Gulf Construction Online - Saudi Aramco set for capex cut amid crisis

Saudi Focus

Saudi Aramco plans to reduce its capital spending for 2020.

Saudi Aramco set for capex cut amid crisis

01 May 2020

State oil giant Saudi Aramco accounts for 20 per cent of the over $50 billion announced cuts in capital expenditure by oil and gas companies globally as they grapple with the coronavirus (Covid-19) pandemic and oil price war, according to a report.

As the oil and gas sector comes to terms with decade-low oil prices and global disruptions caused by Covid-19, company costs and investments are being slashed with over $50 billion pledged to date and more on the horizon, according to GlobalData.

Saudi Aramco’s plans to reduce its capital spending for 2020 to the $25 billion to $30 billion range in light of “current market conditions and recent commodity price volatility”. The Saudi oil giant had a capital expenditure of $32.8 billion last year and $35.1 billion in 2018, the leading data and analytics company added.

Daniel Rogers, Oil and Gas Analyst at GlobalData, commented: “This capex cut could have implications for Saudi Aramco’s ongoing expansion projects in the country. Elsewhere, across the supermajors, the investment cuts are within the 20-25 percentage range, resulting in multibillion-dollar pull backs in new projects and non-critical investments.”

However, experts believe the company’s 21 per cent drop in net income in 2019 is not a cause for undue concern.

“Aramco is working to achieve the task it has been set by the Saudi Energy Ministry to expand spare oil production capacity to 13 million barrels a day (bpd), up from around 12 million bpd at present,” said Indrajit Sen, Oil & Gas Editor at GlobalData. “However, the state enterprise will need to increase its investment in refurbishing and revamping its brownfield offshore and onshore assets to be able to raise its output capacity by one million bpd in the near term.”