Before the recent slump of oil prices (which was believed to be organized by Saudi Arabia) Aramco’s net profit exceeded $180 billion a year, which is much more than that of its nearest competitor Exxon Mobil of $33 billion (biggest private oil company of the world)
With the official support of the authorities Aramco has been actively investing money into various sectors of economy of the country (far away from oil production), including petrochemistry, alternative sources of power and ship building, writes the British magazine The Economist.
Such investment policy reflects strategic goals of Saudi Arabia, which are diversification of national economy, development of infrastructure and raising employees’ professional skills. When over 90% of the state budget is based on the profit from oil sales (oil prices keeps on going down), diversification of economy becomes especially important for the future Kingdom.
Aramco is also involved into development of a new industrial centre on the southwest of the country – Jizan, which must play a key role in increase in non-oil related export.
Steven Hertog, researcher of the London Economy School, said that “Aramco has always paid a special attention to the national interests. Even in times when the company was owned by the US (Saudi Arabia totaled bought out the firm in 1980), Aramco made everything possible for the ruling Sheikhs to be satisfied and used its own money to build roads and houses in various regions of the country.
However, slump of oil prices at the world market makes the Aramco administration to correct its activities focusing on the main business of the company – searching and extracting oil and it is forced to postpone and even cancel the most expensive projects. For instance, on February 1, 2015 the company said it is going to stop deep-water extraction of oil and gas in the Red Sea. Last week there were reports that the company has been looking for a foreign credit to the amount of $10 billion.
The sharply reduced budget will, possibly, make Aramco leave some unprofitable projects, experts believe.
“We are concerned that a present there is almost no information about a real state of Aramco,” Hertog added. The same could be said about situation in the Saudi Arabian government. As role of the company in the life of the country increases, the probability of involvement of members of the Royal family in its management will grow.
However, Aramco administration and the riling dynasty Al Saud must make everything possible for the oil giant not to become a victim of its own success, experts said.
