Oil Company Aramco Emerges as World’s Most Profitable Business
On Monday, Saudi Arabia’s national oil company Saudi Aramco revealed its financial details to investors for the first time. Aramco earned $111 billion in net income in 2018, more than Apple ($59.5 billion) and Exxon Mobil ($20.8) combined. The company had earned $212 billion prior to expenses such as taxes, a number comparable to the military budgets of all 28 European Union member states combined. On average, Aramco produced 13.6 million barrels of oil per day in 2018.
The 470-page disclosure was revealed in preparation for a prospective $10 billion bond sale to help fund a $69.1 billion stake acquisition in Saudi Arabia’s national petrochemicals firm, Saudi Basic Industries. While founded by American oil companies and short for Arabian American Oil Company, Aramco was nationalized by the Saudi government over three decades ago, and its financial information has been kept private since. Saudi Arabia is looking to list Aramco publicly by 2021 and disclosed its profits in the hopes of silencing doubts about the IPO.
Although it is the largest oil supplier on the planet, Aramco is also owned by the Saudi State and is bound to the country as well as dependent on the price of oil. For example, in 2016 when oil prices were low, the company reported $13.3 billion in net income, a fraction of what it earned in 2018. Eurasia Group analyst Ayham Kamel wrote that “[Aramco’s] revenue streams are highly dependent on a single country that could face real instability risks;” however, other analysts have said that the company’s strong financial status reveals that it has the ability to close more deals.
Oil field Ghawar, which spans around 120 miles in the eastern part of Saudi Arabia, is said to be the world’s largest oil field and accounts for more than half of the country’s cumulative oil production. Along with four other fields that dwarf most others, Aramco has some of the largest oil fields on earth, allowing it to maintain very low costs.