Page 5 - MEOG Week 06 2022

MEOG COMMENTARY MEOG

could be sold in order to expand the PIF. production capacity to become 13.4, 13.5mn
“There will be Aramco share offerings com- barrels [per] day by 2027,” he said, noting that
ing in the coming years, and this cash will be such expansion gives Saudi Arabia a “better
transferred to the Public Investment Fund,” he chance of capturing [the] market”.
said, noting that the PIF would use the proceeds He added that the decision to expand MSC to
to invest both locally and internationally. 13mn bpd was taken in March 2020, just before
The PIF has plans in place that will see it crude prices collapsed as the COVID-19 pan-
spend SAR3 trillion ($800bn) into new sectors demic began to have an impact on demand and
over the coming decade while creating 1.8mn Russia and Saudi were engaged in a production
direct and indirect jobs by 2025. war. “A week before [crude prices went] negative,
Ahead of the IPO, Aramco promised to a on behalf of the government in this ministry, we
$75bn dividend in each of the first five years of sent a letter to Aramco saying ‘Go for 13’,” he said.
trading. While this corresponds to just $1.3bn Prince Abdulaziz explained that the country
leaving state coffers, weak oil prices saw the would continue to add to capacity, anticipating
company resort to tapping the market to raise continued healthy growth in oil demand. “We
cash to ensure it can cover its $18.75bn quarterly believe oil consumption will continue to grow.
payments. The demand for oil will continue growing. At
This included the almost $28bn Aramco what level, I do not know, because the jury is
raised last year by leasing out then leasing back out. Anyone who tells you that they have a good
25-year stakes in first its oil pipelines and then grasp of where and when and how much is cer-
gas pipelines businesses. tainly living in a fantasy land. We are human, and
Resurgent oil prices have flipped the narra- we could prove to be wrong, but that is exactly
tive in recent months, though, and Aramco has what we believe,” he said.
returned to spending heavily as it eyes expansion Figures from the International Energy
throughout the value chain. Agency (IEA) show a global consumption fig-
ure of around 98mn bpd as demand closes in on
Production push the 100mn bpd level of early 2020 while prices
Upstream is the company’s core focus and main- remain around $90 per barrel. While Saudi and
taining – and raising – oil production levels its neighbours have repeated warnings about
accounts for as much as two thirds of Aramco’s producers not investing heavily enough in
capital budget. exploration, they are likely to benefit most from
The company is currently maintaining oil a potential shortage of capacity.
production of around 10mn barrels per day Already the world’s largest oil producer, Ara-
(bpd) – including NGLs and condensate – but mco is cashed up and looking to flex its muscles
with much of this sourced from mature assets, through oil expansion, projects to develop gas
many billions of dollars continue to be spent on resources and investments to resume its global
giant crude increment programmes that will refining footprint, all the while working to
provide around 1.5mn bpd to offset decline by reduce to zero its scope 1 and scope 2 greenhouse
the end of 2026. gas (GHG) emissions across its wholly-owned
Aramco has a maximum sustainable capac- operated assets by 2050 ahead of the Kingdom’s
ity (MSC) of 12mn bpd and despite having only own net-zero target date of 2060.
twice breached the 11.1mn bpd mark, the com- Having been on the sharp end of a price drop
pany has spent the last 18 months or so working just two years ago, Aramco has shown a new-
to increase MSC to 13mn bpd by 2027. found willingness to allow ‘outsiders’ in in order
Speaking to TIME this week, Energy Minister to monetise its assets, and the PIF may see the
Prince Abdulaziz bin Salman said that the King- current resurgent oil market providing oppor-
dom’s target is even higher. “We are targeting our tune timing for another share listing.™

Week 06 09•February•2022 www. NEWSBASE .com P5