Briefing

Saudi Arabia publishes draft Petroleum and Gas Activities Regulation for public consultation

The Ministry of Energy of Saudi Arabia (MOE) has published a draft Petroleum and Gas Activities Regulation (Regulation) for public consultation. The consultation closes on 6 November 2026.

Issued pursuant to the Hydrocarbons Law Royal Decree No. (M/37) dated 2/4/1439 H (corresponding to 20 December 2017) (Hydrocarbons Law), the draft Regulation looks to introduce a dedicated licensing and compliance framework for a broad range of petroleum and gas activities in the Kingdom. The proposed regime extends beyond operators and licence holders, capturing a range of drilling contractors, oilfield services companies and pipeline operators.

While subject to consultation and amendments, the draft Regulation provides a useful indication of the MOE’s proposed approach to licensing, operational oversight and regulatory compliance across the sector.

What the Draft Regulation introduces (Articles 3, 4, 5 and 6)

At its core, the draft Regulation introduces a mandatory licensing regime for all regulated petroleum and gas activities, including oil and gas well drilling, extraction-related services (covering well intervention, stimulation, testing, logging, cementing and maintenance) and pipeline transportation.

A separate licence is required for each regulated activity, meaning companies operating across more than one service line must hold multiple licences simultaneously. Each licence runs for one calendar year from the date of issuance and renewal applications must be submitted no later than 90 calendar days before expiry. In practical terms, licence management becomes a standing annual obligation rather than a one-off administrative step. The relatively short licence term appears designed to facilitate ongoing regulatory oversight, enabling the MOE to regularly assess compliance and address potential concerns.

Where a licensee holds or applies for more than one licence, it must demonstrate financial solvency and the necessary administrative and technical expertise, financial systems, risk management policies and operational procedures to meet its commercial and regulatory obligations across all activities. Given the potentially significant capital and operating expenditure associated with licensed activities, the requirement appears intended to give the regulator greater visibility over the financial and operational capacity of licensees, helping to mitigate the risk of material disruption.

One point to note is that, although crude oil extraction and natural gas extraction are included among the eight licensed activities in Article 3, Article 6 provides that these activities are instead subject to the Regulations on the Exploration and Production of Hydrocarbons. A licence under this Regulation is therefore still required for either activity, but the applicable operational requirements are contained in that separate instrument rather than the provisions discussed below.

General Obligations — Article 2

Article 2 imposes standing obligations that apply across all licensed activities. Licensees must use advanced technologies in the implementation of hydrocarbon operations, in accordance with international industry standards, developed protocols, and related regulations. All equipment must comply with the requirements of the relevant authorities, including the Saudi Standards, Metrology and Quality Organisation and international industry standards.

Records must be maintained for five years and submitted to the MOE upon request, including operational, financial and tax records, copies of agreements with licensees held in accordance with the Hydrocarbon Exploration and Production Regulations (issued by Ministerial Resolution No. (2432/470201) dated 12/7/1447 H), training reports, and any other documents the MOE may require.

An annual report must be submitted to the MOE within 60 days of the start of each year. It must cover, at a minimum:

a description of operations carried out in the prior year;
a list of equipment used and certificates proving compliance with applicable standards, including those issued by ISO, API, ASME, IADC and IOGP;
a description of injuries, deaths, fires, leaks, security incidents and operational accidents; and
waste management and disposal practices.

The obligation to retain and produce copies of agreements with licensees held in accordance with the Hydrocarbon Exploration and Production Regulations is not just a record-keeping requirement. Licensees should consider how this interacts with the confidentiality terms of their existing commercial arrangements. We anticipate that this could be an important step towards establishing consistent market standards that align with the MOE’s regulatory requirements and expectations.

A licensee wishing to cease a regulated activity must notify the MOE at least 90 working days before the proposed suspension and may not cease the activity without the MOE’s prior approval. The requirement may be intended, among other things, to give the MOE sufficient time to assess the circumstances underlying a proposed suspension and mitigate the risk of disruption to the relevant activities, including by allowing sufficient time for alternative arrangements to be considered where necessary.

Drilling Operations — Article 7

The obligations in Article 7 apply to licensees practising the activity of drilling oil wells and the activity of drilling natural gas wells.

Drilling and well-control equipment must be periodically tested, capable of withstanding maximum loads and operated within manufacturer limits.
Drilling fluids must be harmless to groundwater; where fluids that may harm groundwater need to be used, all usable groundwater-bearing layers must be isolated. Wells must remain fully controlled, with suitably rated well-control equipment available on site.
Well-control equipment, materials and practices must meet applicable global industry standards and regulations.
Operations must be safely suspended if they risk excessive pollution or harm to persons, property or wells, and may resume only after the licensee verifies that it is safe to do so.
The draft leaves it to the licensee to decide, on its own assessment, when it is safe to resume drilling; there is no requirement for the MOE to review or approve that decision before operations restart, which could leave scheduling and contractual consequences unaddressed.

Extraction Services — Article 8

Article 8 applies to those providing services relating to oil and natural gas extraction (excluding survey activities).

High-pressure and radioactive operations require special risk-minimisation procedures, with protection of human life as the primary priority.
Well barriers and seals must meet international standards throughout drilling, operation, repair and abandonment, and must prevent unplanned flow.
Well maintenance or re-completion requires testing and records confirming casing integrity and cohesion between cement and producing layers.
Drilling cuttings, pulp samples and fluid samples must be indexed and securely stored.

Pipeline Operators – Articles 9 and 10

Articles 9 and 10 set out corresponding requirements for crude oil and natural gas pipeline activities respectively. Under these provisions, pipeline licensees must establish and maintain testing, inspection and maintenance programmes covering their pipeline infrastructure, together with leak monitoring systems, corrosion detection processes, pipeline integrity management measures and safety monitoring arrangements.

Companies operating pipeline infrastructure in the Kingdom should consider whether their existing programmes are documented and maintained in a form that would satisfy that standard, and whether the absence of prescribed technical benchmarks in the current draft is a point worth raising in the consultation. Given the Kingdom’s position as a key global energy market, we suspect the requirements to be either setting best-practice standards or enabling the regulatory framework to adapt agilely to evolving operational and industry demands.

HSE — Article 11

Article 11 imposes a broader set of health, safety, security and environmental obligations, of which the emergency response plan requirement is the most operationally demanding. It requires that comprehensive emergency response plans must be prepared in accordance with the instructions of the relevant authorities, a copy must be provided to the MOE and the plans must be updated periodically. Plans must clearly define responsibilities, develop, update, review and test emergency scenarios in coordination with the MOE and relevant authorities. The plans must also address the qualification and training of employees and subcontractors; and set out procedures for notifying relevant authorities.

MOE Inspection and Audit — Article 12

The Ministry is reserving broad inspection and audit rights under Article 12. These include conducting inspection visits to inspect all establishments and facilities belonging to the licensee, ensuring that all permits and licences are held, and verifying compliance with the Hydrocarbons Law and draft Regulation.

As with other regulated and essential activities, inspections may be carried out by the MOE, or a party authorised by the MOE, without advance notice – the licensee must enable MOE representatives or delegates to enter its facilities, facilitate their inspection, and provide all requested information and documents. Following an inspection, the MOE will prepare a written report. The licensee will have 15 days from receipt of that report to respond and provide proof that appropriate corrective measures have been taken. From reviewing the draft Regulation, there are no clear indicators whether time extensions will be granted in terms of submitting a response and/or taking the corrective measures.

Local Content (Saudisation) — Article 13

While those operating in the Kingdom are already familiar with local workforce hiring, training and development requirements (Saudisation), the involvement of annual licensing and interaction with the MOE raises the stakes. As a matter of law, licensees must support the national industry and increase local content, including compliance with Saudisation requirements and measuring local content as required by applicable laws, regulations and decisions.

Mind the gap

Article 14 sets the Regulation’s effective date at 120 days after publication. As this is a consultation draft, that period will only begin once the final version is formally published. Notably, the draft Regulation currently contains no express transition provisions addressing existing operators, contractors or licence holders already active in the Kingdom. Whether existing arrangements are grandfathered, whether a licence must be obtained before the effective date, and what the consequence of operating without one would be, are questions the draft does not answer.

Those who may be impacted by the draft Regulation can provide comments to the MOE through the Istitlaa online portal or by email before 6 November 2026.