Location: Dhahran, Saudi Arabia
Annual Sales: $210 billion (est.)
On June 22, Saudi Arabia’s King Abdullah said the kingdom would open its taps to cool down soaring oil prices. The Saudi move, which annoyed some fellow OPEC members, helped trigger a subsequent price collapse. For J. Robinson West, chairman of Washington consultancy PFC Energy, the market reaction “was critical in pointing out the ascendancy and influence of Saudi Arabia in the industry.”
Much of that clout resides in one company, Saudi Aramco. It allows Saudi Arabia to be a kind of central banker of oil. Every day the Dhahran-based outfit ships around 8 million barrels to industrial powers. It’s the world’s largest oil producer, controlling almost 10% of global supply. More important, as the only player willing and able to vary production significantly, it plays a critical role in the health of economies worldwide. If it lets prices drift too high, millions worldwide could suffer. Too low, and the Saudi economy gets hit.
Incoming Chief Executive Khalid al Falih understands his company’s influence over global supply. Saudi Aramco has spent tens of billions of dollars to increase capacity and keep fields operating at higher-than-average rates. Among other things, it has used its wealth to become a trendsetter in new technologies such as underground sensors and horizontal wells to squeeze more oil from each field. Andrew Gould, CEO of oilfield services giant Schlumberger, adds that Saudi Aramco’s “success in tackling many of the industry’s toughest technology challenges is growing.”
Saudi Arabia has managed to overrule some of its more radical peers to keep up supply. The kingdom’s financial health depends on its ability to successfully manage oil prices through Saudi Aramco. It doesn’t always succeed. But the markets listen closely to what the Saudis say.