Amr Nabil / AP
DUBAI, United Arab Emirates – Saudi energy company Aramco said on Sunday that its profit jumped 90% in the second quarter from the same period last year, helping its half-year profit to nearly $88 billion.
The increase is a boon for the kingdom and the crown prince’s purchasing power, as people around the world pay higher gas prices at gas stations while energy companies reap the highest profits.
Aramco’s net profit was helped by strong earnings in the second quarter that ended in June, reaching $48.4 billion, higher than in the entire first six months of 2021, when revenue reached just $47 billion. That sets a new quarterly profit record for Aramco since it floated about 5% of the company on the Saudi stock market for the first time in late 2019.
Its profit last quarter alone is roughly the same as Aramco’s full-year profit in 2020 as oil demand slumps amid a pandemic correction. Its half-year profit of $87.9 billion puts Aramco well ahead of full-year 2019 profit before the pandemic, when it reached $88 billion.
The company attributed the jump to higher crude oil prices and volumes, as well as higher refining margins. Saudi Arabia’s vast oil reserves are among the cheapest to extract in the world.
Aramco’s finances are critical to the kingdom’s stability; when margins are high, Saudi Arabia’s economic growth reflects it. As countries around the world struggle with inflation and recession, the International Monetary Fund predicts that Saudi Arabia’s economy will grow by more than 7.6% this year, the fastest in the world.
Despite years of efforts by Crown Prince Mohammed bin Salman to diversify the economy and some success in boosting non-oil revenues, Saudi Arabia remains heavily dependent on crude oil exports to pay public sector salaries, lavish citizen benefits and defense spending . Aramco’s proceeds also help the prince realize his Vision 2030 infrastructure goals.
The company will pay an $18.8 billion dividend to shareholders in the second quarter, as it has promised to do since its stock market debut. Higher profits are promised to the government of Saudi Arabia, which is Aramco’s main shareholder.
Aramco is seen as key to restructuring the Saudi economy. The proceeds from the IPO were transferred to the country’s sovereign wealth fund to invest in projects to stimulate new sectors and create new jobs for Saudi youth.
Brent crude was trading around $100 a barrel even as OPEC, led by Saudi Arabia, and non-OPEC producers, led by Russia, steadily increased production levels that had been cut at the height of the pandemic. The price of oil rose sharply after Russia’s invasion of Ukraine in February. Prices have fallen below the $100 mark in recent weeks amid slowing economic growth in China and the US
Aramco President Amin Nasser said he expects oil demand to continue to grow until the end of the decade despite current economic pressures. OPEC said it expects global oil demand to rise by about 3 million barrels per day this year, with total oil demand averaging 100 million barrels per day.
Nasser said Aramco’s financial results this year reflect this increased demand for oil, even as countries around the world, including Saudi Arabia, pledge to cut their carbon emissions to prevent catastrophic levels of global warming.
“The world is calling for affordable and reliable energy, and we are answering that call,” he said, calling for more investment in oil and gas.
“At a time when the world is worried about energy security, you are investing in the future of our business. Our customers know that no matter what happens, Aramco will always deliver,” Nasser said in a short video released alongside the financial results.
Saudi Arabia currently produces about 10.5 million barrels per day, with most of that exported to Asia and its biggest customer, China. The crown prince said the kingdom’s maximum capacity is 13 million barrels per day. Aramco says it is working to reach that ceiling one day.
Aramco produces all oil and gas in Saudi Arabia with production limits dictated by the Ministry of Energy.