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Saudi energy company Aramco revealed that second-quarter profit rose 90% compared with a year earlier, helping its half-year earnings to reach nearly $88bn (£76bn).
As people around the world pay higher gas prices at gas stations and energy companies reap huge gains, the growth has given a boost to the spending power of the kingdom and crown prince.
Aramco’s net profit was at $48.4bn (£40bn) on the back of strong second-quarter earnings to June – a figure higher than all profits for the first six months of 2021, when profits were just $47bn USD (£39bn).
It set a new quarterly earnings record for Saudi Aramco since it first listed around 5% of the company on the Saudi stock market in late 2019.
The company’s earnings last quarter were roughly equal to Aramco’s full-year 2020 profit, when oil demand plummeted during the pandemic lockdown.
Its half-year earnings of $87.9 billion put Aramco on track to far surpass its full-year 2019 earnings before the pandemic, when profits hit $88 billion.
The company attributed the increase to higher crude prices and volumes, as well as improved refining margins. Saudi Arabia’s vast oil reserves are among the cheapest to produce in the world.
Aramco’s financial health is critical to the kingdom’s stability – when its profit margins are high, Saudi Arabia’s economic growth reflects this.
As countries around the world grapple with inflation and recession, the International Monetary Fund expects the Saudi economy to grow by more than 7.6 percent this year, the highest in the world.
Despite years of efforts by Crown Prince Mohammed bin Salman to diversify the economy and some success in increasing non-oil revenues, Saudi Arabia continues to rely heavily on crude exports to pay public sector wages, generous benefits for citizens and defense spending.
Aramco’s proceeds also help the prince achieve his Vision 2030 infrastructure goals.
The company will pay shareholders an $18.8 billion dividend in the second quarter, as it has promised since going public. Higher profits bode well for the Saudi government, which is a major shareholder in Aramco.
Aramco is seen as key to reforming the Saudi economy. Proceeds from its IPO were diverted to the country’s sovereign wealth fund to invest in projects to stimulate new industries and create new jobs for Saudi youth.
Brent has been trading around $100 a barrel, even as OPEC, led by Saudi Arabia, and non-OPEC producers, led by Russia, have been steadily raising production levels they cut at the height of the pandemic.
Oil prices rose sharply after Russia’s invasion of Ukraine in February. Prices have dipped below the $100 mark over the past few weeks due to slowing economic growth in China and the US.
Saudi Aramco Chief Executive Amin Nasser said he expected oil demand to continue to grow over the next decade despite the current downward pressure on the economy.
OPEC has said it expects global oil demand to increase by about 3 million barrels per day this year, with total oil demand averaging 100 million barrels per day.
Mr Nasser said Aramco’s financial results so far this year reflected growing demand for oil, despite pledges by countries around the world, including Saudi Arabia, to cut carbon emissions to avoid catastrophic levels of global warming.
“The world is calling for affordable, reliable energy, and we are answering that call,” he said, urging greater investment in oil and gas.
“At a time when the world is concerned about energy security, you are investing in the future of our business. Our customers know that no matter what happens, Saudi Aramco will always be there,” Mr. Nasser said in a short video released alongside the financial results. said in.
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