Saudi Arabia To Invest $50 Billion To Increase Oil Capacity

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State oil company Saudi Aramco – Saudi Arabian Oil Co (TADAWUL:2222) – is set to increase investments by 50% to boost oil output this year, amid skyrocketing prices and West outcry. The company doubled its profit in 2021.


As reported by CNN Business, Aramco announced it would increase its capital expenditure to $40-50 billion this year, from $31.9 billion in 2021 or an 18% boost from 2020. This means a 50% increase at the middle of the guidance range.

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The West has drawn bans and curbs on Russian oil and gas imports amid the invasion of Ukraine and the price per barrel crossed the $100 barrier in February.

Economies heavily dependent on Russian crude are pressing OPEC to boost production, and Europe’s largest economy, Germany has reached an energy agreement with Qatar to reduce its dependence on Russian oil and gas.

As global urge for increased output mounts, Aramco CEO Amin Nasser said the company would follow the guidelines from the Saudi energy ministry with regards to production.

By 2027, the company in Saudi Arabia expects to increase its crude oil "maximum sustainable capacity" to 13 million barrels a day.

Free Cash Flow

Since the firm doubled its profit in 2021, Yousef Husseini, head of the materials team at EFG Hermes Research, said: “They are ramping up the reinvestment quite substantially and they are likely to use (the free cash flow) to de-lever the balance sheet.”

The company’s free cash flow in 2020 was $49.1 billion and said it had increased to $107.5 billion last year.

On these impressive numbers, Aramco is planning on boosting its hydrogen exports capability and positioning itself as a world leader in carbon capture and storage technology, according to CNN Business.

“Aramco's shares rose over 4% in early trade to a high of 43.85 riyals, valuing it at 8.76 trillion riyals ($2.34 trillion).”

Nasser said in another statement, “Although economic conditions have improved considerably, the outlook remains uncertain due to various macro-economic and geopolitical factors.”