Saudi Aramco oil profits fall as oil prices and production fall

Middle East News
2023-08-07 | 02:47
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Saudi Aramco oil profits fall as oil prices and production fall
Saudi Aramco oil profits fall as oil prices and production fall

Saudi Aramco, the Saudi Arabian company, announced on Monday that it achieved profits of $30.08 billion in the second quarter of 2023, marking a decline of approximately 38 percent compared to the same period last year when oil prices surged following Russia's invasion of Ukraine.

In a statement published on the Saudi financial market's "Tadawul" website, the company stated, "Net income for the second quarter of 2023 amounted to 112.81 billion Saudi riyals ($30.08 billion), compared to 181.64 billion Saudi riyals ($48.44 billion) for the same quarter of 2022."

The decline reflects the impact of lower crude oil prices and weaker profit margins in the refining and chemical businesses, according to the company.

The decline was largely expected, following a 19.25 percent drop in the first quarter of 2023 after a significant increase in 2022 due to the Russian invasion of Ukraine.

Amin Nasser, the CEO of Saudi Aramco, said, "Our strong results reflect our resilience and ability to adapt during market fluctuations. We continue to demonstrate our long-term capability to meet customers' needs worldwide with high levels of reliability."

"For our shareholders, we intend to begin distributing the first performance-related profits in the third quarter," he added.

The world's largest crude oil exporter reduced its production after Riyadh announced in April a cut of 500,000 barrels per day as part of a coordinated move with other oil powers to reduce supplies by more than one million barrels per day in an effort to support prices.

In June, the Saudi Ministry of Energy announced another voluntary cut of one million barrels per day, which came into effect in July and was extended last week until September.

The kingdom's current daily production stands at nine million barrels, significantly less than its maximum capacity of 12 million barrels per day.

Saudi Arabia relies on high oil prices to finance its ambitious economic reform program, known as "Vision 2030," which seeks to diversify its economy away from fossil fuels. Analysts suggest that the country needs oil prices to be around $80 per barrel to balance its budget.

Oil expert at the "S&P Global" consultancy, Herman Wang, said that the production cuts "demonstrate the extent to which the kingdom will go to defend oil prices, as the market downturn... harms ambitious economic diversification efforts."

Saudi Aramco is investing in projects to increase its production capacity to 13 million barrels per day by 2027.

Wang added, "The hope is that the sacrifices made now will pay off in the end as prices rise."

Exceptional Profits:
In May, Saudi Aramco announced that it achieved a net profit of $31.87 billion in the first quarter of 2023, compared to $39.5 billion in the same period in 2022, marking a decline of 19.25 percent.

Despite this decline, Saudi Aramco's first-quarter profits accounted for over three-quarters of the combined profits of the world's five largest oil companies (BP, Shell, ExxonMobil, Chevron, and Total) during the same period, totaling $40.5 billion.

Saudi Aramco is the main source of funding for "Vision 2030," an ambitious economic and social reform plan led by Crown Prince Mohammed bin Salman.

The record profits of $161.07 billion achieved last year allowed the Gulf kingdom to achieve its first annual budget surplus in about a decade.

Senior editor at the "Middle East Economic Survey," Jamie Ingram, commented that these "were exceptional numbers driven by very special set of geopolitical factors."

He added, "Of course, officials will prefer higher revenues (from oil), but Saudi Arabia still has, in any case, strong reserves that it can rely on."

The Saudi Arabian government owns 90 percent of Saudi Aramco's shares.

In April last year, Riyadh announced the completion of the transfer of a 4 percent stake in Aramco, valued at about $80 billion, from state ownership to the Saudi Arabian Investment Company, "Sanabil Investment," which is fully owned by the Public Investment Fund, one of the world's largest sovereign wealth funds with assets exceeding $620 billion.

This came more than a year after another 4 percent stake in Aramco's shares was transferred directly to the fund.

The approved general budget for 2023 expects a surplus of 16 billion riyals ($4 billion) and a GDP growth rate of 3.1 percent, as announced by the Saudi Ministry of Finance in December of last year.

It is worth noting that Aramco was listed on the Saudi stock market in December 2019 in the world's largest initial public offering, with a value of $29.4 billion in exchange for selling 1.7 percent of its shares.

The Kingdom pledged to achieve carbon neutrality by 2060, but environmental advocates doubt the feasibility of this ambitious announcement, as Saudi officials simultaneously defend increased investments in fossil fuels to ensure global energy security and address economic issues.

Meanwhile, Aramco pledged to achieve "net-zero operational carbon emissions" by 2050. This applies to the emissions directly produced by Aramco's facilities, but not to the carbon dioxide resulting from customers burning Saudi oil in their vehicles and power stations.

However, Amin Nasser and other senior Saudi officials have called for further investment in fossil fuels to ensure global energy security.

Middle East News

Saudi Arabia








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