Page 5 - MEOG Week 12 2021

MEOG COMMENTARY MEOG

Saudi Aramco’s Manifa
oilfield.

Source: Bloomberg

liquids and 191.6 trillion cubic feet (5.43 trillion stewardship, reliability and the “agility” deployed
cubic metres) of natural gas. to navigate such challenging times.
Meanwhile, engineering design and procure- Indeed, speaking of the importance of the
ment began belatedly at the Berri and Marjan, company’s approach to environmental, social
with the projects anticipated increasing pro- and governance (ESG) issues, Nasser said that
duction capacity by 250,000 bpd and 300,000 “environmental stewardship was an integral part
bpd, respectively by 2025. Progress was also of [Aramco’s] approach to business […] long
announced on the ‘Ain Dar and Fazran incre- before the term ESG was first used.”
ment projects ahead of operations beginning However, the challenge of reliably quanti-
later this year to add another 175,000 bpd to fying the environmental impact of oil and gas
production capacity. operations was neatly, if unfortunately, illus-
Work also began on the first phase of the trated by the fact that the company’s upstream
Dammam development project which will add carbon intensity increased year-over-year to
another 25,000 bpd of capacity in 2024 and 10.5kg of CO2e equivalent for each barrel of oil
50,000 bpd in 2026. equivalent produced (kg CO2e/boe). However,
However, total hydrocarbon production Nasser said that the absolute volume of CO2
fell from 13.2mn barrels of oil equivalent per produced was lower and the company still has
day (boepd) in 2019 to 12.4mn boepd in 2020, “one of the lowest upstream carbon intensities
with crude oil accounting for the majority of the in the world”.
reduction as it dropped by 700,000 bpd to 9.2mn
bpd. Meanwhile, the impact of lower produc- Downstream
tion was compounded by a $26 per barrel drop Meanwhile, the company has another three years
in realised oil prices, which averaged $40.6 per to complete the spin-off of its downstream activ-
barrel in 2020. ities into a wholly-owned subsidiary otherwise
it will be liable for five years of retroactive taxes
Uptick relating to its downstream operations charged at
While there remains uncertainty about market an additional 30-65% to the 20% it has already
recovery as the pandemic shows signs of another paid.
wave of cases in Europe, Aramco has provided With the downstream continuing to be a
capex guidance for 2021 representing an $8bn loss-making venture for Aramco – $3.5bn in
increase on 2020. This is $5-10bn less than previ- 2020 – the company hopes that the spin-off will
ous guidance, but is indicative of the company’s make its upstream business a more nimble and
optimism and intention to resume work to ramp attractive investment proposition.
up MSC. The integration of SABIC, for which Aramco
Meanwhile, its healthy bank balance provides paid $69bn for a 70% stake in 2020, is ongoing
some wiggle room relating to the payment of div- and its eventual completion will turn the com-
idends, which the company remains committed pany into a world-scale player in the chemicals
to. Aware of the conclusions the market will draw industry, offering significant economies of scale
from their words, President and CEO Amin as well as expanding guaranteed demand for
Nasser and CFO Khalid al-Dabbagh maintained crude feedstock.
an upbeat and even jovial tone during the earn- Overall, despite the eye-watering drop in
ings call. It is indeed noteworthy that despite the profits and the increasing role of debt, the results
increasing number of attacks targeting Aramco can be seen as a success. While it makes regular
infrastructure in recent months, little mention reference to its people, Aramco’s key strength
was made of these events. is the scale of its operations, and in 2020, the
Rather, the focus of the call and the sub- company leveraged these to the best of its ability.
sequent annual report was on environmental After all, a profit of $49bn isn’t bad.™

Week 12 24•March•2021 www. NEWSBASE .com P5