Aramco to boost capital expenditure despite 2023 profits tumble

Quantum Commodity Intelligence – The world's largest energy company, Saudi Aramco, saw a steep drop in 2023 profits following lower oil prices, although capital expenditure is set to grow despite Saudi shelving plans to boost crude oil capacity.

Aramco announced in its 2023 earnings report profits of $121.3 billion, down 25% from 2022's record $161.1 billion, but still the second highest ever.

The year-on-year decline was attributed to lower crude oil prices, while Aramco also slashed output to around 9 million bpd, the lowest since the 2020 pandemic. Additionally, the company reported weaker refining and petrochemicals margins.

Saudi Arabia cancelled plans earlier this year to boost crude output to 13 million bpd, but the surprise announcement in January means that around $40 billion of capital expenditure will be diverted into other areas, with total capex forecast to grow well into the second half of the 2020s.

Aramco said capex reached $49.7 billion last year, up 28% on the year, while projecting that capital investments in 2024 could range from $48 billion to $58 billion and grow for several more years.

The company noted last year's capex was approximately 60% upstream, 30% downstream and 10% renewables, but longer-term plans to boost renewables to 15% of the capex budget.

Projects

Amin H. Nasser, Aramco president and CEO said that scheduled crude increases from Zuluf, Marjan, Berri and Dammam fields will "remain as planned", which will help sustain capacity at 12 million bpd. However, Safaniya and Manifa increment programs will be cancelled.

Nasser also said in an earnings call that he expects global oil demand growth to average 1.5 million bpd in 2024 and remain "robust" in 2025.

Saudi Aramco highlighted its growth in natural gas, with investments set to grow sharply for the remainder of the decade.  

"During the year, we also made significant progress in expanding our gas production, which we now expect will increase by more than 60% by 2030 when compared to 2021 levels," said Nasser

The company announced a total dividend payment of $97.8 billion in 2023, marking a 30% increase compared to 2022. 

According to Quantum data, benchmark Middle East Dubai crude averaged $82.07/b in 2023, compared to $96.38/b in 2022, a decline of 15%.