Aramco has had a complicated era in 2020 until now. Just a few months after its long-awaited IPO in December 2019, Covid-19 has an obvious effect on the company. Aramco has been forced to delay two major expansion projects in the Marjan and Berri complexes, such as the effects of the virus, have been abundant and damaging to the global economy, oil costs and demand, according to GlobalData.
Conor Ward, global data oil and fuel analyst, commented, “These expansion projects aimed to add a significant amount of production to the company’s portfolio. However, the effects of Covid-19 now constitute a long-term effect. and, in parallel with OPEC’s production cuts, Saudi Arabia is expected to revel in particularly low production than expected.
In line with the production cuts agreed by OPEC, Saudi Arabia cut 2. 5 million barrels of oil according to the day (mmbj) in May, June and July. As a component of the new efforts to rebalance oil prices, Saudi Arabia, the United Arab Emirates and Kuwait have agreed to an extra production cut of 1. 18 mbd, adding Saudi Arabia to one million. Aramco will suffer a relief of about 18% in its planned production by 2020 and with these OPEC discounts as well as the effects of covid-19, it is unlikely that production grades will recover by 2022.
Future expansion plans have been delayed and Aramco will be increasingly adjusted with its capital expenditures due to the uncertainty that Covid-19 has brought to market. Corporate spending in the first part of 2020 has already been 15% lower than in 2019 and this trend is expected to continue in 2021, as the company continues to reconsider its spending performance against a back-to-back of global demand reduction.
Ward concludes: “In the future, the company will become the world’s largest energy company with above-average profit margins for the industry; however, persistently low global oil costs will put pressure on the company and, consequently, on the government’s budget. “
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