Analyst Pin-board The drilling market is gaining strength
- Demand for drilling rigs worldwide, especially in the Middle East, has increased sharply.
- There is a shortage of rig supply as there has been no newbuild rig in the last few years while the older rigs have left the market.
- The rig supply-demand gap is forecasted to narrow until mid-year 2024, which will support the global rig day rate as well as in Southeast Asia. Currently, the rig day rates and utilization rates in Southeast Asia are higher compared to the pre-Covid period.
The Middle East region witnesses a rising rig demand
During the pandemic, the lack of infrastructure investment and the development of new oil and gas projects has dramatically affected the oil production of countries in the Middle East. Amidst the high oil prices in the past 2 years, countries in the region - especially Saudi Arabia and the UAE- have plans to push up the exploration and development of oil projects. For Saudi Arabia, production is expected to increase from 11.5 mn bpd to 12.3 mn bpd in 2025 and 12.7 mn bpd in 2026 and 13 mn bpd in 2027. While the UAE's production volume will increase from 3.4 mn bpd to 5 mn bpd by 2030.
With the ambitious plan, these two countries have continuously implemented the M&A drilling rigs worldwide and increased their demand for rigs. According to IHS, Saudi Arabia is the main growth driver in the Middle East in term of rig demand. It is estimated that by the end of 2023 and the beginning of 2024, the rig demand is anticipated to surge by 60-80%, correlating to around 40 units, in Arab Saudi.
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