Saudi giant’s profit skyrockets to whopping $161.1 bln with oil & gas seen as ‘essential’ in energy arsenal

Saudi state-owned oil and gas player Aramco has posted its highest annual profit ever as a listed company, totalling $161.1 billion, amid high energy demand, tight supply and elevated oil and gas prices while the firm’s progress in low-carbon solutions and technologies serves as the cherry on top of a bumper year for this energy giant, which continues to expand its oil and gas investments.

The previous year is bound to be remembered due to the energy woes that came with the Ukraine crisis, making governments and companies scramble to secure the security of supply while trying to distance themselves from Russian oil and gas.

With the global energy crisis in full swing, energy price volatility become the norm, enabling oil and gas companies to record all-time high profits, as demonstrated by the quarterly and annual results provided by the European and U.S. giants: Eni (nearly $14.1 billion), Equinor ($74.9 billion), TotalEnergies ($20.5 billion), BP ($27.7 billion), Shell ($39.9 billion), Chevron ($35.5 billion) and ExxonMobil ($55.7 billion).

Saudi Aramco released its full-year 2022 financial results on 12 March 2023, reporting a record net income of $161.1 billion – its highest annual profits as a listed company – compared to $110.0 billion for the full-year 2021. This is a 46.5 per cent rise on a year-on-year basis.

The company declared a fourth-quarter dividend of $19.5 billion, to be paid in the first quarter of 2023, representing a 4.0 per cent increase compared to the previous quarter, aligned with the firm’s dividend policy aiming to deliver a sustainable and progressive dividend.

Aramco’s board of directors also recommended the distribution of bonus shares to eligible shareholders in the amount of one share for every 10 shares held, subject to required Extraordinary General Assembly and regulatory approvals.

The Saudi giant pointed out that its results were underpinned by stronger crude oil prices, higher volumes sold and improved margins for refined products, while the firm continues to strengthen its oil and gas production capacity, as well as its downstream portfolio, to meet anticipated future demand.

Commenting on the results, Amin H. Nasser, Aramco President & CEO, remarked: “Aramco delivered record financial performance in 2022, as oil prices strengthened due to increased demand around the world. We also continued to focus on our long-term strategy, building both capacity and capability across the value chain with the aim of addressing energy security and sustainability.

“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real — including contributing to higher energy prices. To leverage our unique advantages at scale and be part of the global solution, Aramco has embarked on the largest capital spending programme in its history, and last year our capex rose by 18.0 per cent to reach $37.6 billion.”

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Aramco claims that its 4Q 2022 net income is in line with analyst estimates, excluding certain non-cash items of around $3.3 billion while the firm’s free cash flow reached a record $148.5 billion in 2022, compared to $107.5 billion in 2021. The Saudi player’s gearing ratio at the end of 2022 was -7.9 per cent, compared to 12.0 per cent at the end of 2021.

The oil and gas player emphasised that its capital expenditure in 2022 was $37.6 billion, an increase of 18.0 per cent from 2021, “as progress continues on multiple fronts to deliver reliable, affordable and more sustainable energy.”

Furthermore, Aramco’s average hydrocarbon production was 13.6 million barrels of oil equivalent per day (mmboed) in 2022, including 11.5 million barrels per day (mmbpd) of total liquids, compared to  12.3 million barrels of oil equivalent per day (mmboed) in 2021, including 9.2 mmbpd of crude oil.

The firm underscored that it had continued its track record of supply reliability by delivering crude oil and other products with 99.9 per cent reliability in 2022, which was the third year running that the company achieved that level of reliability.

In addition, Aramco completed an energy infrastructure deal in February 2022, resulting in a consortium of investors, led by BlackRock Real Assets and Hassana Investment Company, acquiring a 49 per cent stake in a newly formed subsidiary, Aramco Gas Pipelines Company (AGPC), for $15.5 billion.

Moreover, Aramco’s focus on the energy transition and lower-carbon solutions was illustrated with the launch of $1.5 billion sustainability fund, as well as one of the world’s largest planned carbon capture and storage hubs.

“Our focus is not only on expanding oil, gas and chemicals production but also investing in new lower-carbon technologies with the potential to achieve additional emission reductions — in our own operations and for end users of our products,” highlighted Nasser.

As a reminder, Aramco established a $1.5 billion sustainability fund in October 2022 to invest in the technology needed to support a stable and inclusive energy transition. As a result, the fund plans to invest in technologies that support the company’s announced Scope 1 and Scope 2 net-zero 2050 ambition in its wholly owned operational assets, as well as the development of new lower-carbon fuels.

However, the initial focus areas will include carbon capture and storage (CCS), greenhouse gas emissions, energy efficiency, nature-based climate solutions, digital sustainability, hydrogen, ammonia and synthetic fuels.

The announcement about the sustainability fund came only weeks after the energy giant’s CEO said that ramping up oil and gas investments and devising a “more credible” energy transition roadmap was required to address climate priorities and energy security challenges for a more secure and sustainable energy future.

When November 2022 came knocking, a joint development agreement between Aramco and the Ministry of Energy was signed to construct one of the largest planned carbon capture and storage hubs in the world in Jubail, Saudi Arabia, with a storage capacity of up to 9 million tons of carbon dioxide a year by 2027.

Meanwhile, Aramco expects 2023 capital expenditure to be approximately $45 billion to $55 billion, including external investments, with capex increasing until around the middle of the decade. Aramco underlines that upstream continues to execute its growth plans to promote the long-term productivity of the firm’s reservoirs while proceeding with implementing the government’s mandate to increase the company’s crude oil MSC to 13.0 mmbpd by 2027.

The Saudi giant points out that construction and engineering activities for the Marjan and Berri crude oil increments continue to progress, and are expected to add production capacity of 300,000 barrels per day (bpd) and 250,000 bpd, respectively, by 2025. Additionally, compression projects at the Haradh and Hawiyah fields started commissioning activities and full capacity is expected to be reached in 2023.

Aramco explains that the construction at the Hawiyah Unayzah Gas Reservoir Storage, the first underground natural gas storage project in Saudi Arabia, is at an advanced stage and has begun injection activities. The programme is designed to provide up to 2.0 billion standard cubic feet per day of natural gas for reintroduction into Saudi Arabia’s Master Gas System by 2024.

On the other hand, the Zuluf crude oil increment is in the engineering phase and is expected to provide a central facility to process a total of 600,000 bpd of crude oil from the Zuluf field by 2026 while construction activities are also underway on the Dammam development project, which is expected to add 25,000 bpd and 50,000 bpd of crude oil by 2024 and 2027, respectively.

Coming at a time when global climate change concerns are plaguing the world, the Saudi giant’s staggering profit did not go unnoticed by environmentalists, which expressed their criticism along the same lines as the opposition seen after the U.S. and European energy giants disclosed their results for 2022.

Amnesty International claims that the oil and gas produced by Aramco have been estimated to be responsible for more than 4 per cent of global greenhouse gas emissions since 1965, and according to a study, accounted for about 4.8 per cent of all global greenhouse gas emissions in 2018 — the largest of any oil and gas company.

With this in mind, the organisation outlines that “governments must also agree to phase out the use and production of all fossil fuels at the COP28 climate talks later this year. A rapid and just energy transition to renewable alternatives has never been more urgent.”

In line with this, Agnès Callamard, Amnesty International Secretary-General, emphasised: “It is shocking for a company to make a profit of more than $161 billion in a single year through the sale of fossil fuel – the single largest driver of the climate crisis. It is all the more shocking because this surplus was amassed during a global cost-of-living crisis and aided by the increase in energy prices resulting from Russia’s war of aggression against Ukraine.

“It is past time that Saudi Arabia acted in humanity’s interest and supported the phasing out of the fossil fuel industry, which is essential for preventing further climate harm.”

Amnesty International underlines that it supports the countries of Vanuatu and Tuvalu, the European Parliament, the World Health Organisation, and thousands of civil society organisations urging the development of a legally binding Fossil Fuel Non-Proliferation Treaty.

“Aramco’s profits should be used for the benefit of the planet and its people. The profits could fund a just and human rights-based transition to renewable energy and further improve the lives of ordinary Saudi Arabians,” concluded Callamard.