Middle East Brings Solace to Oil Services Companies

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August 25, 2015

GMS Endurance. Photo: Gulf Marine Services


By Angelina Rascouet and Manisha Jha

(Bloomberg) — Demand for oil services is rising in the Middle East even as the rout in crude prices forces major producers to shelve costly projects elsewhere in the world.

Demand from the region is “better than ever” on increasing production by clients, Duncan Anderson, chief executive officer at Abu Dhabi-based Gulf Marine Services Plc, said Tuesday. The company provides support vessels for offshore oil production projects. London-based Petrofac Plc, another oil-services provider, said it too got a boost from industry investment in the Middle East.

While the collapse in oil prices by more than half since last year has prompted producers to fire thousands of workers and cancel costly investment projects around the world, the Organization of the Petroleum Exporting Countries’ biggest members have continued to pump near record levels to defend their market share against lower-cost producers.

“Given the fact that our major national oil company clients particularly in the Middle East are continuing to invest, we do have a record level of work loads,” Tim Weller, chief financial officer at Petrofac, said in a conference call on Tuesday.

Almost 80 percent of Petrofac’s first half revenue originated in the Middle East and Africa, it said. The company secured an engineering, procurement and construction project worth $780 million in Kuwait last month as the Kuwait Oil Company aims to increase crude production over the next five years.

While the number of oil rigs in the U.S. has more than halved since the start of the year, three out of five OPEC Gulf producers saw their rig count rise over that same period, according to Baker Hughes Inc. data. Baker Hughes doesn’t track rig counts in Iran as the country remains under international sanctions over its nuclear program.

Oil production from those five OPEC Gulf nations — Saudi Arabia, Iraq, Kuwait, Qatar, and the United Arab Emirates — rose by almost 9 percent to 21.1 million barrels a day in July since the start of the year, according to data compiled by Bloomberg.

“Even though we are bidding for contracts in South East Asia and West Africa, the largest demand is in the Middle East,” Gulf Marine’s Anderson said in a phone interview. “We continue to see increased production in the Middle East. Clients are pushing to get more market share there.”

Demand in the Middle East and North Africa remained particularly “buoyant,” the company said in its earnings statement.

©2015 Bloomberg News

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