Editor’s Note:
Today we present for your consideration a guest blog post from Abdulateef Al-Mulhim discussing an expanded role for Saudi Aramco in the public life of the Kingdom His commentary has appeared in Arab News and we look forward to your feedback on our guest bloggers perspectives and all of the SUSRIS offerings.
What Norway’s Statoil did, that Saudi Aramco has not done
Abdulateef Al-Mulhim
Abdulateef Al-Mulhim, Commodore, Royal Saudi Navy (Retired)
Oil was discovered in Norway in 1969. Three years later Statoil was created as an integrated state-owned oil company. I studied the effect this company had on Norway in my graduate studies in Political Science at Old Dominion University. My focus on “the politics of oil” included the study of the “seven sisters” a consortium of oil companies, but all our talk in class was about Aramco and Statoil. The resemblances were more than I would have thought.
Oil was discovered in Saudi Arabia in 1938 when the geologists in Bahrain saw similarities with some sites in Saudi Arabia. The discovery of gas by Esso and Shell in 1959 at Groningen in the Netherlands in 1959, prompted some companies to look further north. Discovery of other fields in the North Sea continued and Norway became a very strong player in the oil and gas industry. Norwegian oil production has always been around two million barrels per day and it is exporting oil and gas technology.
Among the most important things Statoil did was to be listed on the Oslo and New York stock exchanges in 2001. The company also got involved in the daily life of the Norwegian people. Not long ago Norway announced that the government pension fund generated by the oil wealth rose to $500 billion. This means every Norwegian man and woman, young and old, has about $120,000 in their bank account. The revenues have contributed to supported for arts and sports, and development of talent among the people.
Saudi Aramco has served the Saudis in every day life. They improved agriculture and had one of the best health care services in the world. They have educated young Saudis since the 1930s. They built roads and schools and education centers. They have a housing fund for their employees that has no parallel in the world. They run a good library and I remember borrowing books when I was 13 years old. They have a mobile library as well. Aramco even has programs for orphans in the area.
Saudi Aramco is a social institution in every aspect. People want Saudi Aramco to be the planner, the budgeter and the builder. We have faith in their planning. Oil prices are always going up and their projects are in the billions. All of this means Saudi Aramco can have a larger role in society.
Saudi Aramco still imports technologies after 77 years of progress. Why” And why did they stop building schools when people were waiting for them to build a university or an institute outside their camp? When I heard of the multibillion-dollar projects that were planned by Saudi Aramco, I hoped to see a newspaper report the next day talking about new job openings for Saudis. In the West, when a billion dollar project is announced, there inevitable reports of new jobs associated with the project. Otherwise the public will have little interest in such news.
If Statoil can do for the Norwegians what they did with two million barrels per day of oil production, just think what Saudi Aramco could do in Saudi society with its exports of about ten million barrels per day.
— Abdulateef Al-Mulhim retired at the grade of Commodore from the Royal Saudi Navy. He can be contacted at: almulhimnavy@hotmail.com
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Posted by the Editor on behalf of Dr. Herman Franssen:
Response:
One of the big differences is that oil and its derivatives (products, petrochemicals) are the prime source of income for the Saudi government. The money goes into the Saudi Treasury and pays for all of Aramco’s and the Saudi government’s expenses, from infrastructure projects to the military, the bureaucracy and so on. In return for the government receiving all of the Aramco income, Saudis do not have to pay income tax and receive generous health, educational and other benefits from the state such as low cost petrol, natural gas, electricity and desalinated water. In Norway, petrol is expensive and so is electricity (even though most of it is renewable energy (hydro). Norway has very high income taxes despite the income from oil and gas.
Yes, the surplus is put in a special account which is likely to be used once the oil and gas income will be declining. Would our Saudi commentator be willing to give up the current benefits Saudi citizens receive for future benefits for a future generation? Would Saudi citizens be willing to pay income tax at a rate of 50% at the margin? Would they be willing to pay full cost for petrol, gas, electricity, water, education and healthcare in exchange for benefits for future generations. It would be interesting to have a public opinion poll in Saudi to see how many would vote for the Norwegian system in exchange for their current benefits.
As for technical capabilities: Aramco is one of the best national oil companies, with highly trained experts and sophisticated equipment. The global oil industry, from ExxonMobil to Statoil and Aramco depend on a large and specialized oil services industry which no one company or country could ever copy in its entirety.
Dr. Herman Franssen is President, International Energy Associates and Senior Associate, Energy and National Security Program, Center for Strategic and International Studies [CSIS]. You can find other SUSRIS items by and about Dr. Franssen by going to SUSRIS.com and using the search function, keyword “Franssen.”
Editor’s note: Dr. Franssen
Posted by the Editor on Behalf of Mr. John Mulholland
Dear Commodore al-Mulhim:
Because of my 22 years in Saudi Arabia I have continued to follow events in the Kingdom as closely as I can from back here in the states. I was very impressed by your subject article. After my arrival in the late 60′s I became very proud, as an American, of the accomplishments of ARAMCO, still very much an American run company at the time. I recall that it was ARAMCO set up the first real estate and agricultural banks, phone networks, the road systems that you mention, port facilities, urban planning, and so very much more. these were many things that no private company oil company would normally consider doing. The result was a feeling of goodwill towards Americans that lasted for many years, and in many respects, still lasts.
Yet, for all the reasons that we both know all too well, the United States managed to squander much of that “goodwill.” Even before I left the Kingdom nearly 20 years ago the average Saudi “in the street” had a very dim view of my country.
As in all things there is no doubt room for improvement for Saudi ARAMCO. Nonetheless, and I’ll admit it’s only a view from afar, I have been very, very impressed by the continued accomplishments of Saudi ARAMCO in what I might term, nation building.
Thank you for your thoughtful article.
Sincerely,
John Mulholland
This is very interesting article written by a Saudi National. Most books and articles about Aramco are written by former employees from the U.S. It is very interesting to see an article about oil industry history coming from a Navy man. The article is very well balanced. It gives Aramco credit, yet he wants more for the society.
Is the writer telling us that Saudi Aramco was better under American supervision. When it was nationalized by the gov. it did less for the society.
My 3+ years and an employee of Saudi ARAMCO was most certainly the most fulfilling in my professional career. This was due principally to the willingness of all the Saudi members of the two departments in which I worked as a divisional superintendent. Their eagerness to learn and their dedication to helping each other (and me), was a truly unique and learning experience of the Arab culture and the Islamic world. This experience has sustained a sincere admiration and respect for the Saudi culture, in which good manners, personal cleanliness, compassion and sincere care for those less advantaged, are so prevalent. I can only wish, hope and pray that the western cultures will adopt yet more of the fundamental truths, moral standards and fulfillments of that Islamic culture. I am a Christian!
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