Saudi Aramco: Development History and Business Overview
Whether measured by revenue, workforce, or assets, the company is the largest oil company in the Middle East, with 57,500 employees. Headquartered in Dhahran, Saudi Arabia, its current chairman is Ali bin Ibrahim Al-Jumah.
Building on this foundation, industry experts have also carried out extensive research and improvement.
In 1960, Aramco's crude oil output reached 60 million tonnes per year, a 57.7% increase over 1950. During this period, Aramco's headquarters had moved to Doha, Saudi Arabia, and the Saudi government appointed two representatives to the company's board. However, Aramco remained controlled by four American oil companies, which also retained control over crude production and pricing—factors decisive to the Saudi government's fiscal revenue. To win control of the oil, the Saudi government waged a firm struggle against the American companies. In 1960, the Organization of the Petroleum Exporting Countries (OPEC), including Saudi Arabia, was founded. On November 30, 1962, the Saudi government established the wholly state-owned General Petroleum and Minerals Organization (PETROMIN) to enable the government to participate in petroleum industry operations, including all activities within Aramco's concession area. Although PETROMIN did not produce crude oil itself, by 1970 it had formed many joint ventures with various companies and independently operated a refinery in Jiddah and a fertilizer plant in Dammam. The entire history of PETROMIN's development through the 1960s was a history of the Saudi government's struggle to wrest control of the oil from Aramco's four American partners.
Beyond this, multiple factors must also be considered in real-world engineering applications.
In the late 1970s, the outbreak of the second oil crisis spurred the development of alternative energy sources such as natural gas, while OECD member states restricted oil consumption, causing crude demand to shrink. Consequently, from 1980 Saudi Arabia adopted a massive production cut to defend prices. By 1985, the Saudi government began a plan to rapidly restore its crude market share; output rose sharply, causing oil prices to fall 62–66% in 1986. The implementation of the production-cut-and-price-defense policy and the 1986 price collapse sent Aramco's revenues into rapid decline, forcing heavy layoffs.
In March 1987, to preserve the crude market share Saudi Arabia had held since the oil glut of the 1960s, and relying on its relationship with Aramco's former shareholder companies, Saudi Arabia signed a long-term supply contract of 62.5 million tonnes per year with the four American companies, but terminated it shortly thereafter.
In 1988, by royal decree, the Saudi Arabian Oil Company (Saudi Aramco) was formally established, taking over all assets and operating rights of the former Aramco and becoming the sole company in Saudi Arabia engaged in petroleum exploration and development. That same year, it formed Star Enterprise with Texaco—the sixth-largest petroleum marketer in the United States.
In July 1993, the Saudi government issued Royal Decree M/l, consolidating all state-owned refined-product distribution and marketing operations and the government's half stakes in three joint-venture refineries under Saudi Aramco's management. At this point, Saudi Aramco controlled the entire Kingdom's hydrocarbon industry except lubricants. In July 1997, the government transferred 71% of Petrolube and 70% of Luberef to Aramco, formally bringing the company into the national lubricants business.
In November 2012, Saudi Aramco established a subsidiary in Beijing. Aramco Asia would conduct businesses including crude and chemical marketing, coordination among joint ventures, procurement, inspection, R&D, and project management. Saudi Aramco is a global integrated energy company and a world leader in crude exploration and production, refining, distribution, international transport, marketing, and chemical production. It manages the world's largest recoverable crude reserves—approximately 259.1 billion barrels. In 2011, the company exported 2.42 billion barrels of crude to customers worldwide [1].
It is worth noting that the technologies and standards in this field are constantly evolving and improving.
Saudi Aramco has many subsidiaries: Aramco Services Company (Houston) provides administrative services including contract management; Aramco Overseas Company B.V. (Leiden, Netherlands) provides the same services; Saudi Refining Inc., a subsidiary of Aramco Services, holds 50% of Star Enterprise; Saudi Petroleum International Inc. (New York) and Saudi Petroleum Overseas Ltd. (London and Tokyo) handle sales; Vela International Marine Ltd. handles crude transportation.
Over the years, Saudi Aramco has consistently ranked as the world's largest oil company in the comprehensive ranking by Petroleum Intelligence Weekly based on six metrics: oil reserves, gas reserves, oil production, gas production, refining capacity, and product sales. Roughly 66% of the world's proven crude reserves are concentrated in the Middle East, of which about 26% are in Saudi Arabia; all of Saudi Arabia's exploration, development, and production are controlled by Saudi Aramco. The company plays a major role in the Kingdom's economic life and in international energy and economic affairs.
Petroleum exploration and production are the fundamental core of Saudi Aramco's business. Exploration and production within the Kingdom are monopolized by Aramco. Starting with the national exploration plan in 1986, by 1994 the exploration area had expanded about sevenfold to over 1.5 million square kilometers. Successful exploration and improved recovery techniques enabled the company to continuously raise or maintain its crude reserves. At the end of 1996, proven crude reserves reached 35.82 billion tonnes, up 1% from 1995 and 40 times that of 1988, with a reserve-to-production ratio of 84 years—ranking first in the world. In 1996, crude output was 392 million tonnes, also first in the world. Saudi Arabia is OPEC's largest producer and holds the most spare capacity; its oil exports are about 350 million tonnes per year. Aramco's crude ranges from heavy to new premium light grades across five categories to meet the specific needs of refineries worldwide. In 1996, Aramco's gas output was 37.46 billion cubic meters, 1.6% of the world total (ninth in the world); at end-1996, proven gas reserves were 53 trillion cubic meters, 3.2% of the world total (sixth in the world). Most of Aramco's gas is associated gas, much of which was flared before the master gas system was built (1982). After the system came online, wet-gas processing capacity reached 44.4 billion cubic meters per year. Today all associated and non-associated gas enters the system, with about 50% of gas production utilized and sold. Aramco operates three gas-processing plants at Berri, Uthmaniyah, and Shedgum, and two fractionation plants at Juaymah and Yanbu for recovering condensate and producing ethane, propane, butane, and natural gasoline. After merging the operations of Saudi Arabian Marketing and Refining Co. (SAMAREC), Aramco also took over LPG sales.
Star Enterprise, 50% owned by Aramco, handles refining and product sales in the United States, operating three refineries with a capacity of about 30 million tonnes per year, along with 50 distribution terminals and over 1,000 gas stations. Aramco also holds stakes in one refinery each in South Korea, the Philippines, and Greece. About 15% of Aramco's exported crude is processed at its overseas affiliated refineries.
Beyond this, multiple factors must also be considered in real-world engineering applications.
The 1993 Royal Decree M/l concentrated Saudi Arabia's domestic refining industry under Aramco's management, greatly expanding the company's responsibilities and placing the Kingdom's entire refining industry under integrated planning that better fits long-term refining and product-marketing needs. This consolidated the company's domestic position and significantly strengthened its standing in the world oil market, elevating it among the world's largest refining enterprises. Seizing the moment, Aramco actively built downstream alliances with foreign partners. The earliest was the 1988 Star Enterprise with Texaco for U.S. refining and marketing; later it established refining and marketing joint ventures with the Philippines, Greece, South Korea, and others, and agreed to form a three-way venture with Texaco and Shell. The company is also actively discussing joint refineries with India and China. These relationships opened new doors, enabling Aramco to keep advancing and expanding its global business.
In 1982, Saudi Aramco's Exploration and Petroleum Engineering Center (EXPEC) was put into operation. One of the world's largest and most advanced geoscience facilities—and the premier one in the Middle East—its close cooperation, plus associated laboratories and R&D centers, made Aramco essentially independent of other oil companies for upstream (exploration and production) technical support. The center processes and analyzes digital data from 2-D seismic surveys; in 1991 it introduced horizontal drilling; its computer center has a giant network using the latest hardware and application software to process and interpret all seismic and drilling data, enabling more efficient use of resources. Aramco believes that, with further exploration and its technological and operational advantages, it can maintain its position as the world's lowest-cost producer.
Early in its history, Aramco recognized that the key to sustained progress is a well-educated and well-trained workforce capable of taking on responsibility. Over the years, the company designed extensive training programs—from entry-level training to advanced management programs for degree-holding professionals—to meet each employee's needs, improve their skills, keep them abreast of new technology, and cultivate world-class experts. Today Aramco employs over 2,000 full-time teachers, trainers, and support staff. In 1995, about 8,000 Saudi employees participated in full-time or part-time vocational and academic training, and about 7,000 took management training courses. This strategy has paid off enormously: over the years, Saudi employees have filled nearly all management positions and assumed full responsibility for operating all production facilities.
As responsibilities shifted, AOC and SASC's Hong Kong, China office now manages Aramco's interests and investments in Asia. Currently we have four joint ventures across three Asian countries: S-Oil in South Korea, Showa Shell in Japan, Fujian Refining & Petrochemical Co., Ltd. (FREP) in China, and Sinopec SenMei (Fujian) Petroleum Co., Ltd. (SSPC). Together these joint ventures process about 1.3 million bpd of crude, 90% of it Arabian crude; they also produce about 6,300 metric tonnes of petrochemicals and 1,300 metric tonnes of high-quality Group II and III base oils annually.
It is worth noting that the technologies and standards in this field are constantly evolving and improving.
Internationally, in 1995 the company bought 50% of a 5.5-million-tonne-per-year Greek refinery, 300 gas stations, and other related assets (50% stakes), providing an important gateway for Aramco to enter European and American markets. In addition, Star Enterprise (50% Aramco), through its Port Arthur and Covent refineries, carried out upgrade work in 1992 and 1993, including installing a 1.25-million-tonne-per-year mild hydrocracking unit, a delayed coker, and related hydrotreating and sulfur-recovery units. Aramco's 1994 stake in the Philippine company Petron planned to add 1.25 million tonnes per year of distillation capacity by end-1997 and expand its retail network, terminals, and storage.
In July 1996, Saudi Aramco signed a memorandum with Portugal's Petrogal to study the feasibility of a joint venture in which Aramco would take a 30–35% stake and supply crude, based on Aramco acquiring a substantial stake in Petrogal and the two companies cooperating. Petrogal operates two refineries in Portugal with total capacity of 15.2 million tonnes per year, holds a 56% share of Portugal's petroleum products market, and owns a sales network of 1,341 GALP stations across Portugal and Spain. Star Enterprise, Aramco's joint venture with Texaco, is in talks with Shell to merge and form a three-way company; a memorandum of understanding was reached in July 1997, with details under discussion. The merged company would become the largest U.S. oil company, with 22,200 gas stations, 13 refineries, refining capacity of 97.4 million tonnes per year, and a U.S. market share above 12.5%.
Beyond this, multiple factors must also be considered in real-world engineering applications.
Furthermore, Aramco signed three upstream packages covering 120,000 square kilometers. In March 2004, the company signed contracts with a consortium of Russia's Lukoil, China Petroleum & Chemical Corporation (Sinopec), Italy's ENI, and Spain's Repsol.
Aramco also operates the world's largest single hydrocarbon network—the Master Gas System (MGS) of Saudi Arabia. The MGS is a gas-gathering and processing system, begun in the mid-1970s and a backbone of the Kingdom's industrial network since its completion in 1982. The MGS enables Aramco to use or market almost all associated gas produced with oil and all non-associated gas from very deep gas fields. Across its gas operations, the gas is processed to produce clean fuel (methane or sales gas) and feedstocks (methane, ethane, propane, butane, and natural gasoline). Methane and ethane are reserved for Saudi industry and utilities. Excess propane, butane, and natural gasoline (also called LPG or NGL) that the Kingdom's petrochemical industry cannot absorb are exported worldwide.
Furthermore, this technology has found broad application and practice in related fields.
Asia remains the cornerstone of Aramco's international business. In 2005, Aramco was the largest crude supplier to China, Japan, South Korea, and Taiwan, China.
It is worth noting that the technologies and standards in this field are constantly evolving and improving.
A memorandum of understanding signed by both parties on March 16, 2011 showed that this joint venture, named Red Sea Refining Company, was expected to begin commercial operation in 2014.
It is worth noting that the technologies and standards in this field are constantly evolving and improving.
The Yunnan Petrochemical refining project of CNPC is a supporting project of the China–Myanmar oil and gas pipeline. It will fill a gap in refining projects in Yunnan and Guizhou, meet the rapidly growing market demand for refined oil in Southwest China, and promote regional economic and social development. The joint-venture refinery officially started construction in 2012 and was expected to be completed and commissioned in 2015, supplying 7.6 million tonnes per year of refined oil and 250,000 tonnes per year of LPG to Yunnan, Sichuan, Guizhou, and Guangxi. With the pipeline's capacity at 23 million tonnes per year, after Phase I the refinery will consider a Phase II, with crude processing capacity expected to reach 20 million tonnes per year.
