- [Narrator] This map shows
the major infrastructure of Saudi Aramco, the worlds
most profitable company. The dark spots clustered to the east are deep reservoirs of
oil and natural gas, the life blood of Aramco's
business and the global economy. For nearly a century,
Aramco's oil has powered cars, planes, and industries, and electrified homes around the world. In 2018, the company
produced 13.6 million barrels of oil a day, more than any other company. Then in 2019, Aramco's
IPO valued the company at 1.7 trillion, in the worlds biggest
ever public offering. But the forces that
propelled Aramco's growth from a single well to the
biggest producer in the world are changing underfoot. And some analysts say
the company won't be able to sustain the kind of growth it will need to keep investors happy. To understand these changes,
you have to understand how Aramco got so big in the first place. The company was founded in the 1930s on a barren tract of desert,
with no natural river or body of water and little vegetation. - It was completely pre-modern. I mean it really looked
basically like it had since the 1700s, the 1800s. - [Narrator] The kingdom's
leader IBBEN SAUD, was low on cash to fund development, so in 1933 he struck a deal
with an American oil company. Standard Oil of California, or SoCal, won the right to search for oil near the eastern coast, in Al Hasa. Five years and several dry wells later, SoCal and it's partner,
Texaco, hit oil, a lot of it. Quickly, well number seven was producing commercial quantities, around 4,000 barrels of crude oil a day. Workers began construction
on a pipeline to the sea. By spring of 1939, the
SoCal tanker, D.G. Scofield docked at Ras Tanura and
filled its first shipment of oil to leave Saudi Arabia
for the global markets. The country with nothing to sell had found what everyone wanted to buy. Over the following
decades, the American Group found more and more mineral
wealth beneath the Saudi sand. By 1970, that oil would play
a crucial role in a market halfway around the world. A market so big it would
lift Aramco's profits and push Saudi Arabia to alter the future of oil markets everywhere. What happened is that in
1970, Texas tapped out. After more than a century of growth, U.S. oil production began to fall. At the time, Americans
were driving to work in gas guzzlers like these. The average fuel consumption
for this type pf vehicle was 13 and a half miles per gallon. To fuel these cars, the
U.S. turned overseas. You can see it on this chart,
which shows the countries imports of crude oil. Aramco, still an American company, had plenty of oil to sell. Wald said that between 1972 and 1973, production grew from five
point four million to eight point four million barrels a day. According to Aramco, in
1971, shipments of crude oil and petroleum products from Ras Tanura had surpassed one billion barrels a year. Saudi Arabia and other
oil producing nations took notice of all this demand. - OPEC, this organization of
petroleum exporting companies, which had been created in the
60s but didn't do anything for years, they would
essentially negotiate with the big international oil companies, like Exxon and BP and Shell, and they would negotiate a price for oil. And they were basically
selling all of their oil to these international companies that had distribution outlets around the world. And 1973 comes along
and the countries say, you know what, we know
what's happening with demand. We know that we're supplying
most of your market. We need a higher price for oil. - [Narrator] When OPEC
tried to raise prices, the international companies said No. So, Saudi Arabia's' oil
minister Ahmed Zaki Yamani, took a different approach. - So right at that exact same time, was the Arab-Israeli War and
a lot of the countries in OPEC wanted to basically help out
their fellow Arab countries by raising the price of
oil and both embargoing it to the countries that were helping Israel, namely the United States and its allies. And the Saudis were actually
the least interested in doing this, but once
it became clear that they couldn't negotiate an
increase in the price of oil, Yamani looked at this
situation and he said, we can use this political
situation to our advantage. - [Narrator] Here's Yamani
in December of 1973. - When the Israelis accept to withdraw from the occupied territories, and the U.S. government guarantees that decision, then immediately we can lift the embargo. This could happen anytime. - [Narrator] The plan worked. This chart shows the U.S. price for oil before and after the embargo. - [Newscaster] President
Nixon said the gas crisis has dissolved into a problem. But it's a problem millions of motorists are still trying to
cope with in long lines at their local gas stations. - [Narrator] While America was
reeling from the price shock, Saudi Arabia was making plans to increase its control of Aramco. That year, the Kingdom set a
deal to buy 25% of the company. - And that was really
when the tables turned and it was very clear that
it was no longer these big international oil companies. It was no longer the Americans. It was the Saudis that
controlled their oil and controlled their commodity. And shortly after that, in
1974, they negotiated to buy another percentage of the company. In 1976, they had more
negotiations that led to them eventually completing the purchase for all of Aramco in 1980. - [Narrator] Aramco was now
fully owned by the Saudi state. From this point forward,
Saudi Arabia along with OPEC would exert enormous control over the price of oil everywhere. In the early 80s, the
company set forth on a period of rapid expansion
that would take Aramco beyond the Kingdom's
oil fields and borders to new markets around the world. - Ali Al-Naimi became the
first Saudi CEO of the company, so it was his vision that diversified and really integrated the company and turned it into something
that could make money in all parts of the value chain, not just the pumping the
oil out of the ground. So they first went to
Korea and they negotiated with the South Koreans and they started a joint oil refinery called
S-OIL in South Korea. They also negotiated in Japan
and they also have a big oil storage facility in Japan. Then finally they got the
China, and they have several joint ventures in China for
refineries and petrochemicals. - [Narrator] The timing
was right to capitalize on a surge in demand for oil. Here's a look at China's
GDP over those decades. - They set up in Asia
at exactly the moment when Asia took off as a consumer and they were really well positioned. And in fact, Saudi Arabia is currently the largest oil supplier
to China right now. - [Narrator] By the 2000s,
it was a global conglomerate positioned to profit from a
historic rally in oil prices. Supply disruptions in the
Middle East and demand in emerging markets, like India, drove the price to new heights. - Price spikes are becoming a way of life in the United States. - Geopolitical certainty
in a number of countries in the Middle East and
Africa will continue to keep markets on edge. - [Male Newscaster] Gas
prices are hitting new highs. - We gotta live with it. They're gonna keep going up. - [Narrator] In 2008, the price of oil hit a record high of $147. In the decade since that peak, many of the factors that
lead to Aramco's rise, have shifted. For one, the U.S. came back online as a major oil producer. By 2008, U.S. producers had found new ways to extract oil from places they
had thought were tapped out, as well as some new areas. Production surged. This is Nansen G. Saleri,
a former Aramco executive. - What the U.S. producers have done
though is extraordinary. And with the benefit of new
engineering capabilities, especially the fracking capabilities, they're able to produce
significant amounts of oil and today you look at the U.S. production, it's approaching 13
million barrels per day. - [Narrator] Meanwhile,
cars and homes had become more efficient, curbing growth in demand. The average fuel economy for
new cars in the United States is now closer to 25 miles per gallon. That's almost twice what it was in 1970. And at the same time, buyers have slowly started shifting toward
cleaner energy sources. - In the new world, it's
all about clean BTUs, clean energies, so
Aramco now has to compete in the clean BTU era. Nobody in the industry,
including the most successful IOCs, including the unconventionals, they cannot say, oh we are totally blind to what's going on as
far as global warming, as far as CO2 emissions,
or greenhouse emissions. That's somebody else's problem. That is not an answer anymore. - [Narrator] Investors are
pumping cash into assets deemed more environmentally friendly,
such as so-called ESG Funds, which focus on environmental,
social and governance factors. Investors say all of these factors have threatened oil stocks. Here's the performance of oil stocks compared to the broader market. This was the stage being set in 2016 when Aramco said it was considering an IPO as part of an effort to diversify the company's economy beyond oil. After setbacks, Aramco
launched its IPO in 2019, selling 1.5% of itself
on the Tadawul in Riyadh, mostly to Saudi Investors. It's unclear if the company will sell more on international markets and reach the five percent
like it had planned. (upbeat music)
