ARAMCO in Saudi Arabia

Well it seemed to me of great importance to talk about Aramco. This company, a shadow in worldwide public eye, is the backbone of all the US oil companies and furthermore used to be parent to them so to sum up, “no Aramco = no oil for the US” ! Formerly jointly owned by large US oil companies and the Crown of Saudi Arabia, this corporation was founded on the twenty-ninth of May nineteen thirty-three when following the discovery of oil fields in neighbouring Kuwaiti Kingdom and Bahraini Kingdom, King Abdul’Aziz Ibn Saud of Saudi Arabia awarded a geographic concession to the company Standard Oil of California (Socal) allowing it to explore the sands of the Saudi Desert in search for fields of the precious Black Gold ; the task was delegated to a fully-owned subsidiary of Socal : California-Arabian Standard Oil (Casoc). During the following four years, exploration was led but was unfortunately unsuccessful ; as a result, fifty percent of Casoc were sold to the Texas Oil Company. Although the efforts deployed during the four years were unsuccessful, the fifth year offered a surprise of outstanding size ; in nineteen thirty-eight, the seventh drill site, also referred to as Dammam Number 7 (it is located several miles north of Dhahran – future site of the first US military base in the Middle-East) offered a production of nearly two hundred and forty cubic meters per day (1,500 barrels/day), this discovery encouraged the company to continue research over the Arabian Sands. Casoc flourished and its name was changed in nineteen forty-four to Arabian American Oil Company (or Aramco). The massive oil drilling potential of the Saudi oil fields becoming more and more famous, it began to draw attention of a lot of oil companies. As a result, in nineteen forty-eight Socal and Texas Oil Company were joined by two other American oil companies namely Socony Vacuum (who purchased ten percent of Aramco) and Standard Oil of New Jersey (who purchased thirty percent of Aramco) leaving at the end the original owners (Socal and Texas Oil Company) with only thirty percent of total Aramco shares. Given the huge ditch between the earnings of the US investors and the Saudi Crown, King Abdul’Aziz Ibn Saud threatened to nationalize all the oil-related infrastructures owned by foreign companies in his country in order to get Aramco to share its profits on oil sales half/half with Saudi Arabia. Finally, the payer for this condition were not the companies themselves but the American Government whom agreed to award US Aramco with a tax break called the Golden Gimmick in order to replace the profits lost due to sharing profits with the Saudis. Since then, Aramco will stay the most loyal “employee” of the Saudi Crown, doing everything in its power to satisfy its Saudi hosts in order not to jeopardize the company’s concession ; for instance, during the nineteen seventy-three oil embargo launched by King Faysal Ibn Abdul’Aziz Ibn Saud on the US, the company’s executive officers not only did exactly as they were told to by the Saudis but cut back production even more than asked to show at what extent they were cooperative with their host country. Another example is the fact that Saudi Arabia’s capacity to put pressure on the OPEC crude oil prices relies on the secrecy of its maximum oil drilling capacities with current infrastructure so when in December 1979 company executive officers said to The Justice Department than in fact Aramco had little spare capacity, the Saudis went extremely angry and retaliated by expressly ordering Aramco to cut its deliveries to parent-companies Standard Oil of California (Socal) and Exxon by twenty thousand barrels per day ! Despite the company’s total cooperation, the Saudis decided nevertheless to engage a nationalization plan of Aramco but contrary to classic nationalization which includes acquisition by the local government of a company’s ownings without any financial compensation, the Crown did it between nineteen seventy-three and nineteen eighty through legal, though forced, financial acquisition of shares : in 1973 the Saudi Government acquired twenty-five percent of Aramco’s shares perhaps as a punishment to the US’s pro-israeli involvement in the Kippur War, in 1974 it increased to sixty percent to finally reach one hundred percent in nineteen eighty after what in nineteen eighty-eight the company’s name was changed from Arabian American Oil Company to Saudi Arabian Oil Company (or Saudi Aramco), we could assume that the date chosen by the Saudis to change the name was symbolical as nineteen eighty-eight is the name “Aramco” ‘s forty-fourth anniversary.

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