Saudi Aramco’s contribution to the Kingdom dropped by 30% in 2020

By Rahul Vaimal, Associate Editor
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The world’s biggest oil producer, Saudi Aramco saw its payments to the Kingdom’s government drop by 30 percent in 2020 as crude oil prices saw one of the worst price crashes in ages amid the COVID-19 pandemic.

Saudi Aramco did successfully maintain its stance of paying a $75bn dividend despite the revenue shortage.

The state-owned oil company transferred $110bn in the form of dividends, royalties and income taxes to the Kingdom last year. Proceeds from Aramco are an important source of income for Saudi Arabia which is struggling to manage its widening budget deficit as its economy went into recession.

Aramco’s insistence towards paying $75 billion in dividends resulted in a more than 50 percent decrease in its royalties and tax payments to the government which was clocked at around $41bn.

2020 saw the oil producer’s debt swelled to $162bn after it took after the company took on $90bn of loans and bonds. Most of the debt was used to fund Aramco’s $69bn purchase of chemicals maker Sabic from the Saudi sovereign wealth fund, PIF.

In an analyst call earlier this week, Aramco’s CEO Mr. Amin Hassan Nasser shared that the company remains “very optimistic” about its prospect in 2021 citing projections of increased demand and output.

The upstream division, the most profitable business segment for Aramco which includes the production of hydrocarbons saw its earnings drop by 40 percent to $110bn in 2020. Aramco’s other vertical, the downstream operation loss of $5.4bn, considerably higher than the $927mn it posted in 2019.

The oil producer reshuffled its downstream business last year to create a separate division that focuses on “portfolio optimization” to scrutinize the company’s existing assets and develop plans to tap growing markets.

Related: Saudi Arabia expected to grow in 2021; S&P Report