Saudi Aramco

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Lore & Background

Saudi Aramco's origins trace to the oil shortages of World War I and the exclusion of American companies from Mesopotamia under the San Remo Petroleum Agreement of 1920. In 1932, Standard Oil of California (SoCal) discovered the first oil field in the Persian Gulf outside Iran via its Bahrain subsidiary. The Saudi government granted a concession to SoCal, which assigned it to California-Arabian Standard Oil Company (CASOC). After four years of fruitless exploration, the seventh drill site in Dhahran in 1938, Dammam No. 7, produced over 1,500 barrels per day. The company was renamed Arabian American Oil Co. (Aramco) in 1944. In 1950, King Abdulaziz threatened nationalization, leading to a 50/50 profit-sharing agreement, and headquarters moved from New York to Dhahran. In 1973, following US support for Israel during the Yom Kippur War, the Saudi government acquired a one-quarter participation interest, increased to sixty percent in 1974. In November 1988, a royal decree created the Saudi Arabian Oil Company (Saudi Aramco) to take control of former Aramco assets.

Reader's Guide

Saudi Aramco is a central entity in global energy markets, holding the world's largest proven crude oil reserves (over 270 billion barrels) and the largest daily oil production among oil-producing companies. Its operations include the Master Gas System, the world's largest hydrocarbon network, and fields like Ghawar and Safaniya. The company's 2019 initial public offering on the Saudi Exchange saw its market capitalization surpass US$2 trillion, though it fell to about US$1.66 trillion by November 2025. In 2024, Saudi Aramco was responsible for more CO2 emissions than any other entity (1,653 Mt CO2, or 4.28% of global emissions), including Scope 3 emissions from oil use. Its history includes a major strike in 1953, expansion during the Persian Gulf War, and involvement in sports partnerships with FIFA and Formula One in the 2020s. The company's evolution from a US-led consortium to a state-owned national champion reflects broader geopolitical shifts in oil control.

Did You Know?

• Dammam No. 7, the well that confirmed oil in Saudi Arabia in 1938, immediately produced over 1,500 barrels per day.
• In 1950, King Abdulaziz threatened to nationalize oil facilities, forcing Aramco into a 50/50 profit split—the US government then gave member companies a tax break called the 'golden gimmick'.
• During the Persian Gulf War in 1990, Aramco ramped production from 5.4 million barrels per day in July to 8.5 million in December after a three-month de-mothball effort.
• Saudi Aramco's market capitalisation surpassed US$2 trillion on the second day of trading in December 2019, but fell to about US$1.66 trillion by November 2025.
• In 2024, Saudi Aramco was responsible for 1,653 Mt CO2 emissions, or 4.28% of global CO2 emissions—more than any other single entity.

From Desert Dust to Global Giant

The story of Saudi Aramco begins not in Saudi Arabia but in the aftermath of World War I, when oil shortages and the San Remo Petroleum Agreement of 1920 locked American companies out of Mesopotamia. President Hoover's 'Open Door policy' in 1921 pushed Standard Oil of California to seek new sources abroad. In 1932, its Bahrain subsidiary found the first oil field in the Persian Gulf outside Iran, and the Saudi government then granted SoCal a concession over a rival Iraq Petroleum Company bid. After four years of fruitless drilling, the seventh well at Dhahran—Dammam No. 7—struck oil in 1938, immediately yielding over 1,500 barrels daily. Texaco had joined the venture in 1936, and by 1947, Standard Oil of New Jersey and Socony Vacuum had acquired additional stakes, reshaping the shareholder landscape. The company was renamed Arabian American Oil Co. in 1944. By 1949, Aramco's incursions into the Emirate of Abu Dhabi had sparked a border dispute with Saudi Arabia, foreshadowing the geopolitical tensions that would later reshape the company's ownership.

The World's Largest Hydrocarbon Machine

Saudi Aramco operates what is arguably the most concentrated hydrocarbon infrastructure on Earth. It manages over one hundred oil and gas fields within Saudi Arabia, holding more than 270 billion barrels of proven crude reserves and 288.4 trillion standard cubic feet of natural gas. Two fields define its dominance: Ghawar, the world's largest onshore oil field, and Safaniya, the largest offshore field, both situated along the Eastern Province. In 2024, the company produced 12.7 million barrels of oil equivalent per day—the highest daily output of any oil-producing company on the planet. Its Master Gas System, the world's largest single hydrocarbon network, traces its origins to a 1975 Master Gas Plan that redirected associated gas from flaring toward power generation. By 1985, the system had incorporated a billion standard cubic feet per day of non-associated gas drawn from the Khuff Formation, a limestone layer 650 metres below the oil-producing Arab Zone. Further discoveries in the deeper Jawf sandstone led to processing plants at Hawiyah and Haradh, ultimately expanding the network to 9.4 billion standard cubic feet per day.

The Long Road to Sovereignty

For decades, Aramco was an American enterprise operating on Saudi soil. That changed through a series of confrontations. In 1950, King Abdulaziz threatened to nationalize the country's oil facilities, forcing Aramco into a 50/50 profit-sharing arrangement; the US government offset this with a tax break called the 'golden gimmick' for its member companies, and headquarters relocated from New York to Dhahran. The decisive shift came after the 1973 Yom Kippur War, when US support for Israel prompted Saudi Arabia to acquire a one-quarter participation interest, which it expanded to sixty percent by 1974. Aramco continued managing the assets on the government's behalf until November 1988, when a royal decree established the Saudi Arabian Oil Company—Saudi Aramco—as a sovereign entity, fully absorbing control of the nation's oil and gas fields from the former American partners. In the years that followed, high-quality oil and gas were discovered in three areas south of Riyadh, further cementing the company's domestic resource base.

Trillion-Dollar Stock and a Carbon Footprint

On 11 December 2019, Saudi Aramco's shares began trading on the Saudi Exchange, opening at 35.2 riyals and briefly surpassing a US$2 trillion market capitalisation on the second day. Yet by November 2025, the stock had retreated to 25.8 riyals, valuing the company at roughly US$1.66 trillion—an approximately US$800 billion decline since 2022, among the largest corporate value losses in history. The company's environmental footprint is equally staggering. In 2024, accounting for Scope 3 emissions from the combustion of its sold oil, Saudi Aramco was responsible for 1,653 megatonnes of CO2, or 4.28 percent of all global emissions—more than any other single entity. Meanwhile, in the 2020s the company expanded its brand visibility through sports partnerships, becoming a FIFA and Formula One partner, including backing the Aston Martin constructor.