History of the oil industry in Saudi Arabia

[3] Prior to 1938, there were three main factors that triggered the search for oil in Arabia: In 1922, Ibn Saud met a New Zealand mining engineer, Major Frank Holmes.

During World War I, Holmes had been to Gallipoli and then Ethiopia, where he first heard rumours of the oil seeps of the Persian Gulf region.

After the war, Holmes helped to set up Eastern and General Syndicate Ltd in order, among other things, to seek oil concessions in the region.

Eastern and General Syndicate brought in a Swiss geologist to evaluate the land, but he claimed that searching for oil in Arabia would be “a pure gamble”.

[5] Meanwhile Ibn Saud had dispatched American mining engineer Karl Twitchell to examine eastern Arabia.

Twitchell found encouraging signs of oil, asphalt seeps in the vicinity of Qatif, but advised the king to await the outcome of the Bahrain No.1 well before inviting bids for a concession for Al-Ahsa.

[6] To the American engineers working in Bahrain, standing on the Jebel Dukhan and gazing across a twenty-mile (32 km) stretch of the Persian Gulf at the Arabian Peninsula in the clear light of early morning, the outline of the low Dhahran hills in the distance were an obvious oil prospect.

SOCAL also joined forces with the Texas Oil Company when together they formed CALTEX in 1936 to take advantage of the latter's formidable marketing network in Africa and Asia.

Over the next three years, the drillers were unsuccessful in making a commercial strike, but chief geologist Max Steineke persevered.

7 was plagued by cave-ins, stuck drill bits and other problems, before the drillers finally struck oil on 3 March 1938.

Geologist Thomas Barger, later Aramco’s CEO (1961–1969), documented the campaign’s high stakes in personal correspondence, noting that failure would undermine confidence in regional exploration.

In return, ARAMCO agreed to provide the Saudi Arabian government with large amounts of free kerosene and gasoline, and to pay higher payments than originally stipulated.

Due to the quantity of the oil in Saudi Arabia, construction of pipelines became necessary to increase efficiency of production and transport.

[12] After the completion of the war, the price of oil increased drastically allowing Saudi Arabia to gain much wealth and power.