(Repeats March 20 item; no changes to text)
By Rania El Gamal and Reem Shamseddine
DUBAI/KHOBAR, Saudi Arabia, March 20 As the
global energy industry stares transfixed at a spectacular drop
in U.S. rigs, Saudi Arabia is ramping up the number of machines
drilling for oil and gas despite a sharp fall in the price of
Industry sources and analysts say the OPEC kingpin is
looking beyond the halving of global oil prices since
June 2014 to a time when crude could again be in short supply.
Riyadh is therefore keen to preserve what is known as its
spare capacity - the kingdom's unique ability to raise oil
output quickly at any given moment.
But to achieve that, Saudi Arabia has to drill much more
than in the past, after boosting output to record levels to
compensate for global supply outages in the past four years.
"The Saudis are probably worried about everyone else
reducing capex as a result of low oil prices and about non-OPEC
output falling off a cliff at some point. We all know that
supply disruptions are unpredictable but they are certain," said
Gary Ross, executive chairman of New York oil consultancy PIRA.
"The increase in Saudi rig numbers is like a signal to the
industry - let's be rational. We will need supply growth in the
State oil giant Saudi Aramco used a record-high 210 oil and
gas rigs in 2014, up from around 150 in 2013, 140 in 2012 and
some 100 in 2011, according to previous industry estimates.
Amin Nasser, Aramco's senior vice-president for upstream
operations, said this month his firm had yet to decide whether
to increase the rig number in 2015 from the 212 currently in
But data shows the numbers are still rising.
Excluding non-U.S.-registered rigs such as Chinese or
Russian, February 2015 saw a total Saudi rig count of 155, up
from 150 in January and 146 in December, according to data from
OPEC and U.S. oil services company Baker Hughes. Since
2010, the number of U.S.-registered rigs has doubled from 67.
Sadad al-Husseini, a former senior executive at Aramco and
now an energy consultant, said the rise in the Saudi oil rig
count had been evolving over a long period.
"You need to drill more wells if you are producing 10
million barrels per day and maintaining your spare capacity," he
"It is also a natural phenomenon in the oil business, that
the more you produce, the more you deplete your reserves and the
more rapidly your field capacity declines. You need to drill
more wells more frequently, simply to maintain production
FOCUS ON GAS
Maintaining Saudi Arabia's spare-capacity cushion for oil is
The country is effectively investing in something it cannot
monetise immediately, but it sees the strategy as a pillar of
its stature as the most important global oil player and a G20
In 2008, Oil Minister Ali al-Naimi said production capacity
would rise to 15 million bpd from 12.5 million but the plan was
put on hold after the global financial meltdown of late 2008 saw
oil plunge below $40 a barrel.
Subsequent events such as Libya's 2011 civil war tested the
Saudi ability to ramp up output to help soothe global supply
outages and showed that spare capacity could not be eroded if
Riyadh wanted to continue playing a key role.
Saudi Arabia's refusal to cut output last year has played a
part in the most recent oil price slump, as Riyadh fights to
maintain its market share against competing sources of crude.
The OPEC heavyweight has been pumping more than 9 million
bpd since mid-2011, up from 8.1-8.3 million for most of
To ease pressure on its ageing giant fields, Ghawar and
Abqaiq, Aramco launched the Khurais and Manifa fields with total
capacity of more than 2 million bpd.
It plans to increase output from onshore fields - Shaybah
and Khurais - by 550,000 bpd by 2017. It has also been ramping
up drilling in offshore fields such as Safaniyah.
The projects should allow Aramco to preserve the world's
largest spare-capacity cushion at more than 2 million bpd.
For 2015, industry sources estimated Aramco would deploy at
least the same number of rigs as in 2014. Aramco declined to
comment for this report.
Over the past two years, Saudi production has sometimes
exceeded 10 million bpd in summer months as crude is burnt
locally for power generation and new refineries.
That forced Aramco to put more emphasis on gas exploration,
as higher gas output would help preserve spare oil capacity.
"Aramco's focus now is more on gas, so they have been moving
some of their oil rigs to gas rather than terminating the
contract and paying a penalty," an oil industry executive in
Saudi Arabia said.
(Additional reporting by Dmitry Zhdannikov in London; Editing
by Dmitry Zhdannikov and Dale Hudson)