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Saudi Aramco, the biggest oil company in the world has received a directive from the kingdom’s energy ministry to maintain its Maximum Sustainable Capacity (MSC) at 12 million barrels per day (MMBD), and not to continue increasing MSC to 13 mmbd.
The MSC is determined by Saudi Arabia's energy ministry. In 2020, the ministry issued a directive to Aramco to raise MSC to 13 mmbd from 12 mmbd.
In a statement, Aramco said it will update its capital spending guidance when its full-year 2023 results are announced in March. For 2023, the oil major had set a capex target of $45 billion-$55 billion.
The move comes as Saudi Arabia is curbing production to 9 million barrels a day, as part of OPEC+ efforts to balance the market in the face of slowing global demand. According to LSEG data, Brent crude was trading at $82.57 a barrel early on Tuesday, after edging higher on escalating geopolitical concerns in the Middle East.
In November last year, Aramco reiterated it was moving ahead with the strategic expansion of MSC to 13 mmbd by 2027 through ongoing engineering, procurement, and construction activities. It delivered total hydrocarbon production of 12.8 million barrels of oil equivalent per day (mmboed) in the third quarter of 2023, the oil major said in its third quarter 2023 financial statement.
MSC is the average maximum number of barrels per day of crude oil that can be produced for one year during any future planning period, after taking into account all planned capital expenditures and maintenance, repair and operating costs.
Citi Research said the decision by the Saudi Government to mothball Aramco's +1 mbpd capacity build programme can be interpreted to suggest that OPEC+ is beginning to recognise it has a problem. "Namely the size of the growing capacity overhang in global oil markets and the need for KSA to continue to cede market share to accommodate growth of competitors (US shale, Guyana, Brazil). The market should probably assume that KSA is willing to defend $70/barrel at all costs, at least in the short-term."
(Reporting by Brinda Darasha; editing by Seban Scaria)
