Saudi Arabia’s exploration & production (E&P) investments are projected to rise from $3 billion in 2021 to $7 billion in 2025, with a compound annual growth rate (CAGR) of 13%, according to Aljazira Capital.

The kingdom is expected to account for 67% of the MENA region’s E&P expenditure by 2025, the consultancy said in its “KSA oil and gas drilling industry” report for May 2024.

This dominance is largely due to multiple rig contracts awarded by oil giant Saudi Aramco, which have significantly boosted the Kingdom’s drilling expenditure.

Globally, onshore drilling activity dominates the industry, with E&P companies spending $23.1 billion, or 70% of the total drilling expenditure, in 2021. The offshore drilling captures the balance of $9.9 billion.

However, offshore drilling leads to $1.6 billion in spending in Saudi Arabia, accounting for 53% of the region’s total expenditure. Onshore drilling accounts for 30%, or $1.4 billion, of the total spend in the kingdom despite the number of onshore rigs being 3.2 times higher than offshore rigs.

The onshore rigs in the kingdom were severely impacted by the oil price crash in 2015 and the COVID-19 pandemic, which led to the suspension of many contracts.

However, active onshore rig counts are expected to increase from 193 in 2019 to 268 by 2025, implying a 5.6% CAGR. This growth will be supported by Aramco’s commitment to maintaining crude oil capacity at 12 million barrels of oil per day and increased drilling for unconventional Aramco’s Jafurah field, boosting demand for onshore rigs from 2021 to 2030.

In the case of offshore rigs, the demand for jack-up rigs has increased substantially over the past two decades due to many contracts awarded by Aramco.

However, offshore rigs are expected to be impacted in the near term by Aramco’s announcement of suspending selected rigs from multiple rig suppliers, Aljazira Capital noted.         

(Editing by Brinda Darasha;