rig market outlook
Moreover, the analysis noted that in the offshore segment, the demand for jack-up rigs has increased substantially over the past two decades. This increase is due to numerous contracts awarded by Aramco. However, the offshore rig market is expected to face some near-term challenges. These challenges are due to Aramco’s decision to suspend selected rigs from multiple suppliers.
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