Skip to content Skip to Search
Skip navigation

Oil service company shares dive on Aramco decision

oil $100 oil price Aramco
Saudi Aramco announced on Tuesday that it would not be raising its production capacity as previously planned
  • Saudi Aramco ditches production plan
  • Service companies’ shares fall 10-15 percent
  • Firms remain upbeat about growth

Saudi Aramco’s decision to cancel plans to expand its oil output capacity has resulted in the share price of some top oilfield service companies taking a sharp dive. 

Shares in firms including SLB, Weatherford and Saipem tumbled by 10 to 15 percent on Tuesday before regaining some ground.

State-run Aramco, the largest oil company in the world, said on Tuesday that it had been asked by the energy ministry to ditch a plan to ramp up its maximum sustainable production capacity from 12 million barrels a day (bpd) to 13 million bpd by 2027.

The plan to increase the long-term productivity of the Safaniya field – the world’s largest offshore oil field – will probably be the most affected.

Houston-based SLB reaffirmed its financial guidance on Wednesday despite its over 7 percent loss the day before.

Olivier Le Peuch, SLB CEO, said the firm would continue working closely with Saudi Aramco. “Our understanding is that all ongoing oil and gas projects remain intact and that only two offshore oil increment projects not yet started will be suspended,” he added in a statement. 

“Our forecast for significant growth for 2024 in the kingdom remains intact,” Le Peuch said.

He noted that SLB activities in Saudi Arabia are weighted toward onshore and the expanding gas market.

Saipem slips

Shares in the Italian energy contractor Saipem plunged 11 percent, as investors were troubled that Aramco’s decision could reduce demand for the company’s services in the region, in addition to an incident involving one of its pipe-laying vessels in Australia. 

In 2020, Saipem and Aramco signed a 12-year agreement covering onshore engineering and construction activities.

Halliburton, the US oilfield services company, predicted a strong increase in its Middle East activity during its latest earnings call. It dropped 9 percent before regaining some ground. 

Lorenzo Simonelli, CEO of Baker Hughes, told Bloomberg that he doesn’t see any long-term changes to Aramco’s production policy.

“I think they will go forward with the capacity increases that they’ve said, but to reassess timing and look at the situation is clearly understandable.”

Without increasing its output, Saudi Arabia still has three million bpd of spare capacity, as it has curbed its production to nine million bps as part of Opec+ policy to stabilise crude prices in the context of slowing global demand and increased supply from non-Opec producers. 

“It is a wait and see game to see whether this policy will stick or if it is just down to current market dynamics,” said Matt Stanley, energy expert at data and analytics Kpler.

Latest articles

Dubai South Aldar logistics warehouse

Dubai South and Aldar to work together

The state developer Dubai South and the Abu Dhabi-listed Aldar Properties will jointly develop facilities in Dubai South’s logistics district. The new joint venture will offer build-to-lease and build-to-suit facilities. Aldar will lead the design, development and delivery of the new facilities, starting with a Grade A logistics facility with 24,000sq m of gross floor […]

WTO director general Ngozi Okonjo-Iweala said Iraq and Lebanon both want to resume talks and the organisation will 'try to go as fast as possible'

Iraq and Lebanon face long wait to join WTO

Iraq and Lebanon have indicated a desire to resume talks aimed at joining the World Trade Organization (WTO), but history suggests the two could be in for a long wait. To join the WTO, a government has to bring its economic and trade policies into line with the organisation’s rules and principles and negotiate with […]

DP World's terminal at Dakar in Senegal, one of the countries in the first phase of the decarbonisation project

DP World and Masdar link up for project to decarbonise ports

Two of the UAE’s biggest companies have formed a partnership that aims to decarbonise ports in the Middle East and Africa. Logistics group DP World has signed a three-year agreement with clean energy giant Masdar. Their initial focus will be on ports in Saudi Arabia, Senegal and Egypt. The companies will identify the best sites […]

PIF enlists global banks for second debt market issue

Saudi Arabia’s Public Investment Fund (PIF) has hired banks for its upcoming Shariah-compliant dollar bond, marking its second venture into the bond market this year. The sovereign fund, which manages over $700 billion in assets, has mandated Goldman Sachs, HSBC and Standard Chartered as joint global coordinators, Reuters reported, citing a PIF document. Investor meetings […]