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Saudi Aramco reported a decline in first-quarter profits, leading to a $10 billion reduction in its dividend payout. This decrease in dividend payments will impact Saudi Arabia’s budget as it heavily relies on oil revenue.
The world’s largest oil company saw its net income fall by 5% from the previous year to $26 billion. This drop was attributed to the average realized oil price of $76.30 per barrel, down from $83 a barrel in the same quarter last year.
While Saudi Aramco’s performance surpassed that of some of its competitors such as BP and Shell, who experienced significant profit declines in the first quarter, the company decided to cut its total dividend to $21.4 billion from $31 billion in the previous quarter.
This reduction in dividend payments adds pressure to Saudi Arabia’s budget as the government and state-linked entities work towards diversifying the economy away from oil revenues. Crown Prince Mohammed bin Salman’s economic diversification program includes ambitious projects like Neom, a futuristic zone on the country’s north-west coast.
The kingdom’s deficit widened to $15.6 billion in the first quarter, compared to $3.3 billion in the same period last year, as oil revenues dropped by 18%. Amin Nasser, Aramco’s president and CEO, cited global trade dynamics and economic uncertainty as factors affecting oil prices in the first quarter of 2025.
Following the first quarter, oil prices continued to decline, reaching around $64 a barrel. This downward trend was influenced by US trade tariffs and concerns of oversupply after Opec+ decided to increase production for the year. Aramco has not provided guidance on further dividend adjustments but emphasized the importance of disciplined capital planning during periods of oil price volatility.
Riyadh is already adjusting its spending by scaling back some projects and extending others over a longer period. However, the country faces challenges in meeting infrastructure deadlines for upcoming events like Expo 2030 and the FIFA World Cup in 2034.
Saudi Arabia, along with other Opec+ members, is moving forward with production increases despite lower oil prices. In June, the coalition announced a 411,000 barrels per day output increase for the second consecutive month. This decision reflects a strategic shift within the group, according to Jorge León, an energy consultant at Rystad.
Despite the challenges posed by fluctuating oil prices, Saudi Arabia remains committed to its economic diversification efforts and infrastructure development projects. The country’s dependence on oil revenues underscores the importance of adapting to changing market conditions and maintaining financial discipline in the face of uncertainty.
