Aramco: The Evolution of an Oil Concession

This brief case history of the Arabian American Oil Company (Aramco) in Saudi Arabia provides some interesting contrasts in foreign company—host government relations in comparison with the two previous case studies. Saudi Arabia is a traditional monarchy. Although some anti-foreign company attitudes exist, both within and outside the Saudi Arabian government, Saudi Arabia has had a relatively free hand in pursuing a policy of maximizing revenues from its oil resources without the encumbrance of ideological constraints or motivations. This “bread and butter” bargaining posture has been reinforced by the impracticality of a primitive economy seriously entertaining ideas of a nationalized petroleum industry, on the one hand, and by the strong competitive position of Arabian oil, on the other. Rapid growth in output (see table 71) has been accompanied by rapidly rising returns to both the government and Aramco, and both parties have been guided to a substantial degree by the joint maximizing principle. Nevertheless, the government’s Table 71 Aramco's Production of Crude Oil, Selected Years

Year	No. of barrels (in thousands)
1938	495
1940	5,074
1945	21,310
1950	199,546
1960	456,453
1965	739,077
1967	948,110

Source: Aramco Handbook (Dhahran: Arabian American Oil Company, 1960), p. 171; and Aramco 1967, Review of Operations (Dhahran: Arabian American Oil Company, 1967), p. 25.