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Petroleum: Fueling the economic engine
Oil revenues make up around 80-85 percent of total Saudi export earnings (and around 35-40 percent of the country's gross domestic product, or GDP), while Saudi Arabia's economy remains, despite attempts at diversification, heavily dependent on oil. Lately, however, investments in petrochemicals have increased the relative importance of the downstream petroleum sector.
The Kingdom is recovering from the collapse in oil prices of 1998 and early 1999, and the country's economic outlook has improved greatly. For 1999, real GDP grew only about 0.4 percent, but the outlook for 2000, assuming higher oil prices continue, is for more rapid growth in excess of 5 percent.
"Our economy is rebounding from the recent oil slump, but we are not going to see a resumption of the boom days of the 70s, or even of how things were in 1996 or 1998," says Medlej Al-Medlej, executive director of the U.S.-Saudi Business Council. "The economy of Saudi Arabia will have its foundation in oil for many years. But, every year, we have seen the share of the private sector - the GDP - increasing. This is very important."
In 1933, Saudi Arabia's founder King Abdulaziz bin Abdelrahman Al-Saud granted the now-historic right to the Standard Oil Company of California to prospect for oil in the Kingdom. In 1938, after more than four years of searching, geologists discovered commercially-exploitable quantities of oil at Dammam Oil Well Number 7. The next year, the King himself opened the valve to allow oil to flow into the first tanker at Ras Tanura. In 1944, the oil company was renamed the Arabian American Oil Company (Aramco). By 1949, Aramco was producing 500,000 barrels of crude oil a day, up from 20,000 before 1944. Crude oil production increased by an average of 19 percent a year from 1945 through 1974 - reaching 8.2 million barrels a day that year.
The country's vast reserves and high level of oil production have made Saudi Arabia a leading producer and a strong voice in the Organization of Petroleum Exporting Countries (OPEC), which has much influence over international oil pricing.
Saudi Arabia's proven reserves of petroleum exceed 250 billion barrels. Annual production in the early 1990s was some 3 billion barrels of oil, more than any other country; output rose sharply after Iraq invaded Kuwait in 1990. Saudi Arabia is the world's leading oil exporter, with petroleum revenues accounting for about 90 percent of all exports.
Although Saudi Arabia has about 77 oil and gas fields, over half of its oil reserves are contained in only eight fields, including Ghawar (the world's largest onshore oil field, with estimated remaining reserves of 70 billion barrels) and Safaniya (the world's largest offshore field, with estimated reserves of 19 billion barrels).
Saudi Arabia is a key oil supplier for the United States, Europe, and Japan. However, in recent years, Western Hemisphere producers (Venezuela, Canada, and Mexico) have challenged Saudi Arabia's dominance in the U.S. market. Asia now takes about 60 percent of Saudi Arabia's crude oil exports, as well as the majority of its refined petroleum product exports. Europe is Saudi Arabia's second largest oil export market, followed by the United States.
Saudi Arabia's oil production totaled about 8.5 million barrels a day in 1999. This compares with an OPEC crude oil production quota of around 8 billion barrels a day.
Aramco estimates Saudi Arabia’s oil reserves account for 25.2 percent of the world's proven reserves. Many in the industry believe this is a conservative assessment: according to the Oil and Gas Journal, as of January 1993, Saudi Arabia had, throughout the entire history of Aramco, produced only 66 billion barrels, or 20 percent of total reserves. These figures exclude estimates of undiscovered oil, which range from 31 billion barrels (with a 95 percent degree of accuracy) to 105 billion barrels (with a 5 percent degree of accuracy).
In terms of potential production levels, based solely on their proven reserves, the Saudis will be able to sustain current levels of oil production for the next 97 years.
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Table of Contents Crown Prince Abdullah: A leader with a global vision |
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With one-fourth of the world's proven oil reserves, Saudi Arabia is the world's largest producer of oil. In 1999, Saudi Arabia supplied the United States with 1.4 million barrels per day of crude oil, or nearly 16 percent, of U.S. crude oil imports during that period.