Saudi Arabia’s state owned oil giant, the Saudi Arabian Oil Company (SAOC), is planning to spend almost £100bn on crown prince Mohammed bin Salman mega-projects despite a drop in profits.
Aramco expects to pay $124bn this year (£99bn), compared with $98bn by 2023, to its shareholders. These are primarily the Riyadh government or sovereign wealth funds.
This was despite the fact that the company reported a fall of 14pc in profits, to $27.3bn for the first quarter 2024.
According to the International Monetary Fund, Saudi Arabia is heavily dependent on Aramco to finance its budget. Oil needs to be around $96 or more per barrel to balance the state’s budget.
On Tuesday, the benchmark crude price was hovering around $84 per barrel.
The move comes at a time when the crown prince, also known as MBS , is in dire need of funding for a number of major projects that aim to radically transform the economy of the Kingdom and make it less reliant on oil.
The plans include museums, marine life centres, opera houses, resorts and new airports near the Red Sea, as well as a $500bn smart city in the desert of Neom at the northwest tip of the country.
After three consecutive quarters of economic contraction however, the kingdom has already reduced work on these projects.
Mohammed Al Jadaan has stated that Vision 2030, the Saudi Finance Minister’s economic transformation plan, will be adapted as necessary.
The Line, the futuristic city that was once 170km in length, has been reduced to 2.4km.
Since late 2022, Saudi Arabia and the other major oil producing nations of the Opec+ group have reduced output as the United States has increased its production.
Riyadh told Aramco in January to abandon plans to increase production to 13,000,000 barrels per day, and to instead maintain the 12,000,000 target.
The price of Brent crude is still below the required level for the Kingdom, and the government faces a deficit of 79bn Riyals (£16.8bn).