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Saudi Aramco to cut 2020 capital spending; 2019 net profit falls 21%

March 24/2020

MOSCOW (MRC) -- State oil giant Saudi Aramco will cut its spending this year due to the coronavirus pandemic, while it increases its dividend, the company said Sunday, as its share price continued to decline amid the Saudi regimes price war with Russia, said The Wall Street Journal.

Saudi Arabia's decision last year to float shares in its state oil company - the most profitable company in the world - was one of the central elements in Crown Prince Mohammed bin Salman's program for economic and political reform.

The record-setting IPO was touted as making the world's biggest energy exporter more professional and transparent.

The 21% decline in net profit for last year means it fell short of analysts' forecasts for the period that culminated in the share sale, months before the coronavirus pandemic became a factor for oil prices.

In recent weeks, Riyadh has announced that it is ramping up production in an oil price war with Russia that has sent global prices plunging and contributed to the coronavirus rout on international financial markets.

The company said it expects capital spending for 2020 to be between USD25 billion and $30 billion in light of current market conditions and recent commodity price volatility, compared to USD32.8 billion in 2019.

Aramco has already taken steps to "rationalize" its planned 2020 capital spending, CEO Amin Nasser said in a statement. "The recent COVID-19 outbreak and its rapid spread illustrate the importance of agility and adaptability in an ever-changing global landscape," he said.

Aramco listed its shares in Riyadh in December in a record USD29.4 billion initial public offering that valued it at $1.7 trillion. Its shares fell below the IPO price last week for the first time, as oil prices crashed after the collapse of an output deal between OPEC and non-OPEC members. Oil prices have fallen nearly 50% from highs reached in January and had their biggest one-day decline on March 9 since the 1991 Gulf War.

As MRC informed before, in October 2018, Saudi Aramco and Total launched engineering studies to build a giant petrochemical complex in Jubail. Announced in April 2018, the world-class complex will be located next to the SATORP refinery, operated by Saudi Aramco (62.5%) and Total (37.5%), in order to fully exploit operational synergies. It will comprise a mixed-feed cracker (50% ethane and refinery off-gases) - the first in the Gulf region to be integrated with a refinery - with a capacity of 1.5 million tons per year of ethylene and related high-added-value petrochemical units. The project represents an investment of around $5 billion and is scheduled to start-up in 2024.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, petrochemistry, Saudi Aramco.
Category:General News
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