Introduction and overview

Saudi Aramco was never intended to be the national oil company (NOC) of Saudi Arabia. Instead, that outcome was an accident of history. In the early 1970s the government of Saudi Arabia was caught in the rising tide of Arab nationalism and had little choice but to nationalize the Western-owned oil assets across most of the country. The company it intended as its national firm performed badly, and that left Aramco to fill the void. Aramco was the Western-operated oil company whose owners were formally changing with nationalization but whose operations were barely affected. It was the most competent institution in the country and attracted the best talent. Among NOCs today, Saudi Aramco’s governance and performance appear to be stellar. Yet it is difficult to compare Aramco with other NOCs because its sheer size and importance to the world oil market are unlike any of its peers. And comparisons are also clouded by Aramco’s (and Saudi Arabia’s) intense secrecy.

This chapter explores the origins and operations of Aramco (section 2) and focuses on the firm’s governance and strategy (section 3), relationship to the government (section 4), and performance (section 5). It makes four broad arguments.