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Aramco Losses Hit a Staggering 44% in 2020

March 22, 2021

Saudi Aramco had a torrid 2020, a lot like every other major oil company. But Aramco isn’t just any other ordinary oil company — it’s the world’s largest, and Covid-19’s toll on its business had a decidedly adverse effect on its business.

Aramco announced on Sunday that its net profit fell an eye watering 44.4% to $49 billion in 2020. Dealing a significant blow, Saudi Aramco committed to spend less this year than it had anticipated: Aramco has said it plans to spend roughly $35 billion in 2021 on capital expenditures, a huge cut from its previous estimate of $40 billion to $45 billion.

Even so, the company was optimistic about the future: It maintained its $75 billion dividend for the year and believes it will return to pre-pandemic oil production levels by the end of 2021.

Saudi Aramco president and CEO Amin Nasser said on a call with reporters he is very upbeat about 2021, and expects the company to reach close to 99 million barrels per day by the end of the year. He said this outlook is based on the views of different global entities and agencies, and he predicted demand will increase in 2022 and has full belief with a global deployment of vaccinations the situation will become much better.

This huge drop in profits demonstrate the coronavirus pandemic’s devastating effect on global energy markets. Last spring, the pandemic sent demand for travel plummeting, in turn causing oil usage to drop rapidly. Meanwhile, Saudi Arabia ramped up its production as part of a price war against Russia.which led to a major oil glut, and storage for all of this over production of Crude became a real issue, with container deliveries being turned away by some refineries.

Since the “Black Swan” price drop that saw crude prices fall deep into negative territory, oil has charged back after OPEC and Russia agreed to roll over production cuts. In February, oil breached $60 per barrel, the highest level since January 2020.
“As the enormous impact of Covid-19 was felt throughout the global economy, we intensified our strong emphasis on capital and operational efficiencies,” Nasser said.

Saudi Aramco refineries have also been facing drone attacks from Yemen’s Iran-backed Houthi rebels, but this is yet to deter Amin Nasser as he stated “Our reliability in 2020 despite Covid-19 and these attacks on different parts of our facilities in the north and the south and in Ras Tanura lately is 99.9%,it’s even higher than previous years.”
It’s further demonstration about the robust crisis management and continuity plans that we have.”

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