Market Trends of Saudi Arabia Drilling Services Industry
This section covers the major market trends shaping the Saudi Arabia Drilling Services Market according to our research experts:
Production Targets to Drive Demand for Drilling Services
- Saudi Arabia is one of the largest crude oil producers in the world. However, crude oil production has declined over the past few years, and the country's economy was hit particularly hard by COVID-19. However, as global energy demand has recovered from the effects of the pandemic, coupled with the disruptive impact of the Russo-Ukrainian conflict on global energy markets, crude prices have increased significantly.
- To leverage this high-price environment, the country is trying to increase production capacity, which is expected to raise revenues for the Saudi economy. The average crude oil production of Saudi Arabia in 2021 was recorded as 9124.7 thousand barrels per day. To achieve its targets, the country aims to increase its crude oil production capacity to nearly 13 million barrels per day by 2027 and aims to increase gas production by almost 50% by 2030.
- Saudi Aramco, the state-owned oil and gas utility, has disclosed plans to boost its capital expenditure (CAPEX) to USD 40-50 billion in 2022, up by nearly 50% from 2021, with further growth expected until 2025.
- According to Saudi Aramco, upstream capital expenditures in 2021 increased by 20.5%, compared to 2020, from SAR 73,651 (USD 19,640) million to SAR 88,758 (USD 23,669) million.
- Such significant targets and investments for achieving the above targets are expected to drive the market significantly during the forecast period.
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Unconventional Segment to Grow at the Fastest Rate During the Forecast Period
- Most of Saudi Arabia's production comes from conventional reserves. However, the country has significant unconventional non-associated gas reserves, which have been relatively underdeveloped. However, as domestic consumption of natural gas rises steadily, the development of such unconventional fields has become a major target for the country.
- One such significant investment is the Jafurah Shale play, the country's largest unconventional shale play, estimated to hold nearly 200 trillion cubic feet of shale gas. The field is expected to produce about 2 billion cubic feet per day of gas by 2030.
- According to Saudi Aramco, the development of the unconventional onshore gas project is expected to be more than USD 100 billion, and the first development phase for the Jafurah gas plant is likely to come onstream by 2025.
- In December 2021, Saudi Aramco awarded subsurface and Engineering, Procurement, and Construction (EPC) contracts worth USD 10 billion. Capital expenditure in the field is expected to reach USD 68 billion over the first ten years of development. The field is expected to provide petrochemicals business and complement the country's plans for lower-carbon electricity and hydrogen production in the future.
- Despite Saudi Arabia's relative inexperience in shale gas production, such significant investments and production targets are expected to drive the demand for the unconventional segment of the market significantly during the forecast period.
