Saudi Aramco
| Case Code: FINC136 Case Length: 16 Pages Period: 2016-2017 Pub Date: 2018 Teaching Note: Available |
Price: Rs.400 Organization: Saudi Aramco Industry: Oil and Gas Countries: Global Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Aramco: A Brief History
In the early 20th century, religious pilgrims to Makkah and Madinah provided the Kingdom with its main source of income. As the number of travellers dwindled during the economic slowdown of the 1920s, the Kingdom was forced to find alternative stable sources of revenue. King Ibn Saud learned about the developments in oil exploration in neighbouring Bahrain and released proposals for oil exploration with the help of foreign experts.
The formation of Aramco dated back to 1933 when an oil concession agreement was signed between Saudi Arabia and Standard Oil Company of California, U.S. Later, a subsidiary called California Arabian Standard Oil Company (Casoc) was formed to operate the oil concession. For the next two years, extensive aerial and geological surveys were conducted to explore oil and in 1935, the first oil wells were drilled. The company generated employment for many Saudis. The year 1939 saw the export of the first tanker load of petroleum. In 1944, Casoc became Arabian American Oil Company or Aramco.
In 1973, the Saudi government bought a 25% stake in Aramco and then increased the stake to 60% the following year. The buyout was completed in 1988. Aramco thus became a 100% state-owned company. It was reported that the acquisition amounted to $1.5 billion. The new nationalized company owned by the Saudi government was called Saudi Aramco...
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