Saudi Arabian oil was first discovered by the Americans in commercial quantities at Dammam oil well No. 7 in 1938 in what is now modern day Dhahran.
Saudi Arabian oil was first discovered by the Americans in commercial quantities at Dammam oil well No. 7 in 1938 in what is now modern day Dhahran.
On January 15, 1902, Ibn Saud took Riyadh from the Rashid tribe. In 1913, his forces captured the province of al-Hasa from the Ottoman Turks. In 1922, he completed his conquest of the Nejd, and in 1925, he conquered the Hijaz. In 1932, the Kingdom of Saudi Arabia was proclaimed with Ibn Saud as king. [2] Without stability in the region, the search for oil would have been difficult, as evidenced by early oil exploration in neighbouring countries such as Yemen and Oman. [3]
Prior to 1938, there were three main factors that triggered the search for oil in Arabia:
In 1922, Ibn Saud met a New Zealand mining engineer, Major Frank Holmes. During World War I, Holmes had been to Gallipoli and then Ethiopia, where he first heard rumours of the oil seeps of the Persian Gulf region. [2] He was convinced that much oil would be found throughout the region. After the war, Holmes helped to set up Eastern and General Syndicate Ltd in order, among other things, to seek oil concessions in the region.
In 1923, the king signed a concession with Holmes allowing him to search for oil in eastern Saudi Arabia. Eastern and General Syndicate brought in a Swiss geologist to evaluate the land, but he claimed that searching for oil in Arabia would be “a pure gamble”. [2] This discouraged the major banks and oil companies from investing in Arabian oil ventures.
In 1925, Holmes signed a concession with the sheikh of Bahrain, allowing him to search for oil there. He then proceeded to the United States to find an oil company that might be interested in taking on the concession. He found help from Gulf Oil. In 1927, Gulf Oil took control of the concessions that Holmes made years ago. But Gulf Oil was a partner in the Iraq Petroleum Company, which was jointly owned by Royal Dutch — Shell, Anglo-Persian, the Compagnie Française des Pétroles (ancestor of French major TotalEnergies), and "the Near East Development Company", representing the interests of the American companies. [4] The partners had signed up to the “Red Line Agreement”, which meant that Gulf Oil was precluded from taking up the Bahrain concession without the consent of the other partners; and they declined. [2] Despite a promising survey in Bahrain, Gulf Oil was forced to transfer its interest to another company, Standard Oil of California (SOCAL), which was not a bound by the Red Line Agreement. [5]
Meanwhile Ibn Saud had dispatched American mining engineer Karl Twitchell to examine eastern Arabia. Twitchell found encouraging signs of oil, asphalt seeps in the vicinity of Qatif, but advised the king to await the outcome of the Bahrain No.1 well before inviting bids for a concession for Al-Ahsa. [6] To the American engineers working in Bahrain, standing on the Jebel Dukhan and gazing across a twenty-mile (32 km) stretch of the Persian Gulf at the Arabian Peninsula in the clear light of early morning, the outline of the low Dhahran hills in the distance were an obvious oil prospect.
On 31 May 1932, the SOCAL subsidiary, the Bahrain Petroleum Company (BAPCO) struck oil in Bahrain. [2] The discovery brought fresh impetus to the search for oil on the Arabian peninsula.
Negotiations for an oil concession for al-Hasa province opened at Jeddah in March, 1933. Twitchell attended with lawyer Lloyd Hamilton on behalf of SOCAL. The Iraq Petroleum Company represented by Stephen Longrigg competed in the bidding, but SOCAL was granted the concession on 23 May 1933. Under the agreement, SOCAL was given “exploration rights to some 930,000 square kilometers of land for 60 years”. [2] Soon after the agreement, geologists arrived in al-Hasa and the search for oil was underway.
SOCAL set up a subsidiary company, the California Arabian Standard Oil Company (CASOC) to develop the oil concession. SOCAL also joined forces with the Texas Oil Company when together they formed CALTEX in 1936 to take advantage of the latter's formidable marketing network in Africa and Asia.
When CASOC geologists surveyed the concession area, they identified a promising site and named it Dammam No. 7, after a nearby village. Over the next three years, the drillers were unsuccessful in making a commercial strike, but chief geologist Max Steineke persevered. He urged the team to drill deeper, even when Dammam No. 7 was plagued by cave-ins, stuck drill bits and other problems, before the drillers finally struck oil on 3 March 1938. [7] This discovery would turn out to be first of many, eventually revealing the largest source of crude oil in the world. [8] For the king, oil revenues became a crucial source of wealth since he no longer had to rely on receipts from pilgrimages to Mecca. This discovery would alter Middle Eastern political relations forever.[ citation needed ][ clarification needed ]
In 1943, the name of the company in control in Saudi Arabia was changed to Arabian American Oil Company (ARAMCO). In addition, numerous changes were made to the original concession after the striking of oil. In 1939, the first modification gave the Arabian American Oil Company a greater area to search for oil and extended the concession until 1949, increasing the original deal by six years. In return, ARAMCO agreed to provide the Saudi Arabian government with large amounts of free kerosene and gasoline, and to pay higher payments than originally stipulated.
Beginning in 1950, the Saudi Arabian government began a pattern of trying to increase government shares of revenue from oil production. In 1950, a fifty-fifty profit-sharing agreement was signed, whereby a tax was levied by the government. This tax considerably increased government revenues. The government continued this trend well into the ‘80s. By 1982, ARAMCO’s concession area was reduced to 220,000 square kilometers, down from the original 930,000 square kilometers. By 1988, ARAMCO was officially bought out by Saudi Arabia and became known as Saudi Aramco.
Due to the quantity of the oil in Saudi Arabia, construction of pipelines became necessary to increase efficiency of production and transport. ARAMCO soon realized that “advantages of a pipeline to the Mediterranean Sea seemed obvious, saving about 3,200 kilometers of sea travel and the transit fees of the Suez Canal”. [9] In 1945, the Trans-Arabian Pipeline Company (Tapline) was started and was completed in 1950. The pipeline greatly increased efficiency of oil transport, but also had its shortcomings. Issues concerning taxes and damages plagued it for years. It had to be shut down numerous times for repairs, and by 1983 was officially shut down. [9]
The Yom Kippur War was a conflict between Egypt, Syria and their backers versus Israel. The conflict was the continuation of a troubling historical pattern of conflict between Israel and the Arab world. Because the United States was a supporter of Israel, the Arab countries participated in an oil boycott of Canada, Japan, the Netherlands, the United Kingdom, and the United States. [10] This boycott later included Portugal, Rhodesia, and South Africa. This was one of the major causes of the 1973 energy crisis that occurred in the United States. [11] After the completion of the war, the price of oil increased drastically allowing Saudi Arabia to gain much wealth and power. [12]
The history of Qatar spans from its first duration of human occupation to its formation as a modern state. Human occupation of Qatar dates back to 50,000 years ago, and Stone Age encampments and tools have been unearthed in the Arabian Peninsula. Mesopotamia was the first civilization to have a presence in the area during the Neolithic period, evidenced by the discovery of potsherds originating from the Ubaid period near coastal encampments.
Saudi Aramco, officially the Saudi Arabian Oil Group or simply Aramco, is a state-owned petroleum and natural gas company that is the national oil company of Saudi Arabia. As of 2022, it is the second-largest company in the world by revenue and is headquartered in Dhahran. It has repeatedly achieved the largest annual profits in global corporate history. Saudi Aramco has both the world's second-largest proven crude oil reserves, at more than 270 billion barrels, and largest daily oil production of all oil-producing companies.
The Eastern Province, also known as the Eastern Region, is the easternmost of the 13 provinces of Saudi Arabia. It is the nation's largest province by area and the third most populous after the Riyadh and Mecca provinces. In 2017, the population was 4,900,325. Of these, 3,140,362 were Saudi citizens and 1,759,963 were foreign nationals The province accounts for 15.05% of the entire population of Saudi Arabia and is named for its geographical location relative to the rest of the kingdom.
Dammam is the capital of the Eastern Province of Saudi Arabia and the kingdom's fourth-most populous city, with a total population of 1,532,300 as of 2022. The judicial and administrative bodies of the province, in addition to the administrative offices of other minor governmental departments functioning within the province, are located in the city. The word itself is generally used to refer to the city, but may also refer to its eponymous governorate.
Khobar is a city and governorate in the Eastern Province of the Kingdom of Saudi Arabia, situated on the coast of the Persian Gulf. With a population of 409,549 as of 2022 in the city core and 658,550 in the governorate, Khobar is part of the 'Triplet Cities' area, or Dammam metropolitan area along with Dammam and Dhahran, forming the residential core of the region.
The Iraq Petroleum Company (IPC), formerly known as the Turkish Petroleum Company (TPC), is an oil company that had a virtual monopoly on all oil exploration and production in Iraq between 1925 and 1961. It is jointly owned by some of the world's largest oil companies and headquartered in London, England. However, today it is only a paper entity with historical rights and plays no part in the modern development of Middle Eastern oil.
Qatif or Al-Qatif is a governorate and urban area located in Eastern Province, Saudi Arabia. It extends from Ras Tanura and Jubail in the north to Dammam in the south, and from the Persian Gulf in the east to King Fahd International Airport in the west. This region has its own municipality and includes the Qatif downtown, Safwa, Saihat, Tarout Island, and many other smaller cities and towns.
Ras al-Khafji or Khafji (الخفجي) is a town on the border between Saudi Arabia and Kuwait. It lies in what was before 1970 the Saudi Arabian–Kuwaiti neutral zone.
Frank Holmes, known affectionately by Arabs as "Abu Naft", was a British-New Zealand mining engineer, geologist and oil concession hunter. Following distinguished service in World War I, he was granted the title of honorary Major and was thereafter known as Major Frank Holmes in his civilian life.
Karl Saben Twitchell was an American mining engineer. Twitchell was born in St. Albans, Vermont in 1885. After graduating from St. Albans High School, he attended the Kingston School of Mines at Queens University, Kingston, Ontario, graduating in 1908.
Uqair, alternatively spelled as al-'Uqair, Uqayr, and Ogair, is an ancient seaport city in the Al-Ahsa Governorate of the Eastern Province of Saudi Arabia. It is the first seaport in the Persian Gulf and has been linked by some to the ancient city of Gerrha mentioned in Greek and Roman sources. The site was also the location of the conference at which the Uqair Protocol of 1922 was issued, which helped to establish the borders of modern Saudi Arabia.
Max Steineke was a prominent American petroleum geologist. He was chief geologist at California-Arabian Standard Oil Co. (CASOC) from 1936 until 1950. His efforts, and persistence through repeated setbacks, led to the first discovery of oil in commercial quantities in Saudi Arabia, which took place at the well known as "Dammam No. 7" in March 1938. He graduated from Stanford University in 1921 with an AB degree in geology. Steineke died in 1952.
Dhahran is a city located in the Eastern Province, Saudi Arabia. With a total population of 143,936 as of 2022, it is a major administrative center for the Saudi oil industry. Together with the nearby cities of Dammam and Khobar, Dhahran forms part of the Dammam Metropolitan Area, which is commonly known as greater Dammam and has an estimated population of 2.2 million as of 2022.
Articles related to Saudi Arabia include:
Al-Ahsa Oasis, also known as al-Ḥasāʾ (الْحَسَاء) or Hajar (هَجَر), is an oasis and historical region in eastern Saudi Arabia. Al-Ahsa Governorate, which makes up much of the country's Eastern Province, is named after it. The oasis is located about 60 km (37 mi) inland from the coast of the Persian Gulf. Al-Ahsa Oasis comprises four main cities and 22 villages. The cities include Al-Mubarraz and Al-Hofuf, two of the largest cities in Saudi Arabia.
Discovery! The Search for Arabian Oil is a non-fiction book written by Pulitzer Prize winning American author Wallace Stegner.
The Dammam metropolitan area, or Greater Dammam, is the largest metropolitan area in the Eastern Province of Saudi Arabia. It consists of "The Triplet Cities" of Dammam, Khobar, Dhahran, Qatif and their vicinities. It had a population of 2,742,800 as of the 2022 census. It is known for the arts, pearl culturing, entertainment and popular music and sports legacies. The area includes a variety of natural landscapes, parks, and beaches with a recreational coastline to the Persian Gulf. The Greater Dammam area is also known for being one of the cornerstones of the oil industry with the world's largest oil company and most valuable company, Saudi Aramco, being based in Dhahran, as a result of the first oil well being dug in the area.
The Al-Hasa Expedition was an Ottoman military campaign to annex the El-Hasa region of eastern Arabia. Ostensibly launched to assist Imam Abdullah bin Faisal in reclaiming control over Najd from his brother Saud bin Faisal, the underlying motive was Medhat Pasha's ambition to extend Ottoman dominion over the Persian Gulf.
Abdullah bin Suleiman Al Hamdan, commonly known as Abdullah Suleiman and also by his nickname Wazīr Kullī Shaīʾ, was the treasurer and long-term as well as first finance minister of Saudi Arabia (1932–1955). He was named "the minister of everything" due to his involvement in nearly all state affairs which included agriculture, transportation and mining resources among the others. During the reign of King Abdulaziz he was the most significant non-royal official.
Dammam No. 7 is the oil well where commercial quantities of oil were first discovered in Saudi Arabia in 1938.
