Saudi Arabia is a country that is well-known for its vast oil reserves. The country is the world’s largest producer and exporter of oil, and has one quarter of the world’s known oil reserves – more than 260 billion barrels. In this article, we will explore the factors behind Saudi Arabia’s oil wealth, including its history, reserves, and production.
History of Oil in Saudi Arabia
Oil was first discovered in Saudi Arabia in March 1938, at a well called Dammam No. 7. The discovery of oil transformed the country’s economy, which was previously based on agriculture and pilgrimage. The Saudi government established the Arabian American Oil Company (ARAMCO) in 1933 to explore and develop the country’s oil reserves. In 1980, the Saudi government bought out ARAMCO and established the Saudi Arabian Oil Company (Saudi Aramco), which is now one of the world’s largest integrated energy and chemicals companies.
Reserves of Oil in Saudi Arabia
Saudi Arabia possesses approximately 17 percent of the world’s proven petroleum reserves and ranks as one of the largest net exporters of petroleum. The country has the second-largest proven oil reserves in the world, with more than 260 billion barrels. Most of these reserves are located in the Eastern Province, including the largest onshore field in Ghawar and the largest offshore field at Safaniya in the Arabian Gulf.
Production of Oil in Saudi Arabia
Saudi refineries produce around 8 million barrels of oil per day, and there are plans to increase production to around 12 million barrels per day. In 2020, Aramco’s average hydrocarbon production was 12.4 million barrels per day, including 9.2 million barrels per day of crude oil. As of June 2022, Saudi Arabia was producing 10.3 million barrels per day of crude oil.
Factors Behind Saudi Arabia’s Oil Wealth
There are several factors behind Saudi Arabia’s oil wealth, including:
Vast Reserves:
Saudi Arabia’s vast oil reserves are the primary factor behind the country’s oil wealth. The country possesses approximately 17 percent of the world’s proven petroleum reserves, which are concentrated in the Eastern Province.
Strategic Location:
Saudi Arabia’s strategic location in the Middle East has also contributed to its oil wealth. The country is located near major oil-consuming countries such as China, India, and Japan, making it a key player in the global oil market.
Government Control:
The Saudi government has played a significant role in the development of the country’s oil industry. The government established ARAMCO in 1933 to explore and develop the country’s oil reserves. In 1980, the Saudi government bought out ARAMCO and established Saudi Aramco, which is now one of the world’s largest integrated energy and chemicals companies.
Investment in Infrastructure:
The Saudi government has invested heavily in the infrastructure needed to extract, refine, and transport oil. This includes pipelines, refineries, and ports.
OPEC Membership:
Saudi Arabia is a founding member of the Organization of the Petroleum Exporting Countries (OPEC), which was established in 1960 to coordinate and unify the petroleum policies of its member countries. OPEC has played a significant role in regulating the global oil market and ensuring stable prices.
Conclusion
Saudi Arabia’s oil wealth is the result of several factors, including its vast reserves, strategic location, government control, investment in infrastructure, and OPEC membership. The discovery of oil in Saudi Arabia transformed the country’s economy and established it as a major player in the global oil market. By understanding the factors behind Saudi Arabia’s oil wealth, we can gain insights into the country’s economy and its role in the global oil market.