Saudi Aramco - History

History

The origins of Saudi Aramco traces back to 29 May 1933, when the Saudi government granted a concession to Standard Oil of California (SoCal) in preference to a rival bid from the Iraq Petroleum Company. The concession allowed Socal to explore for oil in Saudi Arabia. SoCal assigned this concession to a wholly owned subsidiary called California-Arabian Standard Oil Co. (CASOC). In 1936, with the company having had no success at locating oil, the Texas Oil Company (Texaco) purchased a 50% stake of the concession.

After four years of fruitless exploration, the first success came with the seventh drill site in Dammam, a few miles north of Dhahran in 1938, a well referred to as Dammam No. 7. This well immediately produced over 1,500 barrels per day (240 m3/d), giving the company confidence to continue. On 31 January 1944, the company name was changed from California-Arabian Standard Oil Company to Arabian American Oil Company (or Aramco). In 1948, Socal and Texaco were joined as investors by Standard Oil of New Jersey (Esso) which purchased 30% of the company, and Socony Vacuum (later Mobil) which purchased 10% of the company, leaving Socal and Texaco with 30% each.

In 1950, King Abdul Aziz Ibn Saud threatened to nationalize his country's oil facilities, thus pressuring Aramco to agree to share profits 50/50. A similar process had taken place with American oil companies in Venezuela a few years earlier. The American government granted US Aramco member companies a tax break known as the golden gimmick equivalent to the profits given to Ibn Saud. In the wake of the new arrangement, the company's headquarters were moved from New York to Dhahran.

In 1973, following US support for Israel during the Yom Kippur War, the Saudi Arabian government acquired a 25% stake in Aramco. It increased its shareholding to 60% by 1974, and finally took full control of Aramco by 1980, by acquiring a 100% percent stake in the company. Aramco partners continued to operate and manage Saudi Arabia's oil fields. In November 1988, a royal decree changed its name from Arabian American Oil Company to Saudi Arabian Oil Company (or Saudi Aramco) and took the management and operations control of Saudi Arabia's oil and gas fields from Aramco and its partners. It officially cut all oil supply to Israel the same year, by order of the CEO. Following the events that unfolded in 1988, Saudi Aramco has become a fully owned, privately held company. Saudi Aramco is currently the world's largest company with an estimated market value of $781 billion (2005). Concerns for monopolization of the world's economy have been raised.