en zh es ja ko pt

Volume 13, Number 1January 1962

In This Issue

Back to Table of Contents

The Other Discovery

Part I

PROBLEM: Aramco wanted to go out of business (as grocer, druggist, merchant chief)

PROBLEM: Saudi Arabs wanted to get into business

SOLUTION: Use of a hidden resource


About a mile up an asphalt work road that climbs in an easy curve away from the main gate of Dhahran there stands a weathered bronze plaque. The site is cupped in a cluster of wind-riven limestone jebels that rise gaunt and bleached in the sun.

The bas-relief letters on the plaque, abraded by the flying sand of the long summer winds, spell out a legend that reads in part: "Dammam Well No. 7... In Drilling This Well, The Arab Zone Was Discovered, Which Made Possible The Commercial Development Of Oil In Saudi Arabia. . . Initial Production—1,345 BPD / barrels per day/-August 31, 1938."

That historic discovery revealed natural resources of inestimable value and placed Saudi Arabia among the great oil nations of the world. These developments have, of course, become well-known. The oil reserves of Arabia are now discussed by children in geography classes.

But there was another important discovery made by the pioneers of the Arabian American Oil Company in Saudi Arabia—the Saudi Arab. In him the oil men found rich human resources upon which a stable and progressive modern economy could evolve in eastern Saudi Arabia (The "economy" discussed in this article is that of the Eastern Province of Saudi Arabia. The trading firms in the Hijaz, the western part of the country where Mecca, Medina and Jiddah are located, have long dealt in world markets.)

This discovery was not altogether inevitable. It implies in the oil men certain attitudes that resulted in realistic open-mindedness and the inclination to discern the wide scope of Saudi gifts, some of which were obscured by the ways and needs of an unfamiliar culture.

The story and implications of this other Aramco discovery in eastern Saudi Arabia are known only to a few men who are experts in economics or Arab culture—not many of the oil men themselves know it.

In Hands Across Frontiers, a survey of technical assistance around the world, Carleton S. Coon, a distinguished anthropologist and authority on Middle Eastern life, writes of the "intelligence, energy, and capacity for hard work under adversity. . ." of the Saudi Arab. Oasis and desert have bred and sharpened these characteristics. The merchant of the suq and the desert nomad have brought special qualities to their country's human resources.

Having made their second discovery, the Americans began to improvise ways to guide Saudi initiative into channels of sound economic development. Complex problems arose. One solution, already tried by others in similar circumstances, would have been for the company to set up a few chosen Saudis as import agents for selected Aramco supplies. The company would, of course, have gone on doing the actual purchasing work. It would have been an easy way out.

But along with their technology the oil men had imported into Saudi Arabia a tough-minded way of running a business. And they intended to share with interested Saudis all they knew about the most efficient way to start a business, the most cost-conscious way to maintain it and the most market-conscious way to expand it.

Aramco had gone to Saudi Arabia to find oil. Under the terms of its Concession the company was committed to the diligent development of the country's oil fields. It was also committed to carry out its obligation in accordance with first-class oil field practice.

From the beginning of its costly venture, the company held stubbornly to a simple fact: it was an oil company. It didn't want to get involved in a lot of other businesses. However, it faced a paradox.

In order to do its job well in a distant part of the world, Aramco had to become a grocer, road-builder, druggist, chef, school teacher, corner movie house operator, dry cleaner, laundryman, industrial gas manufacturer and community planner. It got thoroughly involved in around-the-world purchasing. At one time it even operated the world's largest private air fleet.

But Aramco looked forward to the day when it could gradually go out of business as a grocer, druggist, merchant chief. And the best way out, the company believed, was to encourage the development of a rational Saudi economy.

The company policy wore different hats, as it were, as time passed. It started out with the informal after-hours efforts of a few men who had arrived in the vanguard of geologists and drillers in the middle 1930's. The ringleader of the group of business missionaries was William Eltiste, now retired.

A few years later the policy became explicit in a program that aimed to stimulate Saudi industrial, mercantile and agricultural progress. Enterprises that would fill the needs of Saudi consumers, actual and potential, as well as meet some of the company's supply requirements were emphasized. Cautious realism was the order of the day for the then new Arab Industrial Development Department. Nobody pushed—but advice was always available, as well as indirect hints.

The results are to be seen in electric power plants and machine shops, construction yards and bonded warehouses, produce vendors' markets and refrigerated storehouses, chemicals plants and drug stores. And the company has moved ahead in its withdrawal from non-oil businesses.

There are several ways of measuring the results of the progress of Aramco withdrawal and Saudi growth. The best index is the rising volume of the company's local purchases. The company has established a special department—Local Purchasing—to handle this fast-growing activity. Two figures show the rate of growth: in 1954 Aramco bought $511,141 worth of items from Saudi suppliers; in five years the total of such local purchases had jumped more than tenfold.

The other discovery that American oil men made in eastern Saudi Arabia has no bronze plaque. The shipping manifests, warehouse receipts, invoices and inventories of Saudi businessmen are witness enough to the once obscure human resources the Aramco pioneers discerned.

If a visible witness to the discovery is needed, the tall landmark processing towers of the Saudi Industrial Gas Company at al-Khobar tell a story in themselves.

On a recent Tuesday morning the gate bar at the entrance to the large plant yard of the Saudi Industrial Gas Company swung high. A red stake truck moved slowly out the driveway. It was 8:21 a.m.

Fifty steel cylinders stood upright in the flat-bed of the truck. They were filled with oxygen, acetylene and carbon dioxide. Some were painted white, the distinguishing color of a medical oxygen "bottle." Each cylinder had a number and a history; each had been pressure-tested within the past two years. The safety profile of every bottle on the truck was in the company files.

Brilliant winter sunlight glanced off the low hummocks of driftsand in the plant yard. The day shift had taken over the round-the-clock production of oxygen, the company's leading product.

Near the back of the plant site another unit turned out acetylene. The cylinders were being filled under a water bath. The floor drains in the filling room carried off the continuous flow. Outside, a group of workmen shoveled away sand and marl to prepare the ground for an addition to the acetylene building.

At the front of the plant area (the processing units are generously spaced for safety) the compressors in the carbon dioxide building pumped away. In a day or so the carbon dioxide bottles would be releasing bubbles into soft drinks.

The truck turning onto the highway was one of several leaving the plant on deliveries. It turned left and rolled past the airport intersection, past a long rise of quarried out-croppings and on into Dhahran.

There it made its daily round of deliveries and pick-ups; the big steel bottles are a costly investment. The truck stopped at Aramco's maintenance shops, reclamation yard, boiler house, construction yard—wherever oxygen and acetylene were being used for cutting or welding. Once in a while it dropped off a cylinder of nitrogen along the line for use in purging boilers, pipe lines or other systems.

Then it delivered the white bottles to the Aramco Health Center where the high-purity oxygen performs its vital medical mission.

About the same time, another Saudi Industrial Gas Company truck was covering a daily route in Ras Tanura and Abqaiq where it delivered its supply of industrial gases for use in Aramco's refining and producing operations.

This was just part of the morning's work for Si (pronounced sigh) Gas. The nickname is American shorthand, the breezy counterpart of Pennsy, Chevy and 3M. It is based upon the first two initials of the company.

Meanwhile, a glistening new Henschel drop-side truck—cargo capacity: 140 cylinders—was proceeding north along the coastal roads and trails leading to Kuwait. There it would deliver to the Kuwait branch of the company a supply of bottles to service a huge construction program in the Neutral Zone immediately south of Kuwait along the gulf coast.

Three of the big blue German trucks were being run as a sort of supply conveyor belt to Kuwait and back. In all, 16 vehicles—autos, trucks and buses—are owned and operated by Si Gas. Deliveries take the trucks to Hofuf in the vast al-Hasa Oasis, to Qatar (like Kuwait an export customer), to Doha, and to the Saudi Arabian national capital, Riyadh, where the company maintains a small inventory.

Offshore export shipments to Bahrain are made in barges or coastal vessels.

Thus, the morning's work was far-flung.

In his plant headquarters at al-Khobar, Abdul Rahman al-Othman, the president of the Saudi Industrial Gas Company, made plans to fling his net even wider and also to bring in more business from his present markets.

His company sells "A Complete Gas Service." This includes welding and cutting torches. He also imports ammonia, nitric oxide, argons and hydrogen. Not long ago the TWA office at the Dhahran Airfield hinted that it might want to fly a large fixed balloon for advertising purposes. Al-Othman had the hydrogen ready just in case.

The gas plant went under construction late in 1954. By January of 1955, oxygen production had started. In the spring, acetylene was being processed, and during the summer, the carbon dioxide unit went into production.

Before 1955 was out, Aramco was able to shut down its own plant and get out of the oxygen business.

The new company had to depend on Aramco's business to get started—95 per cent of its oxygen went to the oil company. Now it has other markets and Aramco's require ments take up only about 50 per cent of its increased oxygen output. Aramco still takes most of the acetylene, but the Saudi-owned Pepsi Cola plant in al-Khobar buys most of the carbon dioxide.

Aramco's Local Purchasing Department at Dhahran now buys 3,000 cylinders of oxygen, 4,800 cylinders of acetylene, and 450 cylinders of carbon dioxide, plus about 50 small medical oxygen bottles, a year from Si Gas.

The carbon dioxide business is seasonal—the CO2 unit runs about four days a week in the summer and about one day a week in the winter, following the fluctuations in soft drink sales.

Until recently, all Aramco deliveries were made into a storehouse for redistribution by the oil company. Now the gas plant truck delivers right to the job, wherever the gas is used. A slight change, but a significant one; it reveals a concept diat crops up frequently in Abdul Rahman al-Othman's discussions—service.

"We want to give more and more service now that the Saudi Industrial Gas Company is getting older," he says. "Service will help us grow."

As his company grows, al-Othman faces a problem that is familiar to businessmen anywhere: the lack of available qualified men to take over management responsibilities.

"A man with this special feeling for business is hard to find," he says. "Of course, this will change because the schools will train our young men to start out with this special feeling for business problems and methods. Well, we are expanding right now. I need experienced men today. The trouble is that other businessmen want them too. And so does the Government. Oh, the competition is very great. So I have sought Government agreement to bring in several experienced men from other Arab business centers in Egypt and Lebanon. Just for the time being, of course."

Al-Othman has 90 people on his payroll at present. Nearly all are Saudi Arabs, with one notable exception. A German chemical engineer manages the processing plant.

The Saudi Industrial Gas Company is a complex enterprise which daily supplies the requirements and meets the exacting standards of its major customer—Aramco. It makes and sells valuable industrial and medical gases and provides complete service for Saudi industrial gas users—construction jobs and soft drink plants. It has established a thriving branch in Kuwait. Day by day it broadens the base of its business so that it will be even less dependent upon Aramco as time passes.

Such an enterprise could not have evolved so quickly except for Saudi initiative in applying a cost-conscious way of doing business.

Initiative—the word crops up again and again in the discussion of men who have worked closely with ambitious Saudis. It is a subtle human quality and it is hard to evaluate. But buried away in annual operating reports and other Aramco data are figures that sketch a clear picture of the way Saudi initiative has enabled Aramco to expand its local purchasing.

(This is the first of two parts. The second part will appear in the February issue.)

This article appeared on pages 3-7 of the January 1962 print edition of Saudi Aramco World.


Check the Public Affairs Digital Image Archive for January 1962 images.