Has Saudi Arabia stopped believing in the future of petroleum? is a question that has been asked a lot in Saudi Arabia in recent weeks, according to a recent report published in The Economist newspaper.
The report pointed out that the desert kingdom’s national oil Goliath has a central position in the world’s oil markets. Its market value of $2trn, five times that of the second-biggest oil firm, ExxonMobil, is predicated on bountiful reserves of crude and a peerless ability to tap them cheaply and, as oil goes, cleanly. So the Saudi energy ministry stunned many industry-watchers in January by suspending the firm’s plans to expand oil-production capacity from 12m to 13m barrels per day (b/d).
Meanwhile, the newspaper said in its report that all eyes turned to its financial results for 2023. No one expected a repeat of the year before, when high oil prices and surging demand propelled Aramco’s annual net profit to $161 billion, the highest ever for any listed firm anywhere. According to the paper, pofits did fall sharply, from $161 billion in 2022 to $121 billion last year, though that was still the second-best performance in the company’s history.
Shovelling a larger chunk of a smaller haul to owners could, on its own, imply that the company is indeed less gung-ho about its oily future, the paper reads.
It is important to remember that the main foundation of Mohammed bin Salman’s (MBS) policy, as stated in Vision 2030, is Aramco’s earnings and revenues. Although he stated that diversifying the economy and state revenues is his goal for the upcoming years, for the past eight years he has continued to spend the company’s profits on his projects without accounting. The diversification he spoke of consisted of raising taxes and the cost of government services to citizens and residents. In other words, Bin Salman’s policy, whether known to him or not, is based on squandering the billions of dollars in profits and revenues of the company on projects that did not add to the Kingdom’s budget other than the accumulation of debt and the cancellation of major projects that he had planned. Is MBS risking Aramco for the sake of his dreams?
