After reporting a doubling of earnings in 2021, Saudi Aramco, the state-owned oil behemoth of Saudi Arabia, expects to significantly increase its investment in energy production.
Over the next five years, the company wants to considerably increase output.
Demand for oil and gas has outstripped supply in recent months, driving up energy costs.
The crisis in Ukraine, as well as a reluctance to rely on Russia for energy, has increased the need to discover alternative energy sources.
Although the increase in investment is geared at raising output over the next five to eight years, it is likely to be welcomed by political leaders concerned about the impact of rising energy costs.
Boris Johnson, the British prime minister, visited Saudi Arabia this week in an attempt to urge the country to release more oil into global markets in the short term.
Saudi Arabia is the largest producer in the Opec (Organization of Petroleum Exporting Countries) cartel, and increasing output could assist to lower energy prices, which are at 14-year highs.
However, the government has been condemned for a number of human rights violations, including its involvement in the Yemeni conflict, the murder of writer Jamal Khashoggi in 2018, the imprisonment of dissidents, and the frequent use of capital punishment.
To address the energy problem, the Labour Party accused the government of going “cap in hand” from one dictator to the next.
Rishi Sunak, the chancellor, said the prime minister was “absolutely correct” in approaching Saudi Arabia about increasing energy supply.
“It would be wrong if we weren’t exploring all the avenues we could to bring cheaper energy and more secure energy to people in this country,” Rishi Sunak told the BBC.
During his visit, the prime minister engaged in “productive dialogue” regarding human rights violations, he said.
Rachel Reeves, the shadow chancellor, said the UK should focus on increasing local energy output through new nuclear and on- and off-shore wind generating to lessen dependency on countries like Russia and Saudi Arabia.
“Getting to net zero is the mission of our generation,” she said.
“We’ve got to do more to reduce our reliance on fossil fuels, which is why investment in homegrown electricity is so important.”
During the epidemic, energy markets were erratic, as rapid shifts in economic activity influenced both supply and demand.
As the global economy slowed in 2020, Saudi Aramco’s profits plummeted.
However, in many nations, the reopening resulted in a significant increase in energy prices in 2021. All of the major energy firms saw an increase in revenue as a result of this.
Saudi Aramco said it intended to boost capital spending to $45-$50 billion this year, with more increases planned through the middle of the decade. Last year, $31.9 billion was spent on capital projects.
The corporation stated it would increase its crude oil “maximum sustainable capacity” to 13 million barrels per day by 2027.
It also plans to boost gas production by more than half by 2030. In February, Saudi Arabia produced little over 10 million barrels of oil per day.
From $49 billion in 2020 to $110 billion in 2021, the oil corporation more than doubled its net profit.
The price of a barrel of Brent crude oil surged by nearly 50% in 2021, and analysts predict earnings to rise much more in 2022 if energy prices remain high.
Saudi Aramco announced plans to build a large hydrogen export capability and become a world leader in carbon capture and storage technology.
(Adapted from BBC.com)