Nature

Saudi Aramco could invest $50 billion to increase oil capacity this year

Oil prices jumped 50% last year as demand recovered from the Covid-19 pandemic, then surged above $100 a barrel to hit 14-year highs in February after the Russia’s invasion of Ukraine, leading Western countries to urge major producers to increase production.

Aramco said it will increase capital expenditure (capex) to $40-50 billion this year, with further growth expected through the middle of the decade. Capital spending was $31.9 billion last year, up 18% from 2020, indicating an increase of about 50% for this year in the middle of the forecast range.

Asked if Aramco would pump more oil to fill market gaps left by the war in Ukraine, CEO Amin Nasser said it would produce according to Saudi energy ministry guidelines.

The company has announced its intention to increase its “maximum sustainable capacity” of crude oil to 13 million barrels per day by 2027 and wants to increase gas production by more than 50% by 2030. Its average production of oil was 12.3 million barrels of oil equivalent. per day last year.

Aramco posted net income of $110 billion in 2021, up from $49 billion a year earlier and compared with analysts’ average estimate of $106 billion, according to Refinitiv Eikon. With rising production and prices, analysts expect net profit to reach $140 billion in 2022.

Aramco shares rose more than 4% in early trade to hit a high of 43.85 riyals, valuing it at 8.76 trillion riyals ($2.34 trillion).

A $2 trillion valuation was a goal sought by Saudi de facto leader Crown Prince Mohammed bin Salman ahead of the company’s record $29.4 billion IPO in 2019. He announced his intention to sell more Aramco shares.

Aramco’s valuation surge on Sunday moved it above Microsoft’s, although it remains behind Apple’s $2.68 trillion.

The Saudi government said last month that Crown Prince Mohammed, who is leading a huge investment drive to diversify the kingdom’s economy, had transferred 4% of Aramco shares to the country’s sovereign wealth fund.

Increase investments

“They are increasing reinvestment significantly and they will likely use (free cash flow) to deleverage the balance sheet,” said Yousef Husseini, materials team leader at EFG Hermes Research.

Aramco said its free cash flow was $107.5 billion last year, down from $49.1 billion in 2020. It declared a $75 billion dividend for 2021, in line with its earlier pledge. .

The company said it also plans to develop significant hydrogen export capacity and become a global leader in carbon capture and storage technologies.

Nasser said on an earnings call that global oil demand was growing healthily and spare production capacity was shrinking.

In a separate statement, he said that “although economic conditions have improved significantly, the outlook remains uncertain due to various macro-economic and geopolitical factors.”


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