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Is This Small Correction In Oil Something To Worry About?

Is This Small Correction In Oil Something To Worry About?

Current selling patterns show that…

Aramco Announces $40 Billion Investment Program

Aramco

Saudi Aramco has announced it will spend US$40 billion annually through 2027, a 25-percent increase on its previous ten-year investment program that was made public last year. The announcement is a surprise one, especially as pretty much everyone in the oil industry tries to rein in spending instead of boosting it, to maximize returns in the post-2014 oil world.

The total figure for the ten-year period stands at US$414 billion. Of this, US$134 billion will go towards drilling new wells and servicing them, while US$78 billion will be used to maintain production potential. Over US$120 billion will go into offshore field development and a lot will be spent on downstream projects as the Kingdom eagerly diversifies into refining and petrochemicals—not just at home but abroad as well—to reduce its reliance on crude oil exports.

Apparently, the money will serve to maintain Aramco’s production capacity at the current 12 million bpd, the Wall Street Journal notes. This is the largest production capacity globally. This suggests OPEC’s kingpin doesn’t plan on restricting its production indefinitely, although some analysts have argued that after two extensions of the oil supply cuts agreed last November, OPEC has no other way to go but make the cuts permanent lest prices should drop below any comfortable level.

At the announcement of the new investment plan, during an industry event, Aramco’s chief executive Amir Nasser said that “We are into so many sectors…before we used to talk about oil and gas but now we are in renewables and infrastructures.

Related: Why Is Canadian Oil So Cheap?

Separately, Aramco closed preliminary contracts with various foreign companies worth a total US$10.4 billion as part of a plan to promote local manufacturing, the company said.

Aramco has been eagerly producing news ahead of its IPO next year, amid investor doubts whether the company—the largest in the world in terms of reserve base—could actually pull off what it says will be the largest initial public offering in history.

By Irina Slav for Oilprice.com

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