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Two Oil Revolutions

October 15, 2013

Two transformations that have changed the world of energy.

“Arabians have always been a proud people, arrogant even, and the extraordinary success story of the Kingdom, from Abdul Aziziz’s poverty stricken exile to the present day wealth of Saudi Arabia, has made them more so.”

“Prior to 70 years ago, Saudi’s lived a life, not much different than the life of Britons at the time of Boadicea, an existence of unspeakable physical hardship and material emptiness.”

“There was no industry in Arabia, no agriculture beyond wandering camels and groves of date palms; the only permanent buildings were built from mud in Riyadh and from coral blocks hacked from the reef in Jeddah.”

Coral House Jeddah Saudi Arabia  - Licensed by GNU Free Documentation

Coral House Jeddah Saudi Arabia – Licensed by GNU Free Documentation

 

“The boy born in a goat-hair tent, with a few pennies worth of pots and bedding, became a cabinet minister with a PhD, enjoying the use of a private jet.”

These quotes are from The Kingdom: Arabia & The House of Sa’ud1.

This is the story of Saudi Arabia and how it emerged as an oil colossus, where hotels and buildings now rival, if not better, the most modern elsewhere in the world. Actually, until the formation of OPEC in 1973, only 40 years ago, Saudi Arabia hadn’t progressed much beyond the primitive, nomadic life of the Bedouin.

The best hotel in the Eastern Province in 1973 was made from concrete block with army cots to sleep on, and with linoleum table tops in the dining room.  The roof opposite the window of my third, top floor room, was occupied by roosters and chickens. Houses of the poor, made from sticks could still be seen. The Aramco compound in Dhahran was, of course, much better, and it was where its employees stayed and lived.

At the time oil was discovered in Saudi Arabia in 1936 with well number 7, the world seemed to be entering a period of declining reserves. The first tanker load of oil left from the port of Ras Tanura, in the Eastern Province, on the G.D. Schofield in 1939, and the revolution was underway.

There had been other discoveries, such as in the Caspian Sea, but these never seemed to revolutionize the world’s oil supply.

The first oil revolution was the result of huge, natural reserves that could be easily exploited with rudimentary rotary drilling rigs.

Leap forward to today, and the new revolution.

Today’s revolution is the result of tireless experimentation with fracking and horizontal drilling that ultimately released oil and natural gas from shale. From being an importer of natural gas and oil, the United States is on the verge of becoming an exporter.

The “shale” revolution has reversed the decline in oil and natural gas production in the United States. It has also opened the door to additional production from shale elsewhere in the world. It has begun to reduce the hold that OPEC has had on the world’s supply of oil. It is threatening Russia’s high-priced natural gas exports to Europe.

Today’s revolution was a technology driven revolution, while the Saudi oil revolution was due to a huge abundance of easily accessible oil2.

The pioneers of the first oil revolution were American oil companies, their geologists and drilling engineers. Once again, it is American ingenuity and tenacity that has unleashed the second oil revolution.

 

  1. The quotes were modified to reflect changes since the book was written, such as changing shillings to pennies. The book was written by Robert Lacey. When published, it was a Book-of-the-Month Club selection. It is available at Amazon.
  2. While the oil was relatively easy to access, the terrain and conditions, physical and political, were not so easily overcome.

 

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2 Comments leave one →
  1. VACornell permalink
    October 15, 2013 3:05 pm

    Donn….once again I need to inform, I went out to Saudi Arabia, in 1951, with an MSChE from USC. I lowered the price of Arab Light from $2.12 per barrel to $1.89… I, with some help, kept it…price…there for three decades. Everyone had to meet this price because WE had capacity…for those decades… Ask Ali Naimi….we grew up together… I was Supt., Plants and Pipelines… He was Supt., Production… In Abqaiq…the center.. I went home…to Fluor.. He went on to Minister..l Good article…keep up the good work…! You enjoyed those prosperous decades at GE…

    Sent from my iPad Vern Cornell

    >

    • October 15, 2013 4:50 pm

      Vern:
      I thought you might enjoy this article.
      Yes, I enjoyed my years with GE, and appreciate the work you did.

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