History of oil in Saudi Arabia. How Donald Trump and Saudi Arabia managed to collapse world oil prices

Abdul-Aziz ibn Saud, the ruler of the kingdom of Hejaz, was taking a car ride. Not alone. Both his interlocutor and the topic of conversation were extremely curious. Sitting next to the king was Jack Philby, a British orientalist and the father of that same Kim Feebly, who would later become one of the most famous double agents of the 20th century. And the king and the spy's father were talking about oil. Or rather, about the deplorable state of the treasury of the Kingdom of Hejaz (in two years it will be renamed Saudi Arabia).

In response to Ibn Saud's sad reflections, Philby replied that both the king himself and his government reminded him of beggars who sleep on buried treasure. He was convinced that the desert concealed huge reserves of oil. All that remained was to convince the king to involve foreigners in her search.

About the dangers of bad habits

Of course, Saudi Arabia did not immediately become one of the main players on the international stage. The concession agreement was signed only in 1933, a few more years geological surveys brought only disappointment. And when oil was found and production was established, the Second World War.

In this situation, US President Franklin Roosevelt almost made a strategic mistake - he did not want to help Ibn Saud. Fortunately, Roosevelt's inner circle included his administration's Secretary of the Interior, Harold Ickes. He understood much better than the president the value of relations with the Saudi dynasty and was able to convince the president, insisting that if the Americans did not help Ibn Saud, the oil concessions of American companies would go to the British.

Relations between the two countries became even closer when Roosevelt and Ibn Saud met in person. They were similar - about the same age, with similar interests and troubles (both were disabled).

Against this background, Winston Churchill’s subsequent visit to Saudi Arabia turned out to be a failure, and all because of the bad habits of the English Prime Minister. Churchill was told that he could not smoke or drink alcohol in the presence of the king. Churchill, according to his own recollections, replied: “If his religion imposes such conditions, then my religion prescribes, as an absolutely sacred ritual, smoking cigars and drinking before, after, and if necessary, during all meals.”

The greed of the oil workers ruined

Saudi Arabia did not make any geopolitical claims until the 1960s. And perhaps this would have continued for a long time if not for the greed of American oil exporting companies. In 1960, they sharply lowered purchase prices for oil, which provoked a sharp reaction from producing countries. In the same year, oil-producing countries created OPEC, an organization that protects their interests, and set a course for gradual nationalization.

For two decades, Saudi Arabia has appreciated the full power of the “oil weapon” that it held in its hands. First of all, thanks to the two energy crises it provoked - 1973 and 1979.

The first was a response to Western countries' support for Israel in the Arab-Israeli war. Saudi Arabia has imposed an embargo on oil supplies to the United States and some other Western countries. By that time, the world was already two-thirds dependent on oil.

It is clear that this was an economic shock for Western countries. But, no less important, the shock was also psychological. It turned out that someone can dictate their terms to the superpowers. The fuel shortage in the United States has completely plunged people into prostration.

Switched from camels to pickup trucks

Saudi Arabia has jumped from the Middle Ages to modernity in just a couple of decades. “Keeping camels is extremely unprofitable; Datsun will cost much less,” joked Nissan bosses who flooded Saudi Arabia with their pickups during these years.

It is not surprising that every American administration that came to power after the 1970s preferred to be friends with the Saudi regime. It was a mutually beneficial friendship. In fact, it made it possible to solve even such problems as the collapse of the Soviet Union. After all, the fall in oil prices in the 1980s was the result of a sharp increase in oil production by Saudi Arabia. According to one popular version, Ronald Reagan convinced the Saudi kings to increase oil production.

Even the terrorist attacks of September 9, 2001, did not spoil relations between the United States and Saudi Arabia, although most of the terrorists came from this country, notes Georgy Mirsky, chief researcher at the Institute of World Economy and International Relations of the Russian Academy of Sciences.

After the 2001 attacks, “almost eighty percent of mosques in Saudi Arabia expressed support for bin Laden,” Prince Mohammed bin Nayef, the Saudi assistant interior minister, told US diplomats. These words are contained in one of the State Department documents declassified by WikiLeaks. “Only then did the Saudi leadership realize how dire the problem they faced was,” the prince argued.

This contributed to the rapprochement of the Saudi monarchy with the administrations of both George W. Bush and Barack Obama. The Saudi leadership welcomed American airstrikes on terrorist bases in Yemen and insisted on war with Iran. In documents published by WikiLeaks, it is mentioned several times that King Abdullah bin Abdulaziz al-Saud of Saudi Arabia, speaking about Iran, called on the American administration to “cut off the head of the snake.”

Fight of clans

The recent death of King Abdullah al-Saud has many speculating that a brutal power struggle has begun in the country. However, the transfer of power to his younger brother Salman al-Saud went very smoothly. Moreover, it has been determined who will become king even after the death of 79-year-old Salman - this is Muqrin ibn Abdulaziz al-Saud. He is not young either - 71 years old.

Then power should pass to the generation of Ibn Saud’s grandchildren. And here any scenario is already possible. The peaceful transfer of power in Saudi Arabia is rather an anomaly in recent decades. Even in the 20th century, during the reign of one Saudi dynasty, power did not always pass from prince to prince voluntarily.

There is a serious confrontation between various ruling clans in the Saudi elite, explains Yevgeny Satanovsky, president of the Middle East Institute. - For example, between the sons of King Faisal, who was killed in 1975, and the sons of the kings who ruled after him.

Clans deprived of power will bet on different successors, and this promises a fierce struggle for the throne, which may even cost the country its territorial integrity. Because there are a huge number of people who want to weaken the Saudi dynasty. In addition to al-Qaeda militants active in Yemen, there is also a relatively new headache in the form of the Islamic State.

Saudi Arabia's share of world oil production

1960 - 8,5 %
1970 - 8,6 %
1980 - 16,8 %
1990 - 10,1 %
2000 - 12,3 %
2010 - 14,2 %

The first oil field was discovered in Saudi Arabia

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Kingdom of Saudi Arabia formed

The regions of Najd and Hejaz were united on September 23, 1932 into one state called Saudi Arabia. The first king of this state was Abdul Aziz. Soon, colossal oil fields were discovered in Saudi Arabia. A well-established oil industry was established in the country only after the end of World War II. Oil became the source of wealth and prosperity for the state.

In 1925, the united Kingdom of Najd and Hejaz was created on the territory of the Arabian Peninsula, headed by Abdel Aziz ibn Saud. In September 1932, the kingdom was renamed Saudi Arabia. The young state was not only very poor, but also experienced an acute shortage of drinking water. And it was the desire to find water that played a very important role in the further development of the country. When drilling one of the wells on March 15, 1938, the first oil field in Saudi Arabia was discovered.

On the first day, the well produced only about 1,500 barrels, and two weeks later more than twice as much. Continuation of the work of wells D-2 and D-4 to the discovered oil depth also gave good results and marked the discovery of a new oil-bearing layer for the region in the formation, which geologists dubbed the Arabian zone.

King Abdulaziz ibn Saud blessed the historic discovery and in April 1939 he himself came to Al-Hasa, where oil was discovered, from Riyadh along the ancient caravan route through the red sands of the Dahna desert, accompanied by a huge retinue of 2,000 people. The procession numbered up to four hundred cars.

In a place that had just received the official name of Dhahran, a tent city of 350 white tents was set up. Before the king’s arrival, the first oil pipeline on Saudi territory was built to Cape Tannura, where the first shipment of oil was waiting for the tanker D. J. Scofield, and on May 1, 1939, King Ibn Saud, with appropriate solemnity for the occasion, turned the valve, releasing oil from Saudi Arabia.

Today, Saudi Arabia's proven oil reserves stand at 268 billion barrels, considered the world's largest until January 2011, when Venezuela announced its proven oil reserves stood at 297 billion barrels. About one fifth of the world's oil reserves are located in Saudi Arabia. Most of them are located in a relatively small number of large deposits.

Although there are about 100 gas and oil fields in Saudi Arabia, more than half of Saudi oil is produced from just 8 fields, the largest of which is Ghawar. Ghawar is the largest oil field in the world, it contains about 70 billion barrels of oil, 90% of Saudi Arabia's oil is produced from 5 fields, with 60% produced in Ghawar.

Saudi Arabia produced 10.3 million barrels per day in 1980 and 10.6 in 2006. According to some experts, Saudi Arabia's oil production has already peaked or will reach it in the near future.

Since Saudi Arabia has not provided foreign researchers with access to documents related to the country's oil reserves since 1982, official information about them raises doubts among experts.

The Hajj was the kingdom's main source of income, and the sharp decline in the number of pilgrims due to the global economic crisis has left Saudi finances in dire straits. The government built the first radio stations, improved Jeddah's water supply and purchased cars, owing a total of 300-400 thousand pounds. Art. Creditors simply stopped paying. Attempts to obtain loans did not lead to anything 1.

At this moment, G. Philby, using his personal connections with the king, persuaded him to meet with the American millionaire Charles Crane, who, under the guise of a philanthropist, was traveling around Arab countries. Obviously, he was connected with American oil companies and was testing the waters for their penetration into an area completely unfamiliar to them. Crane was accompanied as a translator by J. Antonius, the future author of the book “The Awakening of the Arabs.” The American millionaire sent geologist K. Twitchell supposedly to conduct water surveys in Saudi Arabia 2.

In the spring of 1932, Twitchell discovered that there was a promising geological structure for oil in the Dhahran area, and went to the United States to inform oil companies about this 3.

A new era in Saudi Arabia's history was approaching, one that would have an impact on its society comparable in depth only to that of Islam. But the driving forces behind these changes lay outside Arabia. They were caused by the economic switch of the 20th century. for new energy raw materials - oil. Her searches covered all countries of the planet.

American monopolies in the Middle East in the 20s. Before 1920, American companies were either indifferent to foreign reserves or were unsuccessful in their attempts to obtain concessions in the Eastern Hemisphere due to the restrictive national and colonial policies of the European powers and private oil firms. After 1920, however, they became actively interested in oil deposits abroad, prompted by dual concerns - a potential shortage of oil in the United States and the threat of facing an Anglo-Dutch monopoly on the world's resources of this raw material. The main reason lay in the fear of being left out of the exploitation of cheap oil deposits that are conveniently located in relation to important markets 4.

In 1920, W. Fairis, later president of the Standard Oil Company of New Jersey, declared that oil was running out in Texas and Oklahoma. That same year, White, chief scientist at the US Geological Survey, predicted that American oil reserves would run out within 18 years. In this regard, the Department of the Navy began to show concern, as experts argued that the United States would have to reduce oil consumption or begin importing it. Senator G. C. Lodge warned Congress that "England is gaining control of the world's oil supply."5

Whether the companies really intended that US oil reserves were so limited, or whether this was a pretext for greater involvement of the US government in their expansion beyond national borders, remains unknown. The methods of putting pressure on the government and manipulating public opinion in the interests of monopolies are so well developed in the United States that, most likely, it was the second reason that led to the spread of such statements. In any case, in the early 20s, the largest American companies entered the fight for concessions in Central and South America and the Middle East. American oil companies emphasized that at that moment the United States, possessing 12% of the world's oil reserves, accounted for 70% of world production. But control over oil sources outside the United States was in the hands of the Anglo-Dutch monopolies 6.

American companies feared they were too late to share the Middle East oil pie. The Department of the Interior developed policies to support American corporations' bid for foreign concessions, in order to encourage all government departments and agencies to help them. At the peace conference in San Remo in April 1920, the fate of the Ottoman Empire was discussed. London and Paris agreed on the division of Iraqi oil. The American government intervened to bring its oil companies into the pool and began talking about “discrimination” against the United States in commercial activities on the territory of Germany and its allies, insisting on an “open door” policy.

When Ataturk's government tried to challenge the annexation of Mosul territory to Iraq, the opportunity opened for the United States to blackmail its allies into supporting Turkish demands. Therefore, already in 1921 -1922. An agreement was reached that the Americans would be given a 20-25% stake in the future oil company. In 1921, after the Council of the League of Nations transferred Mosul Province to Iraq, the Iraqi government granted a 75-year concession to the Turkish Petroleum Company. But in 1927, when oil production had already begun in Mosul, the Americans had not yet received their share. It was not until July 1928 that an agreement was reached, later known as the “red line agreement.” In accordance with it, the main owners of the Turkish Petroleum Company (since 1929 - Iraq Petroleum) became the Anglo-Persian oil company(the future Anglo-Iranian and then British Petroleum), the Anglo-Dutch Royal Dutch Shell, the French Company Française de Petroleum and the Near Eastern Development Corporation as part of Standard Oil (New Jersey) ( the future "EXSON") and "Soconi Vacuum" (the future "Soconi Mobile"), 5% of the shares went to Kaloust Gulbenkian, the organizer of the Turkish Petroleum Company 7.

US companies penetrated Iraq Petroleum, albeit in a secondary role. But the “red line agreement” significantly limited their independent actions, since Iraq Petroleum participants pledged to acquire concessions in the territories of the former Ottoman Empire only in the same proportions as in Iraq. Let us recall that Najd and Al-Hasa on the eve of the First World War were formally considered part of the Ottoman Empire.

Obtaining the Saudi concession. Standard Oil of California (SOCAL) was one of the American oil companies that, after the First World War, made serious attempts to get involved in oil production outside the United States. Although it was one of the largest American corporations, its efforts in the 1920s to find something abroad were unsuccessful.

But just as the fate of Iraq Petroleum was connected with the personality of the businessman K. Gulbenkian, so the search for oil and oil concessions in a number of Arabian countries were associated with the name of the energetic New Zealander Major Frank Holmes. He appeared in Bahrain in the early 20s, ostensibly to participate in the search for water. In 1922, he went to Najd to negotiate with Abd al-Aziz on behalf of the English company Eastern and General Syndicate. Ibn Saud agreed to provide 30 thousand square meters. miles in Al-Has to the Syndicate concession. According to the agreement, concessionaires had to pay 2 thousand pounds. Art. per year for the right to operate. In 1925 Holmes received a concession also in Bahrain 9.

Syndicate is an English company whose leaders were no strangers to adventurism. She did not have enough capital, but she hoped to interest British oil companies in concessions. However, they were confident that they could cope without intermediaries. Finding no support, Holmes stopped payments, making only 4 thousand pounds, and the concession for the territory with the richest oil reserves in the world was canceled in 1928 10.

The two-year concession in Bahrain survived only because Syndicate secured an extension. Having failed in attempts to interest English oil companies, Syndicate contacted the American Gulf Oil Corporation. In November 1927, Gulf sent its geologist to explore Bahrain and draw up a geological map. The Americans decided that the game was worth the candle and bought the concession from Syndicate.

However, Gulf ran into complications. At this time she was associated with Iraq Petroleum, then known as Turkey Petroleum. The Red Line Agreement also applied to Bahrain. Then Gulf transferred its rights to Syndicate 11 to SOCAL in December 1928.

The lack of interest in concessions in Bahrain and Arabia among British oil companies at that time was explained by the fact that, in their opinion, there was no oil there and they were not going to take risks. Oil production in Iran and Iraq came from different geological structures than those found in Bahrain and Arabia. No oil was found in similar structures on Qeshm Island off the Iranian coast. The British considered Bahrain and Arabia to be unpromising areas. But the history of the oil industry knows examples when new newcomers found oil in places that old companies refused for geological reasons.

Great Britain was against the appearance of an American oil company in the Persian Gulf. Under an agreement signed in 1914, the ruler of Bahrain pledged not to grant concessions on his territory and not to accept proposals from anyone without British consent.

Even a month before the transfer of the SOCAL concession, the British authorities informed the Eastern and General Syndicate that they would “advise” the ruler of Bahrain to extend their concession only if the Syndicate agreed to transfer the concession to a company under British control and management. Then SOCAL simply bypassed the formal English restrictions and organized the Bahrain Petroleum Company in August 1930, registering it V Canada, i.e. formally turning into a British company. Meanwhile, in the spring of 1930, two SOCAL representatives, F. Davis, later chairman of the board of ARAMCO, and W. Taylor explored Bahrain and recommended drilling 12.

Geological structures in Bahrain that showed signs of oil sparked SOCAL's interest in nearby Arabia. The company did not contact King Abd al-Aziz directly in the spring of 1930 because it thought Holmes would do a better job. However, Holmes was busy negotiating with the ruler of Kuwait on behalf of Gulf. He promised to visit the king, but postponed the visit, knowing that he had lost the trust of Abd al-Aziz after refusing to pay for the previous concession. Two years passed, and in June 1932 oil was discovered in Bahrain. SOCAL decided to contact the King of Saudi Arabia, bypassing Holmes. In addition, she learned that the Anglo-Indian government had advised Syndicate not to promote the interests of Gulf or SOCAL in Saudi Arabia.

As early as 1930, representatives of SOCAL approached the Saudi representative in London to obtain permission for their geologist to visit Al-Hasa. The king then refused. But by this time, the “independent geologist” K. Twitchell, fulfilling the assignment of the “philanthropist” Crane, had already visited Eastern Arabia and recommended seeking a concession. SOCAL entered into contact with Twitchell 13.

In October 1932, the SOCAL directorate sent a telegram to G. Philby, who was then living in Jeddah, with a proposal to negotiate with the government of Saudi Arabia to conduct preliminary geological exploration for oil in the Eastern Province. However, the Saudi government preferred to negotiate the concession before the start of geological work.

At the beginning of 1933, L. Hamilton, a representative of the company, had already arrived in Jeddah, where he was assisted in negotiations by K. Twitchell, who was exploring water and mineral resources in Arabia. At the same time, a representative of Iraq Petroleum, Longrigg, and Holmes, from Syndicate, appeared in Jeddah. The Saudi negotiator demanded that the future concessionaire pay 100 thousand pounds in gold upon signing the agreement. Syndicate immediately left the game. Iraq Petroleum offered a maximum of 10 thousand pounds. Art., still not believing in the presence of oil in Saudi Arabia, and SOCAL won the concession for 50 thousand pounds. Art. 14.

One of the reasons for the American victory in the fight for the concession was that they had no imperial past in the Middle East. Surrounded on all sides by English colonies or countries dependent on Great Britain, forced to constantly make friendly gestures towards her, Ibn Saud nevertheless did not trust her and did not want to allow the British company into his country 15.

The negotiations took place during a dark period for American business after the crisis of 1929. Already when an agreement between SOCAL and Saudi Arabia was reached on all points, the United States declared an embargo on gold exports on April 20 and then moved away from the gold standard. Then the company simply bought gold sovereigns in English foreign exchange market. Finally, on May 29, 1933, the agreement was signed by Abdallah al-Suleiman, the Saudi Minister of Finance, and L. Hamilton for Standard Oil of California. The Saudi government ratified this agreement by royal decree on July 7, 1933, and it came into force on July 14, 1933.

In November 1933, the concession was transferred to the California-Arabian Standard Oil Company, a subsidiary of SKAL. This name was changed in January 1944 to Arabian American Oil Company (ARAMCO).

By 1936, SOCAL had potentially large production capabilities in the Eastern Hemisphere, but a weak transportation and market network. At the same time, the oil distribution system developed by the Texas Company (now TEXACO) needed available products. Both companies combined their interests in the gigantic area between Egypt and the Hawaiian Islands. TEXACO received half the shares of an oil company operating in Saudi Arabia 16 .

Some time after the conclusion of the oil concession agreement, the Anglo-American group received a concession to develop gold mines. Gold began to be mined in Mahd ed-Dahab, but the mines were depleted by 1953. There are quite a lot of gold mines in the Hejaz mountains, but apparently both King Solomon and the Abbasid caliphs extracted quite a lot of gold in their time, and the mines after a short period of operation became unprofitable 17 .

The concession agreement gave SOCAL the “exclusive right for a period of 60 years to explore, explore, drill, extract, process, produce, transport, sell, export and export” oil and petroleum products and create the necessary facilities for these operations. The company was provided with a territory with exclusive rights measuring 400 thousand square meters. miles, covering almost the entire eastern part of Saudi Arabia (1 sq. mile is approximately 2.59 sq. km). This agreement provided for SOCAL's "preferential right" to obtain additional concessions in the remaining areas of eastern Saudi Arabia, as well as other rights the government might obtain in the Neutral Zone south of Kuwait. In exchange for these concessions, the company agreed to perform following conditions:

1. Provide Saudi Arabia with a loan of 30 thousand pounds. gold or its equivalent, which was to be paid within fifteen days from the signing of the agreement. The company undertook to provide an additional loan of 20 thousand pounds. gold in 18 months if the agreement is still in force. Repayment of these loans must be made by extractions from half of the estimated rent to the government for the concession.

2. Pay 5 thousand pounds annually. gold ahead, until the discovery of commercial oil reserves.

3. After the discovery of oil in commercial quantities, immediately pay a rent of 5 thousand pounds. and another such payment in the same amount a year later. Deductions must be made from the estimated rent. Start reclaiming areas that the company has no intention of exploiting.

4. Once oil is discovered, the government must receive a rent of 4 gold shillings or its equivalent for each ton of oil. Every year the company pledged to provide the government with free oil for the production of gasoline and kerosene.

5. Build an oil refinery once oil is discovered and provide Saudi Arabia with 200,000 US gallons of gasoline and 100,000 US gallons of kerosene (1 US gallon equals 3.78 liters) free of charge.

In turn, the government agreed to exempt the company and its enterprises from all direct and indirect taxes, customs duties, etc. 18.

There is no doubt that the terms of the agreement were extremely beneficial for the company and disadvantageous for Saudi Arabia, but they reflected the then balance of power between the partners. When the Saudi government signed the agreement, it had no experience in oil affairs and was desperate for money. The main efforts of the government were aimed at obtaining financial benefits in the form of rent, rental payments and loans.

The clause in the agreement that exempted the company from "all direct and indirect taxes" deprived the kingdom of a colossal source of income and provided the company with potentially huge returns on its investment. Business firms that operated in other countries were always subject to taxes.

Start of mining. The company was in a hurry. The first two geologists landed at Jubail in September 1933, less than four months after the concession agreement was signed, and met with C. Twitchell, who had arrived from Jeddah. A local merchant, Hamad al-Ghusaybi, became an agent for the company. Geologists lived in Hofuf in his house until 1936.

Already on September 28, they discovered hints of a dome structure. At first, geologists transported cargo on camels. Only a few months later the trucks appeared. The company brought all the equipment and most of the food from the United States through the port of Al-Khobar. By the end of 1933, there were already eight oil workers in Saudi Arabia.

By 1935, geologists found a favorable structure and began drilling. The first well showed only signs of oil and some gas. The first oil was discovered in commercial quantities in 1938. In September 1938, some oil began to be transported to Bahrain to a refinery owned by the Bahrain Petroleum Company. Then the port for oil export was chosen - Ras Tanura. The British Admiralty provided some information about navigation conditions in the Persian Gulf.

In 1939, the king and his court visited the oil production area in Dhahran, where a camp with 350 tents was set up. For several days, the Saudi nobility celebrated the start of oil production. On May 1, 1939, the first tanker with liquid fuel left Saudi Arabia.

By the time the Second World War began, geologists had covered 175 thousand square meters. miles of preliminary exploration and 50 thousand sq. miles by detailed reconnaissance. A smaller area was covered by seismic surveys and drilling. When work was suspended due to the war, geologists already knew that they had discovered fantastic oil reserves, but had not yet fully determined their extent. In 1934, the company drilled a well in Jauf. It turned out to be completely empty, and this area was considered unpromising 19.

Following the oil discovery, the Saudi government agreed to increase the initial concession area in the southern and northern areas of Eastern Arabia and to grant the company the right to exploit the Saudi share in the neutral zones between Saudi Arabia and Iraq and between Saudi Arabia and Kuwait. This increased the size of the territory where the concessionaire had exclusive rights to approximately 496 thousand square meters. miles, of which 484 thousand sq. miles were on the mainland and 11 thousand on the continental shelf of the Persian Gulf. The area of the concession was equal to the territory of Arizona, New Mexico and Texas combined. The company was granted significant rights in the area west of the exclusive rights zone. Part of the zone of preferential rights was abandoned in 1947, and the remaining part in 196320.

The new concession was granted for 60 years, and the period of the original agreement was extended by six years. The company achieved a ten-year moratorium on the transfer of any part of the territory with special rights. In return for these additional benefits, the company pledged to:

1. After the end of the ten-year moratorium, gradually return those areas of the concession zone that are not going to be exploited.

2. Immediately pay 140 thousand pounds. gold and an additional 100 thousand f. after the discovery of oil in commercial quantities.

3. Set the annual rent at 20 thousand pounds. for an additional area, which will be paid until oil is discovered in commercial quantities.

4. Increase production of free gasoline for the Saudi government to 1.3 million gallons.

The dynamics of oil production growth in Saudi Arabia is as follows:

Abdulaziz ibn Saud

King Ibn Saud had a friend and adviser - the Englishman Harry St. John Bridger Philby or simply Jack Philby. He grew up in Ceylon, graduated from Trinity College, Cambridge, and began his civil service career in India. During the First World War he served on the British political mission in Baghdad and Basra. Philby first met Ibn Saud in 1917 during his mission to Riyadh. In 1925, dissatisfaction with British policy in the Middle East prompted Jack Philby to leave public service. He returned to Saudi Arabia and founded in Jeddah trading company and renewed his friendship with ibn Saud, after some time becoming an unofficial adviser to the king.

It was Philby who took up the challenge of solving the water problem. He interested one of his friends, the American Charles Crane, in this question. Crane was the wealthy owner of a company that dealt in all things plumbing. In addition, he was a man with a keen interest in history and international relations. But his main passion was Arabic studies. And it was Arabic studies that brought Crane and Philby together, who met, corresponded, and exchanged ancient manuscripts. When Jack Philby told Crane about his philanthropic plans to benefit the Arabs with water, he immediately responded. Crane had an expedition in neighboring Yemen at that very moment to search for water, led by a very experienced prospector and drilling specialist, Carl Twitchell.

On February 25, 1931, Crane arrived in Saudi Arabia, in Jeddah. The king greeted him with a luxurious banquet and great honors. For his entertainment, hundreds of the king's bodyguards performed a mesmerizing sword dance. The king gave Crane many carpets, daggers, sabers and two thoroughbred Arabian horses. The two of them talked about the scorched rocky desert and the possible presence of underground rivers under Nejd. After this, Twitchell's expedition was transferred to Arabia.

After making an arduous 1,500-mile journey to check for signs of artesian water in the Arabian Desert, Twitchell showed up in Jeddah in April 1931 with bad news: drilling for water was futile. But at the same time, he stated that the experience of a driller tells him that there must be oil in the eastern regions of Arabia.

2 Oil exploration concession

The prospects looming on the horizon pushed Philby and Ibn Saud to action. It was necessary to find foreign investors. The choice fell on the Americans. The king asked driller Carl Twitchell to be his intermediary in America. In February 1933, Twitchell returned to Saudi Arabia and brought with him a man named Lloyd Hamilton. Hamilton was a lawyer representing the interests of the oil company Standard Oil of California (SOCAL). Philby signed a secret agreement with SOCAL under which he became a “consultant” for the company. Under the terms of the agreement, he received $1,000 a month for six months, obliging himself to ensure that the Americans received a concession to search for oil within this period, as well as a bonus if oil was found.

SOCAL was not the only company interested in searching for oil in Arabia. The Iraqi Oil Company also sent a representative for negotiations. The Saudi side demanded that the future concessionaire pay 100 thousand pounds in gold upon signing the agreement. The Iraqi Oil Company offered a maximum of 10 thousand pounds. Art. SOCAL was also not ready to pay that much. But in the end, an agreement was signed with the Americans.

According to the terms of the agreement, SOCAL had to immediately pay 35 thousand pounds sterling in gold. Eighteen months later a second loan of £20,000 was expected to be issued. In addition, the company pledged to provide another loan of 100 thousand pounds sterling in gold upon discovery of oil. The concession was valid for 60 years and covered an area of 360 thousand square miles. On May 29, 1933, the agreement was signed.

3 Oil discovery

The first two geologists landed at Jubail in September 1933 and met Twitchell, who had arrived from Jeddah. A local merchant, Hamad al-Ghusaybi, became an agent for the company. Geologists lived in Hofuf in his house until 1936. At first, geologists transported cargo into the desert on camels. Only a few months later the trucks appeared. The company brought all the equipment and most of the food from the United States through the port of Al-Khobar. By the end of 1933, there were already eight oil workers in Saudi Arabia.

By 1935, geologists had found a favorable structure to begin drilling. On April 30, 1935, drilling of the first well, Dammam-1 (D-1), began. It was destined to become historical only thanks to its first issue. After 7 months, Dammam 1 produced gas and signs of oil at a depth of seven hundred meters. But due to equipment failure, the drillers were forced to cement the well. Dammam 2 was started immediately. Signs of oil were found at a depth of 663 meters. The company decided to expand the search and began drilling four more wells. Prefabricated houses, equipment, gear - everything necessary to continue work - were sent to Al-Hasa from the United States.

By the end of 1936, 62 Americans and more than 1,000 Saudis were working in the Dammam Dome area. But there was no reason to rejoice yet. Deepening D-1 to 975 meters yielded nothing. D-2 turned out to be “crude” and produced ten times more water than oil. With difficulty, 100 barrels of heavy oil with 15 percent water were pumped out of D-3. D-4 turned out to be dry, D-5 was just as hopeless. "Wild Cat" - a well drilled at random in early 1937 in the El Alat area 20 miles northwest of Dhahran to a depth of 1380 meters, produced a small amount of oil mixed with water.

The experimental well D-7, founded in December 1937, was difficult: chains broke and drills were lost. But at the beginning of March 1938, D-7, drilled to a depth of 1440 meters, produced oil. On the first day there are only about 1,500 barrels, and after two weeks it is more than twice as much. Continuation of D-2 and D-4 to the discovered oil depth also gave good results and marked the discovery of a new oil-bearing layer for the region in the formation, which geologists dubbed the Arabian zone.

King Abdulaziz ibn Saud blessed the historic discovery and in April 1939 he himself came to Al-Hasa from Riyadh along the ancient caravan route through the red sands of the Dakhna desert, accompanied by a huge retinue of 2,000 people. The procession numbered up to four hundred cars. In a place that had just received the official name of Dhahran, a tent city of 350 white tents was set up. Before the king’s arrival, the first oil pipeline on Saudi territory was built to Cape Tannura, where the first shipment of oil was waiting for the tanker D. J. Scofield." On May 1, 1939, King Ibn Saud turned the valve with solemnity appropriate to the occasion, releasing oil from Saudi Arabia.

The reason for the sharp drop in oil prices could be the US deal with Saudi Arabia. American President Donald Trump himself provokes such speculation. In gratitude for the reduction in prices for black gold, he is even ready to forgive the Saudis for the brutal murder of a journalist in Turkey. Is Saudi Arabia's friendship with Russia really worth nothing anymore?

US President Donald Trump thanked Saudi Arabia for lowering oil prices. “Oil prices are falling. Amazing! Like a big tax cut for America and for the world. Enjoy! 54 dollars (Trump meant the price of a barrel of WTI oil - approx. VIEW), it was 82 dollars. Thanks to Saudi Arabia, but let’s do it lower!” Trump tweeted the day before.

According to him, he is holding down oil prices, and Saudi Arabia is helping him with this. Fearing the high cost of oil, Trump is ready to forgive Riyadh even for the brutal murder of journalist Jamal Khashoggi at the kingdom’s consulate in Turkey. Turkish authorities believe that Crown Prince Mohammed bin Salman Al Saud is personally behind this crime.

Oil production in the United States is important, but only concerns oil producers. While gasoline prices, which directly correlate with oil prices, are important for the entire American economy.

Is Saudi Arabia’s friendship with Russia really no longer worth anything and the Saudis, behind Moscow’s back, are playing on Washington’s side?

“The situation around the oil market is quite ambiguous. An interesting scenario is emerging here that Donald Trump made a deal with the Saudis, they say, he forgives im the murder of journalist Jamal Khashoggi in exchange for a reduction in world oil prices,” says Gaidar Hasanov, an expert at the International Financial Center.

“Saudi Arabia is really ‘to blame’ for the decline in oil prices in recent weeks, for which Donald Trump thanks it,” agrees Mark Goikhman from TeleTrade Group of Companies.

One can speculate that Saudi Arabia followed the lead of Trump, who littered his entire Twitter account with accusations of the Arabs and OPEC for high oil prices. However, there is another explanation.

Let us recall that as soon as it became known in August that in November the United States would ban other countries from buying Iranian oil, black gold immediately began to grow strongly. From August to early October, Brent oil rose in price from 70 to 86.5 dollars per barrel. “It was assumed that US sanctions against Iran would reduce global supply by about 1 million barrels per day. Market participants factored this into prices in advance, which caused them to rise. But when oil became too expensive for US consumers, Donald Trump turned first to Saudi Arabia as the market leader with a call to increase production and, accordingly, the supply of oil in the world. And Riyadh went for it, announcing it in advance,” the expert recalls the background. As a result, even with words about an increase in production, oil prices have gone down since October. The Saudis, who produced 10.6 million barrels a day in October, raised output in November to about 11 million barrels.

“However, the Saudis began to increase production not because of Trump’s appeals, but because of fears that a sharp increase prices will limit the demand for black gold in the world and lead to a collapse in quotations in the future,” explains Goikhman.

The next step to lower oil prices was indeed taken by Donald Trump. At first, he convinced everyone that sanctions against Iran would be tough, but in November, instead of a total ban on the purchase of Iranian oil, he made an unexpected exception for major importers. As a result, the Saudis increased production, but Iranian oil practically does not leave the market, and even shale oil production in the United States itself is growing. All this turned out not to be a shortage, but an excess of supply, and, naturally, puts pressure on prices.

The latest OPEC forecasts added fuel to the fire: next year, with global production rising, demand for oil will be lower than expected due to a slowdown economic growth in the world. “Thus, the situation turned into its opposite - instead of fears of an oil shortage, it turned out that there would be a large surplus,” says Goikhman. Apparently, both the Saudis and the Americans are “to blame” for this. However, this does not prove that they acted together behind Russia's back.

What's next for oil? The likelihood of a sharp collapse to 55 dollars, or even more so to 35 dollars per barrel, is small, Goikhman believes. Precisely because within the framework of OPEC+, discussions are already underway on a new restriction on the production of black gold. An important meeting will be between Vladimir Putin and Prince Mohammed bin Salman of Saudi Arabia at the G20 summit next week. But real decisions may be made as early as December 6 at the OPEC meeting in Vienna.

Interesting, that the positions of Riyadh and Moscow differ here.“While Saudi Arabia called for production cuts and warned of a glut, Russia said further market monitoring was needed before any decision was made,” recalls Hasanov. Saudi Arabia has already announced a production cut of 0.5 million barrels per day in December and will try to convince Russia of the need for new production quotas in 2019 to prevent a collapse in oil prices. “The experience of the past agreement on production reduction by OPEC+ countries shows that it was effective and was implemented by all participants. Therefore, it is very likely that oil prices will rise in the coming months and, on average, will remain in the region $70–75 per barrel“, says Goikhman.

If Russia refuses to cooperate with OPEC and does not want to bind itself to a new agreement, then against the backdrop of record production in the United States, we can expect a new collapse down to $50 per barrel of Brent.

However, a drop in prices below $40 is not beneficial for any of the exporting countries, Gasanov retorts. Moreover, even the United States will not benefit from such a price collapse. "Lower prices could delay some of the growth plans companies had previously had," Wood Mackenzie analyst Andrew McConn said in a Wall Street Journal article cited by Dow Jones. Preservation low prices oil prices for a long time will have a very significant impact on production plans in regions such as North Dakota and Canada, said Matthew Portillo of Tudor, Pickering, Holt & Co. Market participants may begin to leave it. The oil produced there is difficult to supply to export markets; it has to be sold at a discount due to infrastructure problems. EOG Resources noted that it would have to cut production plans for 2019 if oil will fall below $50 per barrel.