Crown Prince Mohammed bin Salman is trying to reduce Riyadh's dependence on oil revenues. Photo: AFP
Saudi Aramco, the world's largest oil company, will help cover the Gulf nation's growing budget deficit after a large increase in dividend payments despite falling revenues.
Saudi Aramco, the world's largest oil producer, said on Monday which will increase its payouts to investors by 56%. to $29.4bn (£23bn).
Nearly $29 billion will go directly to the government in support of Crown Prince Mohammed bin Salman, known as MBS, who is struggling with a growing budget deficit.
The Saudi government announced last week that its quarterly deficit has narrowed. jumped 80% to 5.3 billion rials (£1.1 billion) after huge investments in efforts to diversify the economy away from fossil fuels.
MBS's spending on diversification projects includes the $500 billion development of the city of Neom, a futuristic project aimed at boosting tourism.
Riyadh's continued dependence on oil revenue shows that MBS's goal is to make Saudi Arabia less dependent on fossil fuels remains a pipe dream.
Aramco has increased its payments to the government, despite falling profits from last year's record highs due to a combination of lower oil prices and a significant reduction in production.
Net income in the three months to June fell to $30.1 billion, down 38% from $48.4 billion a year earlier when the energy crisis sent oil prices skyrocketing.
Saudi Aramco said it will pay a quarterly dividend of $19.5 billion, as well as a payout of $9.9 billion tied to performance.
Jason Turvey, a Middle East economist at Capital Economics, said Aramco's higher dividend showed «the government is doing its best to ensure that falling oil revenues do not affect its financial plans.»
Saudi Arabia is trying to support prices on oil to support government spending.
The bloc-leading Organization of the Petroleum Exporting Countries (OPEC) cut production by one million bpd in July and announced last week it would extend that cut until September .
Russia, member of OPEC. The ally also announced that it would extend the cut in exports until September.
The move helped raise the price of Brent crude to about $85 a barrel from $75 at the end of June. However, prices remain well below the high of $127 a barrel last year following Russia's invasion of Ukraine.
Aramco CEO Amin Nasser said: “The second quarter of 2023 was characterized by continued global economic uncertainty and volatility. market.
“This has obviously affected energy prices, but Aramco has achieved high revenues thanks to low cost production, high reliability of supply and strong demand for our products.”
Saudi Aramco confirmed plans for its largest ever capital investment program and gave understand that it will invest more in China as it diversifies its overseas operations.
Investment rose 13% to $19.2 billion in the six months to the end of June despite falling profits. Aramco said the spending was aimed at «capturing unique growth opportunities.»
In July, Saudi Aramco acquired a 10 percent stake in Rongsheng Petrochemical, a Chinese chemical company, for 24.6 billion yuan (2.7 billion pounds) with a long-term sale agreement that allows it to significantly expand its presence in the country.
The Saudi Arabian government sold about 1.5% of the shares of Saudi Aramco to investors during the initial public offering (IPO) in April 2019 g.
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