Saudi Aramco Reports Steep Decline in Profits
Introduction
Saudi Aramco’s Profits Decline After Production Cuts and Falling Oil Prices in 2023
Saudi Aramco, the energy giant, has reported a significant decline in profits following a year of reduced production and a sharp decrease in oil prices in 2023. The company’s profits fell by 25% to $121 billion (£91 billion), marking a contrast to its record-breaking performance in the previous year.
Still Second-Highest Profit in Saudi Aramco’s History
Despite the decline, Saudi Aramco’s profits of $121 billion in 2023 remain the second-highest in the company’s history. The state-backed firm stated that it would be increasing its dividends to shareholders and actively seeking investment opportunities in China.
Dividends to Increase and Pursuing Investments in China
In an attempt to bolster shareholder returns, Saudi Aramco plans to elevate dividends to $98 billion, a rise of almost a third compared to the previous year’s figures. The company’s net income for 2022 reached an all-time high of $161 billion, primarily fueled by energy price fluctuations influenced by the war in Ukraine and resulting in oil prices skyrocketing to $130 a barrel in the same period. With the Saudi state holding nearly 95% of Saudi Aramco, the 2022 profits contributed to a surplus in the country’s budget.
A Challenging Year for Saudi Aramco in 2023
The subsequent decline in oil prices to $85 a barrel in 2023 prompted Saudi Aramco to curb production in order to support oil prices. This decision presented an additional impediment to maintaining high profitability levels.
Aramco’s Resilience Amidst Economic Headwinds
Amin Nasser, the CEO of Aramco, acknowledged the financial obstacles faced by the company in 2023. However, he credited Aramco’s resilience and agility for generating robust cash flow and maintaining profitability, despite the challenging economic conditions.
Saudi Arabia’s Economic Diversification Efforts
Seeking to transform the national economy, Saudi Arabia intends to use income generated from the energy sector to fund its transition. Aramco’s CEO, Mr. Nasser, confirmed the company’s plans to announce investments in renewable energy projects in Saudi Arabia.
Focus on the Growing Demand in China
Maturing consumer demand in the Chinese market has drawn Saudi Aramco’s attention. Mr. Nasser highlighted the company’s interest in exploring investment opportunities in China, given the continuous growth and stability of the energy market in the country. Already having investments in Chinese refineries, Saudi Aramco aims to further penetrate the market and strengthen its position.
Future Outlook and Potential Partnerships
Mr. Nasser expects the oil market to remain robust in 2024, with demand marginally surpassing the previous year. Furthermore, discussions are underway regarding potential partnerships between Saudi Aramco, French carmaker Renault, and China’s Geely, with a focus on developing hybrid car engines.
