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Reducing Aramco's Targeted Maximum Production Capacity to 12 Million Barrels Per Day

Saudi Aramco, the world's largest oil company, said on Tuesday 30 of January that it had received instructions from the Ministry of Energy in the Kingdom to maintain its maximum production capacity at 12 million barrels per day, and not to continue increasing its sustainable maximum production capacity to 13 million barrels per day.

Aramco explained that the level of sustainable maximum production is determined by the state, according to the Saudi Press Agency (SPA).

The Saudi Ministry of Energy instructed Aramco greenlit a major expansion project for Aramco in 2020, aiming to boost its peak production capacity to 13 million barrels per day by 2027. 

While Aramco did not announce the reason for the directive issued by the Saudi Ministry of Energy, it would be a factor in raising oil prices, when risks emerge that could affect global crude supplies.

Brent crude futures fell 0.34% to $81.56 a barrel by 12:18 GMT, after rising slightly in early trading.

Reuters quoted a source it described as an insider as saying that this step does not in any way reflect a change in views on future oil demand scenarios.

Added that the change was not the result of technical problems, but rather a government directive, and continued, "if the government decides to go in the other direction, the company is ready."

Despite the insider's rejection of the idea of any change in demand expectations, he suggested that there would be a lot of speculation in the market about the potential implications for global oil demand in the medium and long term as a result of the decision.

Aramco began its efforts in mergers and acquisitions in the liquefied natural gas sector last year, when it acquired a minority stake in MidOcean Energy for 500 million dollars.

Aramco is expected to announce the latest developments on its capital expenditure plans when it announces its full-year 2023 financial results in March.

Moreover, RBC Capital Markets said it expects Aramco to continue with plans that have already been given final investment decisions, such as projects to increase the capacity of the Shaduf field to 600,000 barrels per day, the Marjan field to 300,000 barrels per day, and the Berri field to 250,000 barrels per day.

However, RBC Capital Markets "expects to delay" projects that have not yet been decided, such as the Safaniya field project with a capacity of 700,000 barrels per day.

The note stated, "we had assumed a budget of (around) 12 billion dollars for the Safaniya project, of which 3 billion dollars would be spent in 2024."

It added, "in general, we expect to reduce the capital expenditure budget by (around) 5 billion dollars annually over the coming years compared to the previous indicative guidance."

Aramco had said it expects capital expenditure of between 45 and 55 billion dollars in 2023, the highest in its history, and indicated that it would increase this in the coming years.

Saudi Arabia is the world's largest exporter of crude oil, with a daily average of over 7.5 million barrels under normal conditions, and the second-largest producer after the United States, with a daily average of 11 million barrels under normal conditions.

Edited by Chloe Mansola

Aramco facilities by s2foto is licensed under CC BY-NC-ND 3.0 NL AKTE

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