King's comments could halt future drilling activity

06 July 2010

Oilfield services operators in Saudi Arabia warned that drilling could be reviewed after speech

In numbers

260: Billion barrels is Saudi Arabia’s oil reserves

300: Development wells that Saudi Aramco said it will drill in 2010

48: Exploration wells that Saudi Aramco said it will drill in 2010

14 per cent: Proportion of Saudi Arabian drilling activity concentrated on exploration activities

Sources: MEED, Saudi Aramco

Oilfield services companies fear that plans for future drilling activities in Saudi Arabia could be reviewed after King Abdullah bin Abdulaziz al-Saud said that oil exploration was to be halted in the kingdom.

The Saudi Arabian head of state was quoted by the Saudi Press Agency (SPA) as saying: “I was heading a cabinet meeting and told them to pray to God the Almighty to give it a long life. I told them that I have ordered a halt to all oil explorations so part of this wealth is left for our sons and successors God willing.”

Crude oil reserves
Country(Billions of barrels)
Saudi Arabia260
Source: Saudi Aramco  

Many analysts have said that the king’s comments were taken out of context when translated from Arabic into English, but others have warned that the Supreme Council for Petroleum and Mineral Affairs may now have to respect the king’s wishes and take action.

The state-owned oil giant Saudi Aramco may now have to review future drilling activities in light of the king’s comments, a source in Saudi Arabia tells MEED.

“I have checked with Aramco and they said seismic is going on, but they said that maybe some drilling might not go ahead if the King requested it,” the source says. “[Aramco] has said they will carry on their duties as normal, but said that it may affect the future drilling programme or it may be reviewed.”

Oil exploration can be carried out by both drilling and seismic survey. Current seismic explorations being undertaken in locations including the Red Sea and Arabian Gulf will not be affected by any decision. 

“There is a difference between conducting oil exploration and operational drilling,” the source adds. “Aramco may want to find as much oil as possible, but then cap the field and leave it for the future generations to use, like what happened with the Manifa oilfield.”

The 900,000 barrels per day (b/d) Manifa oilfield was discovered in 1957, but capped in 1960 due to the high sulphur content of the oil. The development of the field is expected to be completed in 2015 and could cost anything up to $15bn.

Another source working in the region’s offshore oil and gas sector says that Saudi Arabia is still seen as a key market to contractors.  

 “If anything Saudi Arabia is pushing its exploration,” the source working offshore tells MEED. “We’re seeing a tonne of work coming up there and we haven’t heard anything about exploration in oil and gas being cancelled.”

For offshore oil and gas drilling about 41 per cent of GCC offshore structures will be in Saudi Arabia over the next five years.

Another source who works for an oilfield services company with a number of projects in the kingdom believes that due to the varied scope of work now on offer in hydrocarbons most companies will not notice much difference if exploration is halted.

“If it happens it may affect drilling specialists, but most oilfield services companies have developed diversified portfolios so could probably handle any changes in policy,” the source says. “Saudi Arabia is a massive market and there are many opportunities from upstream to downstream so many companies working there will not be affected too greatly.”

A source working for a drilling company in the kingdom says that for his company it is business as usual.   

“We have a number of drilling projects in Saudi Arabia at the moment and none of them are affected. We have heard nothing about any ban on drilling or exploration.”

Aramco currently places a lot of empahisis on its exploration activities. On its website the company says: “We operate an extensive and aggressive exploration programme to ensure we will have the petroleum resources to meet domestic and world demand for many years to come.”

Aramco made two discoveries in 2009: Sanaman and Sirayyan. Sanaman is a non-associated gas and condensate field while Sirayyan contains Arabian Super Light oil and gas.

The amount of operational drilling rigs in Saudi Arabia has been reduced to below 100 in the last few months compared to 130 in 2007.

“Many operators are now being told that the deals are not going to be renewed because the kingdom has enough rigs to maintain supply,” a source says. “The simple fact is Saudi Arabia has hit its 12 million b/d target so does not need as many rigs.”

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