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Saudi Arabia
Oil Industry in the 1990s
Structure and Organization
After two decades of organizational change, the reshaping of
the oil industry in Saudi Arabia reared completion by the late
1980s. During the 1970s and early 1980s, the industry was transformed
from one controlled by foreign oil companies (the Aramco parent
companies) to one owned and operated by the government. Decisions
made directly by the ruling family increasingly became a feature
of the industry in the late 1970s. Saudi Arabia's participation
in the Arab oil embargo in 1973 and foreign policy goals were
featives of this transition. In 1992 the government had title
to all mineral resources in the country (except in the former
Divided Zone, where both Kuwait and Saudi Arabia had interests
in the national resources of the whole zone). Through the Supreme
Oil Council, headed by the king, and the Ministry of Petroleum
and Mineral Resources the government initiated, funded, and implemented
all investment decisions. It also controlled daily operations
related to production and pricing.
On a functional level, the industry also underwent significant
transformation. By the late 1980s, the major companies established
by or taken over from foreign owners by the government were required
to produce a particular product. For the most part, only one company
controlled a certain industrial subsector, although there was
some overlap. In the upstream part of the oil industry, all exploration,
development, and production decisions within Saudi Arabia were
controlled by Saudi Aramco. It managed the oil fields, pipelines,
crude oil export facilities, and the master gas system throughout
the country. Through its subsidiary Vela Marine International,
Saudi Aramco controlled Saudi Arabia's tanker fleet. Because downstream
investments overseas were an integral part of Saudi Arabia's crude
oil marketing strategy, these have come under the control of Saudi
Aramco. These downstream investments were joint-venture operations
with foreign oil refiners. Saudi Aramco also operated the kingdom's
largest oil refinery. In 1992 the refinery's output largely conformed
to Samarec's specifications. Saudi Aramco was managed by a board
of directors headed by the minister of petroleum and mineral resources
and a senior management staff headed by a president, with the
Supreme Oil Council having oversight. Most operational decisions
were made by the professional staff except oil output decisions,
instructions for which came from the king through the minister.
The downstream subsector of the oil industry was dominated by
Samarec. Operated as a wholly government-owned refining and marketing
company, Samarec took over Petromin's operation in 1988. Petromin
still existed on paper, legally holding title with three foreign
oil companies to the export refinery joint ventures at Al Jubayl
on the gulf, and Yanbu, and Rabigh on the Red Sea. In addition
to managing these refineries, Samarec operated three wholly owned
domestic refineries at Riyadh, Jiddah, and Yanbu. Samarec controlled
the distribution of refined products within Saudi Arabia and managed
the bulk plants, loading terminals, tanker fleet, and product
pipelines. All export sales of refined products were also managed
by the downstream company. During the Persian Gulf War, to augment
domestic supplies of jet fuel and other products, Samarec bid
for products in the Singapore market. The Petromin board of directors,
headed by the minister of petroleum and mineral resources, set
Samarec policy but operations were managed by a senior staff.
After the reorganization of Petromin, the government transferred
the production and distribution of lubricating oils to two joint
ventures with Mobil. Two new companies were established: Petromin
Lubricating Oil Company (Petrolube) and Petromin Lubricating Oil
Refining Company (Luberef). Luberef operated the kingdom's single
base oil refinery (base oil is a byproduct of the refining process),
while Petrolube ran three small lubricating oil blending plants.
Three other smaller private sector plants also operated lubricating
oil blending facilities.
Data as of December 1992
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