Saudi Aramco's Strategic Debt Expansion: A Sharia-Compliant Path to Capital Efficiency and Shareholder Returns

In a world where oil prices have languished below $70 per barrel for much of 2025, Saudi Aramco’s financial strategy has pivoted toward innovative debt instruments to sustain its global dominance and fund its ambitious Vision 2030 agenda. The company’s recent sukuk issuance—a $3–$4 billion U.S. dollar-denominated Islamic bond program—highlights its commitment to leveraging Shariah-compliant financing to balance capital efficiency, liquidity management, and shareholder returns. This analysis evaluates the investment implications of Aramco’s sukuk strategy in a low-oil-price environment, drawing on recent market data and strategic disclosures.

The Sukuk Strategy: Diversifying Funding Amid Volatility

Saudi Aramco’s sukuk program, announced in May 2025, is part of a broader effort to diversify its capital structure amid declining crude prices and rising debt levels. The company’s net debt surged to $30.8 billion in Q2 2025, driven by weaker margins and higher production costs [1]. To mitigate this, Aramco has tapped both conventional and Islamic debt markets. In May, it raised $5 billion through a three-tranche conventional bond issuance, including a 6.375% coupon for a 2055 tranche [2]. Simultaneously, the sukuk program—structured under its SA Global Sukuk Limited’s Trust Certificate Issuance Programme—aims to raise additional liquidity while catering to a growing base of Islamic and ESG-focused investors [3].

The sukuk’s alignment with Shariah principles, which prohibit interest-based transactions, positions Aramco to access a unique segment of global capital. According to a report by Bloomberg, the sukuk market in Saudi Arabia is projected to grow to SAR 954 billion ($254 billion) by 2030, driven by regulatory reforms and fintech innovations [4]. This growth is critical for Aramco, which seeks to maintain its credit profile while funding long-term projects such as green hydrogen production and carbon capture technologies.

Cost of Capital: Sukuk vs. Conventional Bonds

Aramco’s sukuk issuance appears to offer competitive financing costs compared to conventional bonds. Data from GlobalCapital indicates that the company’s $3 billion 2029 sukuk was priced at 68 basis points over U.S. Treasuries, while its conventional bonds for the same maturity carried a 72 basis points spread [5]. This 4-basis-point advantage, though modest, reflects strong investor confidence in Aramco’s creditworthiness and the unique appeal of Shariah-compliant instruments.

The sukuk’s cost efficiency is further bolstered by Saudi Arabia’s robust fiscal metrics. The Kingdom’s A+ rating from Fitch and A1 from Moody’s, coupled with a low debt-to-GDP ratio and a $400 billion sovereign wealth fund, provides a buffer against refinancing risks [6]. By extending sukuk maturities—such as the 2031 tranche with a 2.694% coupon—Aramco is also smoothing out future debt service obligations, reducing exposure to short-term rate hikes [7].

Shareholder Returns and Capital Efficiency

Despite the challenging oil market, Aramco has maintained its commitment to shareholder returns. In Q2 2025, the company distributed $21.1 billion in dividends, with full-year payouts projected at $85.4 billion [8]. This steadfastness is underpinned by strategic asset sales, including a $11 billion lease-and-leaseback deal for its Jafurah gas processing facilities [9]. Such transactions free up capital for high-return projects while preserving liquidity.

The sukuk program complements these efforts by enabling Aramco to redirect capital toward core operations. For instance, the proceeds from the sukuk will fund general corporate purposes and strategic initiatives, including global expansion and R&D in renewable energy [10]. This aligns with the company’s goal to enhance capital efficiency, as highlighted by CFO Ziad Al-Murshed, who emphasized the need to “optimize capital allocation in a volatile market” [11].

Risks and Market Dynamics

While the sukuk strategy appears prudent, risks persist. The global sukuk market faces uncertainty due to the potential implementation of Shariah Standard 62, which could standardize sukuk structures and alter pricing dynamics [12]. Additionally, Aramco’s gearing ratio—6.5% as of June 2025—risks rising further if oil prices remain depressed, potentially straining its dividend sustainability [13].

However, Aramco’s proactive approach to debt management, including sukuk restructuring and extended maturities, mitigates these risks. The National Debt Management Centre’s recent $32 billion sukuk restructuring, which replaced short-term obligations with longer-dated instruments, exemplifies this strategy [14].

Conclusion: A Strategic Imperative

Saudi Aramco’s sukuk issuance represents a calculated move to navigate the low-oil-price environment while advancing its long-term vision. By combining Shariah-compliant financing with conventional debt, the company is optimizing its capital structure, maintaining shareholder returns, and supporting economic diversification. For investors, the sukuk offers a unique opportunity to participate in Aramco’s growth story while aligning with ESG principles. As the sukuk market matures, Aramco’s ability to balance innovation with fiscal discipline will be critical to its sustained success.

Source:
[1] Saudi Aramco debt nears 3-year high as oil plunge strains ... [https://fortune.com/article/saudi-aramco-debt-3-year-high-oil-plunge-earnings/]
[2] Saudi Aramco secures $5bn in bond sale to bolster ... [https://www.arabnews.com/node/2603213/business-economy]
[3] Corporate Sukuk – Saudi Aramco USD3bn Sukuk [https://www.ddcap.com/corporate-sukuk-saudi-aramco-usd3bn-sukuk/]
[4] Islamic Finance 2025 - Saudi Arabia | Global Practice Guides [https://practiceguides.chambers.com/practice-guides/islamic-finance-2025/saudi-arabia/trends-and-developments]
[5] Aramco lands sukuk well inside conventional curve [https://www.globalcapital.com/article/2dt9l31tqz3fqtszy330g/emerging-markets/aramco-lands-sukuk-well-inside-conventional-curve]
[6] Saudi Arabia's $15 Billion Sukuk Offering and Dollar Debt Strategy [https://www.ainvest.com/news/saudi-arabia-15-billion-sukuk-offering-dollar-debt-strategy-macro-shift-emerging-markets-dollar-assets-2509/]
[7] Saudi Arabian Oil, 2.694% 17jun2031, USD... [https://cbonds.com/bonds/1051493/]
[8] Saudi Aramco Keeps Dividend After Profit Takes Hit From ... [https://www.morningstar.com/news/dow-jones/202508054090/saudi-aramco-keeps-dividend-after-profit-takes-hit-from-lower-oil-prices-update]
[9] Saudi Aramco profit drops as it flags cost cuts, divestments [https://www.reuters.com/business/energy/saudi-aramco-profit-drops-it-flags-cost-cuts-divestments-2025-08-05/]
[10] Saudi Aramco plans US dollar Islamic bonds as soon as ... [https://www.tradingview.com/news/reuters.com,2025:newsml_L8N3UQ0GH:0-saudi-aramco-plans-us-dollar-islamic-bonds-as-soon-as-this-month-say-sources/]
[11] Saudi Aramco to Keep Tapping Debt Market After $5 Billion Bond Sale [https://oilprice.com/Latest-Energy-News/World-News/Saudi-Aramco-to-Keep-Tapping-Debt-Market-After-5-Billion-Bond-Sale.html]
[12] Foreign currency sukuk issuance projected to reach $80bn ..., [https://www.arabnews.com/node/2607386/business-economy]
[13] Aramco Profit Falls for 10th Quarter, Debt Rises on Weak Oil [https://www.bloomberg.com/news/articles/2025-08-05/aramco-profit-falls-for-a-10th-quarter-as-weak-oil-hits-earnings]
[14] Saudi Arabia restructures USD 32 billion sukuk to strengthen debt strategy and local market [https://globalbusinessoutlook.com/banking-and-finance/saudi-arabia-restructures-usd-billion-sukuk-strengthen-debt-strategy-local-market/]