Saudi Aramco: The Crown Jewel of Saudi Arabia's Oil Empire
Saudi Arabia is the largest exporter of petroleum in the world, with the majority of this oil produced by Saudi Aramco. In this article, we will explore the entity behind this massive oil production and the ownership structure of Saudi Aramco.
Ownership of Saudi Aramco
The largest shareholder in Saudi Aramco is the Kingdom of Saudi Arabia, which owns approximately 94% of the company. The remaining 6% is held by Saudi citizens, residents, and private businesses and funds.
Notably, the company's ownership transitioned from a private to a more public structure after an initial public offering (IPO) that placed some shares in public hands. This move happened since about 1986 when the Kingdom initially 'fairly priced' the oil company to its present structure, ensuring a steady flow of government revenue.
History of Oil Production in Saudi Arabia
The discovery of oil in Saudi Arabia dates back to 1932. The oilfields were found in the Eastern Province, an area that includes the Arabian Gulf. This discovery was a significant milestone, marking the beginning of Saudi Arabia's fortunes in the global oil market.
At that time, oil was discovered at Jebel Dukhan in Bahrain by the Canadian subsidiary of Standard Oil of California. However, the company had to be Canadian because the British Protectorate of the Persian Gulf would not allow American companies to prospect for oil there.
From the top of Jebel Dukhan, one can see a similar anticline, Jebel Dhahran, in the Eastern Province of Saudi Arabia. After extensive negotiations, California Standard began drilling at Dhahran, and after Ramadan in 1938, they struck oil with their seventh well.
The historical context is important. The 21-year-old Prince AbdulAziz Ibn Saud played a significant role in this process, his actions contributing significantly to the initial discovery. Today, Ramadan Mubarak is a reminder of the region's rich cultural heritage and religious ties.
The Development of Saudi Aramco
The Second World War delayed further development, and after the war, Chevron (formerly California Standard) recognised the strategic significance of the oil find. They recognised the need for considerable capital expenditure (CapEx) to develop the site and build an export port at Ras Tanurah. To facilitate this, they invited several major oil companies to form a consortium, thus creating the Arabian American Oil Company (Aramco).
Aramco proved to be a robust entity, lasting far beyond the 1970s wave of nationalisation of oil assets. However, the Kingdom of Saudi Arabia took full control of the company in the mid-1980s, making it 100% 'Saudi owned'. This shift marked a significant milestone in the company's history.
Why the Misconception about "Aramco"?
It's worth noting that some individuals still mistakenly refer to Saudi Aramco as simply "Aramco," reflecting an outdated understanding of the company's current structure. This misunderstanding highlights the importance of staying updated with corporate changes and nationalistic shifts within the oil industry.
The Future of Saudi Aramco
As one of the world's largest oil producers and exporters, Saudi Aramco plays a crucial role in global energy markets. Its future is intertwined with Saudi Arabia's vision for a diversified economy. The company is continually exploring new opportunities in refining, petrochemicals, and renewable energy, while maintaining its core mission of producing high-quality crude oil.
Conclusion
In summary, Saudi Aramco is the backbone of Saudi Arabia's oil sector, with the Kingdom of Saudi Arabia owning the majority of its shares. Its journey from the discovery of oil in the 1930s to its current status as a leading oil producer underscores the importance of strategic partnerships, government backing, and forward-thinking policies. As the world continues to navigate the challenges of energy sustainability, Saudi Aramco remains a key player in the global energy landscape.
Related Keywords
Saudi Aramco, Saudi Arabia Oil, Oil Exporter