By Braden Reddall and Reem Shamseddine
SAN FRANCISCO/KHOBAR, Saudi Arabia (Reuters) - Global energy service giants are banking on a boom in Saudi oil and gas drilling over the next few years to revive profits that are being squeezed by overcapacity in the North American market.
Dozens of offshore and onshore rigs are being lined up for drilling in Saudi Arabia in 2014, and service companies are expanding their Saudi operations to meet buoyant demand.
"We have a very close relationship with Saudi Aramco, and the plans that we see for next year are talking about 200 rigs," Gabriel Podskuba, area manager for the eastern hemisphere at steel pipe maker Tenaris SA
Industry sources in the Gulf said at least 160 rigs are currently deployed in Saudi territory and that the world's top oil exporter plans to raise its rig count to 210 by the end of 2014. Aramco
Sources said earlier this year that Aramco was planning a sharp rise in rig use to look for unconventional gas, while increasing oil drilling to help keep its spare production capacity at comfortable levels.
The rigs will be used for exploration, development and maintenance work across the kingdom, the sources said. Aramco is also ramping up drilling in offshore oilfields such as Safaniyah, along with the Arabiyah and Hasbah offshore gas fields.
It is not clear where all the rigs will be deployed because Aramco has yet to issue the tenders.
Aramco is still appraising unconventional gas prospects in the southeast of the kingdom but has already announced plans for a shale-gas-fired power plant in the north.
To rebalance its crude supply mix and extend the lifespan of mature fields, Aramco also plans to increase light sour crude output from two fields - Shaybah and Khurais - by 550,000 barrels per day (bpd) in 2016-2017.
The world's largest oil exporter has been pumping over 9 million bpd since early 2011 to make up for supply disruptions in other countries, and production has exceeded 10 million bpd since July, according to official government figures.
Under pressure to make up for supply losses from Libya, Iran, Nigeria and Yemen over the past few years and to meet growing domestic demand, Aramco is investing heavily to preserve the world's largest spare oil production capacity cushion at more than 2 million bpd.
Saudi Arabia is the only country able to produce much more oil than it needs to. The size of that capacity cushion, which helps dampen price volatility, is a frequent subject of speculation in the global oil market.
"In the past two years alone, we have swung our production by more than 1.5 million bpd in order to address market supply imbalances," Saudi Aramco Chief Executive Khalid al-Falih told the World Energy Congress in South Korea in mid-October.
Saudi government officials fear that very high oil prices could destroy long-term demand for their biggest export product. Saudi Oil Minister Ali al-Naimi reiterated last month that the kingdom has an oil production capacity of 12.5 million bpd.
While Saudi Arabia is already a significant market for many oilfield services companies, the latest ramp-up in activity has caught the attention of the biggest players.
Baker Hughes Inc forecast an "exceptionally strong" year ahead for the Middle East, underpinned by new contracts from the Gulf OPEC heavyweight. It forecasts the international rig count overall to increase by 5 percent to average 1,300 rigs in 2013.
By contrast, it expects the U.S. rig count to fall 9 percent from 2012 to 750 as the oil industry drills about 6 percent more wells per rig.
Halliburton Co. recently won a three-year contract to drill and complete new wells in an existing Saudi field, while rival Schlumberger Ltd. said last week it was transferring more people and equipment to Saudi Arabia to keep pace with the extra workload.
Last Wednesday, drilling contractor Nabors
In offshore drilling, Rowan
Rival Ensco Plc
Roger Hunt, a veteran marketing executive at offshore contractor Noble Corp
"That alone sends an interesting signal," Hunt said. "They have always been opportunistic consumers of rig time."
(Editing by Daniel Fineren and Jane Baird)