The History behind Oil Discovery in Saudi Arabia

Twitch ell is there with lawyer Lloyd Hamilton on behalf of SOCAL. The Iraq Petroleum Company represented by Stephen Longrigg competed in the bidding but SOCAL has approved the concession on 23 May 1933.

Under the agreement, SOCAL was given “investigation rights to some 930,000-square km of land for 60 years”. Shortly after the contract, geologists arrived in al-Hasa and start finding for oil. SOCAL associated a subordinate company, the California Arabian Standard Oil Company (CASOC) to develop the oil acknowledgment.

SOCAL also joined hands with the Texas Oil Company when together they created CALTEX in 1936 to gain the benefit of the latter’s alarming marketing network in Africa and Asia. When CASOC geologists reviewed the allowance area, they acknowledged a promising place and named it Dammam No. 7, after a close by village.

Over the next three years, the drillers were failed in making a profitable strike, but head geologist Max Steineke kept trying. He insisted the team to drill deeper and deeper. Even many problems came. But finally, Drillers struck oil on 3 March 1938.

This finding would turn out to be first and reveal the largest supply of crude oil in the world. For the King, oil revenues became an important source of wealth since he no longer had to rely on revenue from pilgrimages to Makkah. This discovery would modify Middle Eastern political relations forever.

In 1943, the company in Saudi Arabia’s control changed its name to Arabian American Oil Company (ARAMCO). In addition, several changes were made to the original acknowledgment after the finding of oil.

In 1939, the first amendment gave the Arabian American Oil Company a larger area to search for oil and extended the contract until 1949, increasing the original contract by six years. In return, ARAMCO approved to supply the Saudi Arabian government with a large quantity of free kerosene and gasoline, and to pay higher payments than initially fixed.

Beginning in 1950, the Saudi Arabian government began an outline of trying to enhance government shares of income from oil production. In 1950, an equal profit-sharing agreement was signed, whereby a tax was charged by the government.

This tax significantly increased government revenues. The government sustained this tendency well into the ‘80s. By 1982, ARAMCO’s acknowledgment area was a bargain to 220,000 square kilometers, down from the original 930,000 square km. By 1988, ARAMCO was officially acquired by Saudi Arabia and known as Saudi Aramco.