Saudi Looking Beyond Oil Price Slump As Rig Count Spikes

Saudi Looking Beyond Oil Price Slump As Rig Count Spikes
As the global energy industry stares transfixed at a spectacular drop in US rigs, Saudi Arabia is ramping up the number of machines drilling for oil and gas despite a sharp fall in the price of crude.

Reuters

DUBAI/KHOBAR, Saudi Arabia, March 20 (Reuters) - As the global energy industry stares transfixed at a spectacular drop in U.S. rigs, Saudi Arabia is ramping up the number of machines drilling for oil and gas despite a sharp fall in the price of crude.

Industry sources and analysts say the OPEC kingpin is looking beyond the halving of global oil prices since June 2014 to a time when crude could again be in short supply.

Riyadh is therefore keen to preserve what is known as its spare capacity - the kingdom's unique ability to raise oil output quickly at any given moment.

But to achieve that, Saudi Arabia has to drill much more than in the past, after boosting output to record levels to compensate for global supply outages in the past four years.

"The Saudis are probably worried about everyone else reducing capex as a result of low oil prices and about non-OPEC output falling off a cliff at some point. We all know that supply disruptions are unpredictable but they are certain," said Gary Ross, executive chairman of New York oil consultancy PIRA.

"The increase in Saudi rig numbers is like a signal to the industry - let's be rational. We will need supply growth in the future."

State oil giant Saudi Aramco used a record-high 210 oil and gas rigs in 2014, up from around 150 in 2013, 140 in 2012 and some 100 in 2011, according to previous industry estimates.


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Phil Miller | Mar. 20, 2015
It really looks like Aramco believes that prices will normalize somewhat in less than two years.

Loren Reagan | Mar. 20, 2015
Saudi Aramco is not drilling more wells in the years to come they will drill the same amount as in the past years with more rigs, there expertise and how they manage the wells being drilled has gone from 4-5 wells drilled per year per rig to 2-3 wells drilled per rig per year, this I know I was there as a foreman and have first hand knowledge of the in experience and lack of understanding of what it takes to manage there projects. Just because there are more rigs on locations does not mean that they are drilling more wells per year, An example was one of the rigs in the gas drilling fleet 5 years ago was drilling 6 wells per year, now that same rig is drilling 2-2.5 wells per year, mostly because of Aramcos lack of understanding and personal inexperience, service companies like baker and slb managing drilling and not providing the service that is required, not only does the western hemisphere need a correction but so does the eastern hemisphere, global demand will out run new production if companies mentioned dont focus on what they know.

john | Mar. 20, 2015
Shale production has a short shelf life. 18 Months per well ? Rigs are being withdrawn from service due to economic constraints Surplus should diminish in 18 months ?


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