In the second part of our blog series ‘oil and gas nations’, we explore the history and position of Saudi Arabia in the wider Oil & Gas Industry.
The Kingdom of Saudi Arabia has the second-largest proven oil reserves in the world. How did Saudi Arabia become the dominant player in the Oil & Gas Industry in less than a century?
A necessary search
Three events shaped the kingdom’s search for oil – the discovery of the resource elsewhere in the Middle East, the First World War and the Great Depression.
Following its discovery in north-western Persia, Saudi Arabia considered searching for its own sources of oil. Demand increased during World War I, as oil had become a crucial resource for warfare. It was needed for tanks, trucks and warships. As oil was one of the few resources the British Empire did not produce, access to Middle Eastern sources was a strategic priority.
The onset of the Great Depression in the 1930s removed a major source of income from taxes paid by pilgrims on their way to the holy cities. After the depression hit, the amount of pilgrimages dropped from more than 100,000 to 40,000, creating the need for a new financial resource in Saudi Arabia.
Commercial quantities of oil were not found until 1938, six years after the Kingdom of Saudi Arabia was proclaimed. The discovery was the first of many, culminating in the discovery of the largest source of crude oil in the world. By 1939 the kingdom had begun to export its oil.
During and after World War II production of Saudi oil expanded. Between 1939 and 1953, oil revenues from Saudi Arabia increased from $7 million to $200 million, marking the beginning of the kingdom’s dependence on the resource. The boost in wartime production was made possible by the construction of pipelines. With the completion of the Trans-Arabian Pipeline (Tapline), 3,200 kilometres of sea travel were eliminated.
Cementing the nation
Today, Saudi Arabia is the world’s most important oil producer. With its high production levels, the country accounts for nearly 13 per cent of world oil output and holds 22 per cent of the world’s proven petroleum reserves. It has built its nation on the discovery of oil, with roughly half of GDP produced by its Oil & Gas Industry.
Click here for the first part of our ‘oil and gas nations’ series.