Aramco remains resilient despite global headwinds
Saudi Aramco’s third quarter results are no less than impressive. A net income of $32.6 million is undoubtedly respectable by any standards amid lower oil prices and voluntary production cuts aimed at stabilizing the global market.
The oil giant lowered production by about 10 percent due to the voluntary production cuts of 1 million barrels per day agreed by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, which came into force as of July. Another factor that should be taken into account is that crude prices were also lower during this period, oscillating between roughly $75- $92 per barrel compared to $85-$111 a barrel during the same quarter in 2022. Given these headwinds, a net income of $32.6 is very good indeed. Strong refining margins also had a positive effect on the results.
All oil majors had to deal with the lower oil prices, but Saudi Aramco also had to contend with considerably lower production as well.
On Tuesday as of 1242 GMT, the oil price stood at $83.73 per barrel which reinforces that Saudi Energy Minister Prince Abdulaziz bin Salman was right on the money by taking 1 million bpd off the table this summer and keeping it there through the end of the year — potentially into 2024.
When it comes to the dividend, Aramco stuck to the guidance with $29 billion part of which is performance linked through the end of the year, which will be a welcome boost to the Kingdom’s coffers. Alas again, Aramco’s dividend policy is in line with major integrated oil companies, who also give back to shareholders as an incentive at a time when legislation in countries of the Organisation for Economic Co-operation and Development is trying to phase out fossil fuels.
Aramco CEO Amin Nasser and his team do everything to future-proof the company: CAPEX reached $11 billion up $2 billion compared with the same quarter last year. The company invested in future oil and gas production. Aramco notably invested $500 million in liquefied natural gas producer MidOcean Energy. This will allow the company to capitalize on the LNG boom which is here to stay in light of the growing demand for gas and Europe’s necessity to diversify its gas supplies as Russian pipeline gas is no longer an option.
What people often forget is that Aramco’s crude production boasts one of the lowest carbon footprints globally. This is extremely important given that the world will require hydrocarbons for decades to come and that how oil and gas are produced matters in this context.
Aramco’s investment in Al Shuaibah 1 and 2 solar plants worth $2.37 billion alongside the Public Investment Fund and ACWA Power shows the company’s commitment to both sustainability and the Saudi Green Initiative. It is also a global leader in carbon, capture, utilization, and storage technology. The ambitious Paris goal of the UN Framework Convention on Climate Change to reduce global warming to 1.5 percent of pre-industrial levels can only be achieved if we incorporate carbon removal technologies. We can only get there if we understand that net zero does not necessarily mean zero carbon. The Saudi energy minister stated earlier this year that there would be no more new gas-fired power plants in the Kingdom without CCUS attached. This is a step in the right direction.
All in all, the Q3 results proved that Aramco is moving in the right direction from the perspective of the company, its investors, and the country.
• Cornelia Meyer is a Ph.D.level macroeconomist, energy expert and CEO of Meyer Resources, a business consultancy.