Welcome to the Saudi Aramco's Half Year 2024 Results Call. We will be holding a question and answer session following the presentation. If you'd like to ask a question, please press Star followed by one on your telephone keypad at any time. I should now hand over to Mr. Peter Hutton to begin. Peter, please go ahead.
Hello, and welcome to this audio webcast discussing Saudi Aramco's first half 2024 results. I'm Peter Hutton, Head of Investor Relations at Aramco, and I'm pleased to be joined today by Amin Nasser, President and CEO, and Ziad Al-Murshed, Executive Vice President and CFO. Our webcast today will comprise a presentation followed by a question and answer session, and we anticipate the entire call lasting up to an hour. I'd like to remind you that this webcast and conference call are being recorded, and also draw your attention to this cautionary statement. Please also refer to our regulatory filings and website for more details. With that, I'll now hand over the call to Amin.
Thank you, Peter, and welcome everyone, and thank you for joining us on our earnings call today. Let me start by saying that Aramco continues to deliver strong performance, both operationally and financially. Growth in global oil demand is strong, reaching a record 103.2 million barrels a day in the first half of 2024, despite some headwinds in certain economies. We expect further demand growth in the second half of the year. We remain focused on our long-term vision and shareholder value, and believe that a successful energy transition will require a variety of energies and technologies. I am pleased that we continue to progress on our goals. In upstream, we continue to strengthen our liquids and gas capabilities, tapping into our fast reservoir to help ensure a reliable supply of low cost and low emission energy for decades to come.
In downstream, we remain focused on accelerating integration through our liquids- to- chemical expansion to add further value across our global system. In new energies, we are making good progress in building renewable capacity and continuing work to develop a lower carbon hydrogen business in addition to CCS. All of this helps to ensure Aramco takes a leading role in providing global energy solutions. Now, let me walk you through the key milestones achieved in our business areas in the first half. In upstream, we are enhancing our liquid and gas capabilities to satisfy growing demand. Our liquids development are on track. The first phase of the demand increment is expected to come on stream later this year, with major projects on Marjan, Berri, and Zuluf in 2025 and 2026.
We continue to make progress to grow our gas production by more than 60% by 2030 from 2021 levels, with contracts granted to enhance our gas expansion strategy, including contracts for Jafurah Phase Two, the Master Gas System Phase Three, and Fadhili Gas Plant. In LNG, we took further steps to build our global portfolio by capturing offtake and enhancing trading capabilities. We signed two heads of agreement for 20-year LNG offtakes with Sempra and NextDecade, providing a combined volume of 6.2 million tons per annum. The agreement with Sempra also offers a potential participation of 25% stake in the Port Arthur LNG Phase Two. In downstream, we continue to increase integration with 52% of our crude oil production utilized in our downstream system and further balancing our product portfolio between chemicals and fuels.
We furthered our liquids-to-chemicals strategy through MOUs for a 10% equity stake in Hengli Petrochemical, with Rongsheng Petrochemical to explore further collaboration opportunities in Kingdom and China, and started construction of a petrochemical complex in Fujian, China. Further downstream into retail, we completed acquisition of 100% equity stake in Esmax and a 40% equity stake in Gas & Oil Pakistan. These acquisitions will expand our global retail footprint in high-value markets and unlock additional market opportunities for our Valvoline branded lubricants as well as refined products. We signed definitive agreement to acquire a 10% equity interest in HORSE Powertrain, which pioneers advanced transport solution and lower carbon fuel technology. This helps develop more energy-efficient internal combustion engine globally.
In new energies, our solar PV projects are progressing toward our 2030 renewables target, with Sudair reaching full operating capacity earlier this year, and Al Shuaibah 1 and 2 expecting to commence operation in 2026. We have also invested in three new projects with plans to come online in the first half of 2027. We signed definitive agreement for a 50% equity stake in a company to develop a hydrogen network in Kingdom and MOUs to explore direct air capture opportunities and the deployment of heat batteries. All in all, we are taking concrete action to help deliver our energy transition and decarbonization strategy. Aramco continued to deliver strong performance with world-leading profitability, high cash flow, and a strong balance sheet. These qualities were underpinned by our operational excellence, high reliability, and successful execution of our growth strategy.
We recently delivered two successful transactions in the equity and debt capital markets, both of which received strong demand from investors. This has broadened the base of our equity and credit investors and further improved trading liquidity in our stock. In line with our previous indications, the board has declared total dividend of $31.1 billion payable in August, comprising of $20.3 billion of Q2 base dividends and $10.8 billion of performance-linked dividends for our combined 2022 and 2023 results. For the full year 2024, we continue to expect to declare $124 billion in total base dividends and performance-linked dividends, with the remaining dividend payments, of course, subject to board approval. With that, let me now hand over to Ziad to discuss the details of our second quarter performance.
Thank you, Amin, and welcome everyone. Let me start by sharing the latest outlook on the global economy and oil demand. The global economy is expected to remain stable for the rest of the year. Global oil demand grew by 1.1 million barrels per day year on year, reaching 103.2 million barrels per day in the first half. This is the highest-ever level and is expected to grow in the second half. Forecasters expect second half growth from 104.6 to 106.2 million barrels per day, driven by ongoing recovery of global aviation and robust demand in China. Further growth is expected, with additional demand of 1.4 million barrels per day in 2025.
Given this consistent growth in oil demand, combined with global inventories that are at the lower end of their 5-year range, Aramco is well positioned going forward with our roughly 3 million barrels per day of spare capacity of low cost, low carbon intensity barrels, which can be activated quickly, and up to 1 million barrels per day of high-value liquids associated with our growing gas production, which is coming gradually by 2030. Against this background, let me now talk about our financial and operational performance. Our net income in Q2 was 6.6% higher than last quarter, at $29.1 billion, despite flat production and significantly lower refining margins. Upstream EBIT was $55.8 billion, up 1.8% quarter-on-quarter, driven mainly by higher realizations.
Downstream EBIT was down at -$0.3 billion, mainly as a result of weaker margins. Our capital investments were $12.5 billion in Q2, taking the total for H1 to $24.2 billion. Our full-year capital investment guidance remains unchanged at $48 billion-$58 billion, and we will expect to provide an update with our Q3 results. Free cash flow was $19 billion, leaving our balance sheet strong, with gearing of -0.5% at the end of June. Our twelve-month rolling ROACE was 21.8%. This is well ahead of our peers, even though it is negatively impacted by almost $90 billion of assets under construction on the balance sheet that are not yet operational to generate returns. Without these assets under construction, ROACE would have been around 26%.
This ability to consistently deliver strong financial performance was a key success factor in the two capital market transactions recently completed. These successful transactions were underpinned by our unique investor proposition, which I'll talk about more in a moment. The secondary public offering, with a size of $12.4 billion, came four and a half years after our IPO. It increased our free float by around 35% to 2.4% and significantly increased share liquidity, with average traded volumes up by around 60%. We also achieved the objective of further diversifying our shareholder base and increasing international ownership, with 58% of the institutional tranche being allocated to international investors. Separately, our unique credit profile was also recognized by debt investors during the completion of our recent $6 billion bond issuance in July.
The primary objective of going out with this issuance was to enhance liquidity across our bond yield curve after about three years of absence of new issuances. The strength of our balance sheet allowed us to avoid the volatility in the debt markets over these three years. With this transaction, we diversified and broadened our debt investor base, enhanced liquidity, and reestablished a lower bond yield curve as we priced at negative new issuance premiums across all three tranches. This combination of equity and credit propositions is difficult to replicate. Aramco has consistently demonstrated its ability to deliver on shareholder value and business growth, which is anchored by four main pillars. Our sustainable competitive advantage in traditional energy and new energies due to our scale, operatorship, geology, production cost, and low upstream carbon emissions.
Our differentiated and value-focused growth opportunities in upstream liquids and gas, in downstream crude- to- chemicals, and in new energies, CCS, blue hydrogen, and renewables. Our demonstrated financial strength, which has allowed us to deliver on growth and at the same time increase distributions, and our strong position to maximize long-term value with our low-cost, low upstream carbon intensity barrels in a world that requires reliable, affordable, and lower carbon energy. With that, Amin, Peter, and I would be delighted to take your questions.
Thank you. Of course, to ask a question, please press star followed by one on your telephone keypad. To withdraw your question, please press star followed by two. When asking a question, please ensure you're unmuted locally. I shall now hand back to Mr. Hutton.
Thank you very much. So as we go to the Q&A, the first question comes from Iyad Ghulam of NCB Capital. Go ahead, Iyad.
Thank you. Thank you so much, and congratulations on the strong results. I have two questions, one about the phase two of Jafurah. Will that CapEx change your overall guidance for the CapEx in the medium term? And the second question is about... What is the long-term target regarding leverage and gearing? Thank you.
Thank you, Iyad. I will answer the first question and refer the second question to Ziad. With regard to the second phase of Jafurah, anticipation for it to come on by the end of 2027. Third phase is planned for the second half of next year in 2025, and the full production from the Jafurah at 2 billion standard cubic feet per day will happen by the end of 2030. The importance of Jafurah stem from the amount of ethane that will be coming from it, 480 million of ethane, standard cubic feet per day, and about 630,000 barrels per day of gas, liquids, and condensate. And it should not really have a huge impact. It's already considered in our planned capital program.
When we talk about phase two, we announced a $25 billion, part of it for the Jafurah phase two and part for the third, expansion of the Master Gas System. So it is included in our forecast. It doesn't have any impact on our guidance. Ziad?
Yes, Iyad, on your second question regarding gearing. So we don't have a specific balance sheet gearing target per se. We are managing our gearing from several aspects. One is the strength of the balance sheet across the oil price cycles, and then two, an optimum capital structure that optimizes our weighted average cost of capital. And so when you look at it, our gearing as of end of June is now at negative 0.5%. We're still in a net cash position at end of the quarter. The aim, you know, we've been deleveraging the company for a while, and flattening our debt maturity schedule, which in order to give us this flexibility. So do we have a specific target?
No, we don't, for balance sheet gearing. As we guided in the past, we came back into the debt markets with the issuance of $6 billion of conventional bonds. We did this after about more than three years of absence in the debt market. The combination of we were deleveraging and we didn't need the funding at a time when the debt markets were highly volatile over the last three and a half years. So we had the luxury of sitting out this high volatility period. Once the conditions of debt markets became conducive to issuance, we came back with this very.
Successful issuance, and the intent of it, as you can clearly see from our balance sheet, is not use of funds per se, but to reestablish a lower bond yield curve, which we're able to do as we priced at negative new issue premiums across all three tranches that we issued: 10 years, 30 years, and 40-year maturities. It was also an opportunity to reengage the market and increase or further diversify our investment.
Thank you. Thank you. Second question comes from Michele Della Vigna of Goldman Sachs. Go ahead, Michele.
Thank you very much. Thank you, and congratulations on the strong results and the strong balance sheet. I wanted to ask you a couple of questions on your gas strategy. You continue to discover new low-cost resources in the country. It's absolutely key to guarantee that the country can continue to grow low carbon industrial activity. But I was wondering, when do you think this could actually make Saudi an exporter of natural gas? And you've had many interesting initiatives where you start to produce some LNG, trading LNG, producing blue ammonia. How... What do you think is the best route for Saudi to export this gas longer term? Will it be more in the blue ammonia side or potentially as an LNG exporter? Thank you.
Thank you, Michele. You know, our strategy with regard to gas, we will be growing gas over the next couple of years, by 2030, by more than 60%. And you are right, most of that growth is going in the kingdom. There's a lot of industrial growth that's why we are putting Master Gas System 3, not only to shift liquid burning to gas, but also to facilitate a lot of growth in the industries in the kingdom. So, we have significant growth. We will be exporter, but in hydrogen, blue hydrogen, because we are working to export blue hydrogens and finalizing offtakes with different partners. LNG is in our radar screen.
We are making big investments globally in LNG, and we have discussions within the kingdom regarding LNG in the future, depending on how much additional gas. Our mandate is to satisfy the minimum kingdom requirement. It's a growth market. It give us a double-digit rate of return. It's a captive market, and for that, we are keen to make sure that we develop our gas to meet the requirement and grow the industry and the utility sector, and shift from liquid burning. That's almost 1 million barrels. 50% of it will come from replacing it with gas, and 50% will come from the additional renewables that we are also a part of it in the kingdom. But for the time being, it focuses in blue hydrogen growth, utilizing that gas as a feedstock.
And of course, to transport that blue hydrogen, you need blue ammonia, and we have announced 11 million tons of blue ammonia by 2030 in terms of investment, and we are currently working toward achieving that targets.
Thank you.
Thanks, Michele. Next question is from Henri Patricot of UBS.
Yes, hello, everyone. Thank you for the update. I've got two questions from my side, please. The first one, on the CapEx guidance for the full year, I noted your comment here that there will be an update in the Q3 results, but any indication you can give us at this stage or where you're likely to end up? Looks like you're tracking very much towards the lower end of the guidance range based on first half CapEx. And then secondly, just coming back on the topic of LNG, you discussed the new offtake agreements in the quarter, potentially equity. Can you give us an indication of your—what you're trying to build here in terms of scale?
Would you be looking to grow that business even further, or is that already a quite sizable volume that you've signed in your view? Thank you.
Thank you. You know, with regard to, capital guidance, it's $48 billion-$58 billion, including external investment. The first half, the capital investment is around $24.2 billion. We should be in a better shape to update you on the third quarter about narrowing that gap between the 48 and 58. For the time being, we are sticking to the same guidance that we have published earlier. With regard to LNG, yes, we do have big ambitions in terms of growing our LNG portfolio through increasing offtake agreement and increasing our trading capabilities. Of course, we are looking at either offtake agreements that we are signing some of it or equity injection, and we continue to look for attractive opportunity globally.
We have closed, in the first quarter of 2024, a strategic partnership with MidOcean Energy, which is a small step in the right direction. In the second quarter of 2024, we signed a heads of agreement for a 20-year sale and purchase agreement for LNG offtake. One with Sempra for 5 million tons per annum from the Port Arthur LNG Phase Two expansion project, and one with NextDecade for 1.2 million tons per annum from Train Four at the Rio Grande LNG facility at the Port of Brownsville in Texas. So we do have other agreements and other opportunities that we are currently reviewing, and hopefully we'll announce them in due course.
Thank you.
Thanks, Ali. The next question is from Kim Fustier of HSBC. Go ahead, Kim.
Hi, good afternoon, and thanks for taking my questions. Firstly, you've made a number of acquisitions in retail. Could you talk about the broader expansion strategy in retail, and which markets are you targeting in particular? My second question is again on the balance sheet, if you'll allow me to go back to that theme. In previous calls, you've said that further deleveraging would be the last priority. So that doesn't seem to be fully consistent with your current distribution framework, which allocates 30%-50% of excess free cash to the balance sheet. So how should we think about the apparent tension between these two trends? Thank you.
Thank you, Kim. I'll take the first question, Ziad, will take the second question. With regard to the retail and lube project, we secured additional outlets for Aramco refined product and further provide new market opportunity for Valvoline branded lubricants. Our retail strategy is to enter priority markets that are short on products with a growing demand. Chile was where we took a hundred percent of a utility retail business there, about 41,000 barrels per day, 15% of Chile demand and approximately 302 stations. Gas & Oil Pakistan. They have an existing sale of about 29,000. They are 8% of the Pakistan demand, but they have a lot of stations, about 1,200. Our aim is to be, to place our.
We are growing our refined products as we are, even in the liquid- to- chemicals, and we're looking at approximately placement of 500,000 by 2030 of refined products through these acquisition and these JVs that we are doing in different parts of the world, depending on markets that are short, looking for these products and commercial in terms of the opportunity. And of course, Valvoline is an important enabler for a lot of that, and we have closed that in the first quarter of 2023. And it will allow us to expand our world-class base oil business to 1 among leading finished lubricant businesses.
Kim, on your second question, it's important to look at it in the context of the full list of priorities that we put on the cash. You know, after sustaining CapEx, the priority is base dividends, and then growth, and then additional distributions, and this is the performance-linked dividends, and deleveraging. The fact that the performance-linked dividends contribute 50%-70% of net free cash flow is there in order to prioritize growth over additional distributions. We are still in our growth program, and we have the range of 50%-70% to which gives us flexibility in distributing additional distributions, while not impacting the funding of our growth program.
We have been deleveraging for a few years. You've seen us go out to the debt markets with a $6 billion issuance. And so, you know, we're following the same priorities that we've been communicating for the last few years. In general, our gearing has actually increased. We are still in a net cash position, but our gearing has increased, and then we went after it with a $6 billion issuance.
Thank you, Ziad. Thanks, thanks, Kim. Next question is from Syed Akhtar of Al Rajhi Capital. Go ahead, Syed.
Hello?
Hello, Syed. We can hear you, so go ahead with your question, please.
Okay. Okay. First of all, thank you, and again, congratulations for this strong result. I have a question regarding your... I have two questions. One is regarding your operating cost. Year-over-year, we have seen an increase in your selling and general expenses, and also there is an increase in purchasing cost. So what are the reasons behind it? And my-- Can I ask my second question now or after you answer this one?
Syed, go ahead with your two questions, and then we'll-
Yeah.
We'll come back on that.
Yeah, yeah. And the second question is regarding the purchase of fuel oil that the Saudi has purchased, in I think a couple of weeks back. What was the rationale behind it?
Purchase of fuel, fuel oil? Okay. Okay. Shall I go through with it? Do you want to go through the first one?
Sure.
Okay, first one is on operating costs. Look, we're—our costs are actually very steady at the moment, both on the upstream and the downstream. So there's nothing intrinsic that's changing those. There's a very small impact because of a little bit of increase in freight rates. You'll have seen that one, but nothing particularly material. That's one element, but actually, they're relatively flat. You will see changes, particularly in the purchasing costs within a given quarter. But as I say, no, I think, nothing that would we would see on a trend on this one. You know, our costs remain very much at the low end and very stable.
With regard, Syed, your question regarding fuel oil, nothing out of the ordinary, you know, we are a net exporter of products. We always meet whatever required in the kingdom in terms of different products, depending on seasonality and the increase of requirements in terms of the utility sector that we have, but we remain a net exporter of products from the kingdom.
Yes, but I just need to know what would be the use of the fuel oil when the Saudi has, you know, enough amount of fuel oil, I do believe. So just wanted to understand the this.
Fuel oil is used for, liquid, mainly for liquid burning, for the utility side, you know. We use fuel oil, especially higher in the summer, because of liquid burning that is required to satisfy the utility requirements.
Okay.
You seem to be referring to-
Yeah.
You seem to also be referring to sufficient volumes. Fuel oil has different specifications, so sometimes we actually end up, even so the volume is sufficient, we end up exporting some fuel oil and importing different quality fuel oils for liquid burning.
Okay. Okay, clear. Thank you.
Thanks very much for those questions. Appreciate those. And the next question comes from Guillaume Levy at Morgan Stanley. Go ahead, Guillaume.
Hi. Hello, thank you for taking my questions. I have two, please. The first one on refining. I wanted to pick your brain on, on refining margins into the end of this year. And also, if you could say a few words on the investment opportunities on refining from here. The company has been quite activist last year on using China, so I was just wondering, if there is anything else worth, worth highlighting on this front. And then the second one on upstream investments. Earlier this year, the company temporarily suspended a number of, jackup rig contracts. So I was wondering, if you could comment on the current amount of rigs operating for the company, if that's a sustainable level for us to think about over the coming months, or if a further adjustment is still necessary. Thank you.
Thank you, Guillaume. With regard to refining, in our view, the weak refining margin seen during the second quarter is a short-term phenomenon. Refining margin over the coming decade should be fairly healthy. We think the global refining capacity and anticipated demand growth are matched reasonably well over the coming years. Most of the capacity expansions that we see is concentrated in Asia and the Middle East. Our investment in refinery, we are making big investment in refinery, but these are highly integrated refineries with liquids-to-chemicals. You're talking about 60% or higher liquids-to-chemicals conversion. This is what we've done in Rongsheng, in HAPCO, Panjin project, and the other opportunities that we are currently reviewing are on the pipeline. So our...
This, of course, China, as you know, is 40% of the chemical growth or the chemical use is in China. So it is huge market. The growth also in China comes from the need for a lot of carbon fiber, chemicals for solar panels and other products that are important for the transition. So there is a huge growth and shifting, building refineries with liquid- to- chemicals conversion capacity of 50%, 60%, 70% that we are seeing. And we'll continue to invest in these. We made announcement actioning two. There is a good number in the pipeline that we will be announcing in due course, so our interest in refinery will continue. I would like to mention also that the capacity, if you look at the U.S., utilization capacity currently is at 93% in the U.S.
So there is, it's reaching the limit in terms of capacity, in terms of utilization and demand. So that's significant. With regard to your questions about rigs, yes, as we dropped, rigs as a result of, going from 13 million barrels per day and this, maximum sustained capacity to 12 million, but there is, growth in gas. We are adding a lot of gas. And if you look at our rigs by year-end, it's around 300 million, 300 rigs going to be by year-end. So it is still we are showing good growth.
If you look at it in 2019, we used to have, 2021, we had almost 220 rigs, and we are looking at year-end around 300 rigs, driven mainly by the growth that we are seeing in gas, either conventional or the unconventional through the Jafurah. So, there is no drop, there is growth in our rigs activities.
Perfect. Thank you so much.
Thanks, Dean. And the next question is from Shashank Lanka at Bank of America.
Yes, thank you very much for the presentation, and, congratulations on a solid set of results. I have two questions. The first one is on your blue hydrogen growth prospects. You know, we have noticed that you've increased your carbon capture target and are helping developing the ecosystem in Saudi. I think, Mr. Nasser, a couple of years back, you said the market for blue hydrogen was still quite difficult. Just wanted to understand, you know, if there's any change in your view from that perspective in terms of contracts. That's my first question. And the second question is just on Jafurah. Obviously, you begin your phase one next year.
Any key learnings that you've had so far, given it's, you know, a project that's quite gigantic in scale and, you know, the first of its kind in Saudi? So any key learnings or, you know, any challenges that you have encountered will be, you know, quite useful to know. Thank you.
Thank you very much. You know, our target to produce up to 11 million tons per annum of blue ammonia, equivalent to about 1.8 million tons per annum of blue hydrogen by 2030. We see large potential for hydrogen and global energy over the long term, but significant challenges remain to be overcome, which include, but are not limited to, the high cost of producing and transporting hydrogen, development of infrastructure and clear policies. Consumers naturally like clean hydrogen, but are not yet ready to pay a sufficient premium, without which large-scale hydrogen investment are unlikely to come. Our investment is intended to position ourselves for the future while also gaining experience of the business. However, larger investment by us will be guided by the manner in which actual hydrogen demand will unfold over the next couple of months.
You know, we are expecting certain bids to come through in Japan, and followed by Korea, and these will dictate the way the market will unfold. But we certainly intend to be a major player in this important new energy area, and we are gearing for that in terms of making sure our things to provide for the blue hydrogen is available, engineering is done, we are preparing the site. So we are gearing up and able to capture these opportunities when they materialize. With regard to your question about Jafurah, we are progressing very well. The results are speaking for itself. We are on track to put phase one in the third quarter of next year.
We have awarded sixteen contracts for phase two, which is an indication that because of the progress and what we have learned in phase one, we are progressing, and we have already awarded a contract for phase two, worth about more than $12 billion. Jafurah, as you know, will deliver 2 billion standard cubic feet per day by 2030. Phase two will be completed 2027, but we are ramping production to reach the limits of the capacity that we are building by 2030.
The good thing about Jafurah is the amount, as I said, of ethane and the liquid that will be coming with it, which, you know, if you think about Saudi Arabia today, the amount of ethane, we have a huge chemical facilities, SABIC and others, facilitated by some chemical products and about a billion scf per day of ethane. We are adding, through Jafurah alone, 418 million standard cubic feet per day of ethane, almost more than 40% of what we have today. In addition, as I said, to the 650,000 barrels per day of liquid and condensate. And we will continue to drop the cost for what we are developing through phase one. We have learned a lot.
We utilized a lot of technologies that's helping us to reduce the cost and making it more and more commercial to meet our aspiration. And hopefully, you will see more of that coming through the phase two. And don't forget, in, in the unconventional gas, what's unique about it in the Kingdom compared to elsewhere, we are using seawater. So we're not using aquifer water. Water is heavily used in unconventional, the U.S. and elsewhere. But in the Kingdom, we are using seawater. We are cognizant about the resource of water and aquifer water, so we'll be using seawater, treated seawater, for all of our operation in unconventional gas.
Thank you very much.
Thanks Shashank. Thank you, and there's still an opportunity, some opportunity to poll for a question, but for—in the meantime, we go through to Matt Lofting at J.P. Morgan. Go ahead, Matt.
Hi, thanks for taking the questions. Two, if I could please. First, I just wanted to follow up on demand. The strength or not of oil and broader energy demand clearly moved into focus across financial markets through recent weeks and months. So given the scale of Aramco's reach across markets and the oil export angle into Asia and China, I wonder if you could expand on the nearer term trends that you're seeing, and in particular, whether there's any signs of weakness in physical markets that stand out, either product-wise or regionally? And then secondly, just on the Q2 numbers, I mean, I noticed that the effective tax rate was lower in Q2 versus Q1 and prior quarters, despite a sort of a lower downstream result.
I wondered if you could just help us understand the sort of the mixed effect there. Thank you.
Thank you, Matt. I will answer the first question, Ziad will take the second. With regard to demand, we remain positive about the outlook for the global oil demand, despite concerns about the economic downturn. Global oil demand has been resilient, and in the first half of this year, demand reached about a record, I would say, growth. And while Chinese economic growth has been moderating in the second quarter this year, demand for crude oil and refined products remains strong. In addition, as I highlighted earlier, the U.S. refining sector has been running at almost maximum capacity, with a utilization rate that has averaged at 93% over the past three months.
The second half of this year, we anticipate further oil demand growth, with some forecasts predicting growth of 1.6-2 million barrels per day, partly driven by the global aviation sector and the petrochemical demand. For the full year, the estimated global oil demand is expected to be around 104.7 million barrels per day. I should add that, there seem to be continued upward also revision that we see of demand by various forecasters and agencies, which makes it very difficult to make important, investment decision at as these revisions keep surprising to the upside. At the same time, we are seeing more plans to replenish strategic crude oil inventories, which we anticipate will contribute healthy oil demand over the next few months.
If you add to that, that the current inventory levels is at the low of the five-year average currently.
Matt, on your second question, on effective tax rates. You know, the different, we have different tax brackets for different business units. So, upstream gas is taxed at 20%, and so is downstream, while upstream oil is taxed at 50%. So the effective tax rate is a blend of these. What you see specifically as a drop is mainly as a result of our gas pipelines. The transactions that you saw are actually taxed at 50% and are impacted by interest rates. So, you know, that is the main driver behind what happened in the second quarter.
But generally, over the last couple of years, if you look at our effective tax rate, it has been, you know, quarter to quarter, it's been going, as low as 45% and, as high as, 53%. So we're still within that range. Nothing structural to speak of.
Super. Thanks very much.
Thanks, Matt. And with that, that's the last question that we have this morning from you guys. Thank you very much indeed. Can I take the opportunity to thank Amin and Ziad for their time, and particularly to everybody joining the call with us today. As always, if there are any questions, any comments, any follow-up, please contact us at Investor Relations, and we look forward to keeping in touch.