Saudi Arabia increases oil investment as it benefits from price increases


© Reuters. FILE PHOTO: A 3D-printed natural gas pipeline is placed in front of the Saudi Aramco logo shown in this image, taken Feb. 8, 2022. REUTERS/Dado Ruvic/Illustration

By Saeed Azhar and Maha El Dahan

DUBAI (Reuters) – Saudi Arabia’s state oil company Aramco, under pressure from the West to increase production amid rising prices, has pledged on Sunday to increase investment by about 50% this year as it doubles of earnings in 2021.

Saudi Aramco (SE:) benefited from an increase in oil prices of more than 50% last year as increased vaccination coverage against COVID-19 and relaxed restrictions led to demand outpacing supply.

Prices soared above $100 a barrel last month, reaching their highest level in 14 years after Russia invaded Ukraine, prompting Western countries to urge Saudi Arabia and other producers to increase production.

Aramco said it aims to increase its capital expenditures (capex) to $40-50 billion this year, with continued growth expected until about the middle of the decade. Capital expenditures were $31.9 billion last year, an 18% increase from 2020 – indicating a roughly 50% increase for this year in the middle of the guidance range.

The company made a net profit of $110 billion last year, up from $49 billion a year earlier. Analysts had expected a net profit of $106 billion, according to the average analyst estimate at Refinitiv’s Eikon.

Aramco shares rose more than 4% in early trading to a high of 43.85 riyals, valuing the company at 8.76 trillion rial ($2.34 trillion).

A valuation of $2 trillion was a target pursued by de facto Saudi leader Crown Prince Mohammed bin Salman before the company’s record $29.4 billion IPO in 2019.

He has announced plans to sell more Aramco shares.

Aramco’s appreciation on Sunday brought it above Microsoft’s (NASDAQ:), though it lags behind Apple’s (NASDAQ:) $2.68 trillion.

The Saudi government said last month that Crown Prince Mohammed, who is leading a massive investment campaign to diversify the kingdom’s economy, has transferred 4% of Aramco’s shares to the country’s sovereign wealth fund.

INCREASE CAPEX

Aramco has said it plans to increase its “maximum sustainable capacity” to 13 million barrels per day by 2027, and increase gas production by more than 50% by 2030.

The company’s average hydrocarbon production last year was 12.3 million barrels of oil equivalent per day.

Aramco also plans to develop significant hydrogen export capacity and become a global leader in carbon capture and storage technology, it said.

“While economic conditions have improved significantly, the outlook remains uncertain due to several macroeconomic and geopolitical factors,” CEO Amin Nasser said in a statement.

“However, our investment plan is geared towards responding to the increasing long-term demand for reliable, affordable and increasingly safer and more sustainable energy.”

Aramco said its free cash flow was $107.5 billion last year, compared to $49.1 billion in 2020. It announced a $75 billion dividend for 2021, in line with its earlier commitment.

($1 = 3.7515 riyals)

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