From those humble beginnings arose the Arabian American Oil Company (Aramco),
later named the Saudi Arabian Oil Company (Saudi Aramco). Today, Saudi Aramco is
the world's largest oil company, with operations spanning the globe. As was
demonstrated during the Gulf Crisis of 1990-91 when it stepped in to make up for
the loss of oil exports from Iraq and Kuwait, thus averting a catastrophic global
energy shortage, Saudi Aramco is, as Petroleum Intelligence Weekly noted, a
guarantor of the "stability and security to world oil markets that is now the
hallmark of Saudi policy."
The discovery of oil transformed Dhahran from a desert oil camp in the 1940s
to a modern city, the site of Saudi Aramco's headquarters.
spectacular accomplishments in the face of long odds. It took five years of hard
work under harsh conditions in the desert before the well known as Dammam Number
7 hit oil in commercial quantities. On May 1, 1939, King Abdul Aziz boarded the
tanker D.G. Scofield in Ras Tanura to turn the valve that let the first barrel of
Saudi oil enter a tanker for export.
Though Saudi crude oil was of great strategic value to the Allied war effort
during World War II, and could have been produced in relatively larger
quantities, the problems associated with shipping oil during the hostilities
severely limited Aramco's operations. As a result the development of Saudi oil
fields progressed slowly during the war years, with production averaging 58,000
barrels per day (bpd) at the end of the war. During those years, however, Aramco
dedicated its efforts to exploration and development of an infrastructure to
handle future expansion. It built a refinery and a tank farm, and enlarged the
marine terminal at Ras Tanura.
Saudi Aramco operates a Kingdom-wide network of producing wells, pipelines, refineries and plants.
The history of the company is one of close Saudi-U.S. cooperation and
spectacular accomplishments in the face of long odds. It took five years of hard
work under harsh conditions in the desert before the well known as Dammam Number
7 hit oil in commercial quantities. On May 1, 1939, King Abdul Aziz boarded the
tanker D.G. Scofield in Ras Tanura to turn the valve that let the first barrel of
Saudi oil enter a tanker for export.
The period immediately following the end of World War II was one of intense
activity. New deposits were being discovered with increasing regularity, pumping,
pipeline and treatment facilities were expanded and new offices, warehouses and
housing were built. By 1949, the company's production capacity had reached
500,000 bpd. To circumvent the cost and time of shipping oil to Mediterranean
ports via the circuitous route around the Arabian Peninsula and through the Suez
Canal, the company built Tapline, a 31-inch pipeline that initially carried
320,000 bpd of crude from the production facilities in the Eastern Province
through northern Saudi Arabia, Syria, Jordan and Lebanon to the Mediterranean.
Although the pipeline was expanded in later years, the civil war in Lebanon,
coupled with the construction of other pipelines across Saudi Arabia and the
development of more cost-effective ultra-large oil tankers led to cessation of
its use to deliver oil to the Mediterranean.
As the company and its production capacity continued to grow, so did its
requirements for highly-skilled and well-trained manpower. Whereas the original
geologists, engineers and technicians who helped start operations in the 1930s
were primarily American, by the 1950s, the majority of company employees were
Saudi Arabians. In the 1960s and 1970s, tens of thousands of Saudis were sent to
training centers established in the Kingdom and thousands completed their
education at universities. By the end of the latter decade, Saudis were in most
of the management and technical positions in the company.
Finance Minister Abdullah Sulaiman and Socal's Lloyd Hamilton sign concession agreement on May 29, 1933.
The training of large numbers of Saudis to take on leadership posts in the
company enabled it to expand operations across the board to meet growing demand
for Saudi oil during the 1960s and 1970s. Production reached two million barrels
per day by 1965 and grew to more than eight million barrels per day when the oil
shortages of the mid-1970s sent demand for Saudi oil soaring.
To achieve such production rates required a mammoth undertaking that touched
all areas of the Saudi oil industry. Exploration was the core of the effort. The
initial search for oil in the 1930s began in the Dammam Dome. New deposits were
discovered not only at Abqaiq and Qatif, but also at 'Ain Dar and Haradh, which
were later determined to be part of the Ghawar field, the world's largest oil
deposit, almost 160 miles long and 20 miles across at its widest point. Other
fields followed, including the Arabian Gulf's Safaniya, the world's largest
offshore oil field. The discovery of these and other fields required extensive
field operations backed by photogeology and exploration laboratories using the
latest technologies.
A Saudi Aramco crew prepares well casings for an offshore drilling project.
A network of pipelines carried crude from producing wells to the marine
terminal at Ras Tanura. Originally a single pier capable of handling two small
tankers, the terminal was enlarged over the years. Today, four sea islands, a
series of steel-loading platforms welded together and standing in deep water, can
accommodate eight super tankers. A second terminal was later built at Ju'aymah,
about 15 miles north of Ras Tanura. Among the facilities built at the new
terminal is a tank farm for storing oil before transfer to tankers, with 19 tanks
that are the largest in the world, some capable of accommodating a 30-story
building on its side. Loading lines transfer the oil to platforms mounted on
piles some seven miles offshore. Between them, the Ju'aymah and Ras Tanura
facilities can transfer as much as ten million barrels of oil per day onto the
largest tankers afloat.
In 1975, Aramco initiated work to design, build and operate a master gas
system to gather and process the natural gas produced in association with crude
oil for use in the Kingdom's industrialization program. By the early 1980s, the
system was producing and piping natural gas to petro- chemical plants and other
industrial plants in the twin industrial cities at Jubail on the Gulf and Yanbu
on the Red Sea. Using the natural gas as feed stock, the plants manufactured
products that both fed other industrial operations and were exported. The natural
gas collected by the master gas system was also used to generate electricity for
urban and industrial use, to run desalination plants and to provide natural gas
liquids for export abroad.
In 1989, the company began to explore for hydrocarbon reserves in previously
unexplored areas, including the Rub' Al-Khali desert, leading to the
discovery of new oil and gas reserves.
Throughout its first half century, the company, in addition to its oil and
gas operations, was also involved in building housing, schools and other
amenities for its growing work force.
As the company approached the end of its first 50 years in operation, it was
undergoing a dramatic change. Starting in 1973, the Saudi Arabian Government
began purchasing Aramco's assets from its shareholders, Socal (later Chevron),
Texaco, Exxon and Mobil. By 1980, the Government owned 100 percent of the
company's shares, although Aramco continued to operate and manage Saudi Arabia's
oil fields for a time. In 1984, Ali Al-Naimi, who had worked his way up from a
clerical job, was named the first Saudi president of the company. The process was
completed when on November 8, 1988, a royal decree established the Saudi Arabian
Oil Company - Saudi Aramco - to take over the management and operations of Saudi
Arabia's oil and gas fields from Aramco.
Super tankers load crude oil at Ras Tanura's Sea Island in the Arabian Gulf
for transportation to distant markets.
The transition from Aramco to Saudi Aramco has proven to be more than a mere
change of name or key management. It has proved to be a milestone in the way
Saudi Arabia operates its oil industry, one that has ushered in a new philosophy
and method of managing the Kingdom's key resource.
Although Saudi Arabia already possessed a quarter of the world's known oil
reserves at the time of Saudi Aramco's establishment, the company immediately
launched a search for new oil and gas deposits. The purpose of the effort was to
determine if additional hydrocarbon reserves existed outside Aramco's original
concession area, which was largely restricted to the Eastern Province. Such new
deposits could maintain the Kingdom's reserves at a high level. Indeed, despite
the billions of barrels of oil produced by Saudi Arabia, the Kingdom's proven oil
reserves have increased since the exploration program was begun in 1989. Another
objective of the exploration effort was to seek to discover reserves of higher
grades of petroleum than those being produced in the Eastern Province.
Saudi Aramco places great emphasis on
manpower training and education.
The first new deposits were discovered in central Saudi Arabia, south of
Riyadh. By the beginning of 1995, eleven new oil and gas fields had been
discovered in this area. The crude oil from these fields is largely super-light
and sulfur-free, allowing refining into high-value products at relatively low
cost. In 1991, the company discovered natural gas deposits in northwestern Saudi
Arabia and in the following two years found oil and gas fields at several sites
along the Red Sea coastal plain.
The year after its establishment, the company also launched a five-year
campaign to return Saudi crude oil production capacity to ten million bpd.
Although it had been at that level a decade earlier, the decline in demand in the
intervening years had forced the company to shut down several facilities. While
actual production fluctuated with market demand and has historically been lower
than the company's production capacity, Saudi Aramco felt that by raising its
production capacity to the ten-million-barrel-per-day level, it would be capable
of stepping in to meet any sudden rise in global oil demand and thus avert
possible crises. In short, the higher production capacity would better position
the Kingdom to more effectively implement its policy of ensuring market
stability.
A Saudi Aramco environmental protection team practices spill containment in the
Arabian Gulf.
As Saudi Aramco was in the process of recommissioning oil wells, gas-oil
separator plants and associated gas-compression and crude handling facilities,
the Gulf Crisis of 1990-91 resulted in the loss of 4.6 million bpd of crude
exports in the international embargo on Iraq and occupied Kuwait. Within five
months, the company raised its crude production by more than 60 percent to 8.5
million bpd, making up for about 75 percent of the lost Kuwaiti and Iraqi crude,
and reversing a sharp increase in oil prices that was taking place during the
winter of 1990-91.
In 1994, Saudi Aramco completed its program to raise production capacity to
ten million bpd. As part of that program, it undertook to expand the East-West
Crude Oil Pipeline, which transports oil from Abqaiq in the Eastern Province to
Yanbu, 745 miles away. The pipeline's capacity was increased from 3.2 million bpd
to five million bpd.
A company area planner draws plans for a pumping station and support
installations for the East-West Crude Oil Pipeline.
To handle the increased volume of oil coming through the pipeline, the
company built a fourth super tanker berth, additional storage tanks and other
facilities at the Crude Oil Export Terminal in Yanbu, increasing its capacity by
60 percent to 4.2 million bpd.
The success of these projects was largely due to a new Saudi Aramco facility,
the Exploration and Petroleum Engineering Center (EXPEC). Opened by the Custodian
of the Two Holy Mosques King Fahd Bin Abdul Aziz in Dhahran in May 1983, the
facility has been expanded over the years and is currently one of the largest and
most advanced earth science facilities in the world. EXPEC and its affiliated
Laboratory Research and Development Center have enabled Saudi Aramco to eliminate
dependence on foreign oil companies for exploration and production technological
support. The facility brings together top Saudi computer, exploration and
petroleum engineers and makes available to them the most advanced technology for
data collection, processing and interpretation to oversee implementation of
projects.
Perhaps the greatest contribution Saudi Aramco has made since its
establishment is the transformation of the nature of the Saudi oil industry. The
industry had previously been primarily dedicated to producing crude oil for
export. Since taking over, Saudi Aramco has focused on transforming itself into a
multifaceted, vertically-integrated company involved in all aspects of the oil
industry - from the wellhead to the gas pump.
Minister of Petroleum and Mineral Resources Ali Al-Naimi.
Although the first steps were taken back in 1984 with the formation of
subsidiaries to provide crude oil transportation services and to acquire
oil-storage facilities abroad, Saudi Aramco took the effort to a new level.
In late 1988, the company formed a joint venture with Texaco called Star
Enterprise. Under the agreement, a Saudi Aramco subsidiary owns a 50 percent
share in Star's three refineries in the United States, which have a combined
capacity of 615,000 bpd, and a distribution network covering 26 states in the
eastern and southern U.S., including the District of Columbia. Saudi Aramco also
undertook to provide 600,000 bpd of crude oil to the refineries.
In 1991, Saudi Aramco acquired a 35 percent interest in SsangYong Oil
Refining Company, South Korea's third-largest refiner and leading lubricant
manufacturer, as well as a strong marketing presence in the Pacific Rim region.
Under the terms of the agreement, Saudi Aramco will supply at least 70 percent of
the crude used by SsangYong's 525,000-bpd refinery at Onsan.
Saudi Aramco entered into a third joint venture in 1994, this time with the
Philippine National Oil Company (PNOC). It purchased a 40-percent stake in Petron
Corp., PNOC's refining and marketing affiliate. Petron has more than 1,000 retail
outlets and owns a 155,000-bpd refinery. Saudi Aramco is to supply 90 percent of
the refinery's crude oil requirements. In March 1996, Saudi Aramco acquired a 50
percent interest in Motor Oil Hellas and Avin Oil, the refining and distribution
affiliates of Greece's Vardinoyannis Group.
Saudi Aramco President Abdullah Jum'ah.
While securing outlets for its crude oil through such ventures, Saudi Aramco
was at the same time working to diversify its other operations. One such project
called for expanding the operations of its subsidiary, Vela International Marine
Limited, to more effectively provide tanker service to carry Saudi crude
throughout the world. Vela's operations expanded dramatically, from four regular
tankers in 1989 to four ultra-large crude carriers, 19 very large crude carriers
and four petroleum product carriers in 1995.
Additionally, Saudi Aramco has established a global marketing organization
with subsidiary offices in New York, London and Singapore. These offices help
monitor market developments and market Saudi crude oil, refined products, natural
gas liquids (NGL) and sulfur to customers worldwide.
Saudi Aramco's status as the world's largest integrated oil company was
strengthened on July 1, 1993, with a royal decree which merged into the company
all of the Kingdom's state-owned refining, product-distribution and marketing
operations, as well as the Government's half-interest in three joint-venture
refineries. The seven refineries which the company now operates in Saudi Arabia
have positioned it among the ranks of the world's top refiners.
Over the past eight years, Saudi Aramco has entered into joint ventures with Texaco
in the U.S. and companies in South Korea, the Philippines and Greece.
While undertaking the monumental tasks it has successfully accomplished since
its establishment, Saudi Aramco has paid particular attention to other matters
that form the nucleus of its corporate philosophy - manpower development, product
quality, safety and environmental conservation. It has implemented long-term
programs in each of these fields and won numerous international awards for
excellence.
Built on a proud legacy, Saudi Aramco looks to the future to continue to
provide a secure source of crude and petroleum products for the world and thus
ensure the economic stability of both the Kingdom and the world.
