DUBAI, UNITED ARAB EMIRATES (AP) – Saudi energy company Aramco said yesterday its profits jumped 90 per cent in the second quarter compared to the same time last year, helping its half-year earnings reach nearly USD88 billion. The increase is a boon for the kingdom as people around the world pay higher gas prices at the pump while energy companies rake in top earnings.
Aramco’s net profits were helped by strong second-quarter earnings ending in June that hit USD48.4 billion – a figure higher than all of the first six months of 2021, when profits reached just USD47 billion. It sets a new quarterly earnings record for Aramco since it first floated around five per cent of the company on the Saudi stock market in late 2019.
Its earnings for just this past quarter are roughly what Aramco’s full-year profits were in 2020, when demand for oil crashed during pandemic lockdowns. Its half-year earnings of USD87.9 billion put Aramco on track to far surpass the full-year earnings of 2019, prior to the pandemic, when profits hit USD88 billion.
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 per cent 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 USD18.8 billion 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 USD100 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.