Saudi energy company Aramco has revealed that profits jumped 90% in the second quarter compared to the same time last year, helping its half-year earnings reach nearly 88 billion dollars (£76bn).
The increase is a boost for the kingdom and the crown prince’s spending power as people around the world pay higher gas prices at the pump while energy companies rake in huge earnings.
Aramco’s net profits were helped by strong second-quarter earnings ending in June that hit 48.4 billion dollars (£40bn) — a figure higher than all of the first six months of 2021, when profits reached just 47 billion dollars (£39bn).
It sets a new quarterly earnings record for Aramco since it first floated around 5% of the company on the Saudi stock market in late 2019.
Its half-year earnings of 87.9 billion dollars put Aramco on track to far surpass the full-year earnings of 2019, prior to the pandemic, when profits hit 88 billion dollars.
The company credited the jump to higher crude oil prices and volumes sold, as well as higher refining margins. Saudi Arabia’s vast oil reserves are among the cheapest to produce in the world.
Aramco’s finances are crucial to the kingdom’s stability – when its margins are high, Saudi Arabia’s economic growth reflects that.
As countries around the world grapple with inflation and recession, the International Monetary Fund projects the Saudi economy will grow by more than 7.6% this year, the highest globally.
Despite years of efforts by Crown Prince Mohammed bin Salman to diversify the economy, and some success in increasing non-oil revenue, Saudi Arabia continues to rely heavily on crude exports that pay for public sector salaries, generous benefits to citizens and defence spending.
Aramco’s earnings also help the prince carry out his Vision 2030 infrastructure goals.
The company will pay a dividend of 18.8 billion dollars for the second quarter to shareholders, as it has promised to do since its debut on the stock market. The higher profits bode well for the Saudi government, which is the main shareholder of Aramco.
Aramco is seen as the key to overhauling the Saudi economy. Its proceeds from the IPO were transferred to the country’s sovereign wealth fund to invest in projects to spur new sectors and generate new jobs for Saudi youth.
Brent crude has been trading at around 100 dollars a barrel, even as Opec, led by Saudi Arabia, and non-Opec producers, led by Russia, have been steadily increasing production levels that had been cut during the height of the pandemic.
The price of oil rose sharply after Russia invaded Ukraine in February. Prices have dipped below the 100 dollar mark in past weeks amid slower economic growth in China and the US.
Aramco CEO Amin Nasser said he expects oil demand to continue to grow for the rest of the decade, despite current downward economic pressures.
Opec has said it expects world oil demand to rise by around 3 million barrels per day this year with total oil demand to average 100 million barrels a day.
Mr Nasser said Aramco’s financial results so far this year reflect this increased demand for oil, even as countries around the world, including Saudi Arabia, pledge to cut their carbon emissions to avert catastrophic global warming levels.
“The world is calling out for affordable, reliable energy and we are answering that call,” he said, urging greater investments in oil and gas.
“At a time when the world is worrying about energy security, you are investing in the future of our business. Our customers know that whatever happens, Aramco will always deliver,” Mr Nasser said in a short video released with the financial results.