Middle East keeps rolling, despite Saudi Aramco jack-up suspensions

Offshore drilling contracting activity remains strong in the Middle East Gulf despite Saudi Aramco’s decision to suspend contracts for almost two dozen jack-ups earlier this year. The suspensions came in the wake of the Kingdom of Saudi Arabia’s decision to cap the country’s production at 12M bbl per day.

Market analysts MSI said the Gulf region continues to contribute strongly to contract volumes with US$50Bn in awards during H1 2024. The energy analysts said that if the current rate continues, 2024 capex spend will outstrip levels seen in 2022 and 2023.

The Middle East Gulf and South and Central America dominated awards accounting for about 55% and 30% shares, respectively, according to MSI’s Q2 MODU Report.
While Saudi Arabia’s announcement to curtail its oil production plans initially sent a chill through the mobile offshore drilling unit (MODU) market, a number of jack-up rigs were marketed elsewhere or have scheduled in maintenance while the rigs aren’t working. This extra supply is expected to have a knock-on effect in the Asian and African markets where opportunities have already presented themselves for some of the suspended units.
In the wake of Saudi Aramco’s decision, MSI revised its projections for jack-up demand down for Q2 2024 in the Middle East Gulf. Growth for demand in the region has been revised down from 4% to 1%, with Qatar and the UAE among the area’s big drivers.
MSI has also revised down its charter rate growth projection by around 3% for standard jack-ups. Some of the rigs will also be stacked in Saudi Arabia to save running costs and in anticipation of continued work once suspensions are over.