A crude fall of fortunes.

Byline: Syed Rashid Husain

THE oil industry is in the midst of a crisis, taking hits all around. The number of rigs is going down, projects are getting stalled and people are being laid off amid a raging pandemic.

Saudi Arabia, a long term player, had been striving in the past to keep spare capacity - and at a cost to itself - so as to maintain stability in the markets and be able to respond to any urgent demand. To maintain its leadership role in the sector, Riyadh felt keeping spare capacity a necessity. Now it seems to be rethinking the strategy. Harsh economic conditions have compelled Saudi Arabia to be cautious in its approach.

As per Bloomberg, Saudi Aramco, the world's largest oil exporter, has idled two offshore drilling rigs and has suspended development work on some of its crude and natural gas deposits. Early May, offshore drilling contractor Noble Corporation plc said that its jack-up rig Noble Scott Marks, located offshore Saudi Arabia, will be suspended at the request of its client for up to one year. Later, Shelf Drilling reported, it had received a notification from Aramco to suspend operations of the High Island IV jack-up rig for up to 12 months.

Aramco has also announced slashing capital expenditure for this year to between $25 billion and $30bn from the initial target of $40bn, while putting 2021 spending under review. As a consequence, expansion projects worth US$18bn have been postponed in recent weeks. A project to expand oil and gas output at the Marjan and Berri fields has been deferred for a period of six months to a year. As per the International Energy Agency, the planned expansion would have increased oil-production capacity at the fields by 550,000 barrels per day (bpd) to a combined 1.35 million bpd. The project was also projected to give a boost to gas flows by 2.5bn standard cubic feet a day, sending gas by pipeline from Marjan to an onshore processing plant at Berri for domestic use.

In the meantime, Aramco has also started laying off hundreds of employees - mostly foreign staff - across several divisions in response to the oil price crash. Although Aramco annually revises down its staffing, yet this year the job cuts are larger than before, Bloomberg reported.

And Aramco is not alone in its push to slash expenditure. Other producers are also reacting to the emerging...

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