How Aramco Became the Biggest Company in the World | WSJ

Summary

The video script details the rise of Saudi Aramco, the world's most profitable company, from its founding in the 1930s to its 2019 IPO. It discusses how Aramco capitalized on the 1970s oil crisis, expanded globally, and became a dominant force in oil markets. However, changing dynamics like the US's resurgence as an oil producer, increased efficiency, and the shift to cleaner energy sources are challenging Aramco's growth, prompting its IPO as part of Saudi Arabia's economic diversification.

Takeaways

• 🌐 Saudi Aramco is the world's most profitable company, with major infrastructure supporting its oil and natural gas business.
• 📉 In 2018, Aramco produced a record 13.6 million barrels of oil per day, surpassing any other company globally.
• 💰 Aramco's IPO in 2019 valued the company at $1.7 trillion, marking the largest public offering in history.
• 🔍 Analysts question Aramco's ability to sustain growth necessary to satisfy investors due to changing market dynamics.
• 🏜️ The company was founded in the 1930s in a desert with no natural rivers or significant vegetation.
• 🤝 In 1933, Saudi Arabia's leader IBBEN SAUD struck a deal with SoCal (Standard Oil of California) to search for oil.
• 🚢 By 1939, Aramco's first shipment of oil was exported to global markets from Ras Tanura.
• 📉 The 1970s saw a pivotal shift in the oil market with U.S. oil production decline and increased dependency on foreign oil.
• 🛑 The 1973 oil crisis, exacerbated by the Arab-Israeli War, led to an oil embargo impacting the U.S. and its allies, significantly raising oil prices.
• 🏛️ Saudi Arabia gradually increased its control over Aramco, eventually fully nationalizing it by 1980.
• 🌍 Aramco expanded globally in the 1980s, with significant investments in refineries and storage in Asia, coinciding with rising demand in the region.
• 📈 The early 2000s witnessed a historic rally in oil prices, driven by supply disruptions and demand from emerging markets.
• 📉 The U.S. resurgence as a major oil producer, advancements in fracking technology, and increased energy efficiency have challenged Aramco's dominance.
• 🌿 The shift towards cleaner energy and ESG investments has impacted oil stocks, reflecting a changing global attitude towards fossil fuels.
• 💼 Aramco's IPO in 2019 was part of a broader strategy to diversify Saudi Arabia's economy beyond oil.

Q & A

What is the significance of the dark spots on the map in relation to Saudi Aramco?

The dark spots on the map represent deep reservoirs of oil and natural gas, which are the lifeblood of Aramco's business and the global economy.

How much oil did Saudi Aramco produce in 2018?

In 2018, Saudi Aramco produced 13.6 million barrels of oil a day, more than any other company.

What was the valuation of Saudi Aramco's IPO in 2019?

Saudi Aramco's IPO in 2019 valued the company at 1.7 trillion, making it the world's biggest ever public offering.

What challenges does Aramco face in sustaining its growth according to some analysts?

Some analysts say Aramco may not be able to sustain the kind of growth it needs to keep investors happy due to changing market conditions and forces.

How did the discovery of oil in Saudi Arabia impact the global economy?

The discovery of oil in Saudi Arabia led to the country becoming a major global supplier, which significantly impacted the global economy by providing a crucial energy resource.

What was the role of OPEC in the 1970s oil crisis?

OPEC played a pivotal role in the 1970s oil crisis by negotiating higher oil prices and imposing an embargo on countries supporting Israel, leading to a significant increase in oil prices.

How did Saudi Arabia increase its control over Aramco in the 1970s?

Saudi Arabia increased its control over Aramco in the 1970s by negotiating deals to buy increasing percentages of the company, eventually completing the purchase for all of Aramco in 1980.

What strategies did Aramco employ to expand beyond Saudi Arabia's borders?

Aramco expanded beyond Saudi Arabia's borders by setting up joint ventures and establishing refineries and petrochemical facilities in countries like South Korea, Japan, and China.

What factors contributed to the historic rally in oil prices in the 2000s?

The historic rally in oil prices in the 2000s was driven by supply disruptions in the Middle East and increasing demand from emerging markets like India.

How has the rise of the U.S. as a major oil producer affected Aramco?

The rise of the U.S. as a major oil producer has increased competition for Aramco, as the U.S. has found new ways to extract oil and has become less reliant on foreign oil imports.

What is the impact of increased efficiency in cars and homes on Aramco's business?

Increased efficiency in cars and homes has led to a decrease in demand for oil, which poses a challenge to Aramco's business as it means less oil is needed to fuel transportation and power homes.

Why did Aramco consider an IPO in 2016?

Aramco considered an IPO in 2016 as part of an effort to diversify the company's economy beyond oil and to attract investment in a changing energy market.