Saudi Arabia’s offshore drilling expansion

Saudi Arabia

Mohamed Hegazi, CEO of ARO Drilling, talks to The Energy Year about Saudi Arabia’s exponential growth track and how the drilling sector has prepared to increase its production capacity while also increasing localisation. ARO Drilling is a joint venture between Aramco and Valaris established to localise and deliver offshore drilling services.

What are your views on Saudi Arabia’s exponential growth track?
In general, there are large growth ambitions in the kingdom. The economy is genuinely booming. There’s a significant transformation happening. Localisation is important, but now there’s an even greater strategic driver: securing the local supply of critical resources such as energy, food and medicine.
Consequently, there’s a significant push to ensure the energy sector continues to flourish. One of the main components of this sector is offshore oil and gas production.

How has the drilling sector prepared to increase its production capacity while also increasing localisation?
To increase production capacity, you need an adequate number of rigs. An initiative has been established to achieve this in partnership with local rig manufacturers and operators. ARO and SANAD play significant roles on the operations side. ARO handles offshore operations, while SANAD is focused on onshore operations.
Both entities are part of the competitive Saudi energy sector initiative that includes two manufacturing partners, International Maritime Industries (IMI) and Arabian Rig Manufacturing (ARM). IMI specialises in building offshore rigs and vessels and is the largest shipyard in the MENA region, while ARM focuses on land rig construction. This comprehensive setup aims to promote the kingdom’s self-sufficiency.

How is ARO Drilling preparing to support Aramco’s ambitious offshore production increase?
Our strategic plan involves adding 20 rigs to our fleet over the next decade. This will potentially lead to a fleet size of over 30 rigs. Our fleet, as of Q2 2023, consists of 15 rigs, but we expect to increase this number to 18 by early 2024.
Our commitment to commissioning 20 in-kingdom-built rigs over the next 10 years will ensure the stability and sustainability of our operations.

Where does your strategy stand as of Q3 2023?
Our new rigs will be constructed by IMI. We plan to have the first rig in Q3 2023, followed by the second in Q4 2023. The third and fourth rigs will be fully built at IMI, but their completion is expected to take two to three years. These rigs are the first offshore rigs tailored specifically for offshore drilling in Saudi Arabia.

What are your growth expectations for the next few years, and how are you planning to finance this growth?
Over the past few years, ARO has been experiencing growth and expansion. As we enter a new phase of growth, our focus is on enhancing the efficiency of the company to ensure favourable returns for both shareholders.
Regarding financing, we have a straightforward approach. We aim to fund the construction of new rigs through our existing cash reserves and capital markets. Shareholders are enthusiastic about collaborating with us for several reasons. With our growth strategy and long-term investments, we demonstrate that we will make a valuable return on shareholders’ investment and are here to stay for many years.

What is the company’s local content development strategy?
One of our key accomplishments has been crewing our rigs with a significant number of Saudi nationals, surpassing a 70% localisation rate. Moving forward, our primary challenge is to facilitate the progression of Saudi nationals into higher managerial positions within the company.

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