Saudi Aramco is a Saudi Arabian national petroleum and natural gas company based in Dhahran, Saudi Arabia. Saudi Aramco's value has been estimated at up to US$10 trillion in the Financial Times, making it the world's most valuable company.Saudi Aramco has both the largest proven crude oil reserves, at more than 260 billion barrels (4.1×1010 m3), and largest daily oil production. Headquartered in Dhahran, Saudi Arabia, Saudi Aramco operates the world's largest single hydrocarbon network, the Master Gas System. Its yearly production is 3.479 billion barrels (553,100,000 m3), and it managed over 100 oil and gas fields in Saudi Arabia, including 284.8 trillion standard cubic feet (scf) of natural gas reserves. Saudi Aramco owns the Ghawar Field, the world's largest oil field, and the Shaybah Field, another one of the world's largest oil fields.
Saudi Aramco's origins trace to the oil shortages of World War I and the exclusion of American companies from Mesopotamia by the San Remo Petroleum Agreement of 1920. The US Republican administration had popular support for an ‘Open Door’ policy, which Herbert Hoover, secretary of commerce, initiated in 1921. Standard Oil of California (SoCal) was among those US companies actively seeking new sources of oil from abroad.
SoCal through its subsidiary company, the Bahrain Petroleum Co. (BAPCO), struck oil on Bahrain in May 1932. This event heightened interest in the oil prospects of the Arabian mainland. On 29 May 1933, the Saudi Arabian government granted a concession to SoCal in preference to a rival bid from the Iraq Petroleum Co.. The concession allowed Socal to explore for oil in Saudi Arabia. SoCal assigned this concession to a wholly owned subsidiary called California-Arabian Standard Oil Co. (CASOC). In 1936, with the company having had no success at locating oil, the Texas Oil Co. (Texaco) purchased a 50% stake of the concession.
After four years of fruitless exploration, the first success came with the seventh drill site in Dhahran in 1938, a well referred to as Dammam No. 7. This well immediately produced over 1,500 barrels per day (240 m3/d), giving the company confidence to continue. On 31 January 1944, the company name was changed from California-Arabian Standard Oil Co. to Arabian American Oil Co. (or Aramco). In 1948, Socal and Texaco were joined as investors by Standard Oil of New Jersey (Esso) which purchased 30% of the company, and Socony Vacuum (later Mobil) which purchased 10% of the company, leaving Socal and Texaco with 30% each. The newcomers were also shareholders in the Iraq Petroleum Co. and had to get the restrictions of the Red Line Agreement lifted in order to be free to enter into this arrangement.
In 1950, King Abdulaziz threatened to nationalize his country's oil facilities, thus pressuring Aramco to agree to share profits 50/50. A similar process had taken place with American oil companies in Venezuela a few years earlier. The American government granted US Aramco member companies a tax break known as the golden gimmick equivalent to the profits given to King Abdulaziz. In the wake of the new arrangement, the company's headquarters were moved from New York to Dhahran.
In 1973, following US support for Israel during the Yom Kippur War, the Saudi Arabian government acquired a 25% stake in Aramco. It increased its shareholding to 60% by 1974, and finally took full control of Aramco by 1980, by acquiring a 100% percent stake in the company. Aramco partners continued to operate and manage Saudi Arabia's oil fields. In November 1988, a royal decree changed its name from Arabian American Oil Co. to Saudi Arabian Oil Co. (or Saudi Aramco) and took the management and operations control of Saudi Arabia's oil and gas fields from Aramco and its partners. It officially cut all oil supply to Israel the same year by order of the CEO. Following the events that unfolded in 1988, Saudi Aramco became a fully owned, privately held company. Saudi Aramco was the world's largest company with an estimated market value of $781 billion in 2005.