Saudi Aramco's Q1 capex rises 23.8% despite cancelation in production capacity expansion

Saudi Aramco reported a 23.8% increase in capital expenditure in the first quarter of 2024 despite scaling back a planned 1 million b/d production capacity expansion in January, the company said in its quarterly results.

Aramco's Q1 spending was $10.83 billion, compared with $8.74 billion in the same year-ago period, the company said on May 7 in a disclosure to the Tadawul, where it shares trade.

Total hydrocarbons production reached 12.4 million boe/d in Q1, the company said.

Capital spending during Q1 was "directed mainly towards upstream liquids and gas, downstream liquids to chemicals, and new energies such as renewables, lower-carbon fuels, and blue ammonia and hydrogen," Aramco said in the disclosure.

Higher upstream capital expenditure

The state-backed company's capex for upstream activities rose 30.7% to $8.830 billion in Q1 from $6.755 billion during the same year-ago period.

The uptick in upstream spend reflected "progress associated with crude oil increments to maintain MSC [maximum sustainable capacity] at 12 million b/d and increased development activity to support further expansion of the company's gas business," Aramco said.

The company's plans to raise production capacity from 12 million b/d to 13 million b/d exclude incremental capacity additions scheduled for 2024. Aramco is also investing in maintaining its current capacity level of 12 million b/d to offset any natural declines.

The first production capacity increments are due to come online in 2024, with 25,000 b/d from Dammam, closely followed by 300,000 b/d from Marjan and 250,000 b/d from Berri by 2025. A planned 600,000 b/d boost at Zuluf will be added by 2026.

The company canceled planned expansion of Safaniya and Manifa fields in January, Aramco CEO and President Amin Nasser said earlier in the year.

Aramco also plans to spend heavily on increasing its gas production in 2024. During the company's full year results in March, Aramco said it was revising its gas production target to a 60% increase from a 2021 baseline of 50% stated earlier.

Evolving capex

Aramco's downstream capital expenditure, however, fell 3.7% to $1.835 billion in Q1 from $1.906 billion during the same year-ago period.

Aramco said the cancellation of the capacity expansion plan will lead to a contraction in the company's capex by about $40 billion over 2024-2028, it said in full year results in March.

The company plans to spend 60% upstream and 30% downstream, with 10% allocated toward "new energies," including renewables, according to full year results.

Over the next 10 years, capex will evolve to comprise 50% upstream and 35% downstream, with new energies set to take a 15% share of the spending.

Aramco's net income in Q1 fell 14.4% to $27.272 billion from $31.878 billion during the same period last year. The company's net income fell in spite of a higher average realized crude oil price of $83/b in Q1 compared with $81/b for the same period in 2023.

"Global market conditions in the first quarter of 2024 improved compared to the previous quarter, driven by increased crude oil prices as a result of lower global oil inventories and higher forecasted demand," Aramco said in its Q1 results.