By Saima Gul
Your commercial awareness dose
Saudi Aramco is the Saudi Arabian government’s multinational petroleum and natural gas company. It was founded in 1933 and is the leading producer of energy and chemicals of the Middle East. It’s headquartered in Dhahran, Saudi Arabia. As the world’s most profitable company, Saudi Aramco is estimated to have 270 billion barrels in reserves.
Saudi Aramco was formed in 1933 as a product of concession agreement between the Saudi Arabian government and the standard oil company of California (SOCAL). Aramco started its first commercial oil production in 1938. The company then expanded to rapidly increasing production. In 1973, the Saudi Arabian government purchased 25% interest in Aramco, which then increased to 100% in 1970. In 1980 the company was officially established as Saudi Arabian Oil Company (Saudi Aramco).
The company was transformed into petroleum enterprise in 1989. It has built partnership and alliances around the world since then and invested heavily in research and development. Aramco expanded its business from crude to chemical products. Amin H. Nasser is the current president and CEO of the company, while the chairman is Yasir Al-Rumayyan.
Aramco is the world’s biggest oil and gas company. It has estimated liquid reserves of 260.2 bn barrels of liquid oil. The company produces 10.3 million barrels per day of crude oil, 1.1 million barrels of natural gas liquids and 8.9 bn standard cubic feet per day of natural gas. The company produces, refines and exports oil and has refining operations across the globe. It has a net refining capacity of 3.1 million barrels per day and employs nearly 76000 employees.
The investor community perhaps acknowledges that 2018 was a milestone for the company. Saudi Crown Prince Muhammad Bin Salman announced plans to list 5% of the company at a valuation of approximately $2 trillion in what became the largest initial public offering (IPO) in the history. Although the oil giant initially failed to secure the investment to be valued at $2 trillion, more than $25 billion flowing from investors helped the company to achieve Crown’s target.
The oil and gas industry is inevitably one of the sectors that got vastly impacted by the pandemic trauma. The company reported a 25% fall in profits in the first quarter of 2020. The net income of the company decreased to $16.7 billion from $22.2 billion. According to its CEO, “The COVID-19 crisis is unlike any the world has experienced, and we must all adapt to highly complex and rapidly changing developments.” The company expects capital expenditures for the fiscal year to be between $25 billion to $30 billion. On the other hand, shares of the company did not fluctuate much. The stock price is currently hovering at $8.28 per share.
The oil market crises are expected to further affect Saudi Aramco seriously. The economists have warned that the drop in demand for oil will be an ongoing trend. The current fall in demand is estimated to be a record of 9 million barrels of oil per day. The collapse in Crude oil prices following the tensions between Russian and Saudi Arabian governments has automatically affected Aramco’s market value. The company has suspended key projects to recover the loss. A $10 billion refinery in China has also been put on hold. Aramco is looking at selling a stake in its oil pipelines to raise $10 billion and is also looking at cutting its budget by 8 to 10%.
The company recently announced that its expected capital expenditure to be at the lower end of $25 billion to $30 billion range this year. This cutback has caused the company to delay plans to expand production. According to its CEO, the company will keep $75 billion dividends despite dive in profits. Aramco has fared better through these uncertain times due to its largest oil reserves and diversified investments. Nevertheless, there is no doubt that the company will need to focus on more cutting-edge technology and greener resources, given the shift from fossil fuels to renewable energy.
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