aramco Boosts Production, Forecasts Strong Cash Flow Growth Amid Rising Oil Demand
DHAHRAN, SAUDI ARABIA – August 28, 2023 – Saudi Aramco, the world’s largest integrated energy adn chemicals company, is increasing crude oil production by one million barrels per day (bpd) from March levels by September, responding to OPEC+ decisions and anticipating record global oil demand. This production ramp-up, coupled with strategic investments in gas, refining, and chemicals, positions the company for significant cash flow growth and enhanced shareholder value, according to recent statements from CEO Amin Al-Nasser.
Aramco’s move comes as global oil demand is projected to reach an unprecedented 106 million bpd this year, creating an favorable environment for the company to leverage its low-cost surplus production capacity. The company began a gradual increase in output four months ago, adding 800,000 bpd, and anticipates a further 200,000 bpd increase next month. Al-Nasser highlighted that each additional 100,000 bpd of production translates to a 4 billion riyal ($1.07 billion USD, based on first-half 2023 pricing) increase in annual net income, meaning the full one million bpd boost will add approximately 40 billion riyals ($10.7 billion USD) to Aramco’s bottom line.
Long-Term Investment & Diversification
Despite the increased oil output,Aramco maintains its capital spending guidance of $52-58 billion for 2023.The company is actively investing in projects to maintain its maximum enduring production capacity of 12 million bpd and expanding its gas business.Approximately 35 billion riyals were spent in the second quarter alone on these initiatives.
Aramco is also focused on diversifying its portfolio beyond crude oil. Operational cash flows from gas, refining, chemicals, and marketing are projected to rise significantly, reaching between 63 and 76 billion riyals annually by 2030. This growth will be driven by 33-38 billion riyals from gas and 30-38 billion riyals from the remaining sectors. Second quarter operating cash flows totaled 103.3 billion riyals.
OPEC+ and Saudi Arabia’s Role
The production increase aligns with recent OPEC+ decisions, including the agreement on August 27th to increase production by 547,000 bpd starting in September. This marks the final phase of a plan to unwind voluntary production cuts totaling 2.2 million bpd implemented by eight countries since 2023, with Saudi Arabia bearing the largest portion of the reductions. The voluntary cuts were initially implemented in July 2023 to stabilize oil prices.
Strategic Context & Future Outlook
Aramco’s strategy reflects a broader trend within the energy sector: balancing increased production to capitalize on current demand with long-term investments in diversification and sustainability. The company’s ability to bring on additional production at relatively low cost gives it a competitive advantage in the global market. The company’s headquarters are located in dhahran, in the Eastern Province of Saudi arabia.
Note: Currency conversion based on exchange rates as of August 28, 2023.
