Saudi Arabia’s national oil company, Aramco, on Sunday reported near-record profits of $121 billion in 2023. The eye-catching total might seem a bit surprising given media narratives that fossil fuels are on the way out, but Aramco found demand for oil stronger than ever, albeit distributed somewhat differently than in years past.
Aramco said its 2023 profits were the second-highest ever posted, and they were only pushed into second place because energy prices declined from the record-setting year of 2022.
Aramco and its partners in the OPEC+ cartel (which includes Russia) have been waging a successful campaign to shore up oil prices by cutting production.
The Saudi government in January ordered Aramco to cancel plans for a production increase that would have raised its oil output from 12 million barrels per day to 13 million. Several new oil field development projects are still underway, but the company’s overall output will be held fairly steady during the coming year.
Aramco reported revenue of $440 billion for 2023, down from $535 billion in 2022. $31 billion in dividends were paid to stockholders in the fourth quarter of last year, despite profit margins growing tighter in chemicals and refining.
“Our resilience and agility contributed to healthy cash flows and high levels of profitability, despite a backdrop of economic headwinds,” Aramco CEO Amin H. Nasser said.
Nasser said Aramco sees “healthy and growing” demand in China, whose refineries are “fully integrated” with the Saudi oil flow and hungry for more crude. He said worldwide demand for oil should be “fairly robust” in 2024, growing to 104 million barrels per day from 2023’s average of 102.4 million barrels.
Saudi Crown Prince Mohammed bin Salman (MBS), the de facto chief executive of the country, transferred eight percent of Aramco shares to the Saudi sovereign wealth fund last week, boosting its value to over $160 billion.
MBS formulated a plan called Saudi Vision 2030 almost a decade ago that would diversify the economy away from its near-total dependence on oil revenue, using enormous oil profits to invest in other industries. Members of the royal family reluctant to commit their personal oil wealth to these plans were ruthlessly suppressed in 2017.
One of the Kingdom’s top priorities for diversification is another energy industry, liquefied natural gas (LNG). The Saudis are hoping to buy into big LNG projects in America, currently the world leader in LNG exports.
“Aramco is in talks to invest in phase 2 of Sempra Infrastructure’s Port Arthur LNG project in Texas, which represents a proposed expansion to the already producing first phase,” Reuters reported last week.
The Saudis are also looking at methods for extracting lithium from their oilfields, without disrupting oil production too much. Nasser referred to the lithium project as a “work in progress” in his press conference on Sunday.
The UK Guardian predicted on Sunday that Aramco’s high oil profits and dividends would “anger campaigners who have condemned the huge profits made by energy companies – and the bonuses handed to their executives – since the surge in commodity prices, against the backdrop of a cost of living crisis for households.”
This is an almost exact quote of Amnesty International Secretary-General Agnes Callamard’s reaction to the record Saudi oil profits of 2022.
“It is shocking for a company to make a profit of more than US$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,” Callamard said in March 2023 after Aramco’s previous annual earnings announcement.
“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,” Callamard fumed, as her organization pushed for international agreements that would seize and redistribute oil profits to facilitate “a rapid and just energy transition to renewable alternatives.”
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