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Aramco 'may account for 20pc of $50bn hydrocarbon capex cut'


State oil giant Saudi Aramco accounts for 20 per cent of the over $50 billion announced cuts in capital expenditure globally as oil and gas companies grapple with the coronavirus (Covid-19) pandemic and oil price war, according to a report.
This comes in line with 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, according to GlobalData, a leading data and analytics company. 
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, it added.
Daniel Rogers, Oil and Gas Analyst at GlobalData, comments: "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% range, resulting in multibillion-dollar pull backs in new projects and non-critical investments."
However, experts believe the company’s 21% drop in net income in 2019 is not a cause for undue concern.
Indrajit Sen, Oil & Gas Editor at GlobalData, said: "Its slimmer margins can be attributed to lower crude oil prices and production volumes, declining refining and chemical margins, and a $1.6 billion impairment associated with Sadara, its downstream joint venture with US-based Dow Chemicals."
"The forecast for subdued capital expenditure by Aramco in 2020 has attracted significant attention, particularly from the company’s supply chain community," he added.
Contractors and service providers are now trying to assess the likely impact of the spending reduction by the key regional client on their businesses.
"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 (b/d), up from around 12 million b/d at present," noted Sen.
“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 1 million b/d in the near term,” he added.-TradeArabia News Service

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