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History of Saudi Arabia and the Oil Industry

The present day kingdom of Saudi Arabia was established in 1932 after a long battle by Abd al -Aziz Al- Saud to unite the tribal affiliates of the Arabian peninsular. The kingdom originated from the 18th century Wahhabi movement which incorporated the central Arabian Saud family which controlled the greater part of the peninsular with an exception of southern extremities which included Yemen and Hadhramaut. However, le by Muhammad Ali’s sons, the Egyptians brought down the Wahhabi movement between 1811 and 1818. The Wahhabis managed to regain their control of central Arabia after defeating the Egyptians but it later fell under the Rashid dynasty who had managed to overpower them in 1891. By 1901, the Al Rashid dynasty was defeated by Abdul Aziz who then managed regain control of Riyadh which was then the ancestral capital of the Al- Saud (Bowen, 83). Several battles in the following years saw the conquering of the Al-Hasa, the Hejaz as well as the remaining portion of Nejd. After the unification of the regions which Abdul Aziz had gained control of, which included Mecca, Jebed Shammar and Medina, the present day kingdom of Saudi Arabia was born under the leadership of the late Abdul Aziz Al-Saud who was popularly known as Ibn Saud. The kingdom was then a monarchy governed by the Muslim law known as Sharia, a derivative of the holy Quran. The following year saw the incorporation of the Asir region as part of the kingdom.

Saudi Arabia which forms the greater part of the Arabia peninsular has a rich Islamic history owing to the fact that the first Arabs are thought to have originated from there. It is also the historical home of the Islamic religion; the second largest in the world, which was founded by Muhammad in the same place. It is also where Mecca and Medina, the Muslim’s holy pilgrimage cities are located. Mecca remained as the spiritual epicenter of Islam though it d id not play any political or adminstrativre role. When the kingdom of Saudi Arabia was established, Riyadh, the ancestral capital became the capital city of the kingdom. King Abdul Aziz ruled the kingdom till 1953 and was succeeded by his eldest son King Saud upon his demise. After King Saud died in 1964, King Faisal took the leadership of the monarchy. He was good in foreign relations and demonstrated a keen sense of financial responsibility as opposed to his predecessor who was a spendthrift. However, he was assassinated supposedly by his nephew and King Khalid took over leadership till 1982 when he was succeeded by King Fahd. Following his death in 2002, the then crown prince Abdullah became King.

The discovery of oil in several areas of the Persian Gulf gave an indication of a possibility of oil deposits in Saudi Arabia. This led to the discovery of oil by the in 1936 by the U.S based Standard Oil Company which later changed its name to Arabian American Oil Company (ARAMCO). However, according to Al-Rasheed (93), commercial exploitation of oil began in 1938. Due to the proximity of the Saudi Arabian oil to the surface, it was cheap to exploit. The oil industry became the backbone of the economy. The kingdom entered into several concession agreements with the then ARAMCO and its subsidiaries culminating into a fifty – fifty profit sharing agreement with the government in 1950. This led to increase in government revenues from the oil industry. The production of crude oil and its derivatives increased drastically due to the rapid expansion of facilities used for production. The government formed the General Petroleum and Mineral Organization (PETRONIM) in 1962 whose mandate was to develop petroleum, natural gas as well as mineral based industries in collaboration with other investors. Years later in 1988, another company; the Saudi Arabian Marketing and Refining Company (SAMAREC) was created and was charged with the responsibility of the production and marketing of petroleum products , both domestic and abroad as well as upgrading domestic refineries. According to Shoult (342), Saudi Arabia has the world’s greatest oil reserves which accounts for 25%of world reserves with crude oil reserves estimated at 259.2 billion barrels and its key capacity production objective is 10 million barrels per day. It is also estimated to have sufficient oil reserves for about 100 years at the current production rate (shoult 342).

References

Al-Rasheed, Madawi. A History of Saudi Arabia. London: Cambridge University press, 2002. Print.

Shoult, Anthony. Doing business with Saudi Arabia. London: GMB Publishing LTD, 2006. Print.

Wayne, Bowen. The History of Saudi Arabia. Connecticut: Greenwood Publishing Group, 2008. Print.