Sources Of U.S. Oil Imports And U.S. Oil Companies' Role In The Mideast

Before the Organization of Petroleum Exporting Countries (OPEC) rose to power in the 1970s, U.S. oil companies had a major role in both the ownership and operation of oil production facilities in the Mideast. Since then, that role has diminished greatly as the governments of the region have assumed ownership of their national oil industries. Today, there are essentially no American- ownedproduction facilities in the area, although U.S. companies own or hold a partial interest in some Mideast refineries and petrochemical plants and several thousand Americans still work in the oil industry in the region.

The Saudi Arabian Oil Company (commonly called Saudi Aramco) is a corporation wholly owned by the Saudi Arabian government that is the sole producer of oil and natural gas in that nation.

Aramco was a partnership among Chevron, Exxon, Texaco and Mobil. It had its origins in an exploration agreement signed in 1933 by Standard Oil of California (or Socal—Chevron's predecessor company) and the Saudi government. After five years of futile efforts, exploratory drilling finally found commercial quantities of oil in 1938, but large-scale oil production commenced only in the post World War II period. From less than 20,000 barrels per day (b/d) before 1944, Saudi production rose to 500,000 b/d by 1950 and to 3.5 million b/d by 1970. In 1980, Saudi production peaked at 9.6 million b/d, following which it fell once more as high oil prices reduced international demand.

Beginning in 1973, Saudi Arabia bought out the ownership interests in Aramco of the American oil companies. The takeover was an amicable and orderly process that proceeded over an extended period. Beginning with the acquisition of a 25 percent share in 1973, Saudia Arabia's government increased its share to 60 percent in 1974 and eventually to 100 percent in 1980, when it paid for substantially all of Aramco's assets.

Today, of Saudi Aramco's 43,000 employees, only about 2,500 are Americans. The company also draws on the expertise of another 2,000 or so resident Americans on loan from U.S. oil companies.

Most of the Mideast oil industry assets formerly owned by U.S.

companies were transferred to the Mideast countries during the 1970s. While in some cases (Algeria, Iraq and Libya), the transfer was accomplished by expropriation, in most others (Saudia Arabia, Iran, Kuwait, Abu Dhabi and Qatar) it took the form of gradually increasing "participation" agreements that extended over a number of years.

American companies still own some assets in the area. For example, Texaco owns a refinery (and a 50-percent share in the crude oil production that supplies it) at Mina Saud in the Neutral Zone between Saudi Arabia and Kuwait. That facility, with a capacity of 50,000 b/d was closed down immediately after the Iraqi invasion and the 45 or so U.S. citizens who worked there were evacuated. Amerada Hess has a small share in some oil fields in Abu Dhabi, amounting to about 9,000 b/d. Conoco has an equity interest in oil fields in nearby Dubai which produce 110,000 t/d. Mobil has 50 percent ownership of a refinery at Yanbu in Saudi Arabia, with a capacity of 250,000 fc/d, as well as a petrochemical plant there. It also has a smaller share in other operations in Saudia Arabia, including a lubricating oil refining plant.

Exxon also owns shares of petrochemical plants in Saudia Arabia and Abu Dhabi. These operations employ several hundred Americans.

In summary, the role played in the Mideast by the U.S. oil industry as a whole and the value of the physical assets owned by U.S. oil companies today are both far smaller than they were 20 years ago.

Oil Supply Data Sources Of U.S. Oil Imports Before The Embargo Of Iraq/Kuwait Oil The Persian Gulf supplied 25.3 percent of the crude oil and petroleum products imported into the United States from January to July 1990: 8.2 percent from Iraq, 14.8 percent from Saudia Arabia, and 1.2 percent from Kuwait.

Small amounts also came from Oman, Qatar and the United Arab Emirates.

OPEC nations outside the Middle East—Venezuela, Nigeria and four others—provided 29 percent.

Canada, Mexico and other non-OPEC nations outside the Middle East supplied the remainder.

After The Embargo According to the most recent information available, Persian Gulf petroleum imports to the United States fell during the months immediately following the early August 1990 United Nations' embargo of Iraqi and Kuwaiti supplies. However, because total U.S. imports also fell, there was only about a 2 percent drop in the Persian Gulf share of that total.

The decline in Persian Gulf imports was gradual, in part because petroleum supplies that left Iraq and Kuwait before the embargo arrived at U.S. ports during August and September. Also, during this same period, Saudi Arabia, among other Persian Gulf countries, took steps to increase daily production.

Thus, Persian Gulf imports averaged 23.4 percent of total U.S.

imports during September and October 1990. Of this amount, 20.7 percent came from Saudia Arabia, 2.3 percent from Iraq, 0.2 percent from Kuwait and 0.2 percent from Oman.

In addition, OPEC nations outside the Middle East—Venezuela, Nigeria and four others—provided 29.9 percent in September and October. Canada, Mexico and other non-OPEC nations outside the Middle East supplied the remainder.

From January to July 1990, U.S.

petroleum imports, as a percent of domestic deliveries, reached 50 percent, the highest seven-month level in history. During September and October 1990, imports dropped to about 42 percent of domestic demand. The reasons for the decline include a drop in oil use because of higher world oil prices and a weaker economy plus a drawdown in inventories during a p e r i o d of r e d u c e d a v a i l a b i l i t y of supplies.

Japan and Western Europe also rely on the Persian Gulf for a substantial portion of their oil imports.

In 1989, Japan, which imports virtually all of its oil, imported a 4.4 percent of its oil from Iraq, 6.8 percent from Kuwait and 15.8 percent from Saudia Arabia. In 1989, Western Europe, which imports about 75 percent of its oil, imported 8.9 percent of its oil from Iraq, 4.7 percent from Kuwait, and 11 percent from Saudia Arabia.