Saudi Arabia’s state oil giant Aramco recently reported a 25% decline in profit for the year 2023, with net income dropping to $121.3 billion from $161.1 billion in the previous year. Despite this decrease, it is noteworthy that this figure still represents the second-highest net income on record for Aramco, surpassing many of its largest global competitors. The company cited various factors for the decline, including lower crude oil prices and volumes sold, as well as reduced refining and chemicals margins. In response to these challenges, Aramco increased its base dividend for the fourth quarter by 4% to $20.3 billion dollars and raised its performance-linked dividend by 9% to $10.8 billion, resulting in a total dividend payout of $31 billion to the Saudi government and stakeholders.
Despite facing economic headwinds and geopolitical volatility, Aramco’s CEO, Amin Nasser, remains optimistic about the future of the global oil market. He noted that global oil demand reached record levels in the past year and expressed confidence in the market’s health for the remainder of 2023. Nasser also highlighted the company’s decision to halt plans to increase oil production capacity from 12 to 13 million barrels per day, diverting focus towards gas production and developing its liquids-to-chemicals business. This strategic shift is expected to reduce capital investment by approximately $40 billion between 2024 and 2028.
In 2023, Aramco paid a total of $97.8 billion in dividends, marking a 30% increase from the previous year. The company’s performance-linked dividend for 2024 is projected to be $43.1 billion, reflecting its commitment to rewarding shareholders. Additionally, the Saudi government transferred an additional 8% of Aramco shares, valued at $164 billion, to the Public Investment Fund (PIF). This move aims to strengthen the PIF’s financial position and support its goal of reaching $1 trillion in assets under management by the end of 2025.
Looking ahead, Aramco plans to ramp up investments in gas production and infrastructure, with a target to increase gas production by over 60% by 2030. This aligns with Saudi Arabia’s broader strategy to diversify its economy away from oil and capitalize on new areas of growth. The company’s average hydrocarbon production in 2023 was 12.8 million barrels of oil equivalent per day, with a significant focus on expanding its gas and liquids-to-chemicals business lines.
While Saudi Aramco experienced a decline in profits for 2023, the company remains resilient in the face of challenging market conditions. By adapting its strategic priorities towards gas production and shareholder value, Aramco is positioning itself for sustainable growth in the years to come. As global energy markets continue to evolve, Aramco’s ability to navigate these changes will be crucial in maintaining its position as a leading player in the oil and gas industry.
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