Is Saudi Aramco cooling on crude oil?
national oil goliath has a central position in the world’s oil markets. Its market value of $2trn, five times that of the second-biggest oil firm, ExxonMobil, is predicated on bountiful reserves of crude and a peerless ability to tap them cheaply and, as oil goes, cleanly. So the Saudi energy ministry stunned many industry-watchers in January by suspending the firm’s plans to expand oil-production capacity from 12m to 13m barrels per day (b/d).
Did the kingpin of crude finally accept that oil demand would soon peak? For an anwser, all eyes turned to Aramco’s results for 2023, reported on March 10th. No one expected a repeat of the year before, when high oil prices and surging demand propelled its annual net profit to $161bn, the highest ever for a listed firm. But analysts and investors were still interested in the extent of the decline in revenue and profit, in any changes to capital-spending plans and, possibly, in the unveiling of an all-new strategy.
Profits did fall, to $121bn, though that was still the second-best tally in Aramco’s history. Thanks to a recently introduced special dividend, the firm paid nearly $100bn to shareholders last year, 30% more than amid the bonanza of 2022, and promised to hand over even more in 2024. Shovelling a larger chunk of a smaller haul to owners could, on its own, imply that Aramco is indeed less gung-ho about its oily future.
Except that the rich dividend was accompanied by two developments that point in the opposite direction. First, Aramco is rumoured to be preparing a secondary share offering that could raise perhaps $20bn in the coming months—a move typically associated with expansion rather than contraction. Second, more tangibly, it is ramping up capital spending.
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