Global Oil Market Before and After Oil Extraction in Saudi Arabia

Topics: Saudi Arabia, Petroleum, United Arab Emirates Pages: 6 (1940 words) Published: March 16, 2014

Global Oil Market Before and After Oil Extraction in Saudi Arabia


A.Exploring the Oil in KSA4
B.Middle East Economy5
A.Global Market before and after Saudi Oil Exploration6
B.Current Position of Global Oil Market6
C.Worldwide Oil Consumption7
1. Comparison between OECD and Non-OECD Countries7
B.Saudi Arabia role in OPEC9
A.Recommendations & Conclusion10

Global Oil Market Before and After Oil Extraction in Saudi Arabia INTRODUCTION
Before the massive oil reserves were uncovered in late 1930’s by geologists, Saudi Arabia was vaguely known around the world for its vast desserts and as a sanctuary for the holy Muslim sites. One cannot say that the economy of Saudi Arabia was poor before they started extracting oil, but at the same time calling it an ‘economy’ is an overstatement in itself because their GDP was non-existent; they can be called as self-sufficient. The situation reversed, as KSA (Kingdom of Saudi Arabia) was successful in discovering the largest oil reserves of the world in the country which made it one of the world’s richest economy and lined it among the powerful nations of the world (Zuhur, 2011). Throughout 1960’s and 1970’s Saudi Arab’s followed a path of rapid economic development (CNN, 2006). Petroleum liquids take up to for more than 90% of the country’s exports and about 75% of government revenues are accounted by these exports. (CIA, 2013). By earning abnormal profits on oil exports Saudi Arabia became one of the fastest growing economies in the world. The substantial surplus they accumulated as profits by trading oil was used to improve infrastructure of the country and considerable development was made possible as the country became a hub for foreign investment. (Saudi Arabia: Economy, 2011) A. Exploring the Oil in KSA

The process of discovering oil was initiated by King Abd al-Aziz Al Sa'ud who signed an oil concession agreement with Standard Oil Company of California (US). Up till that moment there was no evidence of oil reserves in KSA. American geologists began detail work on geological structure in Saudi Arabia and soon started the process of exploration. They first started desert exploration and then started drilling the ground for oil. In 1935, by effort of professional American wildcatters and locally trained Arab helpers the first oil well reserve was discovered and was named as Dammam No.1. The same year, Dammam No.2 was drilled. In a few months, Damman rilling program expanded and by the mid of the same year Damman No.3, 4, 5 and 6 were authorized to be drilled. As the deed was done, the results brought a haze of disappointment to the drilling program. The first well they discovered was initially not considered as a great achievement, as the flow was only 100 barrels a day, which wasn’t deemed worthy of commercial production. Dammam No.2 gave a positive outlook to the much disappointed geologists and wildcatters. The test results showed that the well was able to support 3840 barrels a day which however fell to 255 barrels in a week. Same was the result with No.3 as it never flowed more than 100 barrels a day. No. 4 was a complete disappointment, as it was nothing but a dry hole. Similarly No.5 and No.6 didn’t yield much oil to base commercial production on it. (World, 2013) Soon after Damman No.7 was drilled in but the process was troublesome as it was the deepest well authorized to be spudded in. By 1937, the drill was dug deeper and deeper as the tests results kept claiming no oil. In 1938, the effort of Standard Oil Company of California which was later named as ARAMCO (Arabian American Oil Company) was met with success as Dammam No.7 flowed to a consistent rate of 3690 barrels a day. (World, 2013). From this point onwards various...

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