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Aramco

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INTERNATIONAL BUSINESS
SAUDI ARAMCO

Question 1 - Brief History of the Company

Saudi Aramco officially known as the Saudi Arabian Oil Company is a fully integrated, global petroleum and chemicals enterprise oil company based in Dhahran, Saudi Arabia which is owned by the Kingdom of Saudi Arabia. The company originally known as the Standard Oil Company of California had reached a concession agreement to search for oil in Saudi Arabia during the early 1930’s. This concession would be assigned to a separate wholly owned subsidiary known as the California-Arabian Standard Oil Co. also known as CASOC.
After a period of time, having found no success in locating oil, the company was joined by the Texas Oil Company in 1936. Failed explorations for locating oil was suffered by the company for a time but four years later, the company had at last met with success, managing to find oil via its seventh drill site located in Damman. The company would later on continue to change its name from the previous California-Arabian Standard Oil Co. (CASCO) to the Arabian American Company Oil Company on the 31st of January 1944. The company then continued to prosper throughout the years, attracting many investors such as the Standard Oil of New Jersey and Socony Vacuum. In 1973, the Saudi Arabian government managed to acquire a 25% stake of the company due to US support for Israel during the Yom Kippur War whereby in 1974, it managed to acquire more shareholdings by a further 60% and alas full control in 1980, when it acquired 100% of the company’s stokes. Due to a royal decree released on the November of 1988, the Arabian American Oil Company changed its name to Saudi Arabian Oil Company, also known as Saudi Aramco, the name which it is known for today.

Question 2 - How the Company came about and why?

Aramco initially came about to take advantage of the situation of the oil shortages that was experienced during World War I as well as the exclusion of American companies from Mesopotamia by the San Remo Petroleum Agreement of 1920. The Saudi Arabians had decided that in order to enjoy the most profitable strategy in the long run was to keep oil prices oil. This resulted in what many call the ‘Aramco advantage’ as well as the world’s largest tax refund with regards to transfer pricing.

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