Oil & Gas Oil service company shares dive on Aramco decision By Eva Levesque January 31, 2024, 2:09 PM 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. Aramco awards $3.3bn contract for new gas facilities IMF predicts 2025 rebound for Saudi GDP Middle East success pumps up Halliburton results 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.