Aramco's gas expansion is one of the factors behind the increase in capital expenditure. (Image source: Aramco)

Aramco has reported profits of US$29.2 bn in Q2 2024 and US$56.3bn for H1 2024, slightly down on the corresponding periods of 2023, and expects to issue total dividends of US$124.2bn this year, according to its latest results

Aramco’s capital expenditure in the second quarter rose nearly 14% year-on-year to US$12.1bn, with H2 capex standing at US$23bn compared with US$19.2bn in the first half of 2023. Upstream capex rose particularly strongly, (24% in H2 2024 compared with H2 2023), reflecting progress associated with crude oil increments to maintain maximum sustainable capacity (MSC) at 12 mn bpd, and continued development of multiple gas projects to support the strategic expansion of the gas business.

Aramco president & CEO Amin H. Nasser said, “We have delivered market-leading performance once again, with strong earnings and cash flows in the first half of the year. Leveraging these strong earnings, we continued to deliver a base dividend that is sustainable and progressive, and a performance-linked dividend that shares the upside with our shareholders.

“We have also continued to create and deliver both value and growth, as demonstrated by the positive investor response to the government’s secondary public offering of Aramco shares and our recent US$6bn bond issuance."

Operational performance

In terms of operational performance, Aramco highlights progress in key strategic areas, notably its strategic gas expansion, with the announcement of contract awards worth more than US$25bn as it targets sales gas production growth of more than 60% by 2030, compared to 2021 levels. They include contracts for the Jafurah unconventional development Phase Two, Master Gas System Phase 3 and Fadhili Gas Plant expansion.

Aramco reports that in the second quarter, it achieved total hydrocarbon production of 12.3mn boed, while exploration activities resulted in seven oil and gas discoveries in the Kingdom’s Eastern Province and Empty Quarter, consisting of two unconventional oilfields, one Arabian light oil reservoir, two natural gas fields, and two natural gas reservoirs. Procurement and construction activities are proceeding on the Marjan and Berri and Zuluf crude oil increments.

Other highlights include partnering with leading car manufacturers on lower-emission vehicle technologies; expanding its new energies portfolio, with the acquisition of a 50% interest in the Blue Hydrogen Industrial Gases Company (BHIG); growing its global retail network with the acquisition of a 40% equity stake in Gas & Oil Pakistan Ltd; and the agreement with Pasqal to deploy the first quantum computer in the Kingdom.

In a presentation on the results, Aramco noted that oil demand growth is expected to continue in 2024 and beyond, amidst a robust economic outlook, highlighting record global oil demand in H1 2024 and demand forecasts of between 104.6mn bpd and 106.2 mn bpd for the second half of the year.

Two Middle East countries feature in the top 5 countries with most recoverable reserves. (Image source: Adobe Stock)

Saudi Arabia tops the list of countries with the most recoverable oil, with 247bn barrels, according to new research from Rystad Energy

Iraq also features in the list of the top five countries with most recoverable oil, with 105bn barrels, coming in fifth place. The USA is second with 156bn barrels, Russia third with 143bn barrels and Canada fourth with 122bn barrels.

However, global recoverable oil reserves could be insufficient to meet demand unless there is a swifter transition to electric vehicles, according to Rystad Energy’s latest research, which shows global recoverable oil reserves standing at around 1,500 billion barrels, down around 52 billion barrels from its 2023 analysis.

The largest downward revisions are seen in Saudi Arabia, where development priorities have shifted from offshore capacity expansions to onshore infill drilling. The only country with any significant increase in 2024 is Argentina, with a gain of 4bn barrels thanks to the derisking of shale projects in the Vaca Muerta formation.

Rystad’s estimates of total recoverable oil resources have fallen by 700bn barrels since 2019 due to reduced exploration activities. Exploration has fallen as investors fear stranded assets due to the ongoing electrification of vehicles and the expected decline in both oil demand and crude prices.

“The world’s remaining oil reserves are insufficient to support oil demand if there is no transition to electric vehicles. Attempts to limit the supply of oil will have hardly any effect on limiting global warming. Instead, the only feasible way of keeping global temperatures rising less than 2.0 degrees Celsius is to ensure fast electrification of road transportation,” says Per Magnus Nysveen, head of Analysis at Rystad Energy.

Rystad Energy also reports proven oil reserves at 449bn barrels, which signifies remaining oil reserves if no new development projects were to be approved and all exploration activities were stopped. This is a significant upward revision since 2023, driven by increased onshore infill drilling in Saudi Arabia.

The acquisition will strongly boost H&P's Middle East presence. (Image source: Adobe Stock)

Drilling contractor Helmerich & Payne (H&P) is to acquire global drilling company KCA Deutag, significantly boosting its Middle East presence

The acquisition will accelerate H&P’s international growth strategy, providing immediate and significant exposure to land operations in key markets in the Middle East, which generated around 70% of KCA Deutag’s calendar year 2023 operating EBITDA. Through the transaction, H&P will increase its Middle East rig count from 12 to 88 rigs, 71 of which are in Saudi Arabia, Oman and Kuwait. Based on award activity to date, the pro forma company would be one of the larger rig providers in the Middle East.

With KCA Deutag, H&P will have a strong geographic and operational mix across the U.S. and international crude oil and natural gas markets, and diversified geographical exposure in earnings and cash flow streams.
The acquisition will also strengthen cash flow and durability, given that the Middle East rig market is expected to grow in the coming years; generate attractive returns; and provide an opportunity to realise synergies, the company says.

Accelerating international expansion

President and CEO of H&P, John Lindsay, commented, 'This is a historic and transformative transaction for the company, and we are excited about what this means for H&P’s future, as it accelerates our international expansion particularly in the Middle East and enhances the company’s global leadership in onshore drilling solutions. KCA Deutag’s assets and operations will add resilient revenues, providing greater earnings visibility and cash flow generation. As a result, we expect to generate sizeable incremental cash flows and are confident this transaction will deliver near- and long-term growth and value creation for H&P shareholders.

“Our experience in the industry combined with a Middle East market poised for continued growth should be indicative of the importance and the compelling reasons for executing on this acquisition at this time. Acquiring KCA Deutag gives H&P immediate scale in core Middle East markets in a way that would be challenging to replicate organically.”

CEO of KCA Deutag, Joseph Elkhoury, added, “We look forward to joining H&P, combining the strengths of our people together with our geographical footprint, to create an organisation with an unrivalled global network, service capability and technology offering. The size, scale and financial strength of the combined organisation will provide a stable foundation for long-term growth and diversification to safeguard a sustainable and prosperous future for our people.”

The global energy supply chain is facing challenges.(Image source: Adobe Stock)

The UK-based Energy Industries Council (EIC) has released its eighth annual Survive and Thrive report, which finds that ongoing geographic and policy uncertainties are posing challenges for the global energy supply chain

The report notes that only 7% of companies are venturing into new markets, high costs and insufficient government support being major deterrents. Clear policies and trade agreements are essential for making new market entries more feasible, according to the views of supply chain businesses shared in the report. Another obstacle is payment delays, which create severe cash flow issues, hindering investment in new technologies and expansion efforts, the report finds.

Developing client-facing services and solutions has emerged as the most popular growth strategy this year, with 82% of supply chain companies now working directly with operators, increasingly sidestepping the traditional model of contracting via tier 1 EPC contractors. This shift allows companies to forge deeper relationships with end-user clients and increases the chances of having their technology pre-specified.

Shift to uncertainty

“2024 sees a shift from boom times to an environment filled with uncertainty, as companies grapple with increased policy and geopolitical challenges,” Stuart Broadley, CEO of the EIC, commented.

“While opportunities abound, the lack of clarity on financial incentives and regulations makes navigating these waters increasingly complex. While activity across the energy supply chain remains high, companies are facing significant hurdles due to policy uncertainties.

“Government support, with fewer exclusions around oil and gas, is crucial for companies to navigate new territories, many of which have important hydrocarbons activities that are also in transition. Our members are asking for more engagement from trade missions and embassies to provide necessary market access and early clarity on new market challenges such as local content needs.”

“Clear and consistent policies, financial incentives, and an understanding of the entire and largely integrated supply chain's needs are crucial. Policymakers should de-silo energy policy, ensure an overarching target with contributions from all stakeholders, and recognise the impact of increased taxes on operators. Upgrading capabilities to meet net-zero demands, reassessing local content regulations, and providing a clear roadmap for energy projects are essential steps to support and nurture the energy supply chain.”