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Volume 12, Number 6June/July 1961

In This Issue

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A Look at the Past Year

Traffic along the paved highway from Dhahran to al-Khobar is heaviest on Thursdays and Fridays. The trip takes only about fourteen minutes by bus or car—yet, the two cities are worlds apart in many ways.

Dhahran, the largest of the three major oil communities in eastern Saudi Arabia, might be found tucked away outside many American cities. It has a suburban air: trim hedges, neat lawns and low cottage-style houses bordered by flowers and shaded by trees. Blooming oleander and thick false-jasmine hedges lend an exotic touch.

Al-Khobar is resolutely Saudi Arab in the long tradition of the suq, the lively, subtle, colorful trading center. While Dhahran is surrounded by barren desert, al-Khobar stretches out along the blue waters traditionally called the Persian Gulf, but now known to the Arab world as the Arabian Gulf. It is a striking city of new buildings and modern shops which look out upon skeletons of still newer buildings which will house still more modern shops. It is marked by the nervous vitality of swift growth and bounding leaps into new enterprises. It lies along the ancient trackways of dhow and camel but has become the "shopping center" of the Eastern Province of Saudi Arabia.

Thursday and Friday are the usual days off for Aramco, the Arabian American Oil Company. This strange "week end" (Americans never quite get used to it) is based upon the facts that Friday is the Muslim sabbath and that three-quarters of Aramco's employees are Saudi Arabs.

In recent years the weekend traffic from Aramco's headquarters at Dhahran to the shopping center at al-Khobar has grown enormously. The intermittent flow of cars of all shapes and sizes is a symbol of a vital change that has been stimulated by the oil company's policy. During its early beginnings in Saudi Arabia, and even more during the era of vast expansion following World War II, Aramco had to act as haberdasher, pharmacist, travel agent, laun-dryman and hardware man for its American employees. But the company decided long ago to "get back into" the oil business. It took time to promote the growth of small Saudi Arab businesses, service companies and contractors to handle the bulk of the non-oil responsibilities. Little by little, however, American residents in Saudi Arabia have been able to turn to Saudi Arab businessmen for goods and services.

The traffic into al-Khobar is, therefore, an outward measure of the achievement of Saudi Arab merchants in building, stocking and managing a great variety of stores to serve the demands of the Americans and their families, as well as the Saudi Arab people.

Far less noticeable to the casual eye has been another significant development that reflected a new breadth in 1960. Like the American families, the oil company has come to depend increasingly upon Saudi Arab businessmen for goods and services. Last year Aramco spent more than $18,000,000 with Saudi Arab suppliers and contractors for constructing pipelines, renting autos and transporting gasoline, for imports of auto tires, cement, sugar and canned foods, for locally produced tiles, paper products, soft drinks and fresh vegetables and eggs. During 1960 the company also began buying highly specialized materials—large-diameter pipe, for example—through Saudi Arab suppliers.

Another symbol of growing Saudi Arab enterprise is seen by turning left from the highway just before reaching al-Khobar. A suburban development comes quickly into view. A cluster of new two-story homes of concrete and stucco, built under the oil company's Home Ownership Program, stands in the brilliant sun. Each home reflects the taste of the owner: ground-to-roof panels of bright color, slanted buttress devices, mosaic panels, decorative designs. And each is surrounded by the traditional high wall that marks the Arab's love of privacy for his family.

This is West al-Khobar, something new under the desert sun—an Arabia Suburbia to be added to the vocabulary of ancient geography that included Arabia Felix and Arabia Deserta. Aramco provides the funds through interest-free loans, and the municipality through a Royal grant provides the land for each new home built or purchased by a Saudi Arab employee of Aramco. The employee generally prefers to choose his own design, while local contractors do the building. West al-Khobar was opened up in 1959. By the end of the past year, 100 homes had been built and 30 more were under construction there.

Last year was a record year for home-building under the company program: 722 homes were built or bought in various parts of the Eastern Province. By now, more than 2,800 homes have gone up under the ten-year-old program. The largest developments are in Dammam, Rahimah and Madi-nat Abqaiq.

Record home-building and record company purchases through Saudi Arab merchants—each was linked intimately to a year of extraordinary activity for Aramco. This spring, when the desert bloomed after a season of better-than-average winter rains, the company made its annual report to the Saudi Arabian Government on the operations of the company during the twenty-seventh full year of its concession.

It was the best year in the history of the company.

The production of crude oil in 1960 increased almost 14 per cent over 1959.

The country's greatest resource — its proved and recoverable crude oil reserves—increased by approximately seven billion barrels.

The big refinery at Ras Tanura processed nearly 29½ per cent more crude oil than in the year before.

Aramco's summary of its banner year is filled with facts and figures which demonstrate the continual push upward that has become necessary in the modern world of international competition. As Chairman of the Board Norman Hardy and President Thomas C. Barger reported:

"During the year there was an encouraging rise in world demand for petroleum, largely as a result of mounting industrial activity in countries of Western Europe and the Far East, which are major consumers of oil from Saudi Arabia and other Middle Eastern countries. The company is pleased to report that despite the world-wide surplus in producing capacity and increasing amounts of oil from the Soviet Union entering free world markets, Aramco's exports have succeeded in keeping pace with the increase in world demand."

Aramco is wholly owned by four American corporations: Standard Oil Company of California, 30 per cent; Texaco Inc., 30 per cent; Standard Oil Company (New Jersey), 30 per cent; Socony Mobil Oil Company, 10 per cent. These four companies in turn are owned by a total of more than 1,200,000 individual stockholders—or more than any American corporation with the single exception of the giant American Telephone and Telegraph Company.

Here are some of the highlights of Aramco accomplishments in 1960:

Producing. The company's logbook had some benchmark entries. For instance, Aramco's 196 producing oil wells produced a daily average of 1,247,140 barrels of crude oil in 1960—an all-time record to date during Aramco's 22 years of commercial production. Aramco's cumulative production passed the four-billion-barrel milestone on June 13. During December the company racked up its best month thus far, with an average daily production of 1,392,014 barrels. A sixth oil field, Khursaniyah, was placed in production.

But volume alone is not the biggest concern—volume without waste, that's the heart of the company's conservation program. To keep up the natural pressure in the deep-underground oil reservoirs and to recover every practical drop of crude oil over a long span of years, Aramco injected vast quantities of water and gas—a quarter of a million barrels of water and a quarter of a billion cubic feet of gas every day—into its principal producing fields. In addition, a liquefied petroleum gas (LPG) injection plant was begun at Abqaiq to permit the return of 55,000,000 cubic feet daily of otherwise unusable gas into the crude oil reservoirs in the 'Ain Dar area.

Already Aramco is injecting or burning as fuel 45 per cent of all the gas produced along with crude oil. The LPG injection plant will raise that figure still higher. Its comppletion will bring Aramco's total investment in conservation to 148,000,000. Although the costs are high, the results are more than worth it.

Drilling. The 17 wells drilled by Aramco in 1960 were designed mainly to define the limits of known oil fields in Saudi Arabia. Such "delineation" wells helped fix the boundaries of the fields with great accuracy. Aramco was thus able to add to the country's proved reserves. At the close of the year Aramco's reserves had been boosted to approximately 45,600,000,000 barrels, or more than in the entire United States. Offshore drilling in the Arabian Gulf doubled the proved area of the Safaniya Field, probably the largest offshore field in the world.

Exploration. The company continued its geological and geophysical exploration in remote sections of the Rub' al-Khali (the Empty Quarter), the world's most extensive sand desert. Special techniques enabled Aramco to carry out seismograph work, based on "echoes" from miniature man-made earthquakes, in the unbelievable terrain of the "sand mountains," towering as much as 1,000 feet high. The mapping of the underground rock formations in the Rub' al-Khali was also facilitated by drilling test holes as much as a mile and a half deep. In addition, Aramco and the United States Geological Survey, under the joint sponsorship of the State Department and the Kingdom of Saudi Arabia, were completing their new geological and geographic mapping program of the Arabian Peninsula.

On July 21, Aramco relinquished from its concession area 33,700 square miles in the southwestern Rub' al-Khali. Now that a total of 140,413 square miles had been relinquished in a dozen years under an agreement between Aramco and Saudi Arabia, the company's remaining concession area still was somewhat in excess of 350,000 square miles, or larger than Texas.

Refining and Marine Terminal. A daily average of 224,894 barrels of crude oil—more than ever before—was processed into petroleum products at the big Ras Tanura refinery during 1960. More than half of the refined products consisted of fuel oil for industrial use, followed by diesel oil, motor and aviation gasoline, kerosene and jet fuel. At the nearby marine terminal more than 1,800 tankers—an average of five a day—were loaded with crude oil, refined products and bunker fuel during the year. The first plant in the world designed to produce refrigerated LPG, normally retailed as "bottled gas," for shipment on tankers was nearing completion at the terminal at the year's end.

Marketing. A further stimulus to small business enterprises in Saudi Arabia came from the establishment of 77 new service stations owned and operated by independent Saudi Arab dealers. A total of 302 retail dealers under such independent management now sell Aramco products across the length and breadth of Saudi Arabia—the only country where the Aramco trademark appears at the filling stations.

Aramco, which is primarily engaged in finding, producing and refining oil in Saudi Arabia, does not market outside of Saudi Arabia. Once this oil is exported, it is transported and marketed by one of Aramco's four owner companies or their affiliates. Of Aramco's 1960 production, 42.5 per cent was marketed in Western Europe, 36.7 per cent in Asia and Australia, and comparatively small quantities in North America, South America and Africa.

Safety. A good index of a company's morale, teamwork and skill is its safety record, and Aramco's record-breaking safety record in 1960 was better than the average in the United States. Only 1.8 disabling injuries were incurred for each million hours worked by Aramco employees in 1960. Aramco's previous all-time low of 1.9 in 1959 was honored by the National Safety Council of the United States.

People of Aramco. At the end of the year the company had 14,834 employees in Saudi Arabia, of whom 11,149 were Saudi Arabs, 2,180 were Americans and the rest were of many other nationalities. Thus the proportion of Saudi Arabs in the Aramco family stood at almost three-quarters.

In turn, more than three-quarters of these Saudi Arabs held semi-skilled, skilled, professional or supervisory jobs—twice the proportion of seven years earlier. Looking toward future advancement, more than one-third of the Saudi Arab employees participated in the company's training programs at the Industrial Training Centers during working hours. Nearly the same proportion were voluntary students during evening classes at the training centers.

By the end of the year, 366 Saudis had been promoted to mushrif (single work group supervisor) or muraqib (supervisor of several work groups). Twenty-nine Saudi Arab employees were sent for advanced, specialized training to colleges and universities outside Saudi Arabia at Aramco expense, 17 of them to the United States.

Schools. During the year the company completed its eleventh elementary school for the sons of Muslim and Arab employees. The school was accepted in September by the Saudi Arabian Government's Ministry of Education. Like the other schools given to the country by the company, the new school at Hofuf will be maintained by Aramco, and the company will reimburse the government for operating costs and teachers' salaries. The 11 elementary schools accommodate a total of 3,300 boys.

Two intermediate schools were being completed at Dammam and Hofuf on the same basis. Each will accommodate 150 youngsters.

Benefits. The human side of Aramco's record year was further reflected in the benefit program for Saudi Arab employees, including its savings plan, death and disability payments, and free medical care. During the year a general pay increase for Saudi Arab employees brought their average annual income to the neighborhood of $1,750, or almost twice the level of five years ago. A retirement plan went into effect in July for Saudi Arab employees, with the company assuming all the costs, and 132 employees retired and began receiving annuity payments.

Forty-six per cent of Aramco's Saudi Arab employees have been with the company for at least ten years, and 14 per cent have passed the 15-year mark. The stability of the great number of Saudi Arab workers indicates their general satisfaction with the conditions of employment.

The housewife driving from Dhahran to al-Khobar on a Friday morning with a long shopping list (perhaps made up with the help of the shopping column in the company's weekly newspaper, Sun and Flare) is likely to be unaware of the magnitude of oil industry history made along that short stretch of highway.

For one thing, when the concession contract was signed in 1933, there was no such place as Dhahran, and al-Khobar was a fishing hamlet made up of a few palm-frond barastis. Today these two communities, linked by the joint endeavors of American and Saudi Arab in a vast enterprise and its flowering offshoots, share three distinctions which rise from the statistics of Aramco's 1960 report to the Government:

. . . Saudi Arabia ranks as the fifth largest crude-oil producing country in the world (after the United States, the Soviet Union, Venezuela, and the tiny Shaikhdom of Kuwait at the head of the Arabian Gulf).

. . . The country ranks second only to Kuwait as having the greatest proved reserves of crude oil.

. . . Aramco ranks as the second largest crude oil producing organization in the world, next to the Kuwait Oil Company.

Of course, these honors belong to Saudi Arabia at large as well as to Aramco, and not merely to the two communities which symbolize certain aspects of the record year.

This article appeared on pages 3-7 of the June/July 1961 print edition of Saudi Aramco World.

Check the Public Affairs Digital Image Archive for June/July 1961 images.