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Saudi Aramco Annual Report 2021
Energy security
for a sustainable world
Energy security
for a sustainable world
Aramco is one of the world’s largest integrated energy
and chemicals companies, creating value across the
hydrocarbon chain and delivering societal
and economic benefits to the Kingdom and
communities who rely on the vital energy we supply.
We are committed to playing a leading role
in the energy transition. We have a responsibility
to help the world achieve a net-zero economy,
and our people are working hard to solve the
world’s sustainability challenges.
For our customers, we are a supplier of choice.
For our shareholders, we provide long-term value creation.
For communities around the world, our ambition is to
provide reliable, affordable, sustainable energy.
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Contents
Aramco
History……………………………………………………….06
Chairman’s message…………………………………..08
President and CEO’s message……………………..10
2021 highlights…………………………………………..12
Aramco’s operations…………………………………..14
Business model…………………………………………..16
At a glance…………………………………………………20
Business overview and strategy
Business overview………………………………………24
Market overview………………………………………..28
Strategy……………………………………………………..29
Results and performance
Key 2021 metrics………………………………………..36
CFO’s message…………………………………………..38
Financial performance……………………………….40
Upstream……………………………………………………48
Downstream………………………………………………58
Corporate…………………………………………………..70
Environmental, social and governance
Aramco’s approach to sustainability……………74
Climate change and the energy transition…..76
Minimizing environmental impacts…………….78
Accelerating human potential…………………….80
Growing societal value……………………………….82
Risk
Risk management………………………………………86
Risk factors…………………………………………………88
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Corporate governance
Board of Directors…………………………………….104
Senior Executives……………………………………..108
Board structure……………………………………….. 112
Audit Committee report…………………………… 117
Risk and HSE Committee report……………….. 119
Nomination Committee statement……………120
Compensation Committee statement………..121
Compensation and other interests…………….122
Governance, risk and compliance……………..126
Additional financial and legal information
Additional financial information……………….130
Reserves information………………………………..137
Regulation of the oil and gas industry
in the Kingdom………………………………………..138
Additional legal information…………………….143
Forecasts and forward-looking
statements………………………………………………..156
Terms and abbreviations…………………………..157
Glossary……………………………………………………159
Consolidated financial statements
Independent auditor’s report……………………166
Consolidated statement of income……………174
Consolidated statement of
comprehensive income…………………………….175
Consolidated balance sheet………………………176
Consolidated statement
of changes in equity…………………………………177
Consolidated statement
of cash flows…………………………………………….178
Notes to the consolidated
financial statements………………………………….179
This Annual Report covers financial and operational
aspects of Aramco and is issued in both Arabic and
English. The print version is identical to its PDF
counterpart, which is available at aramco.com. The
Arabic version prevails in the event of any discrepancy.
The images in this document are representative of the
services provided by Aramco. Wherever possible,
sustainable printing techniques were used.
The information contained in Sections 1 – 7 of this
Annual Report constitutes the Board of Directors’ report.
Saudi Aramco Annual Report 2021
01
King Salman bin Abdulaziz Al-Saud
The Custodian of the Two Holy Mosques
His Royal Highness Prince Mohammed bin Salman bin Abdulaziz Al-Saud
Crown Prince, Deputy Prime Minister and Minister of Defense of the Kingdom of Saudi Arabia
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Aramco
History………………………………….. 06
Chairman’s message……………… 08
President and CEO’s message….10
2021 highlights……………………….12
Aramco’s operations……………….14
Business model……………………….16
At a glance……………………………. 20
Continuing conventional
energy investment
Shaybah Gas-Oil Separation Plant,
Saudi Arabia
Energy security, economic development,
and affordability are current gaps in the
world’s energy transition strategy, and
during 2021 Aramco continued to focus
on increasing its Maximum Sustainable
Capacity to 13.0 mmbpd, and its capital
allocation strategy.
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Saudi Aramco Annual Report 2021
Aramco
Saudi Aramco Annual Report 2021
05
History
Aramco’s history dates back more than 85 years, when
a small group of intrepid adventurers set out to explore
the deserts of Saudi Arabia
The birth of
Arabian oil
1933-1944
1933
Oil concession agreement signed
with Standard Oil of California
which creates the California
Arabian Standard Oil Company
(CASOC) to manage the concession
Expansion
1945-1965
1948
Standard Oil Company of New
Jersey, later Exxon, purchases 30%
of Arabian American Oil Company,
and Socony-Vacuum Oil Company,
later Mobil, purchases 10% to help
provide market outlets
Oil discovered at Dammam
Well No. 7
1949
Oil production hits 500 mbpd
1939
Oil exports began
1952
1944
CASOC renamed the Arabian
American Oil Company
Headquarters moved from
New York City to Dhahran
1958
Oil production exceeds
1 mmbpd
1965
Oil production exceeds
2 mmbpd
1938
Rub’ al-Khali, Saudi Arabia
Making a name
for itself
1966-1988
1971
Oil production averages
4.5 mmbpd
1973
The Saudi Government acquires an
initial 25% participating interest in
the concession, which increases to
60% the following year
1975
Decision made to build the Master
Gas System, enabling one of the
world’s largest gas markets,
transforming the national energy
mix toward clean fuel, and building
the cornerstone for the economy’s
industrialization
1976
Becomes the world’s leading oil
producer in terms of volume
produced in a single year
1980
Saudi Government increases its
participation interest in the crude
oil concession rights, production
and facilities to 100%
1988
Saudi Arabian Oil Company
(Saudi Aramco) officially established
In 1939, on the northern edge of the Rub’ al-Khali, Aramco explored the Jafurah sands, and
82 years later the Company announced development of Saudi Arabia’s largest non-associated
gas field, Jafurah.
Natural gas, a lower-carbon energy source, has a critical role to play in the world’s energy
transition, and commercializing the estimated 200 tscf of unconventional gas in place in
the vast Jafurah basin is expected to contribute to Saudi Arabia’s goal to produce half of
its electricity from gas, and half from renewables — and make the Kingdom one of the
world’s largest gas producers.
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Saudi Aramco Annual Report 2021
Aramco
A global company
1989-2014
Transformation
and resilience
2015-2020
1989
First international downstream
joint venture established in the U.S.
2017
Aramco acquires full ownership
of Motiva
1991
First Asian downstream
joint venture established
in South Korea
2018
Aramco becomes a joint
stock company
1993
Aramco assumes the assets
and operations of Saudi Arabian
Marketing and Refining Company,
a Government-owned in-Kingdom
refining and international product
marketing organization
2009
Petro Rabigh, Aramco’s first
petrochemical plant, begins
production
2011
Sadara Chemical Company formed
2014
SATORP and YASREF refineries
come online
Saudi Aramco Annual Report 2021
Commercial production of
unconventional resources
commences in north Arabia
2019
Aramco becomes a public company
with shares listed on Tadawul
$12.0 billion of Senior Unsecured
Notes issued and listed on the
London Stock Exchange (LSE)
2020
Highest single-day crude oil
production of 12.1 mmbpd
Sustainability and
energy security
2021
2021
49% of Aramco Oil Pipelines
Company sold to a consortium
of international investors
Highest single-day natural gas
production of 10.8 bscfd
Ambition announced to achieve
net-zero Scope 1 and Scope 2
greenhouse gas emissions across
wholly-owned operated assets
by 2050
Energy infrastructure deal signed
to sell 49% of Aramco Gas Pipelines
Company (AGPC) to a consortium
of investors
Historic acquisition of a 70% stake
in SABIC transforms Aramco into
a major global petrochemicals
producer
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Chairman’s message
Delivering exceptional performance and
supporting the energy transition
Dear Shareholders,
In 2021, Aramco continued to focus on
generating long-term shareholder value
while also taking significant steps to
position the Company for continued
success in a world transitioning to a
cleaner energy future.
With global demand for crude oil
strengthening as economic activity
accelerated in key markets, Aramco
utilized its operational agility to deliver
both strong earnings and cash flows for the
year. Our net income was SAR 412.4 billion
($110.0 billion). This strong operational
and financial performance allowed the
Company to declare total cash dividends
of SAR 281.3 billion ($75.0 billion) for
2021, and the Board of Directors also
recommended granting shareholders
one new additional bonus share for
every 10 shares they hold.
Against a backdrop of higher prices
for our upstream products and better
margins in our Downstream business,
we take a long-term view while delivering
on our strategic objectives.
Reducing emissions from energy production
and use, while at the same time satisfying the
world’s growing energy requirements, is the
biggest dual challenge facing our industry.”
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We are maintaining a highly-disciplined
and flexible approach to capital allocation
as we expand our business so our
customers will continue to have access to
the reliable energy they need to support
the growth they desire. In Upstream, we
are working on increasing our Maximum
Sustainable Capacity as per the
Government’s direction. In Downstream,
we are growing and diversifying our
operations while also integrating SABIC
as Aramco’s chemicals arm.
Saudi Aramco Annual Report 2021
Aramco
Creating value for shareholders
and society
The improved market sentiment provided
us with an excellent opportunity to unlock
further value from Aramco’s asset base
through the ongoing portfolio optimization
program. The Company entered into
two energy infrastructure deals in 2021
with a total value of SAR 104.6 billion
($27.9 billion). This resulted in one group
of investors taking a 49% equity stake
in Aramco’s stabilized crude oil pipeline
network in June, and a second group
taking a 49% equity stake in our natural
gas pipeline network following the closing
of that transaction in February 2022.
In a further demonstration of global
investor confidence in Aramco’s long-term
value creation story, our inaugural
international U.S. dollar Shari’a compliant
offering was well received. The
SAR 22.5 billion ($6.0 billion) transaction
not only illustrates our unique value
proposition but also serves to further
diversify our funding sources as well
as expand our investor base.
The Company remains at the forefront of
enabling and enhancing the Kingdom’s
industrial, technology and sustainability
infrastructure to help create new jobs and
further diversify the domestic economy.
Aramco has taken a leading role in the
Shareek program launched by the
Government of Saudi Arabia in March last
year. The word “shareek” means partner
in Arabic, and as the name suggests, the
program is designed to promote increased
public-private partnerships through
a range of finance, funding, tax, and
regulatory incentives. In alignment
with Shareek, we continue to expand
our iktva initiative to further develop our
local supply chain, while also launching
Aramco Namaat as we seek to make a
positive social and economic impact.
The development of the Jafurah
unconventional gas field is another
example of our efforts to create value.
In addition to making Saudi Arabia
one of the world’s largest natural gas
producers, Jafurah is expected to
contribute to the Kingdom’s goal of
producing half of its electricity from
gas and half from renewables.
Saudi Aramco Annual Report 2021
Tackling the climate challenge
In step with the Saudi Green Initiative,
the Company announced its ambition
to achieve net-zero Scope 1 and Scope 2
greenhouse gas emissions across our
wholly-owned operated assets by
2050, which in turn will help support
the Kingdom’s own 2060 net-zero aim.
We did not make nor do we take this
ambition for our Company lightly. We fully
recognize both the scale and the urgency
of the global climate challenge. As one
of the world’s largest integrated energy
and chemicals companies, and as stewards
of the Kingdom’s vast hydrocarbon
resources, we have a critical role to play in
helping the complex transition to a lower
emissions future be as orderly as possible.
As demand for energy continues to
grow in response to an expanding world
population and rising living standards, we
believe oil and gas will still play a vital role
for decades to come. The suggestion that
hydrocarbons can be quickly eliminated
from the global energy mix is unrealistic
as doing so would severely impede and
negatively impact trade and travel.
Instead, society as a whole must seek
a stable and inclusive energy transition
that meets the needs of people in both
the developed and developing world.
Reducing emissions from energy
production and use, while at the same
time satisfying the world’s growing
energy requirements, is the biggest dual
challenge facing our industry. With our
low upstream carbon intensity and our
low-cost oil, as well as our demonstrated
capacity to innovate, we firmly believe
Aramco is well positioned for the future.
Maintaining good governance
As we chart our course forward, we
also welcomed two new members to
our Board of Directors in 2021: Stuart T.
Gulliver, former Group CEO of HSBC, and
Khalid H. Al-Dabbagh, former Senior
Vice President, Finance, Strategy and
Development of Aramco. Both were
elected to the Board at our Ordinary
Annual General Assembly meeting in July,
filling seats vacated by H.E. Nabeel M.
Al-Amudi and Sir Mark Moody-Stuart.
On behalf of the Board, I would like to
take this opportunity to express our deep
appreciation to both Nabeel and Sir Mark
for their valuable contributions to Aramco.
Our continued success would also not be
possible without the visionary leadership
of the Custodian of the Two Holy Mosques
King Salman bin Abdulaziz Al-Saud, and
His Royal Highness Prince Mohammed
bin Salman bin Abdulaziz Al-Saud, Crown
Prince, Deputy Prime Minister and Minister
of Defense of the Kingdom of Saudi Arabia.
In addition, we thank the Ministry of
Energy of the Kingdom of Saudi Arabia
for their ongoing support of Aramco.
Recognizing our many stakeholders
In February 2022, the Government
transferred 4% of its shares in the Company
to the Public Investment Fund. This private
transfer did not affect the Company’s total
number of issued shares and does not have
any impact on the Company’s operations,
strategy, dividend distribution policy, or
governance framework. The Government
remains Aramco’s largest shareholder.
Aramco has long played a special
role in providing energy that powers
the development of countries and
communities around the world. It is not
an exaggeration to suggest that each and
every day billions of people, directly and
indirectly, depend on a reliable supply of
energy that originates from Aramco.
Our ability to reliably meet these energy
demands is dependent on the hard work
of a talented team. And on behalf of the
Board of Directors, I want to take this
opportunity to acknowledge the men and
women of Aramco for their dedication
and commitment. I also want to express
our collective appreciation to our
customers, partners, suppliers, and
contractors for their ongoing support.
Finally, to our shareholders, we thank
you for your continued confidence in
our Company.
H.E. Yasir O. Al-Rumayyan
Chairman of the Board of Directors
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President and CEO’s message
Generating value and providing reliable,
cleaner energy
Dear Shareholders,
With hindsight, there are certain points at
certain times that stand out as pivotal, and
in 2021 there were several such moments.
Globally, we saw economic momentum
return in many countries along with
growing optimism that rising vaccinations
would be a turning point to mark the
beginning of the end of the pandemic.
Related to our industry, there were signs
of energy supply concerns in some parts
of the world, which should serve to
illustrate the potential consequences of
further under-investment in conventional
energy production.
Longer-term, we will continue to position
Aramco to be a cornerstone of world energy
security, providing reliable and ever-cleaner
energy throughout the global energy transition.”
Aramco also marked a number of
milestones in 2021 that are highlighted
in this report. The most significant, by far,
was announcing our ambition to achieve
net-zero Scope 1 and Scope 2 greenhouse
gas emissions across the Company’s
wholly-owned operated assets by 2050.
Other key achievements included two
landmark transactions to monetize our
pipelines infrastructure. We also moved
forward with the development of the
Jafurah unconventional gas field, which
has the potential to make Saudi Arabia
one of the world’s leading gas producers
by 2030. In addition to declaring total
cash dividends of SAR 281.3 billion
($75.0 billion) for 2021, the Board also
recommended the granting of bonus
shares to shareholders in recognition of
our outstanding operational performance
and financial results for the year.
From a personal perspective, I am proud
of how well my colleagues adapted to
the challenges presented by COVID-19.
Indeed, their overwhelmingly positive
response to a Company-led vaccination
campaign was instrumental in our ability
to maintain uninterrupted operations.
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Saudi Aramco Annual Report 2021
Aramco
Building our business
In our Upstream operations, we are
expanding our capability to increase our
crude oil Maximum Sustainable Capacity
from 12.0 mmbpd to 13.0 mmbpd. This
additional capacity is expected to come
on-stream by 2027. We have completed
work on crude oil increments at ‘Ain Dar
and Fazran, which will provide access to
secondary reservoirs with a combined
capacity of 175 mbpd. And we are
progressing with engineering and
construction at Marjan and Berri that
will add a combined production capacity
of 550 mbpd of crude oil by 2025.
Meanwhile, with gas likely to play a critical
role in the energy transition, we believe
the development and commercialization of
the Jafurah unconventional field will have
positive implications for energy security
and economic development. Containing an
estimated 200 tscf of gas in place, Jafurah
will provide high-value feedstock for our
petrochemicals business and complement
our plans for lower-carbon hydrogen
production in the future. When completed,
Jafurah will be one of the most modern,
cost-efficient unconventional resource
programs in the industry.
Our Hawiyah Gas Plant expansion is
expected to be on-stream in 2022, and
we continue to advance the Hawiyah
Unayzah reservoir gas storage program
to provide some 2.0 bscfd of gas for
reintroduction into the Master Gas
System by 2024. And from our existing
gas operations, we achieved the highest
single-day natural gas production in
our history of 10.8 bscfd.
During 2021, we also continued to expand
our downstream operations, including the
successful start-up of our 400 mbpd Jazan
Refinery. And in October, we opened the
first Aramco-branded service station as
part of our joint venture with TotalEnergies
to develop a premium retail network in the
Kingdom. Also domestically, we launched
a new line of automotive lubricants under
the ORIZON® brand. The integration with
SABIC progressed with the marketing and
sales of several Aramco petrochemical
products being transferred to SABIC, while
offtake and resale activities for certain
SABIC products are moving to Aramco
Trading Company.
Saudi Aramco Annual Report 2021
Innovation continues to be a priority for
Aramco. Early in 2021, we commissioned
one of the most powerful supercomputers
in the world to run three-dimensional earth
modeling to enhance efficiencies in
exploration and production. In a fitting
tribute to the Kingdom’s first commercial oil
well, our new 55.4-petaflops supercomputer
was named “Dammam-7.” Aramco was
also granted 864 U.S. patents last year,
making us a leader within our industry.
Advancing the energy transition
As a company, we remain deeply
committed to playing a leading role in
helping to ensure a stable and inclusive
energy transition. Across our global
research network, Aramco scientists
are pursuing answers to critical energy
questions facing our industry and the
world as a whole. At our R&D centers we
are working on a range of cutting-edge
technologies, including ultra-efficient
engines, carbon capture, utilization,
and storage, and also non-combustible
uses for oil.
Clearly our path to meet our
aforementioned net-zero ambition will
not be a straight line, and achieving this
in less than three decades will not be
easy. What is also clear is that Aramco is
coming from a position of strength. Our
upstream carbon intensity of 11.2 kg of
CO2 equivalent per barrel of oil equivalent
is one of the lowest in our industry.
Additionally, as part of our support
for a smooth global energy transition,
we continue to explore the potential
of hydrogen as a new source of lowercarbon energy. In 2021, Aramco also
made its first significant investment in
renewables by taking a 30% stake in the
1.5 GW Sudair Solar PV Plant, which is
expected to start producing electricity
in the second half of 2022.
We will be providing further detail on our
various sustainability-related initiatives in
our inaugural stand-alone Sustainability
Report, which is scheduled for publication
later this year.
Generating value
through partnerships
Aramco has long believed that
collaboration is critical to identifying
sustainable solutions. In 2021, we
continued working with numerous
partners to generate long-term value.
This included establishing the Altamayyuz
Finance and Accounting Excellence
Academy to create a skilled talent pool
for the Company to draw from, as well
as support a thriving financial sector in
the Kingdom. This first-of-its-kind
collaboration involves global banks along
with leading international and domestic
accounting firms.
During 2021, we took an active role in
the Kingdom’s new Shareek program
as it provides attractive incentives to
encourage partnerships and investments
that will create additional shareholder
value. We also launched Aramco Namaat,
an extension of our industrial investment
program, and we continued to expand
iktva, our local supply chain initiative.
All three programs are designed to
help drive economic growth and create
opportunities across industries for local
businesses, small and medium enterprises,
and entrepreneurial start-ups.
Looking ahead with confidence
As we look ahead to the future, we are
optimistic that energy demand will remain
relatively healthy. Longer-term, we will
continue to position Aramco to be a
cornerstone of world energy security,
providing reliable and ever-cleaner energy
throughout the global energy transition.
While we cannot shape future events for
Aramco, I am confident that we are shaping
Aramco for future events. This confidence
is based on many factors, including our
history of overcoming challenges and
our Company’s demonstrated technical
excellence. But the main reason for such
optimism is our people — who strive each
and every day to deliver the energy the
world needs to enable both growth and
progress in societies and to transform
people’s lives.
Amin H. Nasser
President and Chief Executive Officer
11
2021 highlights
Year of achievements
First quarter
Second quarter
Dammam-7 supercomputer
Aramco is evolving as one of the world’s leading digitalized
energy companies, and inaugurated one of the top
supercomputers in the world, Dammam-7.
Aramco Oil Pipelines Company
Aramco’s landmark SAR 46.5 billion ($12.4 billion) energy
infrastructure deal involved the sale of a 49% equity interest
in Aramco Oil Pipelines Company (AOPC) to a consortium of
international investors.
Start-up of Jazan Refinery
Aramco safely and successfully started-up the Jazan Refinery, and
work is progressing well to reach the 400 mbpd design capacity.
Mangrove Eco-Park
On the Arabian Gulf shoreline, Aramco opened its Mangrove
Eco-Park, the first facility in the Kingdom dedicated to the
preservation of mangrove forests.
Preserving the environment
Aramco planted one million new native trees and eight
million mangroves.
Roseyar
Aramco inaugurated a rose factory in al-Taif to employ women
to produce skin care products containing highly-regarded local
rose oil.
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Shareek
Aramco announced its leading role in the new cooperative
Shareek program to support and partner with domestic
businesses and ventures aligned with Aramco’s business strategy.
Inaugural international U.S. dollar sukuk
Aramco successfully raised SAR 22.5 billion ($6.0 billion) in
June following the sale to leading institutional investors of
U.S. dollar-denominated Shari’a compliant securities, listed
on the London Stock Exchange.
Expanding Upstream
Aramco successfully completed and tied-in the ‘Ain Dar
and Fazran crude oil increments, and construction progress
continued on the Marjan and Berri increment programs.
Altamayyuz
Aramco inaugurated the Altamayyuz Finance and Accounting
Excellence Academy.
Saudi Aramco Annual Report 2021
Aramco
Third quarter
Fourth quarter
Namaat
The expansion of the Company’s industrial investment program,
Aramco Namaat, aims to ensure greater reliability of energy
supply, localize the industrial supply chain, and create jobs.
Net-zero
Aramco announced its ambition to achieve net-zero Scope 1
and Scope 2 greenhouse gas emissions across its wholly-owned
operated assets by 2050.
Investing in solar
Aramco invested in the 1.5 GW Sudair Solar PV project, which
will be Saudi Arabia’s largest solar farm when completed.
Aramco-branded retail fuel network
Aramco launched its first branded in-Kingdom service station
as part of its joint venture with TotalEnergies.
Financing arrangement in connection with the Jazan
Integrated Gasification Combined-Cycle Power Plant
Aramco entered into a SAR 44.1 billion ($11.8 billion) financing
arrangement with Air Products, ACWA Power and Air Products
Qudra in relation to the Jazan Integrated Gasification CombinedCycle (IGCC) Power Plant, Air Separation Unit and certain
ancillary assets.
Jafurah development
Aramco commenced the development of the vast Jafurah
unconventional gas field, the largest non-associated gas field
in Saudi Arabia.
New domestic marketplace with ORIZON®
Aramco entered the domestic lubricants marketplace,
offering consumers a new line of lubricant products under
the ORIZON® brand.
Aramco Gas Pipelines Company
The Company signed a SAR 58.1 billion ($15.5 billion) energy
infrastructure deal to sell a 49% equity interest in Aramco
Gas Pipelines Company (AGPC) to a consortium of investors.
The transaction closed in February 2022.
Saudi Aramco Annual Report 2021
13
Aramco’s operations
Global operations
Americas
Argentina, Brazil, Canada,
Mexico
United States of America
Countries of operation
Aramco headquarters
Subsidiary* offices
Crude oil and natural gas production facilities
Refining, petrochemical and manufacturing facilities
Terminals and distribution hubs
Aramco retail fuels network
Technology and innovation centers
*
Subsidiaries are separate legal entities from the Company.
Turaif
Safaniya
Tanajib
Manifa
Jawf
Tabuk
Khursaniyah
Wasit
Fadhili
Jubail
Midyan
Berri
Ju’aymah
Ras Tanura
Qatif
Saihat
Dammam
Aramco headquarters, Dhahran
Khobar
Duba
Abqaiq
Medina
Shedgum
Qasim
al-Hasa
Se’ed
‘Uthmaniyah
Khurais
Yanbu’
SABIC headquarters
Riyadh
Hawiyah
Rabigh
Thuwal
Haradh
Shaybah
Jiddah
Sulayyil
Abha
Najran
Jazan
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Saudi Aramco Annual Report 2021
Aramco
Europe
Armenia, Azerbaijan,
Czech Republic, Finland,
Georgia, Hungary, Portugal
Estonia
Austria
Denmark, Greece, Poland, Sweden
Russia
Belgium, Germany, Italy, Turkey
France
Netherlands, Spain,
United Kingdom
Middle East and Africa
Bahrain
Egypt, Ethiopia, Iraq,
Jordan, Kenya, Tunisia
Morocco, South Africa,
United Arab Emirates
Saudi Arabia
Asia and Australia
Australia, Indonesia,
Pakistan, Philippines
Vietnam
Malaysia, Singapore, Thailand
India
China, Japan, South Korea
Saudi Aramco Annual Report 2021
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Business model
Capturing value across the hydrocarbon life cycle
Who we are
Our vision
Our values
Aramco’s vision is to be
the world’s preeminent
integrated energy and
chemicals company,
operating in a safe,
sustainable and
reliable manner.
Excellence
At Aramco, excellence translates into all aspects of our
workplace. It is our personal and group commitment to
doing what we do well. We drive for best results and are
agile in addressing new challenges.
Safety
Safety is an integral part of Aramco’s culture. We are committed
to providing a safe and respectful working environment for all
with the appropriate safety procedures and policies in place
on-site and within the community.
Our mission
Citizenship
No matter where in the world we are conducting business,
it is important to be known as a good corporate citizen and
to be a positive influence within communities. As a global
company in Saudi Arabia, we take this role seriously.
Integrity
The integrity of business at Aramco is based on the ethical
standards of our employees in our everyday operations.
Integrity is a precious asset, it is our reputation. The
foundation of corporate integrity is personal integrity.
Accountability
Accountability means all employees at Aramco take responsibility
for their actions in meeting corporate objectives. Accountability
for achieving Aramco’s overarching business objectives starts
with the goals and objectives outlined by the President and CEO,
for its business lines, and pervades through Aramco.
Aramco strives to provide
its shareholders with
resilient value creation
through crude oil price
cycles by maintaining its
preeminence in oil and
gas production, capturing
additional value across the
hydrocarbon value chain,
and profitably growing
its portfolio.
Underpinned by our environmental,
Upstream carbon intensity
Flaring intensity1
(kg of CO2e/boe)
(scf/boe)
11.2
16
5.51
Saudi Aramco Annual Report 2021
Aramco
What we do
Aramco directs its strategic focus on four themes:
Upstream preeminence:
maintain Aramco’s position as
the world’s largest crude oil
producer by volume and one
of the lowest-cost producers.
Downstream integration:
continue the strategic
integration of Aramco’s
Upstream and Downstream
businesses to capture
additional value across
the hydrocarbon chain.
Low carbon: develop lowcarbon products and solutions
across the energy, chemicals,
and materials sectors.
Localization and the
promotion of national
champions: facilitate the
development of a diverse,
sustainable in-Kingdom energy
ecosystem to underpin the
Company’s competitiveness.
For more details see page 29
Our operations
Upstream
Downstream
Aramco, with one of the
lowest upstream carbon
intensities and low production
costs, safely explores for,
develops and produces
crude oil, condensate,
natural gas and NGL.
Aramco has a large and
strategically integrated global
Downstream business, which
consists primarily of refining and
petrochemical manufacturing,
supply and trading, distribution
and power generation.
For more details
see page 48
Integrated operations
The strategic integration
of Aramco’s Upstream and
Downstream segments enables
us to secure crude oil demand
by selling to a dedicated
network of local and
international refineries.
For more details
see page 58
social and governance activities
Lost time injuries/illness rate (LTI)2,3
0.017
(per 200,000 work hours)
Saudi Aramco Annual Report 2021
Granted U.S. patents
864
1.
Company’s emissions from wholly-owned in-Kingdom
operated assets, SASREF, Motiva, and ARLANXEO.
2. Applies to Saudi Arabian Oil Company (the Company)
and operationally controlled entities.
3. Total workforce (employees and contractors).
17
Business model continued
How we add value across the hydrocarbon life cycle
Aramco’s conventional proved reserves, crude oil production and profitability
are unrivaled. Its skilled workforce, supported by leading-edge technology,
delivers safe, reliable, low-cost and low-carbon intensity crude oil production,
with secure demand provided by its growing Downstream business
Explore and produce
Aramco manages the Kingdom’s unique
hydrocarbon reserves base, and is
committed to optimizing production
and maximizing long-term value.
Total hydrocarbon reserves
253.6
(billion boe)
Total hydrocarbon production
12.3
(mmboed)
Maximum Sustainable
Capacity (MSC)
12.0
(mmbpd)
Total crude oil and
condensate reserves
196.9
(billion barrels)
Total crude oil production1
Through its global network of
refineries and chemicals businesses,
Aramco produces critical industry
feedstock and essential fuels and
petrochemicals that meet the needs
of communities around the world.
9.2
(mmbpd)
1.
Includes AGOC’s oil production and blended condensate, and excludes
the Kingdom of Bahrain’s entitlement to volumes produced from the
Abu Sa’fah field.
2.
Applies to Saudi Arabian Oil Company (the Company).
18
Refine and
manufacture
Saudi Aramco Annual Report 2021
Aramco
Net refining capacity
4.0
(mmbpd)
Net chemicals production capacity
53.8
(million tons per year)
Saudi Aramco Annual Report 2021
Distribute
Aramco delivers upstream production
to a high-quality external customer
base and a dedicated downstream
system. Aramco also provides highvalue products to the Kingdom and
internationally in large and highgrowth markets through its supply
and trading, distribution and
retail operations.
Reliability2
99.9
(%)
Crude oil exports
6.3
(mmbpd)
Total traded volumes
5.7
(mmbpd)
19
At a glance
Creating shareholder value
Net income
EBIT*
Free cash flow*
(billion)
(billion)
(billion)
$110
$208
$107
Dividends paid
Earnings per share
Gearing*
(billion)
(basic and diluted)
(%)
$75
$0.53
SAR412
SAR281
SAR780
SAR1.98
SAR403
14.2
ROACE*
Upstream capital expenditures
Upstream lifting cost
(%)
(per boe)
(per boe)
$4.9
$3.0
24.4
*
20
SAR18.4
SAR11.3
Non-IFRS measure. Refer to Section 3: Results and performance.
Saudi Aramco Annual Report 2021
Aramco
Innovating flaring minimization
Khurais Field, Saudi Arabia
Technology for drilling has come a long way, and at Aramco the first portion of gas associated
with a well’s new crude oil production is gathered rather than flared.
Saudi Aramco Annual Report 2021
21
2
Business overview
and strategy
Business overview…………………..24
Market overview…………………… 28
Strategy………………………………… 29
Getting closer to customers
Riyadh, Saudi Arabia
Aramco, continuing to build recognition of
its brands, expanded its presence in Saudi
Arabia’s direct-to-consumer market during
2021 by unveiling its first Aramco-branded
retail service station in Riyadh.
22
Saudi Aramco Annual Report 2021
Business overview
and strategy
Saudi Aramco Annual Report 2021
23
Business overview
One of the world’s largest integrated
energy and chemicals companies
Aramco’s Upstream
operations are primarily
based in Saudi Arabia,
while the Downstream
business is global.
12.0 mmbpd
Aramco’s MSC was maintained at
of crude oil as at December 31, 2021.
24
Overview
Aramco is one of the world’s largest
integrated energy and chemicals
companies. Aramco’s operating
segments are Upstream and Downstream,
which are supported by corporate
activities. Aramco’s Upstream operations
are primarily based in Saudi Arabia, while
the Downstream business is global.
In 2021, Aramco’s average hydrocarbon
production was 12.3 mmboed, including
9.2 mmbpd of crude oil (including
blended condensate and AGOC’s
production in the partitioned territory and
its adjoining offshore areas in accordance
with the agreements between the
Kingdom and the State of Kuwait, but
excluding the Kingdom of Bahrain’s
entitlement to volumes produced from
the Abu Sa’fah field). As at December 31,
2021, based on the initial 40-year period
and 20-year extension of the Concession,
Aramco’s reserves stood at 253.6 billion
boe, including 196.9 billion barrels of
crude oil and condensate, 25.2 billion
barrels of NGL, and 194.5 tscf of natural
gas. In addition, as at December 31, 2021,
Aramco had a gross refining capacity of
6.8 mmbpd and net chemicals production
capacity of 53.8 million tons per year.
Upstream
The Upstream segment’s activities
consist of safely exploring for, developing,
and producing crude oil, condensate,
natural gas and NGL. Aramco manages
the Kingdom’s unique reserves and
resources base to optimize production and
maximize long-term value pursuant to the
Hydrocarbons Law, which mandates that
Aramco’s hydrocarbon operations promote
long-term productivity of the Kingdom’s
reservoirs and support the prudent
stewardship of its hydrocarbon resources.
Aramco’s principal fields are located
in close proximity to each other within
the Central and Eastern Provinces of the
Kingdom. An extensive pipeline network
connects Aramco’s fields, processing
plants, and other facilities. The produced
crude oil, condensate, natural gas and
NGL travel through Aramco’s pipelines
to multiple facilities for processing into
refined and petrochemical products, or to
domestic customers or export terminals.
In particular, Aramco’s East-West Pipeline
is critical in linking oil production facilities
in the Eastern Province with Yanbu’ on
the west coast, and providing flexibility
to export from the east and west coasts
of the Kingdom.
The Government determines the
Kingdom’s maximum level of crude oil
production in the exercise of its sovereign
prerogative and requires Aramco to
maintain Maximum Sustainable Capacity
(MSC). As at December 31, 2021, Aramco’s
MSC was maintained at 12.0 mmbpd of
crude oil. In line with the Government’s
mandate for MSC to be increased to
13.0 mmbpd, Aramco is proceeding
with its plans to gradually reach the
mandated MSC by 2027 through multiple
increments. The spare capacity afforded
by maintaining MSC enables Aramco to
rapidly increase its crude oil production
above planned levels in response to
changes in global crude oil supply and
demand. Aramco also uses this spare
capacity as an alternative supply option in
case of unplanned production outages at
any field and to maintain its production
levels during routine field maintenance.
Saudi Aramco Annual Report 2021
Business overview
and strategy
Unrivaled reserves
One of world’s largest hydrocarbon producers
Aramco’s hydrocarbon reserves
under the Concession agreement
(December 31, 2021)
253.6 B boe
196.9 B bbl
of crude oil and condensate
25.2 B bbl
of NGL
194.5 tscf
of natural gas
Saudi Aramco Annual Report 2021
Aramco is the exclusive supplier of natural
gas in the Kingdom and its gas portfolio
is rich in liquids, demonstrated by the
production of 1.0 mmbpd of NGL and
0.2 mmbpd of unblended condensate
in 2021. Aramco owns and operates the
Master Gas System (MGS), which is an
extensive network of pipelines that
connects its key gas production and
processing sites throughout the Kingdom.
In 2021, Aramco commenced development
of the vast Jafurah unconventional gas
field, which is considered the largest
non-associated gas field in the Kingdom
and hosts the largest liquids-rich shale
gas development in the Middle East with
an estimated 200 tscf of gas in place.
The project aims to meet rising demand
for high-value petrochemicals feedstock,
complement Aramco’s focus on hydrogen,
support expansion of its integrated gas
portfolio, and is expected to contribute
to greenhouse gas (GHG) avoidance in
the domestic energy sector.
Aramco seeks to further expand its oil
and gas reserves through new field
discoveries, new reservoir additions
in existing fields, and delineation and
reassessment of existing reservoirs and
fields. The Company continued its focus
on oil and gas reserves replacement
which led to the discovery of five gas
fields comprising three conventional
and two unconventional discoveries.
25
Business overview continued
Downstream
Aramco has a large, strategically
integrated global Downstream business.
The Downstream segment’s activities
consist of refining and petrochemical
manufacturing, base oils and lubricants,
retail operations, distribution, supply
and trading, and power generation.
The strategic integration of Aramco’s
Upstream and Downstream segments
provides an opportunity for Aramco to
secure crude oil demand and capture
incremental value from the hydrocarbon
value chain by selling to its dedicated
system of domestic and international
wholly-owned and affiliated refineries
and petrochemical plants. This crude
placement provides significant benefits
to Aramco’s downstream operations,
including a secure and reliable supply
of high-quality crude oil, which helps
to ensure a secure and reliable supply
of refined and petrochemical products
to their customers.
Aramco’s Downstream business is the
largest customer for the Upstream
segment’s crude oil production, consuming
43% of its crude oil production in 2021.
Aramco’s Upstream business produces all
the crude oil supplied to and processed by
Aramco’s wholly-owned and affiliated
refineries in the Kingdom, and provides
the majority of crude oil used by its
international refineries.
Reliable oil and gas production
Wellhead 593, Abqaiq Field, Saudi Arabia
Aramco, with exceptional supply reliability, produces five Arabian crude oil grades —
Heavy, Medium, Light, Extra Light, and Super Light — which are highly compatible with
most refineries globally.
26
Saudi Aramco Annual Report 2021
Business overview
and strategy
Aramco’s refining operations in the
Kingdom, including its domestic affiliates
and local distribution system, provide
Aramco access to a large domestic
marketplace to which it is the sole supplier.
In addition to its domestic focus, Aramco
is directing its downstream investments
in areas of high growth, including China,
India, Southeast Asia, material demand
centers such as the United States and
Europe, and countries that rely on
importing crude oil, such as Japan and
South Korea. In January 2022, Aramco
signed agreements with Polish refiner and
fuel retailer PKN Orlen, which will expand
Aramco’s European downstream presence
through investments in Poland’s refining,
wholesale, and jet fuel marketing
segments. Completion of the transaction
is subject to regulatory approvals.
Aramco also has an integrated
petrochemicals business within its
Downstream segment, which enables
it to capture incremental margin in the
hydrocarbon value chain. Aramco’s
chemicals business continues to grow
through capacity expansions and
increasing ownership positions in affiliates
and new investments. This includes its
recent acquisition of a 70% stake in
SABIC from the PIF. Aramco’s investment in
SABIC makes it a major global producer of
petrochemicals and expands its capabilities
in procurement, manufacturing, marketing
and sales, and supports Aramco’s liquidsto-chemicals conversion strategies.
Synergies in multiple areas, including
procurement, stream integration, feedstock
optimization, and maintenance activities
are being pursued.
Aramco’s expanding global network of
refineries and chemicals joint ventures
provide access to new markets for the
Company’s products, and allows it to
strategically place crude oil volumes
across different geographies.
Corporate
Aramco’s corporate activities are
underpinned by Aramco’s commitment
to good governance and leadership,
which includes environmental, social
and governance practices (Section 4: ESG),
risk management (Section 5: Risk) and
corporate governance (Section 6:
Corporate governance).
In efforts to optimize its portfolio and
advance its strategic alignment program,
in 2021 the Company signed two energy
infrastructure deals with different investor
consortiums worth SAR 46.5 billion
($12.4 billion) and SAR 58.1 billion
($15.5 billion), involving Aramco’s stabilized
crude oil pipeline and gas pipeline
networks, respectively. In addition, Aramco
secured access to low-cost and diversified
funding by leveraging positive market
sentiment and its proven ability to obtain
external financing, issuing SAR 22.5 billion
($6.0 billion) of U.S. dollar-denominated
Shari’a compliant securities at very
favorable terms.
Aramco’s Downstream
business is the largest
customer for the Upstream
segment’s crude oil production.
Aramco’s Upstream and Downstream
segments, as well as the overall business,
are supported by corporate activities.
This includes technical services essential
to the success of Aramco’s core business,
as well as human resources, finance, legal,
corporate affairs and IT. Additionally,
the integrated corporate development
organization, established in 2020, has
a mandate to optimize Aramco’s asset
portfolio by assessing and monetizing
certain existing assets.
Saudi Aramco Annual Report 2021
27
Market overview
Global energy demand recovery
Global
Domestic
The global economy experienced a strong
recovery in 2021, reflecting increased
mobility and the resumption of business
activities. As such, the outlook for global
energy demand remains robust. This
represents a significant shift from 2020,
which was severely impacted by the
COVID-19 pandemic and its related
lockdowns and recurring outbreaks of the
virus. Accordingly, the global economy
grew by 5.6% in 2021, compared to a
3.9% contraction in 2020, according to
IHS Markit estimates.
According to the General Authority for
Statistics’ latest release, the Kingdom’s
GDP is estimated to have grown by 3.3%
in 2021, vis-à-vis the previous year. This
represents a significant increase when
compared to the 4.1% contraction
registered in 2020. The GDP growth
in 2021 comes as a result of economic
recovery from the COVID-19 pandemic
and in particular the growth of non-oil
activities by 6.6%, Government services
activities by 1.5%, and to a lesser extent,
from oil activities growth of 0.2%.
The IHS Markit Global Crude Oil Markets
Outlook estimates global oil demand
increased by 5.7 mmbpd in 2021 to
96.8 mmbpd, while global oil supply is
estimated to have averaged 96.2 mmbpd
in 2021. The global market was therefore in
an undersupplied position during the year.
In line with the economic recovery,
overall domestic energy demand
increased by 2.8% during 2021. Demand
growth was spearheaded by a 6.4%
increase in transportation fuels, largely
as a result of the phasing out of the
COVID-19 containment measures.
ICE Brent crude oil price averaged $71 per
barrel in 2021, approximately 65% higher
than the average of $43 per barrel in 2020.
In line with the economic
recovery, overall domestic
energy demand increased
by 2.8% during 2021.
Average ICE Brent crude oil price
$/bbl
75
60
65%
increase
45
30
43
15
2020
28
71
2021
Saudi Aramco Annual Report 2021
Strategy
Positioning Aramco for the future
Re
sil
i
y
lit
bi
c
Te
1
Upstream
2
Downstream
3
Low carbon
4
Localization
ab
ili
ty
Por
tf
n
gy
olo
hn
Saudi Aramco Annual Report 2021
in
ta
• Localization and the promotion of
national champions: facilitating the
development of a diverse, sustainable
and globally competitive in-Kingdom
energy ecosystem to underpin the
Company’s competitiveness and support
the Kingdom’s economic development.
• Sustainability: embedded within all
its activities.
s
Su
• Low carbon: the Company aims to
continue to lower the net carbon
emissions of its operations and to
support the global energy transition
through development of low-carbon
products and solutions across the
energy, chemicals, and materials
sectors; and
• Growth: both in its traditional oil and
gas activities and new businesses; and
ce
en
• Downstream integration: the Company
has a dedicated system of domestic
and internationally wholly-owned and
affiliated refineries that are critical to
monetizing the Company’s upstream
production. Through continued
strategic integration, the Company
captures additional value across the
hydrocarbon chain;
• Portfolio optimization: continuously
optimizing the Company’s portfolio
to free up capital for redeployment.
• Resilience: both operational and
financial, enabling the Company
to deliver stable dividends to its
shareholders through crude oil
price cycles and to maintain a high
investment-grade credit rating;
th
• Upstream preeminence: as the
principal engine of value generation,
the Company intends to maintain its
position as the world’s largest crude
oil producer by production volume
and one of the lowest-cost producers.
The Company’s vast reserves base,
spare capacity, and unique operational
flexibility allow it to effectively respond
to changes in demand;
• Technology: innovating, developing
and deploying technology to boost
competitiveness and provide economical
solutions to sustainability issues; and
• Profitability: by reinforcing its
competitive positions across its
upstream and downstream activities;
olio optimizatio
w
To achieve this vision, Aramco focuses on
four strategic themes across its businesses:
Aramco seeks to deliver value across
four dimensions:
• People: preparing the workforce for
the challenges the Company will face
in the future;
Pr
of
ita
Within this context, Aramco’s vision is
to be the world’s preeminent integrated
energy and chemicals company, operating
in a safe, sustainable and reliable manner.
The Company’s strategy requires a
number of enablers to be successful.
Foremost among these are:
Peo
ple
The Company’s strategy is driven by the
belief that the world’s need for affordable,
reliable and sustainable energy will
continue to grow, and that a broad mix of
energy solutions will be required to meet
this demand, including oil and gas.
Business overview
and strategy
o
Gr
29
Strategy continued
Four strategic themes
1
Upstream preeminence
Oil
Aramco intends to maintain its position
as the world’s largest crude oil company
by production volume. Its reserves,
operational capabilities and spare
capacity allow it to increase production
in response to demand.
Aramco maintains its desired level
of crude oil production by balancing
production between maturing areas and
newer production sources, tapping into
new reservoirs when required to optimize
the depletion rate of its fields. It also
maintains its low-cost position due
to the unique nature of the Kingdom’s
geological formations, favorable onshore
and shallow water offshore environments
in which Aramco’s reservoirs are located,
synergies from Aramco’s use of its large
infrastructure and logistics networks, its
low depletion rate operational model,
and its scaled application of technology.
Aramco seeks to maintain its position as
one of the world’s most reliable crude oil
suppliers. The Government determines
the Kingdom’s maximum level of crude oil
production in the exercise of its sovereign
prerogative and requires Aramco to
maintain an MSC in excess of its current
production in accordance with the
Hydrocarbons Law.
30
Gas
In line with the Government’s mandate to
increase its MSC to 13.0 mmbpd, Aramco
is proceeding with plans to gradually
reach the mandated MSC through
multiple increments. The spare capacity
afforded by maintaining an MSC provides
operational flexibility to respond rapidly
to changes in global crude oil supply and
demand. While Aramco has a robust field
maintenance philosophy that emphasizes
the reliability of its upstream operations,
the MSC provides an alternative supply
option in the event of unplanned
production outages at any field.
Aramco utilizes term agreements for
selling crude oil to major consumers
globally. These agreements provide
supply predictability to customers by
standardizing price and delivery terms
to major regional demand centers.
Aramco continues to invest in its
sophisticated and extensive crude oil
distribution and dispatch system, which
maintains Aramco’s supply reliability.
Aramco also seeks to preserve the low
upstream carbon intensity of its crude oil
production, which places it among the
world’s least carbon intensive sources
of crude oil production.
Aramco plans to further expand its
gas business, including the development
of its unconventional gas resources,
increasing production and investing in
additional infrastructure to meet the
large and growing domestic demand
for low-cost, cleaner energy.
Domestic gas demand growth is driven
by power generation, water desalination,
petrochemical production, and other
industrial consumption in the Kingdom.
In 2021, the Company announced the
award of contracts worth $10.0 billion
for the vast Jafurah field development,
a key component of its unconventional
gas program, which will contribute to
greenhouse gas emissions avoidance
in the domestic energy sector.
The Company is also looking into
monetizing part of its growing domestic
gas production through the production
of blue hydrogen and ammonia, which
it expects to play an important future
role in providing low-carbon energy.
Important side benefits of Aramco’s
gas production are the significant
yields of NGL and condensate, which
supplement crude oil production and
provide feedstock to the refining and
petrochemical industries.
Saudi Aramco Annual Report 2021
Business overview
and strategy
2
Downstream integration
Aramco intends to continue the
strategic integration of its Upstream
and Downstream businesses to facilitate
the placement of the Company’s crude
oil in larger offtake volumes through
a dedicated system of domestic and
international wholly-owned and
affiliated refineries, allowing it to capture
additional value across the hydrocarbon
chain, expand its sources of earnings, and
provide resilience to oil price volatility.
Aramco’s 70% equity interest in SABIC
supports the significant expansion of
Aramco’s downstream activities,
particularly in its chemicals business,
and provides additional opportunities
for Aramco to supply mixed feedstock
of crude oil, refinery products and gas
to manufacture petrochemical products.
Changing patterns of demand, including
growth in chemicals demand and the
long-term risk of decline in fuels demand,
are driving the Company’s strategy to
favor investments in facilities with high
liquids-to-chemicals conversion rates.
Saudi Aramco Annual Report 2021
Geographically, Aramco intends to
enhance both its domestic and global
downstream businesses in key highgrowth geographies such as China, India
and Southeast Asia, which are integral
to Aramco’s existing business and future
expansion strategy, as well as in other
attractive markets. Aramco also intends
to maintain its presence in key large
countries, such as the United States, and
in countries that rely on imported crude
oil, such as Japan and South Korea.
Aramco continues to expand global
recognition of its brands. One aspect
of this strategy is to introduce its brands
to existing domestic and international
marketing businesses, including at retail
service stations, and further develop its
petrochemicals and base oil brands. As
new marketing activities are added to its
business portfolio, Aramco intends to use
its own brands to build recognition of its
position in the global energy sector.
In October 2021, Aramco and
TotalEnergies launched the first two
service stations of their joint retail network
in Saudi Arabia. It follows the signing of a
joint venture agreement between Aramco
and TotalEnergies in 2019, with plans to
significantly upgrade a network of over
200 service stations and expand the range
of quality retail services available across
the Kingdom. This network will comprise
Aramco and TotalEnergies-branded
stations, providing motorists with premium
fuels and retail services.
31
Strategy continued
Four strategic themes continued
Low carbon
3
The strategy has two main dimensions:
lower the net carbon emissions of the
Company’s operations (Scope 1 and
Scope 2) over time; and, develop lowcarbon products and solutions across the
energy, chemicals and materials space.
• Developing low-carbon products and
solutions aims primarily at sustaining
and diversifying demand for oil and
gas through competitive technologies
and selective business initiatives. These
include blue hydrogen and ammonia,
low-carbon fuels, and gas to complement
renewables in the domestic energy mix
and to reduce liquids-burning in power
generation. These initiatives will further
help the Company capture the growing
market for low-carbon products and
solutions.
• Lowering the Company’s own net
carbon emissions calls for managing,
reducing, and balancing carbon
emissions across operations through a
raft of measures that span efficiency
gains, renewable power, carbon
capture, utilization, and storage,
and multiple offset initiatives.
Aramco aims to grow its business
sustainably, notably by leveraging
technology and innovation to lower
its climate impact. Aramco intends to
maintain its position as a leader in
upstream carbon intensity, with one
of the lowest carbon footprints per unit of
hydrocarbons produced. In October 2021,
The Company’s low-carbon strategy,
which seeks to address climate-related
risks and opportunities, aims to de-risk its
businesses and maintain competitiveness
and differentiation in carbon-constrained
scenarios.
Aramco announced its ambition to achieve
net-zero Scope 1 and Scope 2 greenhouse
gas emissions across its wholly-owned
operated assets by 2050. This ambition is
an important part of the Company’s focus
on long-term shareholder value creation
and complements the Kingdom of Saudi
Arabia’s aim to reach net-zero emissions
by 2060, announced as part of the Saudi
Green Initiative (SGI). The Company is also
pursuing a wide range of initiatives to
further lower its upstream carbon intensity.
Key enablers
People
Aramco recognizes the need to prepare
its workforce of the future, thereby
ensuring the Company’s capabilities
match the requirements of its strategy.
There are two key dimensions to this
enabler:
• Enabling the Company’s growth
ambitions by advancing technical
and professional skills, developing
commercial and leadership
competencies, and supporting
the progress of localization and
national champions; and
• Making the Company more
sustainable, with a focus on
diversity and inclusion.
32
Technology
Aramco’s technology program aims to
develop new solutions for its Upstream
and Downstream businesses, and to
help in diversifying its product portfolio
and grow its business sustainably. An
increasing share of its investment in
technology and research and development
addresses the sustainability objective.
Such sustainability requires not only fast
and large-scale deployment of existing
solutions, such as renewable energy,
carbon capture, utilization, and storage,
and nature-based solutions, but also
the creation and advancement of new
low-carbon solutions that have both
environmental and commercial potential.
Examples of the new solutions that
Aramco believes will positively impact
its business sustainability, and which are
being actively pursued, include:
• Directly converting liquids-to-chemicals;
• Producing hydrogen with carbon
capture, utilization, and storage;
• Expanding non-metallic applications;
• Accelerating large-scale deployment of
carbon capture, utilization, and storage;
• Enabling sustainable transport through
more efficient engines and low-carbon
fuels; and
• Accelerating technology-based
offsetting solutions such as direct
air capture.
Saudi Aramco Annual Report 2021
Business overview
and strategy
Localization and national champions
In addition to Aramco’s core businesses,
the Company is seeking to foster new
businesses that will increase the longterm reliability and competitiveness
of the Company’s ecosystem, as well
as contributing to the Kingdom’s
economic development.
This is key to ensuring Aramco’s long-term
cost and productivity leadership,
sustainability, and resilience. Objectives are
two-fold: localizing the Company’s supply
chain; and promoting national champions.
4
In March 2021, the Government of Saudi
Arabia announced the Shareek program.
Shareek offers a framework to accelerate
investments that are aligned with the
Company’s strategy and is relevant
for the Company’s plans for domestic
liquids-to-chemicals, for blue hydrogen
and ammonia, for low carbon generally,
and for fostering a more competitive
and resilient energy ecosystem. Part of
Shareek is concerned with the Kingdom’s
industrial development, which has many
touchpoints with the Company’s own
ecosystem. In September 2021, the
Company announced a major expansion
of its industrial investment program,
Aramco Namaat, that will leverage a
range of incentives offered by Shareek.
Portfolio optimization
Through portfolio optimization, Aramco
seeks to unlock value, enhance its capital
structure and reallocate capital to higher
growth and return investments. Aramco
has a comprehensive and disciplined
internal approval process for capital
expenditures, new projects and debt
issuance. It analyzes future projects based
on strategic, operational, commercial, and
financial targets. Aramco’s unique
reserves and resource base, operational
flexibility, field management practices,
and strong cash flow generation serve
as a foundation for its low gearing and
flexibility to allocate capital.
Saudi Aramco Annual Report 2021
During 2021, Aramco has continued its
portfolio optimization efforts, notably
executing a number of large value
adding transactions around existing
infrastructure assets that attracted
international investors, thereby allowing
the Company to reallocate capital towards
its focus areas. Transactions have
included: the sale of a 49% equity interest
in Aramco Oil Pipelines Company (AOPC),
an Aramco subsidiary, to a consortium
of international investors including EIG
Global Energy Partners and Mubadala for
SAR 46.5 billion ($12.4 billion); the signing
of a SAR 58.1 billion ($15.5 billion) energy
infrastructure deal to divest 49% of
Aramco Gas Pipelines Company (AGPC)
to a consortium of investors that closed
in February 2022; and entering into
financing arrangements in connection
with the Jazan Integrated Gasification
Combined-Cycle Power Plant and
associated infrastructure.
33
3
Results and
performance
Key 2021 metrics…………………… 36
CFO’s message………………………. 38
Financial performance…………… 40
Upstream………………………………. 48
Downstream…………………………. 58
Corporate……………………………….70
Strategic integration of Upstream
and Downstream businesses
Jazan Economic City, Saudi Arabia
Aramco, with a strategy to sell crude oil
to its dedicated network of local and
international refineries, safely started-up
the Jazan Refinery in 2021.
34
Saudi Aramco Annual Report 2021
Results and performance
Saudi Aramco Annual Report 2021
35
Key 2021 metrics
Exceptional performance
Financial highlights
Net income
SAR412
EBIT*
SAR780
Free cash flow*
(billion)
(billion)
(billion)
SAR403
Net cash provided by
operating activities
Capital expenditures
SAR120
Dividends paid
ROACE*
(billion)
(billion)
$32
2020: $27
SAR281
Dividends paid per share
$75
2020: $70
Gearing*
Earnings per share
(%)
(basic and diluted)
Average realized
crude oil price
$110
2020: $49
14.2
2020: 23.0
$208
2020: $101
SAR1.98
$0.53
2020: $0.25
$107
2020: $49
SAR1.40
$0.37
2020: $0.35
70.5
SAR523
(billion)
$139
2020: $76
24.4
(%)
2020: 13.2
($/barrel)
2020: 40.6
*
Non-IFRS measure: refer to “Non-IFRS
measures reconciliations and
definitions” for further details.
Hawiyah NGL Recovery Plant, Saudi Arabia
36
Saudi Aramco Annual Report 2021
Results and performance
Operational highlights
MSC
12.0
Hydrocarbon production
(mmbpd)
(mmboed)
(mmbpd)
2020: 12.0
12.3
Crude oil production 1
2020: 12.4
2020: 9.2
Net refining capacity
4.0
Net chemicals
production capacity
53.8
Reliability 2
Upstream carbon
intensity
Flaring intensity 3
Total recordable case
frequency 4
(mmbpd)
2020: 3.6
11.2
(kg of CO2e/boe)
2020: 10.6
Saudi Aramco Annual Report 2021
(million tons per year)
2020: 53.1
5.51
(scf/boe)
2020: 5.97
9.2
99.9
(%)
2020: 99.9
0.054
1.
Includes blended condensate and
AGOC’s production but excludes the
Kingdom of Bahrain’s entitlement to
volumes produced from the Abu Sa’fah
field.
2.
Applies to Saudi Arabian Oil Company
(the Company).
3.
The Company’s GHG emissions inventory
includes emissions from wholly-owned
in-Kingdom operated assets, SASREF,
Motiva, and ARLANXEO.
4.
The Company and its operationally
controlled entities.
(per 200,000 work hours)
37
CFO’s message
Continued agility, resilience, and fiscal discipline
Dear Shareholders,
Aramco’s extraordinary performance
in 2021 is a testament to our fiscal
discipline and flexibility through
evolving market conditions.
We saw a rebound in the
global economy with
increased demand and
higher prices for energy
products, which translated
into strong financial results.”
During the year, we saw a rebound
in the global economy with increased
demand and higher prices for energy
products, which translated into strong
financial results. For the year ended
December 31, 2021, Aramco’s net income
was SAR 412.4 billion ($110.0 billion)
with free cash flow of SAR 403.0 billion
($107.5 billion) and ROACE of 24.4%.
We also continued to strengthen our
balance sheet, and improved our gearing
ratio to 14.2% at the end of 2021 from
23.0% at the end of 2020.
With this outstanding performance, we
declared cash dividends of SAR 281.3 billion
($75.0 billion) for 2021, and our Board
recommended capitalizing SAR 15.0 billion
($4.0 billion) of retained earnings to
support the distribution of bonus shares
to shareholders, in the amount of one
share for every 10 shares held.
Going forward, our financial framework
will remain focused on long-term
shareholder value creation and centered
around three main pillars. First, we will
continue to prudently optimize our capital
structure to maintain a high investment
grade rating with sufficient capacity.
Second, we will ensure optionality and
execution flexibility through diversified
funding sources with optimized costs.
Finally, we will continue our proven
capital discipline and financial prudence
through crude oil price cycles.
Optimizing capital, unlocking value
We continue to maintain our flexible
approach to capital spending, as this
represents a distinct competitive
advantage for Aramco. Our capital
expenditures increased by 18.4% in 2021
to SAR 119.6 billion ($31.9 billion), and we
expect our 2022 capital expenditures to
be approximately SAR 150.0 to 187.5 billion
($40.0 to 50.0 billion). This reflects our
belief that hydrocarbons will continue to
38
be a vital part of the global energy mix,
and captures the opportunity to create
considerable shareholder value from the
current global under-investment in the
oil and gas industry that may result in
a supply gap in the mid to long run.
During 2021, we progressed with our
portfolio optimization program and
completed a SAR 46.5 billion ($12.4 billion)
infrastructure deal with an international
consortium of investors. As part of the
deal, we sold a 49% equity interest in a
subsidiary that holds leasing rights for
Aramco’s stabilized crude oil pipeline
network. We signed a similar deal with
a second group of investors for our gas
pipeline network of SAR 58.1 billion
($15.5 billion) that closed in February
2022. We also entered into a financing
arrangement with a joint operation
company in relation to the Jazan
Integrated Gasification Combined-Cycle
(IGCC) Power Plant, an Air Separation
Unit, and other ancillary assets for
SAR 44.1 billion ($11.8 billion). These
transactions demonstrate continued
investor confidence in Aramco’s long-term
outlook, as well as the attractiveness of
the Kingdom to institutional investors.
To further diversify our funding sources
and expand our investor base, Aramco
successfully raised SAR 22.5 billion
($6.0 billion) through the issuance of our
inaugural U.S. dollar-denominated Shari’a
compliant securities. Our offering was the
largest order book ever recorded globally
for a dollar-denominated sukuk
transaction. This successfully expanded
our investor pool, primarily by adding
international investors seeking Shari’a
compliant instruments. The healthy
subscription was a strong endorsement
from international investors as we
continue to broaden our investor base
in line with our financing strategy, while
maintaining our strong credit rating.
The integration of SABIC into the Aramco
group is progressing ahead of plan, and
we have realized SAR 6 billion ($1.6 billion)
in synergies to date. We have implemented
a go-to-market strategy for all products,
realigned marketing, and optimized the
Saudi Aramco Annual Report 2021
Results and performance
Shareholder value in a carbon-conscious world
Saudi Stock Exchange (Tadawul), Saudi Arabia
Aramco, a major oil producer with one of the lowest upstream carbon intensities and production
costs, is well placed to play a pivotal role in a stable and inclusive global energy transition, and
continues to focus on long-term shareholder value.
commercial and supply chain activities of
both companies to enhance the value we
deliver to customers. By 2025, we expect
to capture a total value of approximately
SAR 11.3 billion to SAR 15.0 billion
($3.0 billion to $4.0 billion) in annual
recurring synergies in multiple areas,
including procurement, stream integration,
feedstock optimization, and maintenance
activities, among others.
These activities demonstrate Aramco’s
financial strength, agility, and cash
generating ability, enabling the Company
to deliver exceptional shareholder returns.
Investing for the future
We are investing in advanced technologies
and solutions to further lower our
emissions to enable the Company to fulfill
its ambition to achieve net-zero Scope 1
and Scope 2 greenhouse gas emissions
Saudi Aramco Annual Report 2021
across wholly-owned operated assets by
2050. As a complement to our energy
products portfolio, we continue to
pursue the commercial viability of
emerging energy sources such as blue
hydrogen and ammonia to primarily
sustain and diversify demand for oil
and gas, while enabling our customers
to deliver on their climate objectives.
within the industry, Aramco is well
positioned to play a pivotal role in a stable
and inclusive global energy transition.
Given Aramco’s unique value proposition,
we remain extremely positive about the
growth prospects for our Company in
an increasingly carbon-conscious world.
In partnership with the Public Investment
Fund and ACWA Power, Aramco also
entered into a shareholders’ agreement for
a 30% interest in the Sudair Solar PV Plant,
one of the largest solar plants in the region
with a capacity of 1.5 GW. This represents
our first participation in the Public
Investment Fund’s renewables program.
Ziad T. Al Murshed
Acting Service Line Head, Finance,
Strategy & Development and
Acting Chief Financial Officer
As a major oil and gas producer with one
of the lowest upstream carbon intensities
and one of the lowest production costs
39
Financial performance
Continuing global demand recovery
Aramco completed a
SAR 46.5 billion ($12.4 billion)
energy infrastructure
transaction in June 2021.
The financial information of Aramco set
forth below, as at December 31, 2021 and
2020, and for the years then ended, has
been derived without material adjustment
from, and is qualified in its entirety by,
the Financial Statements contained in
Section 8: Consolidated financial statements.
It should be read in conjunction with the
financial statements, Section 5: Risk, and
other financial data included elsewhere
in this Annual Report.
Key factors affecting Aramco’s
financial results
The following is a discussion of the most
significant factors that have impacted
Aramco’s financial position and results
of operations for the year ended
December 31, 2021.
Supply, demand and prices for
hydrocarbons, and refined and
chemicals products
Aramco’s results of operations and cash
flows are primarily driven by market prices
and volumes sold of hydrocarbons, and
refined and chemicals products. Global
demand for petroleum products in 2021
continued to recover from the lows of
2020, resulting in higher prices for
hydrocarbons, and improved margins
for refined and chemicals products.
In the Kingdom, the Government regulates
the oil and gas industry and establishes the
Kingdom’s maximum level of hydrocarbon
production in the exercise of its sovereign
prerogative. Accordingly, the Government
may in its sole discretion increase or
decrease the Kingdom’s maximum
hydrocarbon production levels at any
time based on its strategic energy security
goals or for any other reason. Therefore,
Aramco’s results of operations may depend
in part on these sovereign decisions with
respect to production levels.
40
Portfolio optimization and
value creation program
The Company completed a SAR 46.5 billion
($12.4 billion) energy infrastructure
transaction in June 2021. The transaction
involved the sale of a 49% equity interest
in Aramco Oil Pipelines Company (AOPC),
an Aramco subsidiary, to a consortium of
international investors including EIG Global
Energy Partners and Mubadala. As part of
the transaction, AOPC leased and leased
back usage rights in Aramco’s stabilized
crude oil pipeline network for a 25-year
period in exchange for regular tariff
payments derived from transportation of
oil through Aramco’s stabilized crude oil
pipeline network. Under the terms of the
transaction, Aramco retains full ownership
and operational control of its stabilized
crude oil pipeline network.
Aramco entered into a financing
arrangement of SAR 44.1 billion
($11.8 billion) in September 2021 relating
to the Jazan Integrated Gasification
Combined-Cycle Power Plant, an Air
Separation Unit and certain ancillary
assets (together, the facility). The
transaction resulted in the creation
of Jazan Integrated Gasification and
Power Company (JIGPC), an Aramco joint
operation consisting of Saudi Aramco
Power Company, Air Products, ACWA
Power and Air Products Qudra. JIGPC
will operate the facility under a 25-year
contract for a predetermined monthly
fee. Consistent with the terms of the
transaction, the transfer of the facility to
JIGPC has been recorded as a financing
arrangement and therefore the facility
will remain on the books of Aramco.
Saudi Aramco Annual Report 2021
Results and performance
International sukuk program
In June, Aramco successfully raised
SAR 22.5 billion ($6.0 billion) through
the issuance of its inaugural international,
U.S. dollar-denominated Shari’a compliant
securities (U.S. dollar sukuk) under the
newly established international sukuk
program. The U.S. dollar sukuk are
listed on the London Stock Exchange’s
main market.
Consolidation of SABIC
Aramco’s 2021 consolidated results
of operations and cash flows include
SABIC’s full-year results. In comparison,
the 2020 results only included SABIC’s
earnings for the period following
Aramco’s acquisition of a 70% equity
interest, on June 16, 2020.
Debut U.S. dollar sukuk
Landmark achievement demonstrating Aramco’s unique value proposition
$6 B
raised
3
tranches
Saudi Aramco Annual Report 2021
World’s
largest
order book of U.S.
dollar-denominated
Shari’a compliant
securities
>100
new investors
$60+ B
orders received
41
Financial performance continued
All amounts in millions unless otherwise stated
Summarized consolidated statement of income
SAR
USD*
Year ended December 31
Year ended December 31
All amounts in millions unless otherwise stated
2021
2020
2021
2020
% change
Revenue and other income related to sales
1,501,758
(729,840)
862,091
(478,731)
400,468
(194,624)
229,891
(127,662)
74.2%
52.5%
771,918
383,360
205,844
102,229
101.4%
769,521
(357,125)
372,424
(188,661)
205,206
(95,234)
99,313
(50,310)
106.6%
89.3%
412,396
183,763
109,972
49,003
124.4%
24.4%
13.2%
70.5
24.4%
40.6
13.2%
73.6%
11.2 pp
Operating costs
Operating income
Income before income taxes and zakat
Income taxes and zakat
Net income
Average realized crude oil price ($/bbl)
ROACE**
*
Supplementary information is converted at a fixed rate of U.S. dollar 1.00 = SAR 3.75 for convenience only.
** Refer to “Non-IFRS measures reconciliations and definitions” for further details.
Financial results
Aramco’s strong earnings and cash flows
in 2021 are a reflection of rebounding
global energy demand, coupled with
Aramco’s unique operational flexibility
and low-cost base.
Revenues and other income related to
sales for the year ended December 31,
2021, were SAR 1,501,758 ($400,468),
compared to SAR 862,091 ($229,891), for
the year ended December 31, 2020. The
increase of 74.2% was mainly attributable
to higher crude oil prices, stronger refined
and chemicals product prices, and the
consolidation of SABIC’s full-year revenues.
Operating costs increased by SAR 251,109
($66,962), or 52.5%, from SAR 478,731
($127,662) to SAR 729,840 ($194,624), for
the years ended December 31, 2020, and
2021, respectively. This was principally
due to an increase in total purchases
driven by higher prices, an increase in
production royalties resulting from
stronger crude oil prices and a higher
average effective royalty rate, and the
consolidation of SABIC’s full-year
operating costs. The increase in operating
costs was partially offset by favorable
inventory movements during the year.
42
Income before income taxes and zakat
increased by SAR 397,097 ($105,893), or
106.6%, primarily due to higher crude
oil prices, the consolidation of SABIC’s
full-year results, and stronger refining
and chemicals margins. This was partially
offset by higher total purchases and an
increase in production royalties.
Income taxes and zakat for the
year ended December 31, 2021, was
SAR 357,125 ($95,234), compared to
SAR 188,661 ($50,310) in 2020. The
increase was mainly driven by higher
taxable income recorded in 2021.
Income vs. average realized crude price
$/barrel
$ millions
300,000
70.5
60
240,000
180,000
40.6
45
205,844
120,000
60,000
75
30
109,972
102,229
15
49,003
2020
2021
Operating income
Net income
Average realized crude price
Saudi Aramco Annual Report 2021
Results and performance
All amounts in millions unless otherwise stated
Summarized consolidated balance sheet
All amounts in millions unless otherwise stated
SAR
USD*
As at December 31
As at December 31
2021
2020
2021
2020
% change
Total assets
Total liabilities
2,162,690
882,022
1,914,261
813,167
576,718
235,206
510,470
216,845
13.0%
8.5%
Significant balance sheet movements:
Property, plant and equipment
Trade receivables
Cash and cash equivalents
1,244,316
140,373
299,579
1,209,460
85,183
207,232
331,818
37,433
79,888
322,523
22,715
55,262
2.9%
64.8%
44.6%
Non-controlling interests
Borrowings (non-current and current)
Deferred income tax liabilities
Trade and other payables
Income taxes and zakat payable
167,411
510,921
74,850
124,689
90,525
110,246
536,077
53,621
93,740
42,059
44,643
136,246
19,960
33,251
24,140
29,399
142,954
14,299
24,998
11,216
51.9%
(4.7)%
39.6%
33.0%
115.2%
14.2%
23.0%
14.2%
23.0%
(8.8) pp
Gearing**
*
Supplementary information is converted at a fixed rate of U.S. dollar 1.00 = SAR 3.75 for convenience only.
** Refer to “Non-IFRS measures reconciliations and definitions” for further details.
Financial position
Total assets were SAR 2,162,690 ($576,718)
as at December 31, 2021, compared to
SAR 1,914,261 ($510,470), as at December
31, 2020. The movement was largely due
to an increase in property, plant and
equipment, trade receivables and cash
and cash equivalents.
The increase in property, plant and
equipment reflects higher capital
expenditures in relation to crude oil
increments, the Tanajib Gas Plant, other
development drilling programs, and
additions from SABIC during the year.
Trade receivables increased mostly
due to the impact of higher prices for
the sale of crude oil and refined and
chemicals products.
The higher cash and cash equivalents
balance is mainly attributable to an increase
in operating cash flows, cash proceeds
related to Aramco’s crude oil pipeline and
JIGPC transactions, and the issuance of its
U.S. dollar sukuk. This was partially offset
by a net repayment of borrowings.
Saudi Aramco Annual Report 2021
Total liabilities were SAR 882,022
($235,206) at December 31, 2021,
compared to SAR 813,167 ($216,845),
as at December 31, 2020. The increase
was primarily due to higher deferred
income tax liabilities, trade and other
payables, and income taxes and zakat
payable, partially offset by a reduction
of borrowings during the current year.
The increase in deferred income tax
liabilities is mainly driven by changes
in taxable temporary differences
associated with property, plant and
equipment, provisions, and postemployment benefit obligations.
The reduction in borrowings was driven by
the repayment of a term loan facility and
payment of the deferred consideration
related to the SABIC acquisition, partly
offset by the issuance of the U.S. dollar
sukuk and financing proceeds associated
with the JIGPC transaction.
Non-controlling interest was SAR 167,411
($44,643) at December 31, 2021, compared
to SAR 110,246 ($29,399), at December 31,
2020. The increase was largely attributable
to the sale of equity interest in AOPC
associated with Aramco’s crude oil
pipeline transaction.
Trade and other payables increased
as a result of higher prices relating
to purchases of crude oil and refined
products. Income taxes and zakat
payable increased due to the impact
of higher taxable income in 2021.
43
Financial performance continued
All amounts in millions unless otherwise stated
Summarized consolidated statement of cash flows
SAR
USD*
Year ended December 31
Year ended December 31
All amounts in millions unless otherwise stated
2021
2020
2021
2020
% change
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Cash and cash equivalents at end of the year
522,601
(135,741)
(294,513)
299,579
285,297
(20,899)
(234,872)
207,232
139,360
(36,197)
(78,537)
79,888
76,079
(5,573)
(62,632)
55,262
83.2%
549.5%
25.4%
44.6%
Capital expenditures
Free cash flow**
(119,645)
402,956
(101,030)
184,267
(31,905)
107,455
(26,942)
49,137
18.4%
118.7%
*
Supplementary information is converted at a fixed rate of U.S. dollar 1.00 = SAR 3.75 for convenience only.
** Refer to “Non-IFRS measures reconciliations and definitions” for further details.
Cash flows
Net cash provided by operating activities
was SAR 522,601 ($139,360) for the year
ended December 31, 2021, compared to
SAR 285,297 ($76,079) reported in 2020.
The increase of SAR 237,304 ($63,281)
primarily reflects higher earnings
resulting from stronger crude oil prices
and improved refining and chemicals
margins. This was partially offset by
unfavorable changes in working capital,
mainly due to higher receivables driven
by stronger prices, and an increase in
cash paid for the settlement of income,
zakat and other taxes.
Net cash used in investing activities
was SAR 135,741 ($36,197) for the year
ended December 31, 2021, compared to
SAR 20,899 ($5,573) in 2020, an outflow
of SAR 114,842 ($30,624). This was
mainly due to an increase in short-term
investments and the absence of cash
inflows relating to cash acquired on
acquisition of SABIC in 2020. In addition,
net cash in 2021 was also impacted by
an increase in capital expenditures
related to crude oil increments, the
Tanajib Gas Plant, other development
drilling programs, and the consolidation
of SABIC’s full-year capital expenditures.
44
Net cash used in financing activities was
SAR 294,513 ($78,537) in 2021, compared
with SAR 234,872 ($62,632) in 2020.
The increase in financing-related cash
outflows of SAR 59,641 ($15,905) mainly
reflects higher dividend payments and
net repayment of borrowings, largely
attributable to payments of a term loan
facility and deferred consideration related
to the SABIC acquisition, partially offset by
cash received in association with the U.S.
dollar sukuk and the JIGPC transaction.
The overall increase in cash outflows was
offset by cash received in connection with
Aramco’s crude oil pipeline transaction.
Cash flows
$ millions
150,000
120,000
139,360 (31,905)
90,000
107,455
60,000
76,079
(26,942)
49,137
30,000
2020
2021
Net cash provided by operating activities
Capital expenditures
Free cash flow
Saudi Aramco Annual Report 2021
Results and performance
All amounts in millions unless otherwise stated
Non-IFRS measures reconciliations and definitions
This Annual Report includes certain
non-IFRS financial measures (ROACE,
free cash flow, gearing and EBIT) which
Aramco uses to make informed decisions
about its financial position and operating
performance or liquidity. These non-IFRS
financial measures have been included
in this Report to facilitate a better
understanding of Aramco’s historical
trends of operation and financial position.
financial position. The non-IFRS financial
measures are not defined by, or presented
in accordance with, IFRS. The non-IFRS
financial measures are not measurements
of Aramco’s operating performance or
liquidity under IFRS and should not be
used instead of, or considered as
alternatives to, any measures of
performance or liquidity under IFRS. The
non-IFRS financial measures relate to the
reporting periods described in this Annual
Report and are not intended to be
predictive of future results. In addition,
other companies, including those in
Aramco uses non-IFRS financial measures
as supplementary information to its
IFRS-based operating performance and
Aramco’s industry, may calculate
similarly titled non-IFRS financial
measures differently from Aramco.
Because companies do not necessarily
calculate these non-IFRS financial
measures in the same manner, Aramco’s
presentation of such non-IFRS financial
measures may not be comparable to
other similarly titled non-IFRS financial
measures used by other companies.
Return on average capital employed (ROACE)
ROACE measures the efficiency of
Aramco’s utilization of capital. Aramco
defines ROACE as net income before
finance costs, net of income taxes and
zakat, as a percentage of average capital
employed, calculated on a 12-month
rolling basis. Average capital employed is
the average of total borrowings plus total
equity at the beginning and end of the
All amounts in millions unless
otherwise stated
applicable period. Aramco utilizes ROACE
to evaluate management’s performance
and demonstrate to its shareholders that
capital has been used effectively.
ROACE for the year ended December 31,
2021, was 24.4%, compared to 13.2%
in 2020. This increase was primarily
attributable to higher earnings, mainly
SAR
USD*
Twelve months ended
December 31
Twelve months ended
December 31
2021
2020
2021
2020
412,396
183,763
109,972
49,003
6,029
5,282
1,608
1,409
418,425
189,045
111,580
50,412
Total equity
436,920
99,157
1,101,094
150,690
24,895
1,046,235
116,512
26,442
293,625
40,184
6,639
278,996
Capital employed
1,637,171
1,221,820
436,579
325,819
Total equity
436,371
74,550
1,280,668
436,920
99,157
1,101,094
116,366
19,880
341,512
116,512
26,442
293,625
Capital employed
1,791,589
1,637,171
477,758
436,579
Average capital employed
ROACE
1,714,380
1,429,496
457,169
381,199
24.4%
13.2%
24.4%
13.2%
Net income
Finance costs, net of income
taxes and zakat
Net income before finance costs,
net of income taxes and zakat
As at period start:
Non-current borrowings
Current borrowings
As at period end:
Non-current borrowings
Current borrowings
*
reflecting stronger crude oil prices,
improved refining and chemicals margins,
and the consolidation of SABIC’s full-year
results. This was partially offset by higher
average capital employed during the year,
mainly resulting from the acquisition of
SABIC in June 2020.
ROACE
%
24.4
2021
13.2
2020
Supplementary information is converted at a fixed rate of U.S. dollar 1.00 = SAR 3.75 for convenience only.
Saudi Aramco Annual Report 2021
45
Financial performance continued
All amounts in millions unless otherwise stated
Free cash flow
Aramco uses free cash flow to evaluate
its cash available for financing activities,
including dividend payments. Aramco
defines free cash flow as net cash
provided by operating activities less
capital expenditures.
cash flows, mainly driven by stronger
crude oil prices and improved refining
and chemicals margins. This was
partially offset by unfavorable changes
in working capital, higher cash paid for
the settlement of income, zakat and other
taxes, an increase in capital expenditures
related to crude oil increments, the
Tanajib Gas Plant, other development
drilling programs, and the consolidation
of SABIC’s full-year capital expenditures.
Free cash flow in 2021 was SAR 402,956
($107,455), compared to SAR 184,267
($49,137) in 2020, an increase of
SAR 218,689 ($58,318), or 118.7%.
This was largely due to higher operating
All amounts in millions unless
otherwise stated
Net cash provided by
operating activities
Capital expenditures
Free cash flow
*
SAR
USD*
Year ended December 31
Year ended December 31
2021
2020
2021
2020
522,601
(119,645)
285,297
(101,030)
139,360
(31,905)
76,079
(26,942)
402,956
184,267
107,455
49,137
Free cash flow
$ billions
107
2021
49
2020
Supplementary information is converted at a fixed rate of U.S. dollar 1.00 = SAR 3.75 for convenience only.
Gearing
Gearing is a measure of the degree to
which Aramco’s operations are financed
by debt. Aramco defines gearing as the
ratio of net debt (total borrowings less
cash and cash equivalents) to net debt
plus total equity. Management believes
that gearing is widely used by analysts
and investors in the oil and gas industry
to indicate a company’s financial health
and flexibility.
All amounts in millions unless
otherwise stated
Total borrowings (current
and non-current)
Cash and cash equivalents
Net debt
Total equity
Total equity and net debt
Gearing
*
46
Aramco’s gearing ratio was 14.2% as at
December 31, 2021, compared to 23.0%
as at December 31, 2020. The decrease in
gearing was a result of higher cash and
cash equivalents as at December 31, 2021,
mainly driven by stronger operating cash
flows attributable to higher crude oil
prices, improved refining and chemicals
margins, the consolidation of SABIC’s
full-year results and cash proceeds in
connection with Aramco’s crude oil
pipeline transaction.
Gearing
%
14.2
2021
23.0
2020
SAR
USD*
As at December 31
As at December 31
2021
2020
2021
2020
510,921
(299,579)
536,077
(207,232)
136,246
(79,888)
142,954
(55,262)
211,342
1,280,668
328,845
1,101,094
56,358
341,512
87,692
293,625
1,492,010
1,429,939
397,870
381,317
14.2%
23.0%
14.2%
23.0%
Supplementary information is converted at a fixed rate of U.S. dollar 1.00 = SAR 3.75 for convenience only.
Saudi Aramco Annual Report 2021
Results and performance
All amounts in millions unless otherwise stated
Earnings before interest, income taxes and zakat (EBIT)
Aramco defines EBIT as net income
plus finance costs and income taxes
and zakat, less finance income. Aramco
believes EBIT provides useful information
regarding its financial performance to
analysts and investors.
All amounts in millions unless
otherwise stated
Net income
Finance income
Finance costs
Income taxes and zakat
Earnings before interest,
income taxes and zakat
*
EBIT for 2021 was SAR 780,174 ($208,046),
compared to SAR 380,217 ($101,391)
in 2020. This increase of SAR 399,957
($106,655), or 105.2%, principally
reflects the impact of stronger crude oil
prices, improved refining and chemicals
margins, and the consolidation of SABIC’s
full-year results.
SAR
USD*
Year ended December 31
Year ended December 31
2021
2020
2021
2020
412,396
(1,405)
12,058
357,125
183,763
(2,771)
10,564
188,661
109,972
(375)
3,215
95,234
49,003
(739)
2,817
50,310
780,174
380,217
208,046
101,391
EBIT
$ billions
208
2021
101
2020
Supplementary information is converted at a fixed rate of U.S. dollar 1.00 = SAR 3.75 for convenience only.
Saudi Aramco Annual Report 2021
47
Upstream
Upstream competitive strengths
Unrivaled scale of crude oil and condensate
production, and conventional proved reserves
Prolonged reserves life and proven track record
of low-cost reserves replacement
Ability to produce multiple crude grades with access
to global crude oil delivery points
Extensive high-quality gas reserves with exclusive
access to the Kingdom’s large and growing domestic
marketplace
Proven ability to execute some of the world’s
largest upstream capital projects
Abqaiq Plants, Saudi Arabia
48
Saudi Aramco Annual Report 2021
Results and performance
Unique ability to capture value through active
management of the world’s largest conventional
hydrocarbons reserves base
Unique operational flexibility to respond to changes
in supply and demand
Crude oil extraction with one of the lowest average
upstream carbon intensities in the industry
Low lifting costs and capital expenditures per barrel
of oil equivalent
Saudi Aramco Annual Report 2021
49
Upstream continued
Upstream overview
The Upstream segment’s activities consist
of exploring for, developing and producing
crude oil, condensate, natural gas and NGL.
Aramco manages the Kingdom’s unique
reserves and resource base to optimize
production and maximize long-term
value pursuant to the Hydrocarbons Law.
Under this mandate, Aramco’s hydrocarbon
operations aim to promote long-term
productivity of the Kingdom’s reservoirs
and support the prudent stewardship of
its hydrocarbon resources.
Our Upstream business
pulled together in the face
of challenging circumstances
to maintain Aramco’s wellknown standard of reliability
and achieve substantial
progress on our long-term
goals. With our Company’s
net-zero ambition, we
continue our focus on further
reducing our carbon footprint
while maintaining our
leadership in the industry,
and ensuring the health and
well-being of our communities
remains our first priority.”
As set out in the Concession, Aramco has
the exclusive rights to explore, develop
and produce the Kingdom’s hydrocarbon
resources, except in the Excluded Areas,
for an initial period of 40 years, to be
extended by the Government for 20 years
provided Aramco satisfies certain
conditions commensurate with current
operating practices. In addition, the
Concession may be extended for an
additional 40 years beyond this 60-year
period subject to Aramco and the
Government agreeing the terms of the
extension. The provision of a specified
term in the Concession impacts the
calculation of Aramco’s reserves as
compared to the Kingdom’s reserves
in the fields Aramco operates.
Key events in 2021
The Concession also requires Aramco
to meet domestic demand for certain
hydrocarbons, petroleum products
and LPGs through domestic production
or imports.
As at December 31, 2021, Aramco’s
reserves under the Concession agreement
were 253.6 billion boe (2020: 255.2 billion
boe), including 196.9 billion barrels (2020:
198.8 billion barrels) of crude oil and
condensate, 25.2 billion barrels (2020:
25.2 billion barrels) of NGL, and 194.5 tscf
(2020: 191.6 tscf) of natural gas.
The Government determines the
Kingdom’s maximum level of crude
oil production in the exercise of its
sovereign prerogative and requires
Aramco to maintain MSC in excess of its
then current production in accordance
with the Hydrocarbons Law. MSC was
maintained at 12.0 mmbpd for the year
ended December 31, 2021.
Started to proceed with the
Government’s mandate for
MSC to be increased from
12.0 mmbpd to 13.0 mmbpd.
Nasir K. Al-Naimi
Senior Vice President, Upstream
Commenced the development of
the vast Jafurah unconventional
gas field, the largest nonassociated gas field in the
Kingdom.
50
Saudi Aramco Annual Report 2021
Results and performance
In line with the Government’s mandate
for MSC to be increased to 13.0 mmbpd,
Aramco is proceeding with its plans to
gradually reach the mandated MSC by
2027 through multiple increments. The
spare capacity afforded by maintaining
MSC enables Aramco to rapidly increase
its crude oil production above planned
levels in response to changing global
crude oil supply and demand, as an
alternative supply option in case of
unplanned production outages at any
field and to maintain production levels
during routine field maintenance.
In 2021, Aramco maintained its position
as one of the world’s largest producers of
crude oil and condensate with an average
total daily hydrocarbon production of
12.3 mmboed (2020: 12.4 mmboed),
including 9.2 mmbpd (2020: 9.2 mmbpd)
of crude oil1. For the year ended December
31, 2021, approximately 84% (2020: 84%)
of the aggregate hydrocarbon production
consisted of liquids, which generally
command a higher margin.
1.
In 2021, Aramco also maintained
its position as one of the lowest-cost
producers globally. The average upstream
lifting cost was SAR 11.3 ($3.0) per boe
produced in both 2021 and 2020, while the
upstream capital expenditures averaged
SAR 18.4 ($4.9) (2020: SAR 15.0 ($4.0)) per
boe produced. This competitive advantage
is a result of the Company’s robust fiscal
discipline and is further strengthened by
the unique nature of the Company’s oil
in place endowment and its thoughtful
stewardship over generations. The
Kingdom’s geological formations,
favorable onshore and shallow water
offshore reservoirs, best-in-class reservoir
management and the sheer scale of its
hydrocarbon reserves are industry
differentiators. Moreover, synergies
created by effectively leveraging the
large infrastructure and logistics
networks, low-depletion rate operatin…
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