Key facts
- Alessandro Bernini, CEO of Italy's Maire, said logistics costs on some Middle Eastern contracts have tripled.
- Maire's labor expenses have risen between 30% and 40%, Bernini said.
- Saipem CEO Alessandro Puliti said the company's equipment has been sitting outside the Strait of Hormuz for months.
- Sherif Foda, CEO of NESR, said contractors often absorb extra storage costs: "You eat it most of the time."
- SLB reported third-quarter Middle East and Asia revenue of $2.81 billion, up 9% sequentially but down 6% year on year.
- Baker Hughes reported $1.26 billion in Middle East and Asia oilfield services revenue, down 13% from a year earlier.
Oilfield services companies working in the Middle East are paying as much as three times their usual logistics costs, with fuel expenses doubling and labor costs up by as much as 40%, executives said Tuesday at the ADIPEC energy conference in Abu Dhabi. The companies tied the increases to a nine-month conflict that has damaged infrastructure, forced employee evacuations and made moving equipment through the Strait of Hormuz harder.
The effects vary by company. Maire CEO Alessandro Bernini said logistics costs on some Middle Eastern contracts had tripled while labor expenses rose between 30% and 40%. Saipem CEO Alessandro Puliti said his company's equipment had been sitting outside Hormuz for months. NESR CEO Sherif Foda said the company was holding materials in warehouses longer to guard against supply interruptions, at a cost contractors often cannot recover: "You eat it most of the time."
Recent earnings reports show uneven results. SLB reported a 9% sequential rise in third-quarter Middle East and Asia revenue to $2.81 billion, still 6% below the year-earlier level, and said activity recovered before renewed disruptions in September. Baker Hughes reported $1.26 billion in Middle East and Asia oilfield services revenue, down 13% from a year earlier, partly reflecting a divestiture.
Higher oil prices have encouraged more drilling in some markets, creating work for service providers. But the equipment, personnel and transport needed to do that work has become considerably more expensive.