Aramco has stuck to annual dividend payments of $75 billion a year through oil’s crash in 2020 and subsequent recovery. Image Credit: Gulf News Archives

The Saudi government’s oil income almost doubled in the second quarter even as state-controlled producer Aramco held dividends unchanged.

The oil giant made payments to the government - its 94 per cent shareholder - of more than $65 billion in the period, up from $35 billion a year earlier, according to financial statements released on Monday. That’s a combination of dividends, income taxes and royalties on oil production.

Despite efforts to diversify the economy, Saudi Arabia’s crude is still the major source of government revenue. Soaring prices are set to give the country its first budget surplus in almost a decade, even without Aramco boosting shareholder payouts, most of which go to the government.

Under a system introduced in January 2020, Aramco pays a royalty of 80 per cent on Brent crude prices above $100 a barrel, and 45 per cent when oil’s at $70 to $100. Benchmark futures jumped above $100 a barrel in March following Russia’s attack on Ukraine, and stayed above or near that level until the end of July.

Aramco has stuck to annual dividend payments of $75 billion a year through oil’s crash in 2020 and subsequent recovery, in contrast to most Big Oil firms. Still, some analysts are starting to question whether the company will boost its payout later this year.

“They probably will up the dividends in the second half,” Aarthi Chandrasekaran, director of investments at Shuaa Asset Management, said in a Bloomberg Television interview. With Aramco likely to reduce gearing - a measure of debt to equity - to its 5 per cent target by the fourth quarter, “they might open up the taps for the dividend”.

Aramco is also using record profits to finance what it calls the “largest capital program in our history”. The company is working to expand output capacity to 13 million barrels of crude a day by 2027, from 12 million now, as it sees oil demand continuing to grow for the rest of the decade.

Capital expenditure this year will be at the low end of the $40 billion to $50 billion range it announced in March, up from about $32 billion last year. By keeping a hold on spending, Aramco may be able to make cash available for a bump in dividends later this year. But that may not be necessary for the Saudi government to keep making money from higher crude.