Oil giant Saudi Aramco is suspending multi-billion-dollar petrochemical and gas projects as it pledged to fulfil dividend commitments amid low oil prices. Aramco is abandoning a $20 billion oil-to-chemical project at Yanbu on Saudi Arabia’s Red Sea coast, Bloomberg reported, citing two sources familiar with the matter. It is also reviewing a plan to acquire 25% of Sempra Energy’s LNG terminal in Texas.
The moves came as the world’s largest oil producer tries to meet its pledge to pay an annual dividend of $75 billion for the coming years. Its European peers such as Shell and BP lowered dividend payments as the COVID-19 pandemic ravaged the energy market. Oil prices have been doubled since their lows in April, but remained 30% below the prices at the start of the year.
Aramco’s CEO Amin Nasser has decided to slash the company’s 2020 capex to $25 billion from the initial target of around $40 billion, with analysts expecting him to reduce next year’s capex even further. One of the sources said that Aramco is reviewing all of its major greenfield projects and may instead choose to invest in existing assets.
Shelving gas and petrochemical projects is a blow to the oil giant’s diversification drive. The oil giant is trying to diversify from pumping and selling crude. It acquired SABIC in a $69-billion deal this year to embark on new manufacturing sectors. Aramco and SABIC are planning the Yanbu petrochemical plant as an outlet for Aramco’s crude as growing renewable energy uses worsens the outlook for petroleum product demand.
Aramco will finish a feasibility study on the Yanbu project by the end of 2020. The company is also working on a $15 billion plan to acquire Reliance’s oil-to-chemicals business. Last week, Aramco dismissed a report that it is suspending a petrochemical joint venture project with China’s Norinco.
