Saudi Aramco’s profit took a significant hit as the energy behemoth slashed production and grappled with a sharp drop in oil prices throughout 2023.
After a record-breaking year in 2022, Saudi Aramco saw its profits decline by 25% to $121 billion (£91 billion), yet this figure still marks the second-highest profit ever achieved by the state-backed company.
The company announced plans to increase dividends for shareholders and explore investment prospects in China as part of its strategic expansion efforts.
With dividends poised to reach $98 billion, representing a nearly one-third increase from 2022, when the company achieved a record profit of $161 billion, the surge is attributed to the profound influence of Russia’s conflict in Ukraine on energy prices. During 2022, oil prices surged to $130 a barrel.
With the Saudi state holding close to 95% ownership of the company, the substantial profits generated in 2022 translated into a budget surplus for the kingdom.
However, in 2023, oil prices regressed to $85 a barrel. Additionally, Saudi Aramco’s decision to scale back production in a bid to bolster oil prices poses yet another hurdle for profits.
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“In 2023 we achieved our second-highest ever net income. Our resilience and agility contributed to healthy cash flows and high levels of profitability, despite a backdrop of economic headwinds,” Aramco’s chief executive Amin Nasser said in a statement.
Saudi Arabia is aiming to diversify the country’s economy, using income from its energy sector to fund the transition.
Mr Nasser said the firm would make some announcements this year on renewables investments in Saudi Arabia.
In addition, the spokesperson highlighted the company’s pursuit of investment opportunities in China, where the demand for oil is on the rise.
“So far we are in the early part of 2024, demand is healthy and growing in China,” Mr Nasser told journalists.
The spokesperson also mentioned that Saudi Aramco currently holds investments in Chinese refineries. Moreover, he expressed optimism about the oil market’s prospects for 2024, anticipating it to remain “fairly robust,” with demand projected to be only slightly higher than the previous year.
Furthermore, the spokesperson highlighted the ongoing discussions regarding Saudi Aramco’s potential stake in the partnership between French automaker Renault and China’s Geely, both of which are engaged in the production of hybrid car engines.