Oil was first discovered in Sa'udi Arabia in 1938, and exploitation of the world's largest oil field, Ghawar (west of Al-Hufuf), began 10 years later. By 1975, Sa'udi Arabia had become the world's third-leading producer (after the United States and USSR) and largest exporter of crude oil. With the continued developed of Sa'udi Arabia's production capabilities and the dissolution of the Soviet Union in December 1991, Sa'udi Arabia became the world's largest oil producer. Most oil exports are transported by tanker from the Persian Gulf port of Jubail, and the rest moves by pipeline to the Red Sea port of Yanbu al-Bahr. In 2001, oil exports contributed $54.9 billion and accounted for 90%–95% of the total export revenue. Proven reserves of crude oil, found along the Gulf in a quadrangular area northeast of Riyadh, were estimated at 264.2 billion barrels, or more than 25% of the world's known deposits, in early 2002. ARAMCO, a US-controlled firm that held the original oil concession, divested 60% of its interests to the Sa'udi government in 1974 and the remainder in 1980, but continued to produce 96% of Sa'udi Arabia's oil under a management contract with the Sa'udi government.
After the Iranian revolution of 1979 and the outbreak of war between Iran and Iraq in 1980, the Sa'udi government made up for the diminished oil exports of both countries by increasing its average oil output to a record 9.9 million barrels per day in 1980. Production remained high at 9.8 million barrels a day in 1981 but was cut to 6.5 million barrels daily in 1982. Because of the continued oversupply of oil, Sa'udi Arabia cut its production from 1983 to 1985, when it averaged about 3.3 million barrels per day. In 1986, in an attempt to increase its market share, Sa'udi Arabia temporarily abandoned its role as the swing producer in Organization of the Petroleum Exporting Countries (OPEC) and flooded the market, producing about 5 million barrels a day, forcing the price to less than $10 per barrel. Since 1987, when production amounted to 4.2 million barrels per day, Sa'udi Arabia has dramatically intensified production, especially since the end of the 1991 Persian Gulf War. In 2001, an estimated8.7 million barrels of oil (8 million, crude oil) were produced per day. As of 2002, Ghawar, with remaining reserves estimated at 70 billion barrels, was still the world's largest oil field. Safaniya, with estimated reserves of 19 billion barrels, was the world's largest offshore field.
As of 2002 two major pipelines operated actively in Sa'udi Arabia. The Petroline, used to transport crude oil to refineries in western Sa'udi Arabia and to the Red Sea for export, was constructed in 1981 and expanded in 1987. In 1993 its capacity was increased to 5 million barrels per day. The Abqaiq-Yanbu pipeline, which carried natural gas liquids to petrochemical plants in Yanbu, had a capacity of 290,000 barrels per day. The IPSA pipeline had been closed indefinitely since Iraq invaded Kuwait in 1990.
Natural gas production was 46.1 billion cu m (1.6 trillion cu ft) in 1999. Reserves of natural gas, estimated at 6.2 trillion cu m (219 trillion cu ft) at the beginning of 2002, ranked as the world's fourth-largest (surpassed only by Russia, Iran, and Qatar). About two-thirds of these reserves consisted of gas associated with the onshore Ghawar oil field and the offshore Safaniya and Zuluf fields.
Sa'udi Arabia has limited waterpower resources, and oilpowered diesel engines generate most of its electric power. Electrical service, which reached 2.2 million people in 1975, was extended to 4.2 million in 1979 and, by 1990, reached 92% of the population. Total installed generating capacity was 23,792 MW at the beginning of 2001. Production in 2000 amounted to 120.7 billion kWh, of which 100% was from fossil fuels. As of 2002, demand for power was growing about 5% annually, and it was estimated that capacity would need to be nearly doubled by 2020 to meet the country's needs. Solar energy is becoming increasingly important as an alternative to diesel power, particularly for use in the desalination of seawater.