Early oil years proved difficult for explorers

PUBLISHED : Friday, 23 September, 2011, 12:00am
UPDATED : Friday, 23 September, 2011, 12:00am

Saudi Arabia has emerged as a behemoth in the global oil and gas industry. Almost 80 years after oil was first sucked from beneath the sweeping desert sands, the country stands proud as the world's largest producer and exporter of oil.

It is estimated that Saudi Arabia maintains more than 260 billion barrels, more than any other oil-producing nation and representing a quarter of the world's proven reserves. However, the early oil years proved a difficult time for explorers who scratched around potential deposits on the east coast of the country with limited reward.

Modern Saudi Arabia was born in 1932 with the unification of the Hejaz and Nejd regions by King Abdul Aziz after a series of conquests that started in 1925.

One year after the formation of the Kingdom of Saudi Arabia, the government granted its first oil concession to Standard Oil of California (Socal), but now known as Chevron.

Socal raised hopes of an early killing with the second drill at Dammam 2 producing more than 3,800 barrels a day. The company bolstered its workforce to meet the expected increased load, but hopes faded as Dammam 2 gradually produced more water than oil.

The future looked grim as Dammam 3's capacity peaked at only 100 barrels a day, while Dammams 4 to 6 were either bare or produced only a trickle of oil. Three years later, Socal had sold half of the concession to the Texas Oil Company, now called Texaco, but the company endured another five barren years and had all but shut shop in Saudi. Only Dammam 7 was in operation.

In 1938, Socal chief geologist Max Steinke forged a close relationship with Bedouin Khamis Bin Ramthan, a friendship that sealed a special bond between Saudi and American oil companies that lasts until today.

Steinke was battling to save oil exploration in Saudi, as Socal was on the verge of shutting down operations. But on March 4, 1938, news emerged that Dammam 7 was flowing. It started with 1,585 barrels. A few days later, almost 3,700 barrels spurted out. In less than a month, Dammam 7 was pumping out more than 100,000 barrels. Steinke directed other drills to the same subterranean zone with similarly successful results, prompting Socal to breathe a huge sigh of relief as Saudi Arabia boasted its first commercial oil field. Initial exports were sent to Bahrain by barge and the first tanker laden with Dammam 7 oil was given a rousing send-off in 1939, as oil exploration intensified along the eastern part of the country.

In 1944, the company changed to Arabian American Oil Company, or Aramco as it is famously known now, eventually becoming one of the biggest companies in the world.

Four years later, the Saudi oil industry reached another milestone with the discovery of the Ghawar oil field. Measuring 280 kilometres by 30 kilometres, it is the largest oil field in the world. In 1950, construction was completed on the Trans-Arabia Pipe Line that connected the Eastern Province of Saudi Arabia with Lebanon and the Mediterranean.

Another large oil field, Safaniya, was discovered in 1950, with reserves of about 37 billion barrels and more than 5,000 billion cubic feet of natural gas.

Meanwhile, Aramco was establishing itself around the world as one of the premier suppliers of crude oil and natural gas, and proving diversification was profitable by producing liquefied petroleum gas in 1961.