Rising crude prices and falling Opec spare capacity have spurred Saudi Arabia to call on oilfield services firms to bolster the kingdom's drilling fleet.
Saudi Aramco, the state-owned oil monopoly, met leading services companies in the region last week, including Halliburton, which has headquarters in Houston and Dubai. The firms discussed plans to increase the kingdom's rig count this year by 28 per cent to 118 from 92, Bill Herbert, an analyst at the US investment bank Simmons, said last week.
The move was unexpected, he said, but "with Libyan production falling, Saudi Arabia may feel it has to be ready for higher production capacity".
Saudi officials said extra drilling activity would be needed to maintain the kingdom's estimated 12.5 million barrels per day (bpd) of oil production capacity. That includes 12 million bpd of Aramco capacity and another 500,000 bpd maintained by the US oil company Chevron on behalf of Saudi Arabia in the neutral zone between the kingdom and Kuwait.
"It's not to expand capacity. It's to sustain current capacity on new fields and old fields that have been bottled up," an official told Reuters.
Analysts put Saudi oil output last month at 9 million bpd, the highest since October 2008. That may have raised apprehensions inside the kingdom, as well as internationally, about Aramco's ability to pump oil even faster to meet rising world demand.
A recent Bloomberg News survey suggests Opec production fell last month as extra volumes from Saudi Arabia, the UAE and some other Opec members failed to cover a sharp drop in Libyan output to a 49-year low. Data compiled by the news agency indicate Saudi Arabia could increase production by 2.5 million bpd within 30 days. That is significantly less than the 3.5 million bpd of spare output capacity Ali al Naimi, the Saudi oil minister, said on March 8 the kingdom had at its disposal, and lower still than the 4 million bpd production cushion it may have had before fighting broke out in Libya.
"The numbers show that it will take a while before the Saudis and others make up for Libya's missing barrels," Rick Mueller, the director of oil markets at Energy Security Analysis, told Bloomberg. "This is why Brent is above US$115."
North Sea Brent crude, the European benchmark, topped $119 per barrel on Friday, as US light crude in New York reached a new 30-month high above $108.
Khalid al Falih, the Aramco chief executive, said last month the state oil company stood ready to cover any shortfall in Libyan crude supplies. Mr al Naimi said Saudi Arabia had developed two light, low-sulphur crude blends that were close to the specifications of Libya's high-quality crude.
But with oil exports from Nigeria, the biggest African producer, also threatened by increasing sabotage attacks in the run-up to presidential elections, the pressure on Gulf oil producers is growing.
Opec oil shipments are expected to fall to their lowest level since October, according to the tanker tracker Oil Movements.
"I can't see any movements from Libya at all," Roy Mason, the firm's founder, told Bloomberg.
Oil Movements predicted shipments would fall to 22.91 million bpd in the four weeks ending on April 16, down 2.3 per cent from volumes shipped in the previous four-week period.
While Saudi Arabia may already be exceeding its Opec production quota by about 950,000 bpd, the UAE also boosted output last month by about 160,000 bpd to more than 2.5 million bpd.