Oil Discovery in Saudi Arabia – From Early Efforts to Recent Events

The discovery of oil is a major event in the history of Saudi Arabia. After all, it transformed us from just a large desert kingdom to one of the world’s leading oil producers. Besides, oil discovery also reshaped the Saudi economy, society, and geopolitical situation.  From the initial explorations to the establishment of the Arabian American Oil Company (Aramco), there is so much for you to know about the oil discovery journey. So, gear up, and read this blog till the end.

The Discovery of Oil in Saudi Arabia – History & Recent Developments

The first-ever event of oil discovery in Saudi Arabia occurred in 1938 when a well named Dammam No. 7 struck oil in the Eastern Province. Undoubtedly, it was a groundbreaking discovery in the history of KSA. Over the decades, the country has developed vast oil fields and become one of the largest oil producers in the world. Let’s walk you through all the events that made us a notable body in the oil industry.

Early Historical Events

The search for oil in Saudi Arabia started in the early 20th century. This started somewhere around when the unification efforts began. The main reason to start this search was the increasing global need for petroleum. Before oil was discovered, the Arabian Peninsula was mostly known for its large deserts and nomadic tribes. Moreover, the economy initially depended on farming and trade. However, after World War I, the political situation changed. As a result, the Western countries began to see the region’s strategic importance in terms of natural resources. 

Important:
Standard Oil Company of California (SoCal) exploration efforts beginning in 1933 were a major turning point in the discovery of Oil in Saudi Arabia.

In the 1920s, many foreign companies started exploratory efforts in the kingdom. However, these early attempts were hardly successful. The first significant exploration was conducted by the Standard Oil Company of California (SoCal). It started when King Abdulaziz signed a concession in 1933 with the company. This marked a turning point. After all, it set the foundation for more extensive exploration efforts throughout the coming years.

Events Leading Up to Oil Discovery

King Abdulaziz was the one to recognize oil’s potential to change a country’s potential. His cooperation with foreign oil companies was essential for bringing investment and expertise to the country. In 1936, the Standard Oil Company of California (SoCal) created a subsidiary called the Arabian American Oil Company (Aramco). The company majorly focused on finding oil in Saudi Arabia. Throughout the search, it faced many challenges, such as tough desert conditions and a lack of infrastructure. But, their hard work and new technology eventually paid off.

Important:
Oil was discovered in Dammam Oil Well no. 7 in March 1938. 

However, the big breakthrough happened in 1938 when the Dammam No. 7 Well hit oil, producing about 1,500 barrels a day. This discovery confirmed that there were large oil reserves in the area. Hence, this marked the start of a new economic era for Saudi Arabia. Eventually, Saudi Arabia became a major player in the global oil market.

The Role of the Arabian American Oil Company (Aramco)

The Arabian American Oil Company has been very important in developing the oil industry in Saudi Arabia. Because of its constant efforts, the country turned into one of the world’s top oil producers. Aramco was established by SoCal to explore and develop oil resources in the region. In fact, this initiated a series of partnerships between the Saudi government and foreign oil companies.

Did You Know?
“Aramco had been closely associated with the Saudi Oil Industry throughout its initial years.”

After the 1938 breakthrough, the company quickly expanded its operations, and built the necessary infrastructure, refining facilities, and transportation networks to support oil production and export. The company also developed major oil fields, including the Ghawar Field – the largest conventional oil field in the world.

Aramco became a Saudi Owned Company

In 1973, the Saudi government started to take a more active role in the oil industry. As a result of this, they gradually gained more ownership of Aramco.  By 1980, the Saudi government made it a state-owned enterprise by fully owning it. Even after this change, Aramco continued to operate professionally and efficiently. Today, Aramco is the largest oil company in the world in terms of production volume and has a major role in the global energy market.  The company has also expanded into natural gas, petrochemicals, and renewable energy projects. It is also officially supporting Saudi Arabia’s Vision 2030 goals for economic growth and diversification.

Impact on Saudi Arabia

The discovery of oil proved quite beneficial for the Saudi economy, infrastructure, and society. Here are some of the major impacts it brought upon the kingdom:

1. Economic Growth

• The oil boom turned Saudi Arabia from a largely agrarian society into one of the wealthiest nations in the world.
• Oil exports became the primary source of government revenue and led to substantial investments in different sectors.
• The GDP of Saudi Arabia has grown exponentially since the mid-20th century – all because of oil production and export.

2. Infrastructure and Urban Development

• Massive investments in infrastructure, including roads, airports, and ports to improve the transportation of oil and goods.
• Major cities like Riyadh, Jeddah, and Dhahran experienced rapid urbanization, with modern buildings and amenities emerging to support a growing population.
• Use of Oil revenue to diversify the economy beyond it, in sectors like construction, manufacturing, and tourism.

3. Social and Lifestyle Changes

• Increased national wealth led to improved living standards, with better access to education, healthcare, and modern amenities for many citizens.
• The government came up with social programs to improve the quality of life, including housing projects and job creation initiatives.
• Urbanization resulted in a shift from traditional lifestyles to more modern, diverse ways of living.

Recent Oil & Gas Discoveries

Saudi Arabia didn’t stop there. Its continuous efforts and collaborations led to the discovery of more oil and gas resources. In 2020, Saudi Aramco announced the discovery of two new oil and gas fields in the northern regions of the Kingdom: the Hadabat al-Hajara gas field in al-Jawf Province and the ‘Abraq al-Toloul’ oil and gas field in the Northern Borders Province. In the same year, the discovery of unconventional oil was made at the al-Reesh field, located northwest of Dhahran City. Other discoveries included unconventional gas at the Munhaz Well and the Sahba Well, both located southwest of the Ghawar field. This is not all! Here is all you need to know about the recent oil and gas discoveries:

Hadabat al-Hajara Gas Field:

• Located east of Sakaka, this field produced rich gas with condensates from the Sara reservoir.
• Initial flow rates reached 16 million standard cubic feet per day, along with around 1,944 barrels of condensates.

Abraq al-Toloul Oil and Gas Field:

• Situated southeast of Arar, this field yielded unconventional premium light Arabian oil from the Sharurah reservoir.
• The flow rate was 3,189 barrels per day with about 1.1 million standard cubic feet of gas per day.
• Also, gas flowed from the Qawwarah reservoir at a rate of 2.4 million standard cubic feet per day, with 49 barrels per day of condensates.

Al-Reesh Field:

• Al-Reesh Well No. 2 produced 4,452 barrels of very light Arabian oil and 3.2 million standard cubic feet of gas daily.
• Further drilling at Wells No. 3 and No. 4 confirmed the field’s richness. The initial extraction from Well No. 3 reached 2,745 barrels per day and Well No. 4 yielded 3,654 barrels per day.

Additional discoveries included unconventional gas at the Munhaz Well and the Sahba Well, both located southwest of the Ghawar field.

• Munhaz Well: Gas flowed at a rate of 18 million standard cubic feet per day, with 98 barrels of condensates.
• Sahba Well: Gas flowed at a rate of 32 million standard cubic feet per day.

Other Important Discoveries

Another significant discovery was made at the Ajramiyah Well No. 1, northwest of Rafha, where testing resulted in an oil flow of 3,850 barrels per day. Besides, in 2022, many new natural gas fields were discovered:

• Shedgum Natural Gas Field: It’s located 180 km southeast of Riyadh. Gas flowed from the Shedgum-1 well at a rate of 27 million standard cubic feet per day, with 3,300 barrels of condensates.
• Shahab Natural Gas Field: Found in the Empty Quarter region, gas flowed from the Shahab-1 well at a rate of 31 million standard cubic feet per day.
• Shurfah Natural Gas Field: It is also in the Empty Quarter. Here, gas flowed from the Shurfah-2 well at a rate of 16.9 million standard cubic feet per day, with 50 barrels of condensates.
• Um Khansar Unconventional Natural Gas Field: This field is located 71 km southeast of Arar City. Gas flows from the Um Khansar-1 well at a rate of 2 million standard cubic feet per day, with 295 barrels of condensates.
• Samna Unconventional Natural Gas Field: Situated south of the Ghawar field, the Samna-2 well produced gas at a rate of 5.8 million standard cubic feet per day and 24 barrels of condensates.
• Awtad Unconventional Natural Gas Field: This field was discovered southwest of the Ghawar field and here, the gas flowed from the Awtad-108001 well at a rate of 10 million standard cubic feet per day with 740 barrels of condensates.
• Dahna Unconventional Natural Gas Field: Located 230 km southwest of Dhahran City, gas flowed from the Dahna-4 well at a rate of 8.1 million standard cubic feet per day.

Challenges and Opportunities Ahead

Saudi Arabia’s oil industry has been the strongest pillar of its economy for decades. However, with opportunities come challenges. Therefore, the government’s Vision 2030 initiative aims to diversify the economy and reduce its dependence on oil. The main focus is to invest in non-oil sectors such as tourism, technology, and renewable energy to reduce reliance on oil revenues. Apart from this, the Kingdom must keep up with the global shift towards renewable energy. Simply put, the future of KSA with oil and natural gas is bright, but it can fully rely on just these two. This is why they are simultaneously focusing on making other economic means strong as well.

Conclusion

The discovery of oil transformed Saudi Arabia’s economy and global standing for good. From the initial exploration to recent oil and gas discoveries, the Kingdom has solidified its position as a leading oil producer. However, with the passing years, the government realized that fully relying on oil for the economy is a risky business. Hence, they are making efforts in diversifying their investments in the non-oil sectors too. By focusing on both the oil industry and non-oil sectors, the Kingdom aims to secure a prosperous future.