Research estimates that the capital expenditures of national oil corporations in the Gulf Cooperation Council will total USD 115 billion in 2024, an increase of 5% over 2023.
S&P’s Global Ratings’ research, however, does not account for the possibility of a major increase in spending due to current plans for development, including the North Field West Project in Qatar.
In line with the current policy of the Organisation of the Petroleum Exporting Countries and its allies, or OPEC+, the report highlighted that Saudi Arabia’s planned output cuts are likely to reduce demand for drilling platforms, operating ratios, average daily production rates, and profitability among regional drilling companies, especially in the Kingdom, even though the growth in capital expenditure is modest.
“We estimated that the debt to EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) of rated and publicly listed drillers based in GCC countries could increase by approximately 1x on average after stress-testing the impact of a hypothetical 15-20 per cent loss of total rig demand in the region on GCC drillers,” according to S&P Global Ratings Credit analyst Rawan Oueidat.
“At this moment, we believe that the headroom for drillers’ ratings could decrease, but we do not anticipate any immediate pressure on ratings,” Oueidat continued.
After Saudi Aramco decided to halt its plan to enhance the Kingdom’s maximum production capacity, the agency expressed concerns about the future of capital investment in other GCC oil and gas-producing nations.
Notwithstanding these reservations, the region’s overall oil capital spending is anticipated to stay high because of Qatar’s and the UAE’s continued expansion ambitions.
However, the rate and scope of investment are anticipated to affect drilling companies, whose business models primarily depend on corporate capital expenditures, as well as oilfield service providers and the entire value chain.
According to the US Energy Information Administration, the UAE’s Abu Dhabi National Oil Co. plans to boost its oil production capacity from 4 million barrels per day as of February 2024 to 5 million barrels per day by 2027.
By 2030, Qatar hopes to increase its liquefied natural gas production capacity from the present 77 million tonnes per year to 142 million tonnes. According to the estimate, the average price of oil will be USD 85 per barrel for the rest of 2024 and USD 80 per barrel for 2025.
Additionally, it implied that the planned production cuts and geopolitical concerns of OPEC+ will bolster prices and improve the cash flows of Gulf oil corporations.