Gulf Producers Delay Field Work

Gulf exporters cutting cost, ask for discounts.

Gulf oil producers are delaying some field maintenance until next year to keep production high and reduce costs as they forecast weaker oil prices in 2016, industry sources said.

It was not possible to clarify which fields were affected - information which is highly sensitive.

But it showed that Gulf oil producers aim to keep pumping hard as they expect weak oil prices next year when sanctions on Iran are lifted allowing it to export more to an oversupplied market, the sources said.

They told Reuters that OPEC members Saudi Arabia, United Arab Emirates and Qatar are rescheduling non-essential maintenance work at oilfields originally planned for the last quarter of this year later into 2016 due to low oil prices.

"The non-urgent maintenance is definitely being pushed. We see huge focus on production in Qatar, Abu Dhabi and Saudi Arabia," said one industry source.

"They are delaying to keep production high, if they shut down now they will not produce, and they also have to preserve cash," the source said.

Two more sources also said that Gulf oil producers are pushing forward some of their maintenance plans for oil rigs, wells and pipes that are not critical to production or safety of operations, but declined to give details.

"There is delay. The reason is low oil prices, they are trying to have some control over the cost," another industry source said of Saudi Aramco's maintenance plans this year.

A Gulf industry source said: "Companies are trying to benefit from higher margins now as they expect oil prices to drop next year, when Iran comes back."

Iran will notify OPEC in December of its plans to raise its output by 500,000 barrels per day (bpd), its oil minister said on Saturday.

CUTTING COSTS
The sources said delayed maintenance was also a way to rein in spending, when the work often involves bringing in specialist foreign companies.

"I think what people are doing is spacing out some maintenance, or being smarter about combining maintenance schedules as a way of bring prudent on costs," said one senior oil executive working in the Middle East.

State oil firms Saudi Aramco, Abu Dhabi National Oil Company (ADNOC) and Qatar Petroleum did not respond to enquiries.

One industry source said he had not heard of any upcoming planned maintenance at ADNOC's oilfields and expects production from Abu Dhabi to hold steady in the fourth quarter. The UAE pumped 3 million bpd in September.

Saudi-based sources have said the kingdom's level of crude production was likely to stay around current levels in the fourth quarter as a decline in domestic crude burning for electricity would be offset by rising global demand.

Saudi Arabia pumped 10.225 million bpd of crude oil in September. Qatar's production was 663,000 bpd in September, according to official figures submitted to OPEC.

The collapse in crude prices since last year has prompted oil majors, service companies and even wealthy oil producers to cut spending and shelve some projects.

Even Middle East OPEC producers were reviewing oil investments plans and asking for cost cuts.

Iraq has told foreign companies that they may need to slash development spending next year.

Saudi Arabia's finance ministry is telling government bodies to return unspent money which they were allocated in this year's budget.

Saudi Aramco has said it would renegotiate some contracts and postpone some projects due to falling oil prices. It has asked international oil service companies for 25 percent discounts, industry source have said.

ADNOC has also asked contractors for around a 10 percent discount for some of the maintenance and services they provide, another industry source said.

"They are saying 'lower your prices' for the new contracts, they are not expanding or awarding new projects, it is extremely slow right now," the source said, referring to ADNOC.

"What's my plan for 2016? One word: survival."

By Rania El Gamal