Oil Production In Saudi Arabia - Essay Example

Oil production in Saudi Arabia Saudi Arabia boasts of having the largest oil reserves in the world with more than 280 billion barrels (45 x 109 m3). This represents about 25% of the total world oils. Large parts of oil reserves are located on the Eastern part of the country; Ghawar and Safaniya. The first sample of oil reserve was discovered in Dammam in the year 1938. Saudi Arabia is known to be a leading exporter of gas and oils, estimated to be 18% of all exported oils in the world. Within its boundaries oil and gas contributes to 50% of Saudi Arabia’s gross domestic products and about more than 85% of all exported earnings (Jones, 48).

With these statistics, it is undeniably true that Saudi Arabia’s contribution in the energy industry position’s herself as key player in the global economy. This paper therefore discusses the oil production in Saudi Arabia through understanding its history and development over the years. Statistics derived from organization of the petroleum countries (OPEC) in 2014 showed that Saudi Arabia’s value of exports from petroleum related products to be about $ 321, 723 million, and its current crude oil reserves standing at 265,789 million barrels.

In a whole ,oil related products, natural gas reserves constitute about 8317 billion cubic meters. Pushed by the demand for oil of about 1000 barrels per day , Saudi Arabia has increased its production capacity to be about 9637 barrels per day; this is about 2507 barrels per calendar day refinery capacity. Last year, Saudi Arabia’s export earnings came from natural gas with 100030 million cubic meters exported globally (Bronson, 56). Before Saudi Arabia controlled its oil industry, the first king of Saudi Arabia Abd al Aziz Ibn Abd granted oil concession in 1923 to British investment groups who exploited, and utilized the concession granted.

It is after the discovery of first oil reserve in 1938 that the concession agreement was changed to Aramco’s concession. It allowed an equal haring of profits between the company and the government on a fifty-fifty basis. With the discovery of large quantities of oil reserves in 1945, the use of pipeline was in evitable. The trans-Arabian pipeline company came into existence owned by Aramco’s group. After completion of the Tapline pipeline in 1950, it did collect oils from fields, and it was able to handle 480, 000 barrels per day.

Tapline continued to operate with a number of challenges coming from within and externally and in 1982; it was forced to stop its operations in Saudi Arabia (Branson, 45). After 1982 and onwards, Aramco had to change its operation, because Saudi Arabia was faced with development challenges like underdeveloped infrastructure, and facilities. The company started to construct everything including hospitals, offices, housing and ports. It embarked on training Saudi Arabia citizens to carry out many tasks, but at junior management levels, while senior levels were for management teams.

The areas that Aramcos offered to Saudi Arabia citizens’ trainings in empowering them included: oil drillers, truck driving, ship pilots, and mechanics. This in the long run was useful in promoting local economy (Toby, 40). After a period of long negotiations between Aramco and Saudi Arabia’s government, the company became a government owned institution in 1988, changing its name to Saudi Arabian Oil Company. The petromin’s company was established by Saudi Arabia’s Government in 1988 and was tasked with development and exploitation of domestic oil and gases.

In 1980, another company was established to take responsibilities of ‘Petromin’, it was known as Samarec (Saudi Arabian Marketing and Refinery Company). Samarec took all responsibilities concerned with exploitation of oils and other related activities (Bronson, 66). Since then the company has embarked on oil exploration in virgin fields with remarkable success. In conclusion, Saudi Arabia has continued to be a leading producer and supplier of oils. The country’s immense contribution towards the global economy and in the energy industry to be precise cannot be underestimated.

However, Saudi Arabia’s success story in the oil industry doesn’t come without challenges. The operation of desert storm (reduction of workers) and also after Iraqi attacks on storage facilities both slowed down production, but after the year 1992 peak levels were revived. More so, the issue of market pricing of oil still continues to be a glaring menace to this giant oil producing nation. A fall in oil price dictated by other forces beyond the country’s control always results to low profits if not losses to the producer.

Works citedRachel Bronson. Thicker than oil: American uneasy partnership with Saudi Arabia: New York: US, Oxford University press, 2006, pages 9-108. Toby Craig Jones. Desert Kingdom: how oil and water forged modern Saudi Arabia; New York: US, Harvard press, 2011. Pages 38-98.