Saudi Basic Industries Corporation(Sabic) and Saudi Aramco have reportedly decided to reassess their USD 20 billion crude-oil-to-chemical projects in a bid to cut spending amid the COVID-19 pandemic.
The decision comes as oil companies across the globe are re-evaluating their energy projects to preserve cash, with a decrease in demand caused by the pandemic threatening to keep crude oil prices low for a long time. However, both the companies are planning to incorporate current facilities into the Yanbu project on Saudi Arabia’s Red Sea coast in spite of developing a completely new one.
Converting crude oil directly into high-quality chemicals in spite of transportation fuels is part of Saudi Aramco’s strategy to expand from selling oil and garner more profits from every barrel it pumps. The world’s largest oil firm aims to double refining capacity to accelerate its unprofitable downstream unit. The company’s move to acquire a 70% stake in Sabic is key to that goal.
Sabic said in the statement that both companies are still dedicated to advancing crude oil to chemical technologies through current development programs with the aim to improve cost efficiency.
Recently, Aramco recorded a 73% drop in second-quarter profit and a sudden increase in debt primarily due to lower oil prices. This year’s 35 percent fall in oil prices to around USD 43/ barrel has forced the company to lay off hundreds of mostly foreign staff members and announce new plans to sell non-core assets. However, the company maintained a commitment to pay a dividend of USD 75 billion for 2020. Almost all of it will go to the government of Saudi Arabia, which owns 98% of the firm.
For the record, Aramco’s shares have increased by 1.4 % in 2020 to 35.75 riyals this year. They have outperformed those of other oil companies in large mainly due to the company’s dividend commitment, claims a credible report.