Saudi Arabia (Washington Insider Magazine) – Earlier this year, Saudi Arabia’s decision to scale back its oil production expansion caught the market off guard, leading to contract suspensions for jack-up rigs. However, a leading offshore service vessel (OSV) executive sees continued strong demand in the Middle East.
Strong Demand Despite Cutbacks
Martin Helweg, CEO of P&O Maritime Logistics, highlighted that the Middle East remains a key driver for the oil and gas industry. Helweg acknowledged initial concerns when Saudi Aramco suspended contracts for 22 jack-ups, affecting nearly 40 OSVs, including several from P&O Maritime.
Regional Stability and Investment
According to Rivieramm, contrary to fears of a broader market downturn, Helweg noted that there has been no similar pullback in other parts of the region, such as Qatar and Abu Dhabi. Investment in gas development continues to support offshore activity, with state-owned entities pressing forward with projects, albeit at a slower pace.
Analysts Confirm Positive Outlook
Energy analysts and brokers echo Helweg’s optimistic outlook. Singapore-based brokerage UOB Kay Hian maintains a positive view in the Middle East, noting that day rates and utilization rates have remained robust despite Aramco’s recent suspensions. Market analyst MSI reported that $50 billion in offshore projects were awarded in the first half of 2024 in the Middle East Gulf.
Aramco’s Strategic Shift
Aramco maintains its production capacity at 12 million barrels per day while shifting focus to natural gas resources. Recently, the company awarded $25 billion in contracts for its Jafurah II and Master Gas System III projects to boost unconventional gas production.
ADNOC’s Advanced Drilling Rigs
In July, ADNOC Offshore awarded a $733 million contract for three island drilling rigs, set to be among the most advanced in the world. These rigs, to be constructed by China’s Honghua Group, will support operations at the offshore Zakum field and are scheduled for delivery in 2026.
Qatar’s LNG Expansion
QatarEnergy is undertaking a major drilling campaign to expand gas production from its North Field, aiming to increase LNG liquefaction capacity by 85% by 2030.
Healthy Utilization Rates
As of July 1, rig utilization levels in the Middle East Gulf stood at 85%, with 130 jack-up and mobile offshore drilling units active. Similarly, 1,108 OSVs and 309 offshore construction vessels were operational, showing utilization rates of 86% and 88%, respectively.
Balancing Contracts for Stability
Helweg emphasized the importance of balancing short-term gains with long-term utilization. While the Middle East may not offer the highest rates, it provides stability and longevity. P&O Maritime Logistics strategically balances long-term contracts in Qatar, Saudi Arabia, and the Caspian with short-term contracts in West Africa to maximize returns.
Riding the Upcycle
The recent suspension by Saudi Aramco led to the cancellation of contracts for four P&O Maritime vessels. However, this situation has allowed the company to secure new contracts at higher rates, reflecting a positive trend in the market.
Strategic Fleet Investments
P&O Maritime is not investing in new buildings but is focusing on converting existing vessels to support offshore wind farm development. These conversions include upgrading module-carrying vessels into dynamic positioning class-2 cable-lay vessels.
Expansion Plans and Newbuilds
Zamil Offshore Services, based in Saudi Arabia, is increasing its fleet by adding four fast support intervention boats (FSIVs). Lita Ocean’s new vessels will serve Saudi Aramco’s operations and are set for delivery in 2024 and 2025.
Sustaining Growth and Innovation
Despite challenges, the Middle East offshore market shows resilience and growth potential. With strategic investments and balanced contract management, companies like P&O Maritime Logistics and Zamil Offshore Services are well-positioned to capitalize on the ongoing demand in the region.
