Obliging Goliath

Even to hardened Bedouin shepherds, the waterless wastes of Saudi Arabia's Rub' al Khali (literally, "empty quarter") seemed so desolate that "not even Allah had been there." But under these simmering sands American geologists discovered a sea of oil, and the company that tapped it--the Arabian American Oil Co.--has become one of the world's two largest single oil producers. (The other: Kuwait Oil Co., jointly owned by Gulf and British Petroleum.)

Since bringing in its first well in 1938, Aramco has shipped 5.7 billion bbl. of oil--enough to supply the entire world's demand for seven months. Its known reserves are worth $90 billion at current prices. By automating whenever possible, Aramco in the past ten years has doubled output while reducing its payroll nearly 50% and sharply cutting production costs. This amazingly successful and discreet company is doing better and better. On last year's sales of $1 billion, Aramco made a princely profit of $762 million. That was split fifty-fifty between the Saudi government and Aramco's four U.S. parents: California Standard, which owns 30%, Jersey Standard (30%), Texaco (30%) and Socony Mobil (10%).

Selling oil is sometimes almost as hard as finding it, and one reason Aramco can profitably produce such quantities is that its parents have such big markets. The four U.S. companies buy Aramco's entire output but ship only 5% of it to the U.S. because of import quotas. The bulk goes to Europe and Japan, whose needs are rising so rapidly that Aramco expects to double production again in the next decade.

Prudent Politics. Aside from consulting four parents on their projected oil needs, Aramco's easygoing President Thomas C. Barger, 54, runs his own shop. Barger's career tells much about the company: a geologist who arrived in Saudi Arabia in 1937, Barger spent four parched years prospecting the Rub' al Khali, learned to eat roast camel with his fingers and speak fluent Arabic, became Aramco's chief negotiator with the shrewd Saudis.

Aramco has often been criticized for bending too far to please the Saudi government and its free-spending princes instead of talking tough, as did some British oilmen in the Middle East. Aramco's view seems to be that it didn't create the Saud dynasty but must live with it, that its policy has prevented the expropriation that some Arab nationalists demand, and that whenever it could, it has tried to bring Saudi Arabia out of the 12th century.

Peaceful Gunsmoke. The kingdom's first roads, ports and irrigation projects were built by Aramco, but the company was careful to bill the Saudi government for public works and let the government do the ordering. The result might not be maximum efficiency or economy, but it kept Aramco on the right side of the royal family. Saudi Arabia's small but growing middle class owes its existence to Aramco, which pays its workers good wages (up to $570 a month for Arab executives) and has financed many of them in setting up their own businesses, from lens grinding to food importing, tasks that Aramco once had to do for itself. En couraging Arabs to save and study, the all-pervading company matches dollar for dollar the savings of employees, has 114 instructors teaching them advanced management, automated techniques and other subjects; one-fourth of Aramco's 10,850 Saudi employees are always enrolled in company courses.

Six years ago, Aramco brought the eye of television to Saudi Arabia. To enthusiastic audiences, its Dhahran station broadcasts an average six hours daily of Arabic and English lessons, prayers from the Koran, and such U.S. shows as Gunsmoke dubbed in Arabic, though Aramco censors out religion, sex and sadism. Most popular program: Aramco's local quiz shows, with TV sets and washing machines as prizes.

Suburbias on the Sands. Americans often join Aramco for the high salaries --roughly 40% above U.S. scales for secretaries and 15% above for executives. There are tax advantages, too. Those who go abroad for a quick buck often stay because they like the desert life and the afterhours round of water skiing, barbecues, Little Leagues. Divorce and dalliance are rare, partly because everybody knows everybody and everybody's business. Aramco's 4,267 U.S. employees and dependents live in company-built suburbias (rent: $300 a month for an air-conditioned three-bedroom bungalow) that also house Aramco Arab executives' families. The Americans are taught to defer to Moslem sensibilities. Though the government permits Aramco's Americans to have Christian religious services, it forbids display of the Cross. Imports of whisky, beer and wine are banned, but the men who can refine crude oil have little trouble in distilling bathtub gin and Scotch, known locally as "the white" and "the brown."

Bowing to longstanding Saudi demands earlier this year, Aramco signed a new deal with reform-minded Prince Feisal, who has replaced ailing King Saud as the nation's de facto ruler. Aramco agreed to pay the Saudis $160 million in retroactive extra royalties and to surrender in stages its original 673,000-sq.-mi. concession, until all that will be left in 1992 will be a 20,000-sq.-mi. area. With the money and the land, the Prince intends to set up a nationalized oil company. Aramco keenly regrets losing its concessions but figures to keep its best oil producers and rationalizes that the Saudis, by establishing their own oil company, should be under less pressure from fanatic nationalists to expropriate the American company.

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