Riyadh leads Saudi real estate surge with 18% rise in office rents

RIYADH: Saudi-based Arabian Drilling and the UAE-headquartered Shelf Drilling have entered three global tenders as part of their strategic alliance to expand international operations. 

The partnership, formalized through a memorandum of understanding signed in early February, seeks to leverage Arabian Drilling’s fleet of rigs alongside Shelf Drilling’s extensive expertise to accelerate global expansion and unlock new market opportunities. 

Talking to Arab News, Ghassan Mirdad, CEO of Arabian Drilling, emphasized that the partnership aligns with the company’s long-term ambitions to expand beyond the Kingdom. 

“When we go back in time to when we were listed, part of our strategy was to grow outside of Saudi Arabia; it was clearly the intention to grow in the land market, not the offshore,” he said. “However, with the suspension of rigs, we had to accelerate the expansion out of Saudi Arabia.” 

The alliance provides Arabian Drilling with the necessary framework to establish a presence in global markets without having to build operations from scratch. “And this (alliance) is the license to operate outside of Saudi,” Mirdad added. 

He further underscored the increasing demand for offshore drilling worldwide. “Today, I can easily name on top of my head four or five countries that are in desired need of offshore jack-ups.” 

Mirdad noted that while entering these markets independently would require significant investment, partnering with an international player like Shelf Drilling facilitates market access. “With this alliance, automatically we have the license to operate in all of these rigs, we have the local knowledge that Shelf has, and it gives us access to all the tenders,” he said. 

Greg O’Brien, CEO of Shelf Drilling, confirmed that the alliance has already begun executing its objectives by bidding for project proposals across different regions. 

“We have participated in three different opportunities. We have a longer list of target opportunities,” O’Brien told Arab News. 

He noted that while the alliance is taking an aggressive approach to exploring international prospects, the financial impact of these tenders will likely not be seen until late 2025 or early 2026 due to the time required for rig mobilization and contract execution. 

Strategic rationale

As an international offshore extraction contractor, Shelf Drilling operates in multiple regions and continues to seek expansion opportunities while optimizing costs. 

O’Brien highlighted that maintaining operational efficiency is a priority, particularly in a competitive market. 

“We have 14 rigs right now, all but one of those are contracted, and that one we expect to have contracted really soon, and we see additional opportunities to deploy newer, more capable rigs in other markets where we have a footprint like West Africa and Southeast Asia,” he said. 

The alliance allows Shelf Drilling to expand its capacity without significant capital expenditure on new assets. 

“This alliance with Arabian Drilling gives us access to a few additional rigs that we believe we can deploy in the contract opportunities and markets that we know well without having to buy other assets,” O’Brien stated. 

For Arabian Drilling, the alliance is a critical step in its broader international growth strategy. 

The company, which operates 36 rigs, has three currently suspended. O’Brien explained that these three rigs share similarities with those used by Shelf Drilling, making their international deployment more seamless. 

By leveraging Shelf Drilling’s established presence in key markets, Arabian Drilling can re-enter the global scene more efficiently. 

Opportunities and plans 

Several international markets present promising opportunities for new contracts, with West Africa emerging as a key target region. 

“India, Southeast Asia, West Africa are markets we know extremely well. West Africa is a place that has a decent number of new projects that are incremental to existing activity in that region, and it’s not quite as competitive,” O’Brien said. 

“Southeast Asia holds great opportunities as well, but we see a better opportunity margin in West Africa,” he added. 

Mirdad acknowledged that the alliance’s initial three rigs would not be sufficient to meet the growing demand for offshore drilling services. 

“When we looked at the opportunities, we, as Arabian Drilling, looked at each other and realized we don’t have enough rigs,” he said. 

He indicated that the company is actively considering further expansion. “The three rigs are not enough. So, I’m very upbeat to giving the market some good news in the short term,” Mirdad said. 

When asked about plans for additional rig deployment, he explained that the alliance is a long-term strategic move rather than a short-term fix. 

“In the first instance, it might seem like we’re doing this alliance to secure these three rigs, which is true, but this alliance is not a short-term fix; it is long-term.” 

He further highlighted that with a strong balance sheet and growing international demand, Arabian Drilling is well-positioned to explore additional rig deployments beyond the initial three. 

Financial outlook and growth strategy 

When asked about the financial impact of the alliance, Mirdad stated that Arabian Drilling’s strong balance sheet allows it to focus on growth rather than relying solely on financial maneuvers to expand. 

“Our relations with the banks are really good, so access to cash is not a problem for growth, but this is a great avenue for us and Shelf to grow and not to miss out on any international opportunities,” he said. 

O’Brien added that current oil prices remain at levels that support offshore rig demand, strengthening the alliance’s financial rationale. 

He emphasized that while the primary goal is to establish a broader global footprint, the venture is designed to generate long-term profits for both companies. 

“The alliance will definitely aim to generate profit and revenue for both companies, and the approach will be opportunity-specific,” O’Brien said. 

Global industry trends and long-term demand 

O’Brien highlighted that the alliance aligns with global trends in the shallow-water drilling market, particularly as demand for offshore rigs remains strong. 

“There are about 425 jack-ups around the world, the Middle East is the biggest market, and Saudi Arabia is the largest market for offshore shallow water drilling, but there is stable demand in other parts of the world,” he said. 

He pointed out that the supply of jack-up rigs in markets outside the Middle East has remained relatively stagnant and is expected to decline in the coming years. 

This presents an opportunity for drilling contractors to capitalize on increasing demand. 

“The supply side in other markets has been flat and would most likely be declining in the years to come, which is a good thing for a drilling contractor,” he added. 

O’Brien expressed confidence in long-term global oil demand, which will likely drive continued demand for drilling services. 

“We believe oil demand will continue to grow around the world for the next five to 10 years, or even more,” he said. 

Mirdad further explained that new jack-up rigs are rarely built, leading to a gradual phasing out of older rigs and creating a supply gap in the offshore drilling market. 

“That means that you’ll have demand but not enough rigs available,” he added. 

RIYADH: Oman’s foreign direct investment inflows rose by over 17.6 percent over the past five years, reaching 26.6 billion Omani rials ($69.3 billion) by the third quarter of 2024.

As reported by the Oman News Agency, this significant growth highlights the country’s success in solidifying its position as a key global investment hub. The rise has been fueled by strategic initiatives, a conducive capital environment, and advanced infrastructure.

This increase in Oman’s FDI aligns with a global rise of 11 percent in FDI flows in 2024, which reached $1.4 trillion. However, developing Asia saw a 7 percent decline in its FDI inflows, according to the UN Conference on Trade and Development.

According to the National Center for Statistics and Information, the UK led the way with investments totaling 13.6 billion rials, followed by the US with 5.2 billion rials. The UAE contributed 836.5 million rials, while Kuwait invested 833.5 million rials. China invested 817.8 million rials, and Switzerland added 551.9 million rials.

Qatar’s investments in Oman reached 488.3 million rials by the end of the third quarter, with Bahrain contributing 375.7 million rials. Investments from the Netherlands and India amounted to 359.1 million rials and 286.1 million rials, respectively.

Oman’s Minister of Commerce, Industry, and Investment Promotion Qais bin Mohammed Al-Yousef highlighted that high-level directives aimed at improving the capital climate have played a key role in building a promising economic future.

He emphasized that positive indicators in the investment sector reflect the success of Oman’s policies and initiatives in creating a robust environment for attracting projects, as reported by the state-run news agency.

Al-Yousef further noted that efforts to establish the Investment and Commercial Court highlight the government’s commitment to fostering a stable legal framework that encourages foreign investment. The ministry is also focused on offering competitive incentives and streamlining business operations within a dynamic market.

He concluded by emphasizing that improving the investment and business environment remains a top priority for promoting sustainable development. The ministry is actively working on initiatives aimed at diversifying the national economy and generating job opportunities across various sectors.

Ibtisam Ahmed Said Al-Farooji, undersecretary at the Ministry of Commerce, Industry, and Investment Promotion, stated that Oman’s investment sector is actively reviewing and evaluating its investment policies, laws, and incentives.

She further explained that investment opportunities undergo comprehensive feasibility studies before being presented to investors. This thorough evaluation helps drive capital into targeted sectors, enhances economic diversification, and boosts non-oil revenues, thereby strengthening investor confidence and improving Oman’s competitiveness.

The government is focusing on key sectors aligned with the Oman Vision 2040 strategy. These sectors include transportation and logistics, renewable energy, information technology, food security, tourism, mining, and manufacturing. Supportive industries such as the circular economy, healthcare, and education are also part of the focus.

Al-Farooji highlighted that the manufacturing sector attracted 2.13 billion rials in FDI, followed by financial intermediation with 1.36 billion rials, and real estate activities with 969.1 million rials.

The ministry has organized investment opportunities through the “Invest in Oman” platform, showcasing 20 opportunities in sectors such as tourism, real estate development, aviation, logistics, and manufacturing.

Industrial lands have been allocated in collaboration with the Public Establishment for Industrial Estates, which has sparked investor interest in the industrial cities of Rusayl, Sohar, and Samail.

In 2024, the ministry promoted Oman on the international stage at 21 events, welcomed delegations from 23 countries, hosted eight local promotional forums, and targeted six G20 countries and four markets in collaboration with the Oman Chamber of Commerce and Industry.

Nasser bin Khalifa Al-Kindi, CEO of Invest in Oman, explained that the “Invest in Oman” lounge brings together government institutions under one roof, streamlining the investor journey.

The lounge is designed to attract high-capital investors to strategic sectors and serves as a digital gateway to promote Oman’s investment environment and present new opportunities.

He also noted that 59 investment projects worth 3.2 billion rials are currently under review, with 29 initiatives valued at 1.2 billion rials already localized.

India, China, and Egypt are the top investing countries in Oman, with the industrial sector leading the way in attracting investments, followed by renewable energy and healthcare.