Stock - Aramco / Saudi Aramco
Aramco's total dividend for 2023 was almost $98 billion. Image Credit: Bloomberg

Riyadh: Aramco raised its dividend despite a retreat in energy prices and lower production, a boost for Saudi Arabia as it faces a widening budget deficit.

The total payout of about $31 billion for the fourth quarter to investors and Saudi Arabia's government, including a special component, rose from the previous quarter's level even as lower oil output pushed net income down 25 per cent year-on-year.

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The world's biggest crude oil exporter provides much of the Saudi government's income via generous dividends. The distribution is becoming ever more vital as Crown Prince Mohammed bin Salman pursues expensive projects such as the futuristic project of Neom, the purchase of high-profile footballers and stakes in sporting leagues, while looking to diversify the economy from oil.

The budget shortfall, however, is starting to bite. The Saudi government is predicting a deficit every year until 2026, pushing it to delay past 2030 some of the projects that it launched as part of its economic transformation plan. It also ordered Aramco last month to halt the expansion of its production capacity, helping free up spending for other areas.

The suspension is likely to reduce Aramco's capital investments by about $40 billion between this year and 2028, the company said in a statement. Capital expenditure rose about 28 per cent to just short of $50 billion last year, and is expected to be $48 billion to $58 billion in 2024.

'Increased Flexibility'

The government's directive "provides increased flexibility, as well as an opportunity to focus on increasing gas production and growing our liquids-to-chemicals business," Chief Executive Officer Amin Nasser said in the statement.

Riyadh needs crude above $90 a barrel this year to fund spending plans, according to Fitch Ratings. Brent crude in London closed near $82 last week. Saudi Arabia's oil export revenue sank to $248 billion last year, a decrease of nearly $80 billion that offered a reminder of its dependence on high energy prices.

Aramco's total dividend for 2023 was almost $98 billion. If it maintains the base payout at the fourth quarter's level of $20.3 billion, and with a promise to distribute $43.1 billion in performance-linked dividends in 2024, total payments for this year will be $124.3 billion, a 66 per cent increase since 2021.