A dynamic drilling equipment market

Saudi Arabia

Mohamed Rafik, Varel Energy Solutions’ region director for Saudi Arabia and Bahrain, talks to The Energy Year about key factors driving the drilling equipment market in Saudi Arabia and challenges faced by manufacturers. Varel Energy Solutions manufactures downhole drilling and completion products.

What are the key factors driving the drilling equipment market in Saudi Arabia?
The drilling equipment market grew considerably between 2022 and 2023 and looks positive through 2025. Growth in this market is primarily driven by offshore developments and the exploration of new resources. This is clear from the number of new offshore rigs that Saudi Aramco is attracting to the Saudi market, and the total number of active drilling rigs in the kingdom has reached a recent high.

What are the main challenges for drilling bit manufacturers as they grow in the Saudi market?
The local drill bit manufacturing sector in Saudi Arabia is highly competitive, as it is performance oriented rather than cost oriented. Saudi Aramco has a state-of-the-art database that compares all suppliers based on their performance, which is unique compared to other energy markets around the world.
Due to the complexity, scale and local support required to perform effective operations, Saudi Arabia is structured as a stand-alone region for Varel. This ensures we have the necessary focus and resources for long-term success. The drilling environment is vast, with different challenges across the region.
Drilling requires a strong focus on application engineering and understanding these characteristics. Cutters are one of the main components of a polycrystalline diamond compact (PDC) bit. We apply daily innovative changes to drive improved performance in the bit.
Engineering creativity is the secret to adding value to bit performance. It takes work to develop the right recipe of quality and cost efficiency that Saudi Aramco demands for operations while also driving ahead with improving our local content.

How has Varel Energy Solutions’ footprint in Saudi Arabia’s drilling bit manufacturing sector evolved over the years?
We have been in Saudi Arabia since 2002, but we initially had an agent through which we were selling our products manufactured outside of the country. However, since 2017, it has become clear that in-kingdom total value add is a must and a key pillar to our growth in the kingdom.
We subsequently established a joint venture with the Arabian Establishment for Trading & Shipping (AET), which gave birth to Varel Arabia. We decided to invest in our local presence by building an in-country manufacturing facility in 2019, which we are extremely proud of today. We will continue to invest in our capabilities not only in Saudi Arabia but also in neighbouring GCC countries.
We produce mainly drill bits, both roller-cone and PDC bits, at our Varel Arabia facility. The facility produces approximately 750 bits per year and is also one of the leading suppliers of primary cementing equipment. We manufacture in-kingdom along with our partner Energy Projects Support Company, which has a separate facility.
We expect to grow by 35% year on year from 2022 to 2023 and increase our market share from 5% to 12% by the end of 2023.

How has the investment climate evolved in Saudi Arabia in recent years?
The investment climate in Saudi Arabia has moved significantly given the investment facilities the country is offering in line with Saudi Vision 2030. Moving capital has become easier, labour laws are attractive to investment, and local contracts are supportive of long-term investments and strategic engagements.
The benefits of the Saudisation initiatives are clear, and they encourage one to invest in hiring and training Saudi talent in-kingdom and also globally.

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