OIL AND GAS

MASSIVE ENERGY INVESTMENT IS UNDERWAY IN SAUDI

Saudi Aramco is proceeding with the largest capital programme in its history, following investments in reliable energy and petrochemicals, while also developing lower-carbon solutions that can contribute to the broader energy transition.

The world’s largest oil exporter strongly benefitted from high commodity prices in the first half of 2022. It posted a record half-year net income of USD 87.9 billion, compared to USD 47.2 billion during the same period last year.

Second quarter revenues stood at USD 48.4 billion in the second quarter, compared to USD 25.5 billion in the same period in 2021. The company attributed the growth to higher crude oil prices and volumes sold, in addition to strong refining margins during the second quarter and higher downstream margins in the first half of 2022.

Capital expenditure rose 25% to USD 9.4 billion in the second quarter, and 8% to USD 16.9 billion in the first half of 2022, compared to the same period in 2021.

“While global market volatility and economic uncertainty remain, events during the first half of this year support our view that ongoing investment in our industry is essential — both to help ensure markets remain well supplied and to facilitate an orderly energy transition,” said Aramco president and CEO Amin Nasser. “In fact, we expect oil demand to continue to grow for the rest of the decade, despite downward economic pressures on short-term global forecasts.”

Brent crude prices have risen 25% year to date, and were last trading at USD 88.62 per barrel.

Aramco also published its first sustainability report, which outlines its plans to achieve net-zero Scope 1 and Scope 2 greenhouse gas emissions across its wholly owned operated assets by 2050. The company aims to capture, utilise and store 11 million metric tonnes of CO2 equivalent annually by 2035; invest in renewables to generate 12 gigawatts of solar and wind power by 2030; reduce or mitigate more than 50 million metric tonnes of CO2 equivalent annually by 2035; and cut upstream carbon intensity by around 15% by 2035 (compared to a 2018 baseline).

 

The company is expanding its natural gas production and has made progress on the initial construction and design of the Jafurah Gas Plant. Once complete, the facility will have the capacity to generate 3.1 billion standard cubic feet per day (bscfd) of raw gas. The plant is expected to be completed in two phases by 2027. The field will provide feedstock for hydrogen and ammonia production, and will help meet expected growing local energy demand.

Construction of the Hawiyah Unayzah Gas Reservoir Storage has reached an advanced stage, with the injection phase nearing completion. This is expected to provide up to 2.0 bscfd of natural gas to be injected into the Master Gas System by 2024,” the company said. “It is the first underground natural gas storage project in the kingdom, which helps to manage seasonal changes in demand and in turn improves asset utilisation and cost efficiency.”

The deployment of the Ghawar-1 supercomputer for reservoir simulation– the second largest supercomputer in the region – is also expected to unlock more opportunities within its existing resources.

 

In its latest report in August, the Organization of the Petroleum Exporting Countries (OPEC) downgraded world oil demand growth in the remainder of 2022. Still the group expects healthy increase of 3.1 million barrels of oil equivalent per day this year.

Oil demand in the OECD is estimated to grow by 1.6 million bpd, while the non-OECD is expected to grow by 1.5 million bpd. Total oil demand is expected to average around 100 million bpd in 2022.

“The first half of this year is revised higher, amid better-than-anticipated oil demand in the main OECD consuming countries. However, oil demand in 2H22 is revised lower, amid expectations of a resurgence of COVID-19 restrictions and ongoing geopolitical uncertainties,” OPEC said in its monthly report. “For 2023, the forecast for world oil demand growth remains unchanged at 2.7 million bpd, with total oil demand averaging 102.7 million bpd. The OECD is expected to grow by 0.6 million bpd and the non-OECD by 2.1 million bpd.”

Still, the group anticipates oil demand in 2023 to be supported by a still-solid economic performance in major consuming countries, as well as improving geopolitical developments and improvement of COVID-19 in all regions.

The group expects non-OPEC liquids supply to grow 2.1 million bpd in 2022 to average 65.8 million bpd, with Russian production rising to offset lower production in the US, Norway, and Kazakhstan. In 2023, non-OPEC production will rise to 67.5 million bpd, with output in the US, Norway, Brazil, Canada, and Guyana. 

“However, uncertainty regarding the operational and financial aspects of US production, as well as the geopolitical situation in Eastern Europe remains high,” OPEC said.