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Saudi Aramco Suspends Two Oil Contractors

Aramco has served notices of temporary suspension to two oilfield service contractors, Zawya has reported, citing the companies.

According to one of them, Borr Drilling Limited, the suspension will begin this month and last for a year, the report said. Borr Drilling operates the Arabia I rig in Saudi Arabia and said it would look to move the rig elsewhere for the duration of the suspension.

The other company, Valaris, has also received a suspension for one rig, out of a fleet of 19 that its Saudi subsidiary operates in the kingdom. The contract for the rig was ending at the end of this year, the report noted.

Aramco earlier this year said it had scrapped plans to expand production capacity to 13 million barrels daily. The company said in January that the state had ordered it to stop work on the capacity expansion and keep the maximum sustainable capacity at 12 million bpd.

The expansion plan was announced back in 2021 and it was supposed to be completed by 2027. Since then, however, price movements have not always been in a favorable direction for Aramco and its owners.

In reaction to the price slump from 2023, the Saudis and their partners in OPEC+ affected additional production restrictions, which are already bearing fruit, especially in combination with Middle Eastern tensions that traditionally have a bullish effect on prices.

A month later, Italy's Saipem said that it expected the decision to result in 20% lower orders from the Saudi giant.

Meanwhile, Aramco officials have on numerous occasions warned that the world's oil production capacity is insufficient in light of expected demand trends, and more investment was needed to ensure a balance between demand and supply.

In February, Aramco's chief financial officer said that Due to the natural decline in operating fields, as many as 6 million barrels per day of global oil production is being lost every year and needs to be replaced-which was not happening.

By Charles Kennedy for

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Charles Kennedy

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  • Mamdouh Salameh - 8th Apr 2024 at 4:27am:
    Saudi Arabia is signalling furtively to the world that it is facing a serious production decline and that its giant fields that have supporting the bulk of its production so far are depleting fast.

    1- Its voluntary production cut of 1,0 million barrels a day (mbd) announced in June 2022 and extended many times since despite periods when Brent crude even hit $90 a barrel.

    2- Saudi Aramco scrapping earlier this year plans to expand production capacity to 13 mbd in order to keep the maximum sustainable capacity at 12 mbd. The truth of the matter is that Saudi is neither capable of achieving a 13.0 mbd capacity nor does it have or ever had a 12.0 mbd capacity.

    3- Aramco serving notices of temporary suspension to two oilfield service contractors: Borr Drilling Ltd and Valaris.

    For more than seven decades 90% of Saudi crude production has been coming from five aging and fast-depleting giant oilfields (Ghawar, Safaniyah, Shaibah, Khrains and Zuluf) discovered 75 years ago and needing billions of gallons of water to continue producing.

    My estimate of Saudi production currently ranges from 6.0-6.5 mbd. Saudi Arabia taps its oil inventory to make up its declining exports. By 2030 Saudi Arabia could only export 400,000 barrels a day (b/d) and would have virtually ceased to remain an oil exporter.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
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