The History of Saudi Aramco from 1930 to 1940

Introduction

Saudi Aramco is an oil company found in South Arabia. The acronym Aramco stands for the “Arabian American Oil Company”. It is one of the companies owned by the state of Saudi Arabia. It is the country’s largest oil company as well as in the entire world. The most successful well is called Dammam 7. Initially the company was referred to as Aramco but later to represent the image of Saudi Arabia it adapted the word Saudi and this why even to-date is referred to as Saudi Aramco.

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History of Oil Exploration in Saudi Arabia

Major Frank Holmes (1874-1947), who later came to be nicknamed “Father of petroleum”, was an experienced miner, who had worked with a number of mines and also was a British Navy. He held great hopes that oil was available in quantities in Saudi Arabia. Though he was challenged by earlier geologists because he was a non geologist, he stood firm and overcame the challenges. His message was simple ‘’Saudi Arabia has rich oil reserves”. In 1922, Holmes was in Saudi to discuss his interests with the president, coincidentally the British high commissioner by then, Percy Cox was also meeting the president. He was surprised to learn of the presence of Holmes, he also got interested in the whole scenario. An American called Lebanese Ameen Rihani was the one who recommended the deal to the president and in 1923, the concession was granted. The exploration was to happen at the eastern Al-Hasa region at an annual rent of 2500 pounds. In 1927, the results so far were not forthcoming and he suffered financial problem, he then sold the concession to Gulf Oil Company. Holmes was appointed the general manager. A year later, the concession was sold to the S.O.C.A.L. (Standard oil of California). Holmes remained as the manager. The cost of the concession was $50,000. To facilitate its operation, the company formed a subsidiary in Bahrain with Holmes as the ground man. The subsidiary was called Bahrain Petroleum Company. The Saudi Arabian government approved the concession of standard Oil of California (S.O.C.A.L.) in 1933. President King Abdul Aziz bin Abdul Rahman Al-saud was the one who ratified the agreement that gave authority to S.O.C.A.L. to explore the oil reserves in the province now referred to as eastern kingdom. The section has the largest oil reserves. The finance minister then was Abdullah Suleiman. S.O.C.A.L. was allowed to survey for oil reserves in the country of Saudi Arabia (Stegner, 2008).

Dammam number seven

Dammam number 7 is one of the most successful wells. It is found eight kilometers away from the Dammam village port. The companies sent six geogrants to undertake the exploitation and were the successful ones; they were, R.P. Hugh Burchfield, “Bert” Miller, S.B. “Krug” Henry, J.W. “Soak” Hoover, Art Brown, and Thomas Koch. Due to the condition then, they had to be escorted by soldiers as they undertook their duties. Their security was a great concern for the company and the country. In 1935, Guy S. Williams, who was an experienced driller and Floyd W. Ohliger who was a petroleum engineer assisted in the drilling of the first well referred to as Dammam 1. The drilling was not successful; only small amounts of gas that could not be commercialized were discovered. The drilling was stopped at nine hundred and seventy six meters deep. Dammam 2 was started in February the following year, and the only mineral that was found was salty water. Dammam three, four and five were all drilled but nothing was found. Efforts to drill Dammam six were spared by Max Steineke when he found a better place that Dammam 7 started to be drilled in December the same year (Carstens and Kvassheim, 2009). The only thing that came out of the drill by March the same year was gas, but Max kept encouraging his mates to dig deeper, finally on December 31, barrel of oil that lay underground started to flow freely, out of the well. It was the success story. The first flow was 1585 barrels. Surprisingly three days later the flow had doubled and surpassed the flow to 3690 barrels. The well was completed at 1441metres deep. It was discovered after five years of search and it was the well that gave oil in commercial quantities. The average daily production then was 58000. The company with the hand of the government embarked on infrastructure development, for example it built a tank farm and a refinery. It also engorged Ras Tanura marine terminal.

Challenges Encountered During the Exploration

The exploitation was being undertaken in the conditions of the desert and thus there was a lot to be encountered. The first challenge was the harsh desert conditions with hot sun during the day and extreme cold at night. This led to diseases and made the exploitation difficult day by day. It is worth to note that the accommodation facilities that were available were only tents which the entire team had to live in. Though Saudi Aramco was of great help in the Allied war, it experienced some delays in the realization of its full potential during the Second World War in the early 1940’s. This was because no shipping could take place during that era of hostility (Sunayama, 2007).

Another problem that was a hindrance to the works was the level of development in the country. By then the country (Saudi Arabia) was among the poorest countries in the world. This meant that barely any infrastructure had been laid more so in the site area, the area was considered remote. There were no roads or any communication system. They used camels as the only available mode of transport. This meant that incase of any import through Dammam village port it took a lot of time before reaching the site. Some materials at times were required to be ferried on human back to and from the port. The extract area of concern was also considered to as a remote area. As much as the explorers were trying to keep up the works and develop the infrastructure to ease their work, misfortunes were always upon them, a good example was the viscous sulfur oil that came from well Dammam 3 and covered the roads that the men were drilling. The works were basically manual in nature. The country had an illiterate population and they depended on the import of expertise as well as machinery. On the other hand, if you follow the story keenly, it is evident that the idea to explore the oil was a foreign idea and due to the previous unsuccessful stories, the residents were not supporting the process fully. They considered it another waste of time and resources. It also took some time before the discovery was successful, this lack of full support worked not very well to the explorers. There was no electricity, machinery, and the finances were not so much available that the facilities could be made in the site right from start (al-Imārāt, 1997).

During this time the Second World War was taking place and it had its blow to the discovery. As much machinery was required to be imported as well as crude oil to be exported the situation of the time posed a lot of danger. No shipping could be done and this delayed the process. The value of the oil by then was so small and not forgetting that the country did not have a refining plant by then, it had to initially sell the oil in crude form and probably import the same in the refined form. This was a challenge that had to be addressed with the assistance and full support of the government. The solutions were almost immediate and international companies were on the full assistance of the country. Let’s look at some of the early solutions;

Solutions to Some of the Challenges

The country took advantage of the unfavorable trading period during the Second World War and started to develop the infrastructure. This included the road networks, and enlarging the port for the preparation of the market. Come the year 1939, a pipeline linking Ras Tanura with the mining spot was set up. The pipeline was 63kilometres. A refinery followed nearly a year later at the same point (Ras Tanura). The refinery had a capacity of 3000 barrels. May first 1939, saw the mark of exportation of oil from Saudi Arabia. It was commissioned by a cheerful president, king Abdul Aziz bin abdul Rahman al-saud. D.G. Scortfield was the vessel that carried the first oil cargo from Saudi Arabia. By the end of the year1939, Saudi had successfully exported approximately 3.9 barrel of oil (Bradley, 2008).

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Conclusion

It was a long journey for the exploitation and took men of great determination and focus to make the successful story and discovery. It is this discovery that marked the development of Saudi Arabia and assisted it to play a crucial role in the world economy.

It took many decades before Saudi Arabia was sized as the world’s largest oil producing country. Today, the country holds that title. This success can be attributed to the signing of a concession where Saudi Aramco was established. History notes the struggle that was encountered before the discovery. S.O.C.I.A.L. was not the first company to engage in the exploration some other companies has unsuccessfully tried. The hopes seemed diminishing until the arrival of two American geologists that advised on the need to get deep in the interior. They were successful. They derived enthusiasm from the similar geological ideologies available that were similar to those found in Bahrain which had previously been successful in its exploitation. Bahrain was an offshore island. The company is seen as the world oil supply and price stabilizer through its controlled supply to march with the demand of the world. It marked a great influence when it rescued the world from the 1990-1991 world oil crises.

Reference List

Al-Imārāt, A. (1997). Gulf energy and the world challenges and threats. London: B. Taurus.

Bradley, L.M. (2008). Capitalism at work: Business, government and energy. Ontario: Scrivener press.

Carstens, H., and Kvassheim, A. (2009). The Emergence of the Arabian Oil Industry. London. Republishing Ltd.

Stegner, W. (2008). Discovery: the search for Arabian oil. Web.

Sunayama, S. (2007). Syria and Saudi Arabia collaboration and conflict in the oil Era. London: Taurus Academic Study press.

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