Saudi Aramco makes short-term output cuts, plans long-term global growth
Even as it reins in its production following the December 2018 OPEC+ decision to cut output, Saudi Arabia is looking to expand its exploration and production globally
When OPEC and its non-OPEC allies (collectively known as OPEC+) decided in December 2018 to cut output by 1.2mn barrels per day (bpd), it was clear that Saudi Arabia and Russia would be the main contributors to the cuts. Saudi Arabia agreed to shoulder 40% of the agreed upon cuts for OPEC members, which totals 800,000 bpd, and Russia agreed to take on 60% of the cuts slated for non-OPEC members, which totals 400,000 bpd.
Saudi Arabia almost immediately cut production, and recent events, including the temporary shut down of Safaniya field, have pushed its production down further. But Saudi Arabia's energy minister, in an interview with Financial Times (FT), said that Saudi Aramco has global plans for growth.
“We are no longer going to be inward-looking and focused only on monetising the kingdom’s resources,” KSA Energy Minister Khalid Al-Falih told FT. “Going forward the world is going to be Saudi Aramco’s playground.”
That means Saudi Aramco will compete with international oil companies. Al-Falih told FT that "we can stand shoulder to shoulder with anyone and outdo them."
Despite the kingdom's efforts to diversify its economy and move away from oil following the 2014 crash in oil prices, spearheaded by Crown Prince Mohammed bin Salman and marked by investment into tourism and technology, among other sectors, it appears that hydrocarbons will remain an important source of revenue for Saudi Arabia.
Saudi Aramco has already invested in international downstream assets, including the largest oil refinery in the US, Motiva, which Aramco owns, but its exploration and production efforts have always centred around Saudi Arabia.
In January 2019, Saudi Aramco CEO Amin Nasser told Reuters that the company was looking to develop its US investments.
"Aramco’s international gas team has been given an open platform to look at gas acquisitions along the whole supply chain," Nasser told Reuters. "They have been given significant financial firepower–in the billions of dollars."
Saudi Aramco has dropped a trail of hints suggesting that it plans to expand globally, specifically in terms of gas assets. In November, Nasser said that Saudi Aramco's gas strategy would "attract investments of about $150bn over the next decade, with daily production reaching 23bn standard cubic feet a day from the current 14bn." He also noted plans to turn Saudi Aramco into a "main global player" in gas.