Saudi Aramco: From ‘Prosperity Well’ to energy giant

DUBAI: From its beginnings in 1938 when it first struck oil with the aptly named “Prosperity Well”, Saudi Arabia’s energy giant Aramco, whose IPO could be announced today, has delivered unimaginable riches. Aramco is poised to sell a total of five percent on two exchanges, starting with an initial listing of two percent on the Tadawul Saudi bourse in December.

Over the decades, it has grown into the world’s largest and most profitable energy concern, generating some 10 percent of global crude supplies and trillions of dollars in income. The company is valued at between $1.5 and $1.7 trillion, with the combined listings set to raise $75 billion to $85 billion in the event that this valuation is achieved. Aramco was expected to launch the first part of the two-stage IPO in October, but the process was delayed, reportedly due to the prince’s dissatisfaction with the valuation, which fell short of a hoped for $2 trillion.

The energy giant has been hit by a recent string of attacks on its oil facilities, the latest and most serious halting the flow of 5.7 million barrels of oil per dayover half of its output-in drone strikes on September 14. The strikes had threatened to undermine plans for Aramco to make its stock market debut. The firm has its origins in a 1933 concession agreement signed by the Saudi government with the Standard Oil Company of California. Drilling began in 1935 and the first oil began flowing three years later.

It gained its current name from the subsidiary created to manage the agreement that was called the Arabia American Oil Company in the late 1940s. In 1949, oil production hit a milestone 500,000 barrels per day and the following year Aramco built the 1,212-kilometre (753mile) Trans-Arabian Pipeline to export Saudi oil to Europe across the Mediterranean Sea.

Production rose rapidly after the discovery of large offshore and onshore oilfields including Ghawar, the world’s largest with some 60 billion barrels of oil, and Safaniya, the biggest offshore field with 35 billion barrels. In 1973, with prices spiking at the peak of the Arab oil embargo-imposed against the US over its policy on Israel-the Saudi government acquired 25 percent of Aramco to increase its share to 60 percent and become a majority stakeholder.

Seven years later, it was nationalized, and in 1988 it became the Saudi Arabian Oil Company, or Saudi Aramco. From the 1990s, Aramco invested hundreds of billions of dollars in massive expansion projects, raising its oil output capacity to over 12 million bpd, alongside making bold international acquisitions and pursuing joint ventures.