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Russia Gears Up To Boost Oil Production In July

Russia Gears Up To Boost Oil Production In July

According to export schedules and…

Saudi Aramco Sets Up Drilling JVs With Foreign Firms

Offshore Drilling

Saudi Aramco said on Wednesday that it had signed joint venture agreements with Nabors Industries (NYSE:NBR) and Rowan Companies (NYSE:RDC) for onshore and offshore drilling, respectively.

The joint ventures would invest between US$6 billion and US$7 billion in buying onshore rigs and offshore jackups made in Saudi Arabia by Saudi Aramco manufacturing joint ventures. The Saudi oil giant expects the joint ventures to begin operations in the second quarter next year.

The onshore joint venture with Nabors will see initial investment by the two companies of more than US$1 billion in the form of domestic operations, assets, equipment and capital. At the start of the operations, the joint venture would own 15 rigs: five from Saudi Aramco and 10 from Nabors. The venture would also manage the other Nabors-owned rigs currently in Saudi Arabia, for a total fleet of 41 rigs, Aramco said.

As for the offshore joint venture, the initial investment by both partners via domestic operations, assets, equipment and capital is expected are more than US$1.2 billion. The joint venture would own in the beginning seven contributed jack-up rigs—two from Saudi Aramco and five from Rowan—and would manage another four Rowan-owned jack-ups currently in Saudi Arabia.

Related: Canada’s Oil Exports Are Dead Without U.S. Shale Production

Sometime within the next two years, Saudi Aramco’s planned IPO would become the biggest IPO in history. Aramco says it has more than 260 billion barrels of recoverable reserves – 10 times what Exxon has. In addition, Aramco has marginal recovery costs for each barrel of around US$6 each – perhaps the lowest in the world.

Aramco likely has a value of around US$3 trillion, so even selling 5 percent of the company will require finding investors willing to shell out around US$150 billion. The IPO would fetch huge resources which, ideally, could be used to start diversifying the Saudi economy away from oil.

By Tsvetana Paraskova for Oilprice.com

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