Saudi Aramco Will Find It Increasingly Hard to Serve Two Masters
With the steep drop in oil, the company’s role as a main source of government funding will likely put pressure on its obligation to shareholders as a public company.
Aramco faces some hard choices in 2020.
Photographer: Simon Dawson/Bloomberg
Saudi Aramco released its first earnings report as a public company this week, and the oil giant’s management discussed the results with analysts on a call Monday. By itself, Aramco’s 2019 financial performance wasn’t as strong as 2018, but not overly disappointing. However, these numbers show that Aramco — or more accurately the Saudi monarchy, which controls it — may have some hard choices ahead in 2020.
Falling demand for oil from the coronavirus outbreak — combined with the significant drop in prices sparked by Saudi Arabia’s actions to boost output and offer discounts following the breakdown of OPEC+ talks — means that Aramco will make even less money in 2020. Despite Saudi Arabia’s recent announcement that it intends to sell more oil, its profit is likely to fall substantially in 2020, which will force the monarchy to choose whether Aramco will honor its responsibilities to all shareholders as a publicly traded company or whether it will focus on funding the Saudi government.