The low oil price trend has continued, leading to a sharp decline in the net profit of Saudi Arabia's state-owned company Aramco. As Aramco has played the role of the Saudi government's 'treasury,' it is expected to become more difficult to promote Saudi Arabia's diversification policy amid financial difficulties.
On the 11th (local time), major foreign media reported that Aramco announced its net profit for the first quarter fell by 5% compared to the previous year, recording about $26 billion (about 36 trillion won). As a result, Aramco's dividends decreased by over 30% from $31 billion (about 43 trillion won) in the fourth quarter of last year to $21.4 billion (about 30 trillion won) in the first quarter of this year.
The low oil price trend has significantly impacted Aramco's performance. Aramco sold crude oil for an average of $76.30 per BARREL in the first quarter, which is a 10% decline from $83 a year ago. Recently, international oil prices fell below $60 per BARREL for the first time in four years due to concerns over global economic slowdown and oversupply.
The decline in Aramco's performance will soon lead to financial difficulties for the Saudi government. The Saudi government and the sovereign wealth funds (PIF) jointly hold more than 97% of Aramco's equity. As such, Saudi Arabia has heavily relied on Aramco's dividends, which accounted for 62% of government revenues last year through oil-related income.
The Financial Times (FT) noted, 'The Saudi government is spending billions of dollars to reduce its oil dependence and diversify its economy,' and 'the reduction in Aramco's dividends will further increase pressure on the Saudi budget.' The fiscal deficit of Saudi Arabia in the first quarter of this year also expanded to $3.3 billion (about 5 trillion won), approximately five times larger than the same period last year.
Bloomberg also reported, 'These figures are another signal that pressure is being applied to Aramco's financial condition,' adding that 'although Aramco has decided on dividends of $85 billion this year, easing some of Aramco's burden, the government of Saudi Arabia, which faces increasing fiscal pressure, will have its main sources of income shrink.'
Currently, Saudi Arabia is undertaking several large-scale projects, including the mega-city project 'Neom City' as part of its 'Vision 2030' initiative aimed at reducing oil dependence. However, it has been reported that the decline in international oil prices and rising construction costs have made it difficult to proceed with the projects since last year.
Saudi Arabia is also set to host major events such as Expo 2030 and the FIFA World Cup in 2034. Monica Malik, chief economist at Abu Dhabi Commercial Bank, stated, 'The sharp drop in oil prices makes financing prospects for both fiscal deficits and the Vision 2030 projects much more difficult.'
The trend of reducing Aramco's dividends is expected to continue. Amin Nasser, Aramco's CEO, said, 'In the first quarter of 2025, changes in the dynamics of global trade affected the energy market, and economic uncertainty impacted oil prices,' adding, 'Such times further highlight the need for a cautious approach to capital planning and execution.'