September 29, 2023

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Saudi Aramco reports record profits as fossil fuels remain 'essential'

Saudi Aramco reports record profits as fossil fuels remain ‘essential’

Saudi Aramco, the national oil company of the Kingdom of Saudi Arabia, reported on Sunday that the company generated net income of $161.1 billion last year — an increase of 47 percent from 2021, a record since Aramco began offering its shares on the local Tadawul stock exchange in 2019.

Aramco generates huge sums of money for the Saudi government, which owns nearly all of its shares.

Saudi Aramco, the world’s largest oil company, is the latest energy giant to report record profits. It is betting that global demand for its oil will remain strong despite concerns about climate change. So far, these bets are paying off.

“We expect oil and gas to remain essential for the foreseeable future,” Amin Nasser, CEO of the company, said in a statement.

Reflecting the profit jump, Aramco said it would increase its dividend for the fourth quarter by 4% from a year earlier, to $19.5 billion. Total earnings for 2022 were about $76 billion.

Oil company earnings closely track commodity prices, with Exxon Mobil, Chevron and Shell all posting the highest earnings ever, and Saudi Aramco is no exception. The average price of Brent crude, the international benchmark, rose about 40 percent to just over $100 a barrel in 2022, compared to the previous year, reflecting higher profits.

Saudi Aramco also benefited from higher profits from refined products such as diesel and gasoline.

Several factors in the past year have contributed to higher oil prices, including the Russian war in Ukraine, which has created hitherto unrealized fears of oil shortages, and an increase in energy demand as the global economy recovers from the pandemic.

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The group of oil producing countries, known as OPEC Plus, led by Saudi Arabia and Russia, has also helped keep oil prices strong by restricting production. Brent crude is now selling for about $83 a barrel.

While some major Western oil companies have taken a disciplined approach to new investment in fossil fuels, especially as governments promote electric cars and other ways to reduce carbon emissions, Aramco is spending record amounts. Last year, its spending on capital expenditures, which invests mainly in oil and natural gas production, rose 18 percent to $37.6 billion.

Mr. Nasser repeated his warning that not investing enough could lead to oil shortages and higher prices in the future. “The risks of underinvestment in our industry are real, including contributing to higher energy prices,” he said.