Page 5 - MEOG Week 32 2021
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MEOG COMMENTARY MEOG
without returning to debt markets.
“It’s important to note that during the down-
turn last year we maintained our dividend,” he said, adding: “For now our dividend is staying at the normal level for the second quarter but, again, we’ll advise later this year whether we’ll be sticking to the ordinary dividend or doing more.”
In reality, with 98.5% of the company remain- ing in the hands of the Saudi government, only $281mn of the quarterly total will leave state cof- fers, however, such positive performance may lead those in Dhahran to consider floating addi- tional shares in the coming years.
Output expansion
The MoE instructed Aramco to begin efforts to expand MSC from 12mn bpd to 13mn bpd, though work in this regard was halted as the company slashed its 2020 capital programme by around a third in Q2 last year as it sought to stem the bleeding.
With full-year cap-ex having recovered to $15.7bn during H1 and expected to be around $35bn for the full year, Aramco is returning to these plans. Nasser said: “Seeing that there is a lot of under-investment in [oil] supply it’s a great opportunity for us. We are diligently working to increase capacity.” He added that he expects oil demand to surpass 100mn bpd in 2022.
Having earlier this year completed and tied-in the ‘Ain Dar and Fazran crude increment pro- jects to target additional combined capacity of 175,000 bpd and kicked off the first phase of the Dammam development project to add 25,000 bpd of in 2024 and 50,000 bpd in 2026, Aramco is continuing work on two larger initiatives.
Nasser noted during an earnings call that Aramco has begun a two-year front-end engi- neering and design (FEED) stage of efforts to add to MSC, saying that most of the output expansion would come from offshore fields.
In a report to accompany its results, the com- pany said it was in the final stages of detailed engineering for the Berri and Marjan crude increment projects to add 250,000 bpd and 300,000 bpd, respectively.
The Berri and Marjan increments are
designed to more than double oil production capacity from the assets to a combined 1.35mn bpd at a cost of around $18bn. They are also expected to result in the production of up to 2.5bn cubic feet (71mn cubic metres) per day of associated gas, which will be piped to the Berri gas plant.
However, both projects have been on the table since well before the instruction to increase MSC was received having been delayed repeatedly, so including them in the company’s efforts to reach the 13mn-bpd target is questionable.
In 2019, Italy’s Saipem was awarded a $1.3bn contract for 10 production deck modules (PDMs) and multiple pipelines under the Berri programme with the contractor awarding a deal to China’s Sinopec in June for engineering, pro- curement and construction (EPC) work on the expansion of processing facilities at Abu Ali and Khursaniyah to cope with increased flows of oil and condensate.
Then in March, London-listed fabrication specialist Lamprell was awarded an engineer- ing, procurement, construction and installation (EPCI) contract for two offshore production deck modules and associated pipeline and sub- sea cables for Marjan.
Meanwhile, in April, tenders were launched for work on another delayed crude increment programme.
The Zuluf initiative will add 600,000 bpd of Arabian Heavy to the current Arabian Medium crude production capacity of 550,000-600,000- bpd. The $8bn project is scheduled for comple- tion by 2026.
Taking all of these expansions into consid- eration, Aramco could theoretically achieve an MSC of 13.75mn bpd in 2026, however, the com- pany must also offset decline from mature assets several of which, including Ghawar, the world’s largest asset, and Berri, where output have fallen significantly after decades of production.
However, it has only twice produced above 11mn bpd and despite grabbing headlines, Ara- mco’s desire to expand MSC lies more in the flexibility it offers rather than an expectation to produce at full tilt for extended periods.
Week 32 11•August•2021 w w w . N E W S B A S E . c o m P5
