Milestone in energy sector development

SAUDI Arabia’s state oil company is setting up joint ventures with two international drilling companies as part of an effort to boost economic development in the Kingdom.

Saudi Aramco said the landmark deals signed on Wednesday with Nabors Industries and Rowan Companies will focus on onshore and offshore drilling.

The joint ventures will include Nabors’ existing Saudi onshore and Rowan’s existing offshore operations. The companies did not provide financial terms for the partnerships, but said they will ultimately invest $6 billion to $7 billion to buy drilling rigs made in Saudi Arabia.

The company said the new joint ventures mark a major milestone toward the development of a competitive Saudi energy sector, as encapsulated in the company’s In-Kingdom Total Value Add (iktva) program and Saudi Vision 2030.

Amin H. Nasser, Saudi Aramco president and CEO, said: “We look forward to successful partnerships with Nabors and Rowan to drive a best-in-class drilling industry, provide opportunities to manage drilling costs through increased collaboration, drive localization of the energy value chain, and enhance in-Kingdom technical capabilities.

“These initiatives represent an unprecedented new large scale model of collaboration, with substantial value creation for both Saudi Aramco and its partners through a closer working relationship. These investments are part of a wider program to leverage our core activities, to help enable the sustainable development of the Kingdom’s economy through diversification, and the development of an internationally competitive and dynamic local energy sector, supported by national champions.”

The joint ventures with Nabors and Rowan were announced as part of Saudi Aramco’s iktva Forum 2016, which marks its one year anniversary.

In December 2015, Saudi Aramco launched iktva, a major localization initiative designed to drive domestic value creation and maximize long-term economic growth, diversification, job creation and workforce development, to support a rapidly changing economy. Iktva aims to achieve 70 percent localization of all spending on goods and services, and to enable 30 percent export of Saudi energy sector products by 2021.

The onshore and offshore drilling joint ventures will invest $6 billion to $7 billion to purchase onshore rigs and offshore jackups, manufactured in Saudi Arabia by Saudi Aramco manufacturing joint ventures, which are in the process of being set up. The joint ventures will create an additional 5,000 jobs with an aim to achieve 80 percent Saudization levels. It is anticipated that the joint ventures will commence operations in the second quarter of 2017.

The onshore joint venture will combine Nabors and Saudi Aramco’s existing onshore drilling operations in Saudi Arabia, with the joint venture covering segments of our current and future onshore oil and gas fields in the Kingdom. It will initially own 15 contributed rigs (five from Saudi Aramco and 10 from Nabors) and manage the remaining Nabors-owned rigs currently in Saudi Arabia, for a total fleet of 41 rigs. The total value of initial contributions from both partners through domestic operations, assets, equipment and capital is estimated at over $1 billion. In addition, the joint venture has committed to a substantial order of newbuild rigs over a 10-year period from an in-Kingdom manufacturing joint venture.

The offshore joint venture will combine Rowan and Saudi Aramco’s existing offshore drilling operations in Saudi Arabia, with the joint venture covering segments of current and future offshore oil and gas fields in the Kingdom. It will initially own seven contributed jack-up rigs (two from Saudi Aramco and five from Rowan) and will manage an additional four Rowan owned jack-ups currently in Saudi Arabia. The total value of initial contributions from both partners through domestic operations, assets, equipment and capital is estimated at over $1.2 billion. In addition, the offshore joint venture has similarly committed to acquire and operate newbuild jack-ups over a 10-year period from an in-Kingdom Maritime complex.