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Aramco spending to be significant despite revisions, says MEED

Following the news that Saudi Aramco recorded a 73.2% fall in its Q2 profits to $6.6bn, down from the $24.7bn in the same period last year; Indrajit Sen, Oil & Gas Editor at GlobalData’s MEED, offers his view

While Saudi Aramco noted it expected its total capital expenditure in 2020 to be at the lower end of the previously announced guidance range of $20bn-$25bn, the company has already spent $13.6bn during the first six months of the year. The remaining $12bn is a considerable sum of money left to be spent in the remainder of 2020, and the company is unlikely to spend below the 2020 level. Contractors and suppliers can assume it will be spent on projects and equipment purchases.

Contractors, consultants, engineering firms, equipment manufacturers and other services providers that regularly work with Aramco have to realize that, like all other hydrocarbons producers, Aramco cannot continue funneling tens of billions of dollars into the Saudi projects market. The nature of the energy business has changed sharply in the past decade or so, and oil producers worldwide, with Aramco being no exception, are having to cope with the steep challenges posed by alternative sources of energy to demand for conventional sources such as crude.

COVID-19 has only battered global oil demand further, and, in the post-pandemic scenario, oil producers will need to exercise stringent cost-efficiency programs and justify every dollar spent.

At the same time, it is important for the supply chain to realize that Aramco will be making considerable project expenditure, only not in the regular way it has been doing for so long. Companies in future must take the time to carefully understand Aramco’s project requirements, strategize and approach jobs accordingly, as well as offer smart, cost-efficient bids that generate added value for the client.

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