Aramco achieves positive performance in all oil price cycles: Nasser

Aramco President & CEO Amin Nasser

Amin Nasser, President & CEO of Saudi Aramco, expects demand for crude to continue growing in the medium to long term despite market fluctuations.

Markets are positive on the level of oil demand in the medium term. Demand for oil is expected to reach a record of over 103 million barrels per day by the end of 2023, exceeding its high pre-COVID levels, he added in an earnings call.

Aramco’s resilience and high reliability in addition to low production costs enhance its ability to report profit and strong free cash flows. This, in turn, strengthens its solid financial position and affirms its ability to demonstrate positive performance through oil price cycles.

Nasser pointed to the continued high demand for oil amid a consensus among several research houses that H1 2023 will witness a rise in demand, especially from several major markets and not only China, as demand from China was stronger than expected.

He added that Aramco seeks to pay performance-related dividends to shareholders during the years of strong performance, as the company accelerated the distributions that were calculated based on the upper end of the range.

The additional distributions will be calculated based on the performance of 2022 and 2023 together, which greatly increases the performance-related dividends, as free cash flows were very high in 2022.

The world's biggest oil company focuses on maintaining a high investment-grade credit rating through the various cycles of oil prices, in addition to achieving remarkable progress in growth plans, as financial investments reached $22.4 billion in H1 2023.

This includes foreign investments, which increased by 30% year-on-year (YoY).

Nasser expects Dammam project to start by the end of next year, the Marjan and Berri oilfields projects to complete in 2025, and the Zuluf field by 2026.

He said China is a major player in the chemical sector, and the more the country recovers, the more demand will increase, and this would create a better environment for the sector.

Aramco is a long-term investor; hence its investment decisions are not related to the short term.

Aramco's crude-to-chemicals program aims to convert liquids into chemicals to reduce the refining risks, Nasser added.

As for gas, Aramco made more progress to achieve its goal of increasing gas production by 50% in 2023 compared to 2021.

Further, the firm continues to work on gas compression projects in the Hawiyah fields, expecting that the two projects will reach their full production capacity this year, as five out of nine plants are complete.

The gas plant in Ras Tanaqib, which is part of the Marjan field development project, will be operational in 2025.

As for unconventional gas, design and construction work is under way in the gas plant and field in Jafurah, which is scheduled to start production in 2025.

Aramco continues to implement its strategy in the refining, processing, and marketing sector, in addition to operating in several markets, and processing up to four million barrels per day (bpd) of liquids to convert them into chemicals.

Locally, Aramco awarded the engineering, procurement, and construction (EPC) contracts for the $11 billion Amiral petrochemicals complex. Integrated with the existing SATORP refinery in Jubail, the new complex aims to house one of the largest mixed-load steam crackers in the Gulf.

The upstream sector recorded strong profit before interest, income taxes and Zakat, reaching $56.7 billion, which is slightly less than the first quarter, and in line with the decline in the average crude oil prices, which was offset by the seasonal increase in gas production in the second quarter.

Meanwhile, the downstream sector recorded $800 million in profit before interest, income taxes and Zakat in Q2 2023. This was attributed to lower profit margins in the chemicals and refining sectors, as well as the negative changes in inventory value resulting from significantly lower prices compared to last year, which is not related to performance.

The indicative range of capital spending this year was fixed at $45-55 billion, and spending continues to grow, achieving its highest levels in the middle of this decade, Nasser said. He indicated that the firm continues to implement the largest capital program in its history according.

On the other hand, Ziad Al-Murshed, Aramco's Executive Vice President & Chief Financial Officer, stressed the strength of the company's financial position, which was further strengthened in the first half of 2023, as the firm continues its capital program, which reduces uncertainty about its need for financing.

The first performance-linked dividends to be paid in Q3 will reach nearly $10 billion, along with $19.5 billion from base dividends, bringing the total amount to be paid in the third quarter to $29.4 billion.

The performance-linked dividends will be paid on a quarterly basis until the end of 2024, Al-Murshed noted.