The Kingdom of Saudi Arabia is the largest producer and exporter of petroleum liquids in the world and the second largest producer of crude oil after Russia. To date, its economy is highly dependent on oil and petroleum-related industries including petrochemicals and petroleum refining.

With increased economic development, the kingdom has seen a lot of success in its oil and gas industries, making it the largest in the country. The economy is petroleum-based with approximately 75 per cent of its budget revenues and 90 per cent of its export earnings coming from the oil and gas industry. The country’s comes from approximately 45 per cent oil and 40 per cent from the private sector and the country is home to 260 billion barrels of oil reserves—one-fifth of the world’s petroleum reserves.

In the 1990s Saudi Arabia experienced a change in oil revenues because of the high rate of population growth. At the height of the oil boom in 1981 income stood at $11,700 per capita, and fell to $6,300 in 1998. In 2007, oil price increases boosted Saudi Arabia’s per capita GDP to $17,000.

Saudi Oil

In 1933, the government of Saudi Arabia worked with Standard Oil of California to explore and produce oil in the eastern parts of the country. Since its inception, it has evolved into the Saudi Arabian Oil Company, known globally as Saudi Aramco, the world’s No. 1 petroleum company.

Saudi Aramco, the state-owned national oil company, is widely regarded as the world’s most valuable company. Headquartered in Dhahran, Saudi Arabia, it is responsible for the operation of all of Saudi Arabia’s oil and gas exploration, production and distribution.

The company’s yearly production of oil is approximately 3.4 billion barrels and it also manages more than 100 oil and gas fields in Saudi Arabia. Amongst its portfolio, is the 100 per cent-owned Ghawar Field, the world’s largest oil field, and the Safaniya Field, the world’s largest offshore field.

From 1933 the company worked for five years in exploration near Jabal Dhahran and oil was discovered in 1938. This is widely considered to be the nation’s beginnings as an oil producing country, and Jabal Dhahran has become famous for being the first place that Saudi Arabia struck oil. In May of 1939, the first shipment of Saudi Oil was exported to the international market from the new Ras Tanura port on the Arabian Gulf.

Since 110 fields have been discovered in the country and the majority have been oil fields with some oil and gas, gas only or condensates fields. By the end of 2006, its oil reserves were at about 260 billion barrels and its oil production averaged 8.9 million barrels per day, making up 11 per cent of the world production. Currently, Saudi Oil comes in five different grades: Arabian heavy, medium, light, extra light and super light.

Saudi gas

In the 1970s the Saudi government developed a plan to use its gas to provide fuel and feedstock for various industries. Saudi Aramco designed and constructed the Master Gas System, which was the world’s largest project undertaken by a single company. This network of gas collecting facilities and processing created a backbone for the development of Saudi Arabia’s gas industry and made Saudi Aramco the world’s largest exporter of liquefied petroleum gas.

In the past two decades, Saudi Aramco created a gas program aimed at increasing the capacity of the Master Gas System’s facilities and expanding the company’s exploration programs. Because of these efforts the reserves of Saudi Arabia’s non-associated gas grew throughout the past decade from 45 trillion cubic feet in 1993 to 95 trillion cubic feet in 2003.

With major gas projects from Saudi Aramco such as the completed Hawiyah and Haradh Gas Plants, natural gas became readily available across Saudi Arabia in order to meet the industry demands and public demands of power generation.

The development of Saudi Gas is also in part due to the National Gas Initiative which was a government launched joint venture between Total, Shell, Repsol, Eni, Luke Oil, SINOPEC and Saudi Aramco.

Long-term goals and targets

According to the U.S-Saudi Arabian Business Council, Saudi Arabia’s long-term goals centre on further development of its lighter crude oil reserves. Regarding the global financial crisis, Saudi Arabia was affected negatively which resulted in a drop of oil revenues. The government responded swiftly by continuing its programs in structural reforms and focusing on infrastructure projects in the country—two areas of development it has a record of success rate in mastering.

In 2002 the Supreme Economic Council approved a privatization strategy directed at advancing Saudi Arabia’s privatization drive and expanding the role of private sector and foreign investments in oil and gas, petroleum and energy services. Private investment is a major issue for Saudi Aramco, with the country announcing that a lot of its new production targets will be met through these means.  Until 2000 foreign companies were limited to a 49 per cent share of joint ventures with Saudi domestic partners. Following that year a new law was issued aimed at attracting foreign investment in the country’s energy sector. Under this law, companies were permitted full foreign ownership of Saudi property and licensed projects that have been set up by the Saudi Arabian General Investment Authority.

The Saudi Arabian Ministry of Petroleum and Mineral Resources has announced plans to spend approximately US$60 billion on upstream and downstream operations leading to 2014. This is a great commitment to industry on the part of the country, with a budget that includes funding for 144 projects including 14 projects valued at more than US$1 billion, 30 large projects, 17 medium projects and 80 small projects. Saudi Arabia’s oil and gas industry has had a tremendous history. From small beginnings and first striking oil in the 1930s, it has become a world-leading petroleum country with a national economy founded and built on its strength and abundance of natural resources—the largest producer and exporter of petroleum liquids on the globe.

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