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Aramco increases spending despite drop in profits

13 August 2024

Commentary
Indrajit Sen
Oil & gas editor

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Saudi Aramco’s profits in the second quarter and first half of 2024 may have slid year-on-year, but that has not impacted the company’s capital expenditure (capex). Project spending, on the contrary, has spiked sharply.

Capex rose to $12.13bn in the second quarter from $10.46bn in the same period last year. Second-quarter capex also increased from the first quarter, during which Aramco spent $10.83bn.

In the first half of the year, the company’s spending increased to $22.96bn, compared to $19.20bn in the first half of 2023.

Aramco has demonstrated robust capex so far this year on major projects that are critical to its strategic goals of maintaining oil production potential at 12 million barrels a day (b/d), raising gas production by 60% by 2030, with 2021 as its baseline, and achieving a liquids-to-chemicals conversion capacity of 4 million b/d by the end of the decade.

Vigorous project spending

Despite the Saudi government shelving its oil output capacity-building programme at the start of the year, Aramco has already spent an estimated $2bn on offshore engineering, procurement, construction and installation (EPCI) contracts year-to-date.

Gas projects, however, have dominated Aramco’s capex in 2024. In April, Aramco awarded EPC contracts totalling $7.7bn to expand the Fadhili gas plant in the Eastern Province of Saudi Arabia. The project is expected to increase the Fadhili gas plant’s processing capacity from 2.5 billion cubic feet a day (cf/d) to up to 4 billion cf/d.

Following that, on 30 June, Aramco officially awarded $25bn-worth of contracts for EPC works and other services for two of its major gas expansion programmes: the third expansion phase of the Master Gas System (MGS-3) and the second expansion phase of the Jafurah unconventional gas development.

Aramco awarded 15 lump-sum turnkey contracts for the MGS-3 project, worth $8.8bn. Aramco also awarded 16 contracts, worth a combined total of about $12.4bn, for the Jafurah second expansion phase.

Furthermore, since awarding contracts for the Jafurah second expansion phase, Aramco has made significant progress with the third and fourth expansion phases of the massive unconventional gas development programme, estimated to have a total capex allocation of $110bn.

Buoyant capex outlook

Aramco said last year that it expected its total capex in 2024 to be in the range of $48bn to $58bn.

As the first seven months of the year have demonstrated, far from witnessing a slump in capex, 2024 may well turn out to be a record year for Aramco’s project spending.

Looking beyond 2024, Amin Nasser, Aramco’s president and CEO, told MEED in May that he expects his company to ramp up capex in the next two years as it strives to achieve its strategic 2030 goals.

This capex guidance indicates that Aramco’s spending boom on oil production, gas capacity expansion and liquids-to-chemicals projects could extend into 2026.

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Indrajit Sen

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