Saudi Aramco posts record ’22 profit on strong oil; sets higher ’23 capex at $45bn-55bn

SINGAPORE (ICIS)–Energy giant Saudi Aramco has posted a record 2022 net profit of $161bn on strong oil prices, and plans to invest heavily in 2023, setting its capital expenditure at $45bn-55bn.

• 2023 capex up by an average of 33% from last year
• Q4 cash dividend up 4% at $19.5bn; bonus shares recommended
• China, S Korea petrochemical expansions in the works

The world’s biggest crude exporter’s net profit last year surged by nearly half from 2021 levels as oil prices had surged above $100/bbl for about five months following Russia’s invasion of Ukraine on 24 February amid heightened supply concerns.

Saudi riyal (SR) billion	2022	2021	% change
Sales	2,006.96	1346.93	49.0
Operational profit	1,144.08	771.92	48.2
Net profit	604.01	412.40	46.5

“The results were underpinned by stronger crude oil prices, higher volumes sold and improved margins for refined products, while the company continues to strengthen its oil and gas production capacity, as well as its downstream portfolio, to meet anticipated future demand,” Saudi Aramco said in a statement on 12 March.

The oil giant has declared a fourth-quarter cash dividend of $19.5bn, up by 4% from the previous quarter “in line with aim to deliver a sustainable and progressive dividend”.

It has recommended a 20% increase in its capital through granting of bonus shares worth SR15bn, to be funded by retained earnings. Each shareholder will be granted one bonus share for every 10 shares owned, subject to regulatory approvals.

In 2022, its average hydrocarbon production stood at 13.6m barrels of oil equivalent per day (boe/day), including 11.5m bbls/day of total liquids.

HIGHER CAPEX SET FOR 2023
“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,” Saudi Aramco president and CEO Amin Nasser said.

Saudi Aramco expects its 2023 capex “to be approximately $45.0 billion to $55.0 billion including external investments, with capex increasing until around the middle of the decade.” In 2022, the company’s actual capex increased by 18% to $37.6bn.

“Upstream continues to execute its growth plans to promote long-term productivity of Saudi Arabia’s reservoirs and is proceeding with implementing the Government’s mandate to increase Aramco’s crude oil MSC [maximum sustainable capacity] to 13.0 mmbpd [13m bbls/day] by 2027,” the state-owned energy giant said.

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

In this regard, Saudi Aramco has launched a $1.5bn Sustainability Fund, which is focused on lower-carbon energy solutions, with plans to set up a huge carbon capture and storage hubs.

The fund set up in October 2022 will 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 development of new lower-carbon fuels, it said.

Meanwhile, Saudi Aramco and the Saudi Ministry of Energy signed in November a deal to build a CCS hub in Jubail with a storage capacity of up to 9m tonnes/year of carbon dioxide (CO2) by 2027.

DOWNSTREAM EXPANSIONS
Saudi Aramco is continuing to invest heavily downstream to diversify its business.

In China, it made a final investment decision on 10 March to participate in the development of a liquids-to-chemicals complex in the northeast region.

The project will include 300,000 bbl/day refinery to be built at Panjin in Liaoning province slated for start-up in 2024.

It presents an opportunity for Saudi Aramco to supply up to 210,000 bbl/day of crude oil feedstock to the complex, it said.

This was the latest in a host of recent deals in China – the world’s second-biggest economy, top oil consumer and a major importer of petrochemicals.

In South Korea, S-Oil – which is 63%-owned by Saudi Aramco through its subsidiary Aramco Overseas Co – began construction of its $7bn crude-to-chemicals project in Ulsan called “Shaheen” (Arabic for falcon) this month.

The project – which is expected to have a 1.8m tonne/year mixed feed cracker; a 880,000 tonne/year linear low density polyethylene (LLDPE) unit; and a 440,000 tonne/year high density polyethylene (HDPE) plant – is due for completion in 2026.

In Saudi Arabia, a final investment decision was made with TotalEnergies in December to build a petrochemical complex in Jubail that will enable an existing refinery of their joint venture SATORP to advance Aramco’s liquids-to-chemicals strategy”.

The complex, to be named Amiral, will be owned, operated and integrated with the SATORP. Construction is expected to begin in Q1 2023, with commercial operations due to start up in 2027.

In Europe, Saudi Aramco has expanded its downstream presence after completing deals in November 2022 with Polish refiner and fuel retailer PKN ORLEN.

As part of the transaction, it acquired equity stakes of 30% in a 210,000 bbl/day refinery in Gdańsk; 100% in an associated wholesale business; and 50% in a jet fuel marketing joint venture.

Along with its Saudi petrochemical subsidiary SABIC and Polish group PKN Orlen, Saudi Aramco plans to do a feasibility study on building a petrochemical complex in Gdansk, Poland.

Meanwhile, Saudi Aramco completed in March its $2.65bn acquisition of lubricants producer Vavoline.

Focus article by Pearl Bantillo

($1 = SR3.75)

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