State-backed oil company Saudi Aramco has been forced to raise $3bn (SR11.25bn) from Islamic bonds in order to pay dividends to the government in Saudi Arabia.  

At the same time, the Saudi Government has rescinded its unofficial plan of keeping oil prices at $100 a barrel as it plans to increase the kingdom’s output.  

The Islamic bonds come as a form of debt raising. Aramco has outlined it must pay $124.3bn in dividends for 2024 at a time where the company’s oil production is a quarter below its capacity.  

These dividend payments are up from $97.8bn last year.  

Reuters reported that the company, in which the Saudi Government holds nearly an 81.5% stake, aims to raise up to $3bn from Islamic bonds.  

Saudi Arabia’s Sovereign Public Investment Fund holds a 16% stake in Aramco.  

Monica Malik, chief economist at Abu Dhabi Commercial Bank, has explained that Aramco’s dividend payments were higher than the company’s cash flow for the first half of 2024.  

Aramco has been a huge source of income for Saudi Arabia, but recently lower oil prices and production cuts have hit profits.  

However, the Organization of the Petroleum Exporting Countries (as well as the larger OPEC+ grouping) is committing to increasing oil production on 1 December, despite a potential decrease in prices.  

Saudi Arabia is subsequently preparing to increase its oil output in order to regain its market share, subsequently abandoning its $100 a barrel oil price, the Financial Times reported.  

Saudi Arabia has decided it is unwilling to continue the decrease in its market share to other oil producers, arguing it has enough funding options to withstand lower oil prices. Debt funding scenarios, like Aramco, are one of these options.  

According to Offshore Technology’s parent company, GlobalData, Saudi Arabia’s total oil production hit 9.7 million barrels per day in 2023.