Page 7 - FSUOGM Week 02 2021

FSUOGM COMMENTARY FSUOGM

Saudi Energy Minister
Prince Abdulaziz bin
Salman Al-Saud and
Russian Energy Minister
Alexander Novak
in Vienna, Austria,
December 6, 2019.

maintained a 2021 production ‘base case’ of price war with Russia and drastic production
around 10.3mn bpd. cuts to stem the bleeding resulting from weak
However, as outlined by MEOG last week, the demand, has once again stamped its authority
company has experienced significant growing on not just OPEC and OPEC+, but the global
pains in its transformation into a ‘public’ com- oil market.
pany following the listing of just under 2% of its Oil stocks and crude prices jumped on the
shares on the Saudi Tadawul stock exchange in news and while the announcement is contrary
late 2019. With production cut, revenues will to the wishes of Russian Deputy Prime Minis-
also fall, which means that the company’s antic- ter Alexander Novak, Russia will gladly soak
ipated short-term delays to major projects to up the additional market share while benefit-
increase production, including Berri, Marjan, ing from higher prices, at least for the next two
Zuluf and Jafurah to name a few, may be pushed months.
back further, as it is likely to be forced once again Aramco’s sole operatorship of Saudi Ara-
to rationalise its capital programme to safe- bia’s oil industry and the Kingdom’s enormous
guard the $75bn per year dividend promised to and cheap-to-produce reserves give it unique
shareholders. ‘swing’ production capabilities. In recent
Meanwhile, Abdulaziz’s cautious approach is years, Riyadh had teamed up with the UAE
likely to be put to the test. He is understood to and Kuwait to increase the impact and share
have put a halt to Aramco’s $10bn plans to lease the pain of such swings and as US shale pro-
out a stake in its oil pipelines business, but moves duction rocketed, OPEC was perceived to have
like these are likely to be needed if the company lost its mojo.
is to continue spending heavily to sustain and However, the cut, in addition to last year’s
add to production while also fulfilling its obliga- production highs and lows, shows that Riyadh
tions to shareholders. will do whatever it believes it needs to do to
protect its long-term interests, irrespective of
Leading role whether or not it gains support among other
With the latest move, Saudi Arabia is portray- OPEC/OPEC+ members. It also provides a
ing itself as a benevolent master in its role as stark reminder of the unpredictability of Saudi
the de-facto leader of OPEC. Indeed, in one fell oil production policy, and it is this that may best
swoop, the Kingdom, which appeared some- serve the Kingdom’s efforts to truly control the
what to have lost its way last year following the market. ™

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