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Saudi Aramco cuts 2021 capex guidance even as Asia showing signs of demand rebound

Highlights

2021 capex guidance cut to $35 bil from $40-$45 bil

'We are seeing a pick-up in demand in Asia'

2020 hydrocarbons output at 12.4 mil boe/d vs 13.2 mil b/d in 2019

New York — Saudi Aramco, the world's largest crude oil exporter, on March 21 lowered its guidance for capital expenditures for 2021 even amid a pick-up in demand for oil and natural gas in Asia.

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Capex will be around $35 billion this year, down from previous guidance of $40 billion to $45 billion, Aramco said in a statement. Aramco -- which listed 1.5% of its shares in December 2019 on Saudi Arabia's Tadawul domestic stock exchange – pledged to issue a $75 billion dividend annually for five years. This promise, which it fulfilled in 2020, is further weighing on its finances and is understood to have been a main driver for the company to slash its capex.

Spending in 2020 was $27 billion, after budgets were clashed during the height of the pandemic, which resulted in the mothballing and postponements of projects, as well as large delays in payments to contractors, S&P Global Platts previously reported. The oil giant's capex spend for 2019 was $33 billion.

Aramco's average hydrocarbon output in 2020 was 12.4 million boe/d, including 9.2 million b/d of crude oil, it said. The total was 13.2 million boe/d in 2019.

"Looking ahead, our long-term strategy to optimize our oil and gas portfolio is on track and, as the macro environment improves, we are seeing a pick-up in demand in Asia and also positive signs elsewhere. We remain confident that we will emerge on the other side of this pandemic in a position of strength," Amin Nasser, Aramco's CEO and president, said in the statement. Net income was $49 billion last year, according to the statement. That is 44% lower than the $88.2 billion reported for 2019.

In April, Aramco achieved a record 12.1 million b/d of crude oil production, it said. This followed a stand-off between Saudi Arabia and Russia at the March 2020 OPEC meeting, which led to a collapse of the production cut deal, and triggered an oil price war.

In August, the company also produced a single-day record of 10.7 Bcf/d of natural gas from its conventional and unconventional fields, it said.

Saudi Arabia's export volumes are limited by its commitments to the OPEC+ production cuts, in an agreement intended to counteract plummeting demand caused by the coronavirus pandemic and to steady the market. The kingdom has also opted to slash its output by a further 1 million b/d on a voluntary basis for

February, March and April to offset potential market weakness. It pumped an average of 8.13 million b/d last month, according to the latest Platts OPEC survey.