Saudi Aramco breaks profit record on high energy prices

Saudi Aramco beat its quarterly profit record set last May as rising energy prices driven by Russia’s invasion of Ukraine generated windfall profits for oil producers.

But the state-owned company’s chief executive warned that idle capacity remained limited as demand rose, with pandemic restrictions expected to ease in China, the world’s second-biggest oil consumer.

Net income rose to US$48.4 billion (R$245.8 billion) in the second quarter, an increase of 90% over the previous year and the group’s highest profit since its listing in 2019. According to the agency Bloomberg, the result is the highest among listed companies.

The Saudi oil company kept its dividend unchanged at $18.8 billion in the third quarter as it worked to expand oil and gas production. The company said it had limited production capacity to increase supply, and that by 2025 it would reach 12.3 million barrels a day.

“While global market volatility and economic uncertainty remain, developments in the first half of this year support our view that continued investment in our industry is essential,” said Amin Nasser, chief executive of Saudi Aramco.

Western countries pressured Saudi Arabia, the de facto leader of OPEC (Organization of Petroleum Exporting Countries), to increase production to offset rising prices, but the kingdom said it would only do so if demand increased.

Nasser told reporters on Sunday that demand was “healthy” but warned that there was little surplus capacity after a period of low investment in the sector.

“With Covid restrictions in China easing, demand will increase (…). The aviation industry will also increase demand,” he said.

Saudi Arabia, the world’s biggest oil exporter, has a production capacity of 12 million barrels a day, a figure that Saudi Aramco could quickly achieve if instructed by the government, Nasser said. The company’s capital expenditure rose 8% to $16.9 billion in the first half of the year, compared with the same period in 2021, and would gradually increase through 2025, he added.

The world’s largest publicly traded oil producers, including ExxonMobil, Chevron and BP, have posted big profits after a surge in commodity prices fueled by the war in Ukraine and a recovery in post-pandemic demand. Most of them increased payments to shareholders.

High profits are putting increasing political pressure on oil majors as high energy prices threaten to provoke a public backlash. US President Joe Biden said in June that Exxon was making “more money than God”.

Brent oil, an international benchmark, dropped from US$ 120 a barrel in June to almost US$ 98 on Friday (12). Saudi Aramco shares, listed in Riyadh, are up more than 25% this year. The government offered 1.7% of the oil company’s shares in 2019.

Responding to pressure from the US and the West for an increase in oil production, OPEC warned of “severely limited availability of surplus capacity” after years of underinvestment across the industry.

Nasser said it would take years to “bring in solid additional capacity.”

He added: “We are deeply concerned about the lack of investment; even now with higher prices, you only see short-term investment in the market.”

Earlier this month, OPEC and its allies agreed to one of the smallest oil production increases in the group’s history, with Saudi Arabia working to appease its Western allies without using up its idle capacity.