National oil companies rose to prominence in the economies of the Arab World in the 1960s and the 1970s, when governments took full control of them from the Western multinationals.
The process was handled in a range of ways. The companies developed along different lines as they ran the production in the sector, which kept the world moving and its output growing.
Al Majalla looks at the different experiences of oil companies in the Arab world and explains why some succeeded and others struggled at a formative time for an industry crucial to the Middle East and the wider world.
Kuwait and Saudi Arabia
In Kuwait, nationalisation occurred in 1975. The process was led by Abdullah Al-Nibari, a member of the National Assembly, who used detailed explanations to convince the government and the legislature to take action.
It was carried out via a proposal that initially gave the government 60% of KOC, previously owned by Gulf Oil and British Petroleum (BP).
In Saudi Arabia, oil was being pumped by Aramco. It was set up in 1933 in a deal between the government and Standard Oil of the US, and production started in 1938 after oil was found in the desert.
In 1973, the Saudi government bought 25% of Aramco, and in 1974, it increased its share to 60%. The company became fully owned by the government in 1980.
Renamed Saudi Aramco, it emerged as the most successful national oil company in the Arab world. It has professional capabilities that are hard to find in many Arab national oil companies and has technological capabilities and scientific expertise on par with global industry giants.
Like other successful firms in the sector, it has been able to improve production capacities and expand upstream and downstream investments. It has worked to qualify national personnel through training, scholarships abroad, and cooperation with experts from international companies.
Kuwait’s story has been different. The reasons are varied, but some identifiable patterns exist behind what works and what does not.
Many of them have been defined by Dr Majid Al-Moneef, a distinguished Saudi economist who headed institutions related to the oil sector.
In his book, Oil Between the Legacy of History and the Challenges of the 21st Century, he discusses oil economics since the middle of the 19th century and reviews the factors that led to the emergence of national oil companies and the degrees of success and failure of each.