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The Saudi state has ordered energy major Aramco to stop work on expanding its maximum sustainable capacity to 13 million barrels daily, instead keeping it at 12 million bpd.
The company said in a statement today that its maximum sustainable capacity is determined by the state under a law from 2017. Aramco added that it would update its capital spending plans for the year in accordance with the new government directive in March when it announces its 2023 financial results.
Saudi Arabia’s state oil company said it was working to boost its production capacity to 13 million barrels daily back in 2021. The capacity expansion will come fully online by 2027 and will come on in chunks, chief executive Amin Nasser said at the time.
The Saudi giant, the world’s biggest oil firm and the largest oil exporter globally, was working as fast as it could to reach that production capacity expansion, the executive said, noting that upstream investment has a long lead time.
Aramco’s CEO has often warned the market that the industry is underinvesting in new oil supply, which, regardless of many scenarios, will continue to be needed for decades.
Even so, the perception of oil demand among traders has failed to match these warnings. Despite extended and sizeable production cuts effected by Saudi Arabia and some of its fellow OPEC+ members, prices have remained stubbornly range-bound. This may be the reason for the new order. Alternatively, the long-term outlook for oil demand in Riyadh may have changed.
Oil prices inched higher this week, following the latest news from the Middle East, which included a fuel tanker attack by the Yemeni Houthis and a deadly drone attack on U.S. troops. However, their gains were pared by real estate news from China, believed to affect its oil demand prospects.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.