In 1923, a British company entered into an exploration contract with the Government of the Kingdom of Saudi Arabia. No oil was found. In 1933, the Standard Oil Company of California (“Socal”) responded positively to an invitation of an emissary of the Kingdom's Government and dispatched a knowledgeable representative who concluded what later came to be called the Aramco Concession Agreement. Article 1 of that Agreement provided that: “The Government hereby grants to the Company on the terms and conditions hereafter mentioned, and with respect to the area defined below, the exclusive right, for a period of sixty years from the effective date hereof, to explore, prospect, drill for, extract, treat, manufacture, transport, deal with, carry away and export petroleum … however … such right does not include the exclusive right to sell crude or refined products … within Saudi Arabia.” The Agreement contained an arbitration clause.

The concession covered a vast area of Saudi Arabia's immense eastern land mass, and was later amended to include its eastern islands and Arabian Gulf waters as well. Except for a number of oases, the area was barren, desolate and hot. The economy of Saudi Arabia in the 1930s was medieval. Every piece of equipment needed by the Company to explore and prospect for oil, and, later, to produce, transport and export it, had to be imported by California Arabian Standard Oil Company (Casoc), Socal's subsidiary that was formed to handle the Arabian concession.