Background of Saudi Aramco

The story of Aramco’s beginnings and the journey the company has taken to become the largest oil company in the world is as remarkable as the journey that has brought Saudi Arabia to its current standing in the community of nations. Aramco is a company characterized by resilience and the courage to take bold steps that have made it a key player in global energy security (Saudi Aramco 2012).

The journey of the company is tied to the transformation the Kingdom of Saudi Arabia has undergone to become a modern-nation state and a key player in the geopolitical sphere of not only the Arab world but also globally.

Having began as merely an oil producing companies that was no different from other companies in the industry at the time, Aramco has steadily grown to become the fully integrated global energy enterprise that it is today with partnerships spreading to various parts of the world including Asia, Europe and North America (Saudi Aramco 2012). Aramco’s journey began with the signing of an oil concession agreement with the Standard Oil Company of California on May 29, 1933 which paved way for the beginning of aerial surveys the following year.

In 1935, the first oil well was drilled and a new pier was erected at al-Khobar at a time when more proven oil finds were located in Bahrain, Iraq and Persia. In 1936, the Texas Co. made a 50% acquisition of the concession and launched operations in Bahrain. By 1939, various wells had been drilled and for the first time, an oil tanker transported the first load of petroleum from Saudi Arabia.

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Aramco was officially on its way to becoming the corporation it is today (Saudi Aramco 2012).

By the beginning of the 1940s, the company was producing about 15,000 bpd and its workforce had grown to nearly 4,000. 1940 began with the discovery of the Abqaiq oil field but during the early years of the 1940s, the company faced some difficulties including the closure of its refinery at Ras Tanura in 1941 and suspension of field mapping in 1942. 1943 witnessed growth of innovation in the oil and gas industry due to the shortages occasioned by the World War II and Casoc was renamed Aramco in 1944 with headquarters in San Francisco and an amazing journey of remarkable growth began.

As of 1949, Aramco had increased its productivity to 500,000 bpd. In 1946, the company commissioned its administration building in Dhahran and the decade ended with the completion of the Trans-Arabian Pipeline enabling Saudi Arabia to export its oil through the Mediterranean Sea (Saudi Aramco 2012). In 1951, the Safaniya offshore oil field was discovered and the following year, Aramco moved its headquarters to Dhahran. In 1954, the company’s production reached 1 million bpd transforming Aramco into an oil production powerhouse (Saudi Aramco 2012).

Exploration work at Rub’ al-Khali began in 1955 and by 1958; the company’s production had topped 1 million bpd. The close of the 1950’s saw two Saudi nationals joining Aramco board as more Saudis assumed managerial positions within the company. In 1961, the company hit yet another milestone when it exported liquefied gas from its Ras Tanura facility for the first time. By 1962, production of crude oil had hit the 5 billion barrels mark and the following year, the company patented its oil sweetening technology.

In 1965, Aramco’s oil production reached 2 million bpd and the discovery of the Shaybah oil field further boosted the company’s productivity. The company closed the decade with the commissioning of an offshore gas-oil separation plant at the Safaniya oil field, the first of its kind in the history of Aramco (Saudi Aramco 2012). Photo 2: Aramco’s first offshore gas-oil separation plant at the Safaniya oil field commisioned in 1969 [Source: Aramco] During the 1970s, the Saudi Government began the acquisition process aimed at changing Aramco into a fully government owned company or a national oil corporation (NOC).

It is a decade that would witness rapid growth in the oil and gas industry as Aramco was operating three of the largest oil and gas projects in the world (Saudi Aramco 2012). The company had officially taken the lead in oil and gas production and taken its rightful place in the global energy security landscape. In 1973, the Government acquired a 25% stake in Aramco followed by a further acquisition of 35% in 1974 bringing the Government’s ownership of the Aramco to 60%.

The same year, the Ju’aymah offshore crude oil terminal was commisioned and in 1976, Aramco became the first oil company in the world to reach an output of 3 billion barrels in one year, a fete that had not been achived by any other company (Saudi Aramco 2012). In 1980, the Saudi Government completed acquisition of the remaining 40% ownership of Aramco but the decline in oil prices would force the company to rethinkk its strategy (Saudi Aramco 2012). By this time, the governemt owned 100% stake at Aramco and despite the hardships in the global oil market, Aramco made significant strides.

For example, the Exploration and Petroleum Engineering Center (EXPEC) was opened in 1983. Having fully acquired the company, the Saudi Government transformed Aramco into Saudi Arabian Oil Company (Saudi Aramco) and in 1989, the company found oil at Hawtah marking the beginning of a decade that would witness massive invention and investment in the oil and gas industry (Saudi Aramco 2012). Picture 3: Aramco’s Operations Coordination Center, the largest of its kind in the Oil and Gas industry [Source: Aramco]

Aramco began its expansion strategy in earnest with the 1991 acquisition of a 35% stake in S-oil refinery and harbor, Onsan, Republic of Korea (Saudi Aramco 2012). The following year, the company’s exploration efforts yielded discovery of oil in the central part of the country having drilled its first well at Midyan. In 1993, Aramco’s merger with Samarec was completed and the following year, Aramco acquired a 40% stake in Petron, a company based in the Philippines and in 1996, Aramco entered its first European joint venture.

In 1999, the company completed the refurbishment of the Ras Tanura refinery before opening a Research & Development Center (R&DC) to spearhead innovation in the oil and gas sector (Saudi Aramco 2012). Picture 4: Refurbished and upgraded Ras Tanura refinery [Source: Aramco] During the 2000s, Aramco established partnerships with various international companies with focus on gas production as well as patenting of technology developed by the company’s R&DC.

On top of this, Aramco embarked on the largest capital expansion in the company’s history aimed at ensuring stability and reliability. To this end, the company commissioned Hawiyah gas plant in 2001 and in the following year, Aramco acquired Texaco’s stake in Motiva (Saudi Aramco 2012). This was followed by the opening of the Haradh gas plant in 2003 before further expansion plans in 2004 led to rge acquiition of stake in Showa Shell which enabled the company to raise its output by a further 800 thousand bpd.

In 2005, Aramco entered into a joint venture with Sumitomo Chemical Company. 2007 saw Aramco enter into yet another equity venture, this time in China with the Fujian Refining and Petrochemical Co. Ltd. In 2008, Aramco celebrated its 75th year in the oil and gas industry and the following year, the company completed its expansion program raising its capacity to 12 million bpd (Saudi Aramco 2012) but with actual production averaging 9. 1 million bpd in 2011.