The Saudi government’s order for Aramco to suspend work on expanding its oil production capacity from 12 to 13 million bpd will not hit demand for oilfield services, according to analysts cited in The National.
While analysts expect the suspension to affect expansion work at two offshore fields – Manifa and Safaniya – they remain upbeat that there will be significant growth opportunities for oilfield service companies in 2024 and beyond.
The Saudi state ordered Aramco to stop work on expanding its maximum sustainable capacity to 13 million barrels daily at the end of January.
The company said in a statement at the time that its maximum sustainable capacity was determined by the state under a law from 2017 and added that it would update its capital spending plans for the year in accordance with the new government directive in March when it announces its 2023 financial results.
Saudi Arabia’s state oil company said it was working to boost its production capacity to 13 million barrels daily back in 2021.
The capacity expansion was scheduled to come fully online by 2027 and come on in chunks, chief executive Amin Nasser said at the time.
Yet concern about the possibility of extended weak demand for oil may have driven the decision to reverse the capacity boost plan, The National wrote, citing analysts.
The report also mentioned factors regularly cited as responsible for lower oil demand projections, such as EV sales and a generalized reference to renewable energy.
“We think the market overreacted and the jack-up rig count will likely remain stable to modestly up in 2024, and other projects, including Marjan, Berri and Zuluf, will continue to move forward,” Evercore ISI managing director James West told The National.
“We remain confident the long-duration offshore and international upcycle will continue and drive significant growth opportunities for oilfield services companies in 2024 and beyond,” West also said.