Aramco on Sunday posted a fall in net income to $88.2 billion for the full-year 2019, down from $111.1 billion in the previous year. The decrease was primarily due to lower crude oil prices and production volumes, Aramco said, coupled with declining refining and chemical margins.
Slashing Capex due to sluggish demand
The Saudi state oil company plans to slash capital expenditure for 2020 to between $25 billion and $30 billion in light of the coronavirus-induced demand destruction and recent commodity price volatility. In contrast, Capex in was $32.8 billion, already lower than the $35.1 billion Capex in the previous year.
“Capital expenditure for 2021 and beyond is currently under review,” the Aramo CEO said, indicating there might be drastic cuts. He stressed, however, the company’s low upstream costs and low sustaining capital give it a competitive edge over rival producers.
“Our unique scale, low costs, and resilience came together to deliver both growth and world-leading returns,” Nasser stressed, adding these strength combined with disciplined and flexible approach to capital allocation are meant to help sustainably grow free cash flow.
Tapping huge Jafurah field from early 2024
On the upstream side, Aramco in February received regulatory approval to develop the Jafurah unconventional gas field in the Eastern Province. It is the largest unconventional gas field in the Kingdom to date, with an estimated 200 trillion cubic feet of resources.
Start of production of the first of three development phase is slated for early 2024.
A boost in domestic gas production is set to help the Saudi kingdom to realize its goal of using more cleaner-burning gas as fuel in power stations and as feedstock for the production of petrochemicals. Refining and petchems are high-priority industries for the government in its strategy to diversify the economy.