Saudi Aramco raised its dividend to investors and Saudi Arabia’s government despite a retreat in energy prices and lower production, a boon for the kingdom as it faces a widening budget deficit.
The total payout of $31.07 billion for the fourth quarter, including a special component, rose from the previous quarter’s level even as lower oil output pushed net income down 25% year-on-year.
The world’s biggest crude oil exporter provides much of the Saudi government’s income via generous dividends. The distribution is becoming ever more vital as Crown Prince Mohammed bin Salman pursues expensive projects such as the futuristic project of Neom, the purchase of high-profile footballers and stakes in sporting leagues, while looking to diversify the economy from oil.
The budget shortfall, however, is starting to bite. The Saudi government is predicting a deficit every year until 2026, pushing it to delay past 2030 some of the projects that it launched as part of its economic transformation plan. It also ordered Aramco last month to halt the expansion of its production capacity, helping free up spending for other areas.
Riyadh needs crude above $90 a barrel this year to fund spending plans, according to Fitch Ratings. Brent crude in London closed near $82 last week. Saudi Arabia’s oil export revenue sank to $248 billion last year, a decrease of nearly $80 billion that offered a reminder of its dependence on high energy prices.
