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Saudi Arabia carries on drilling despite oil slump

Saudi Arabia carries on drilling despite oil slump thumbnail

Saudi Arabia is one of the very few countries which has increased its drilling for new oil and gas wells since prices began to slump in the middle of 2014.

The number of rigs drilling for oil and gas around the world has fallen from a peak of 1,382 in July 2014 to just 920 in October 2016.

The international rig count excludes North America, which has also experienced a slump in drilling, as well as onshore China, Russia and the Caspian region.

However, the number of rigs operating in Saudi Arabia has climbed from 105 to 126 over the same period, according to oilfield services company Baker Hughes.

The only other countries to report a significant increase in rig counts were the United Arab Emirates and Kuwait, which produce from the same petroleum basin as Saudi Arabia.

Saudi Arabia has kept the number of rigs targeting oil-bearing formations steady at around 70, which is high by historical standards, while adding an extra 20 rigs targeting gas-rich targets (

Continued drilling is intended to protect the country’s crude market share at a time when rivals in Iran, Iraq and Russia are also increasing output.

The drilling program demonstrates the country’s determination to maintain its production capacity despite the slump in prices and natural decline rates at older fields.

The kingdom’s reserves and field-by-field production rates remain secret, but the increased number of rigs over the last five years is an indication the country is investing significantly to maintain output.

Saudi Arabia’s large onshore fields remain some of the most attractive and lowest cost in the world with superb geology and high flow rates per well.

Most fields have now been producing for several decades and exhibit natural declines in field pressure as well as increased water production.

So significant investment is needed to maintain output from existing wells, open up new sections in existing fields and develop completely new targets.

But most drilling in Saudi Arabia is field development work and extension rather than wildcat exploration, meaning the risks are lower and returns higher, supporting continued expenditure.

And the program has been supported by a big cut in contract costs for all aspects of drilling and well completion, enabling drilling to continue despite lower oil prices.

As one of the few oil companies around the world maintaining rather than cutting its drilling program, Saudi Aramco has been able to extract big price reductions from the services companies.


The resilience of drilling programs in Saudi Arabia, UAE and Kuwait underscores their importance to service providers.

On the gas side, the increased number of rigs operating is consistent with Saudi Arabia’s strategy of switching power generation to gas from oil, reserving more valuable crude for refining or exporting.

The strategy helped Saudi Arabia cut its direct combustion of crude in power plants this summer even as temperatures hit record levels across the Arabian peninsula.

Reduced direct burn freed up oil for export, either as crude or refined products, enabling the kingdom to maintain crude exports near record levels this summer, but pressuring prices.


22 Comments on "Saudi Arabia carries on drilling despite oil slump"

  1. Shortend on Tue, 29th Nov 2016 8:15 pm 

    Everything is AWESOME…full speed ahead…the hamster wheel is a turning
    See…and the worrywarts here getvso worked up about it all.

  2. brough on Wed, 30th Nov 2016 3:18 am 

    Over the past 15 years the Saudi-Arabia, UAE, Kuwait group have more or less tripled the amount of rigs they have deployed, just to keep production levels steady.
    Unfortunately everyone who uses oil for their everyday needs, EROEI decay is everywhere.

  3. joe on Wed, 30th Nov 2016 6:24 am 

    It seems Saudi will cut, Iran will freeze, not sure why the markets jumped 8%. Tight oil will be the biggest winner out of this.

  4. makati1 on Wed, 30th Nov 2016 6:44 am 

    Oil prices go up and down with the weather.

    Oil reserves change with the tides.

    It’s ALL bullshit.

  5. Davy on Wed, 30th Nov 2016 7:35 am 

    “OPEC Agrees To Cut Oil Production By 1.2 Million Barrels A Day, Details Pending”

  6. joe on Wed, 30th Nov 2016 9:50 am 

    I did say stupid like a fox.
    Now they will try and get Russia to cut. Tight oil will come roaring back. Global trade is going to die f he does the things he said he would. With most currencies weak the dollar will be strong, how on earth he can justify tariffs etc to the elites I dont know. I suspect hes gonna flip flop big style. Already Im hearing a 14% billionaire tax cut and 2% for the middle class. The end is neigh! Get that pension fund into tight oil for 2 years, then get the hell out. With the dollar strong, the price of oil up and demand flat, the glut not cleared out, the perfect storm of oversupply is about to play out.

  7. Truth Has A Liberal Bias on Wed, 30th Nov 2016 11:56 am 

    Saudi, Kuwait and UAE are all infill drilling. The decline will come, and when it does it’ll be steep.

  8. rockman on Wed, 30th Nov 2016 12:34 pm 

    Actually the number of rtigs drilling for oil in the KSA has dropped about 10% from the peak of 80 in 2015. It has been the rigs going for NG that has bumped up the total count.

    As far as drilling for “new oil”…maybe, maybe not. Since the KSA doesn’t share details much, if not most, of the drilling may be “accelerator wells”: duplicate wells drilled into already producing reservoirs. In the US wells are required to be a regulated distance from each other. Done to max the URR. The KSA does not have such restrictions: they can complete a new well just tens of feet from one in the same reservoir. And while it will produce the reservoir faster it can lower URR. Not by a huge amount but by some. But more important: doing so depletes the reserves that much faster.

    And just like increasing the rates on existing wells the primary goal of any accerlerator wells is to increase revenue and not to increase market share. The Rockman did exactly that over 20 years ago with some hz wells in an offshore NG field. BTW the EROEI: there is ZERO energy returned in the sense that the oil from an accelerator would have been produced by the existing wells. Which, once more, highlights why EROEI has no relevance to drilling decisions. In this case even worse since accelerator wells are essentially unprofitable since they produce no additional revenue but just increase the rate of revenue recovery.

    The one possible exception could be for any horizontal wells recovering bypassed oil.

  9. Sissyfuss on Wed, 30th Nov 2016 1:21 pm 

    The wicked witch is dead, boys. Cut to your heart’s content. Even Russia breathes easier.

  10. claes rydeman on Wed, 30th Nov 2016 3:38 pm 

    I would like you give a message in chinese formal ways.

    we only say one sentence at a time, and it always have to be two or three lines

    My next line will be a sentence that has three lines, because it is very important. The importance of this line is emphasized by the very excistance of three lines. The message is therefor important.

    The next sentence, which is only two lines is therefore not so important, but it is because I have now changed to another subject. that you cannot know.

    I have now changed to a new subject, and I want you to understand that fully.I hope you understand that I have now changed to another object.

    You will now be informed about our next important message. Also this message will be expressed in formal chinese ways, where you newer know when they change subject.

    The important thing is that we get our message through. If you understand it or not is not important

  11. claes rydeman on Wed, 30th Nov 2016 3:58 pm 

    A lot of western journalists have taken over this chinese governmental style of imforming the sheeples. It is really bad because it a slow stream of informations with no interruptions between different problems. It is actually like mainstream media in the USA, but in a chinese way.
    Take a closer look at the article above and ask yourself if this style gives you real information, or if it kind of makes you skim it and agree ??

  12. Sissyfuss on Wed, 30th Nov 2016 5:06 pm 

    President-elects like to repeat half sentences, repeat half sentences. They really do.

  13. Survivalist on Wed, 30th Nov 2016 5:18 pm 

    Good points Rockman. And if an accelerator well decreases URR then indeed it’s EROEI is negative.

  14. babyrunningdry on Wed, 30th Nov 2016 5:41 pm 

    deplete, baby, deplete

  15. rockman on Wed, 30th Nov 2016 6:19 pm 

    Survivor – Even if an acceleration well not only doesn’t decrease URR but adds some of additional recover some/most of its production would still be oil that would have been recovered by the existing wells. By definition an acceleration well “accelerates” recovery of PRODUCING reserves by producing them faster. IOW some of the “ER” in the EROEI cannot be counted when calculating the EROEI of the new well. How much? Folks can try to model a number but just too many variables and what-ifs to come up with a hard number IMHO.

  16. Survivalist on Wed, 30th Nov 2016 7:23 pm 

    Rockman- it is my understanding that infill drilling/accelerator wells deplete the reserve quicker. Perhaps peak production spikes higher or stays on a plateau for longer, but when the decline does come it is a steeper decline because the accelerator wells in essence brought potential future production forward in time, if you follow my meaning. Do you know of any good examples, models or predictions that might offer insight into the pending decline that KSA, Kuwait and UAE must one day experience? I’m very interested in getting my head around what might happen in those countries production volumes when the decline occurs.

  17. Apneaman on Wed, 30th Nov 2016 8:43 pm 

    Anyone still want to make the claim that the humans can’t change the planet. Anthropocene? You betcha.

    Earth’s ‘technosphere’ now weighs 30 trillion tons, research finds

    “…..suggesting that the bulk of the planet’s technosphere is staggering in scale, with some 30 trillion tons representing a mass of more than 50 kilos for every square metre of the Earth’s surface.”

    “The Anthropocene concept – a proposed epoch highlighting the impact humans have made to the planet – has provided an understanding that humans have greatly changed the Earth.”

    “The researchers believe the technosphere is some measure of the extent to which we have reshaped our planet.”

  18. rockman on Thu, 1st Dec 2016 10:42 am 

    Survivor – “Do you know of any good examples, models or predictions that might offer insight into the pending decline that KSA, Kuwait and UAE must one day experience?” That would take a good bit of effort to do that with a single major field in Texas…and still just a educated guess. And for the entire state…a monumental effort. And this for a region with abundant and accurate data available. Data completely unavailable in the countries you mention.

    But having said that IMHO regardless of how many accelerators drilled in all those old mature fields the overall decline rate won’t look more “cliff-like”. But if you’ve noticed my posts I’ve never been in the “Oh f*ck, we’re heading for a cliff!!!” camp in the first place. LOL. The giant old fields in the ME have slide into their lower decline rate phase long ago. Acceleration wells probably probably won’t even make a noticeable wobble on the global curve IMHO. But similarly any production increase from them shouldn’t imply the world has suddenly found a lot of “new oil”.

  19. rjk on Thu, 1st Dec 2016 2:46 pm 

    Survivor, Rockman: In the data base of the World’s Giant Oil Fields from the A.A.P.G, a copy of which I have dated September 2013, it shows the significant 59 largest oil fields of Saudi Arabia having less than 45 Billion BBO after taking into account the last three years production. That is a lot less than the 266 Billion BOO they regularly lie about. This data base has 28 columns of information on each field, including Lat.& Long, Depth, Discovery date, URR and various decline rates etc. Similarly Kuwait and UAE have far less reserves as well as do Iraq and Iran. If you provide an email I would be happy to forward the data base.

  20. rjk on Thu, 1st Dec 2016 2:55 pm 

    If you think they don’t lie, they prove it out of their own production information. In late 2014 and early 2015 the two large oil fields in the Neutral Zone, Khafji and Wafra were closed down taking 500,000 BO off line. No where did this show up as a decline in Kuwait’s and Saudi’s production data. Chevron was steam injecting this fields for along time but I believe, technical problems and cost have caused these fields to perhaps never produce again

  21. shortonoil on Thu, 1st Dec 2016 3:18 pm 

    “Saudi, Kuwait and UAE are all infill drilling. “

    What they are doing is a lot of horizontal drilling to skim what remains of their old depleted fields. Ghawar has at most 30 feet of its original 350 foot oil seam. Once the water hits those horizontal producers these fields will collapse almost over night. It is just another sign of what is coming! Neither of them have brought a new field online that has amounted to anything in 60 years.This is sometimes called “the bottom of the barrel”.

  22. onlooker on Thu, 1st Dec 2016 4:21 pm 

    It seems KSA is caught between a rock and a hard place. Its main client having become more self sufficient via fracking/shale and Eurasia becoming more centered around Russia and China. Even as the Petrodollar is losing its dominance. Not only that if Mathew Simmons aka Twilight in the Desert is to be believed. KSA is working practically on fumes now. Its water cut in its reservoirs must be already so high and Ghawar must truly be petering out just about now. Remember Mr. Simmons wrote about this in 2006

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