Saudi Aramco’s Drilling and Workover (D&WO) marked a major turning point in late 2016 with the signing of two new drilling joint ventures (JVs) with Nabors and Rowan.
Within a few months, the JVs — an onshore JV between Nabors and Saudi Aramco, and an offshore JV with Rowan — will become fully operational, providing Saudi Aramco with the drilling services it needs while also transforming and industrializing the economy and creating thousands of local jobs. Saudi Aramco will have 50% ownership in both JVs.
If all of this sounds familiar, it may be because Saudi Aramco has aligned itself fully with the Kingdom’s own National Transformation Program, as spelled out in the Saudi Vision 2030 plan last year. Together, Saudi Aramco and the Kingdom will ensure that every business activity initiative will not only be good for business, but will also strengthen the economy and the sustainable growth of the Kingdom.
“Our strategy looks to leverage the scale of our drilling activities to create two national champions that will enable the development of a dynamic energy sector,” said AbdulHameed A. Al Rushaid, executive director for D&WO. “The drilling JVs are anchor projects that grew out of Saudi Aramco’s upstream oil field services and equipment industry strategy which supports the wider development and localization of industries such as rig and rig equipment manufacturing and casting and forging, as well as the Maritime manufacturing complex.
Gaining critical advantages
With these new JVs, Saudi Aramco gains a number of critical advantages that will help to secure the company’s position as a global leader in energy, and the Kingdom’s position as a hub for energy services. Not only are these JVs commercially attractive and profitable, but they help Saudi Aramco to meet the objectives of its Competitive Saudi Energy Sector Strategy, including the following:
- Working with our partners, Saudi Aramco can maintain best-in-class technologies that make the JVs role models in the drilling service industry.
- The long-term commitment between Saudi Aramco and the JVs will provide a competitive marketplace.
- We can guarantee a security of supply of drill rigs in the Kingdom, available when needed.
- With the drilling JVs investing $6 billion to $7 billion, we are promoting local content by creating a steady demand for new drill rigs built in the Kingdom by Saudi Aramco’s manufacturing JVs.
- We are promoting Saudization of the workforce, with an additional 5,000 jobs at the two JVs and the creation of thousands of indirect jobs in support industries in rig manufacturing, forging and casting, and related service sectors.
“This strategy is a major milestone and a step change in the way we do business in Saudi Arabia,” said Al Rushaid. “We want to create a national drilling champion to meet the ever-increasing demand for the company’s upstream drilling activities. We also want to sustain the company’s position as a global leader and as the most reliable supplier of energy.”
Driving investment, job creation
When the JVs were announced as part of Saudi Aramco’s In Kingdom Total Value Add Forum 2016, president and CEO Amin Nasser explained how investment in local industry not only helps Saudi Aramco control costs, but the company also uses its annual spending activities to strengthen the Saudi economy.
“These investments are part of a wider program to leverage our core activities to help enable the sustainable development of the Kingdom’s economy through diversification — and the development of an internationally competitive and dynamic local energy sector, supported by national champions,” Nasser said.
Transforming the way we do business
When it came time to select JV partners, it was clear that both Nabors and Rowan were dominant players in the drilling services field.
Nabors, which has operated in Saudi Arabia for more than four decades, owns and operates the world’s largest land-based drilling rig fleet and is the largest drilling contractor in Saudi Arabia. Over the past 15 years, Nabors has also directly created thousands of jobs for Saudi citizens.
Rowan is a global provider of jack-up rigs and ultra-deepwater drillships, with operations in the Arabian Gulf, Gulf of Mexico, and the North Sea. Currently, Rowan has the largest offshore drilling fleet in Saudi waters, and with the creation of the new offshore drilling JV, that position will grow even more. Rowan’s history spans more than 90 years.
Currently, a JV setup and readiness team has been formed and is working toward launching the JVs in the second quarter of 2017. The greatest challenge is to work with our JV partners to ensure a seamless transfer of assets without interruption to Saudi Aramco D&WO operations.
Al Rushaid said he is “very proud that the two JV deals have been finalized. “This is going to be an investment in the Kingdom for generations to come,” he added. “The deal will have a positive impact on job creation, as companies will receive graduates from the Saudi Arabian Drilling Academy and Saudi Petroleum Services Polytechnic to man the new rigs. In the short-term, the JV rigs will operate in the Kingdom, and help the company to meet its needs for drilling services. And in the long-term, we can begin to see these two companies as regional and international drilling companies that make Saudi Arabia a hub for energy services.”