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Saudi Aramco to Keep Same Number of Oil, Gas Rigs

Source: Reuters 2/3/2016, Location: Middle East

State oil giant Saudi Aramco is expected to keep the same number of its oil and gas drilling rigs this year despite weak oil prices, industry sources said.

Saudi Aramco has asked oilfield service companies and suppliers again this year for discounts due to a slump in global oil prices. Aramco managed to make big savings last year on drilling costs, the sources say.

"It is a normal situation in drilling activity," said one of the sources who declined to be identified.

Saudi Aramco is now operating around 212 oil and gas rigs; which is a level it has kept steady since 2015. That number does not include water rigs.

"They want to maintain activity but reduce costs, there might be some movements by replacing offshore rigs to land or oil to gas," said a second source.

"Most likely it will stay flat this year, maybe the contracts that expire will not be renewed, but eventually activity will pick up because of the unconventional gas; some of that may move to development phase and that requires more rigs," said a third source.

Saudi Aramco declined to comment.

Saudi Arabia has maintained a high level of oil production at above 10 million barrels per day for most of 2015. A Reuters survey showed that the world's biggest oil exporter pumped 10.25 million bpd in January.

Aramco is continuing to invest in oil and gas production capacity despite cost-cutting due to low oil prices, the company's chairman Khalid al-Falih said last week.

Aramco's plans starkly contrast with governments and oil firms outside the Gulf region, which have been reducing capital spending sharply in response to financial pressures.

U.S. energy firms cut oil rigs for the sixth straight week, data showed on Friday, and were expected to shed more with major U.S. shale oil companies slashing spending plans after crude prices hit 12-year lows.

Last year, industry sources said Aramco may raise the number of its oil and gas drilling rigs to as high as 250 in 2016 but that plan depended on oil prices which last month fell below $30 a barrel for the first time since April 2004.

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