FUEL INVESTIGATION FRIDAY, JANUARY 30, 1948 HOUSE OF REPRESENTATIVES, The committee met at 10 a. m., pursuant to adjournment, in room 1334, New House Office Building, Hon. Charles A. Wolverton (chairman) presiding. The CHAIRMAN. The committee will come to order. The committee is very fortunate in having as its witness today Mr. James Terry Duce, vice president of the Arabian American Oil Co. Mr. Duce, we are pleased to have you with us today and you may proceed. STATEMENT OF JAMES TERRY DUCE, VICE PRESIDENT OF THE ARABIAN AMERICAN OIL CO., WASHINGTON, D. C. Mr. DUCE. Mr. Chairman, I understand that the committee wants to see this picture that we took about our venture in Arabia. I think we might start with that. I would like to say a word as to how this picture arose. Mrs. Reed, the owner of the Herald-Tribune was making a trip around the world on a Pan American plane with some other editors. They took her off the plane at Dhahran, at our camp in eastern Saudi Arabia and she had breakfast there, and then we gave her about a 20-minute tour around our camp. She was surprised to find an American city there in the middle of the desert and to see what we were doing. She asked me if we could prepare a film for the Herald-Tribune forum. So, the time was short, and I sent Mr. Richie over to Saudi Arabia and he made this film. This is the version that we showed at the Herald-Tribune forum and we are now reediting it to get it a little bit more accurate than it was on our first run. I think you will like the picture and I suggest that we run that in the beginning. It will show what we are doing in Saudi Arabia. The CHAIRMAN. Very well, Mr. Duce, you may proceed. (Thereupon, the mentioned film was exhibited.) The CHAIRMAN. We congratulate you, Mr. Duce, on the splendid presentation which you have given to us. The committee has been privileged on many occasions to have pictures of industrial development, but never have we had a more satisfactory presentation than you have given us this morning of this great development in Saudi Arabia. Mr. DUCE. Thank you, sir. I might say, Mr. Chairman, off of the record (After informal discussion off the record, the following proceedings were had:) The CHAIRMAN. That was all very interesting. Mr. DUCE. Shall I proceed? The CHAIRMAN. You may proceed. Mr. DUCE. Mr. Chairman and gentlemen, my name is James Terry Duce. I am vice president of the Arabian American Oil Co. I was Director of the Foreign Division of the Petroleum Administration for War during the war period. I have just returned from an extensive trip to the Middle East. I assume that the committee wishes to hear the latest developments in that area and to know something of our plans. In starting, however, I would like to make a general statement about the oil situation. A great deal of the testimony that has been given on the Hill during the last few months in respect to oil does not differentiate between the two separate problems, that of general supply in peacetime and the question of wartime supply. In peacetime when steel and other commodities used in the production of oil are abundant, no problem has ever arisen regarding oil supply. It is the impact of the scarcity of materials which results in such shortages, as we are now facing in the United States. I am inclined to believe that even this shortage would have been averted if the Maritime Commission had put in operation early this year the tankers which they had moored in their various yards. There is an abundance of oil in the world. We have immense reserves in the Middle East. If all the world produced from its reserves at the same rate as the United States is producing from its reserves, there would be a surplus instead of a shortage in oil at the present time. We have pushed our production in Arabia up from 200,000 barrels per day last year to over 300,000 barrels per day at the close of 1947. I believe, sir, last week we produced 315,000 barrels per day. The war supply problem is somewhat different. There we have the interaction of a great many factors-the strategic one which the military people can best tell you about, and the constant problem of supplying steel sufficient to cover the thousand and one separate requirements of waging war. If we have the necessary steel and the manpower, we can produce the oil. If we don't, then shortages appear. It was always a question during the last war as to which had priority-guns and tanks or wells and factories and we were always faced with the question-whether you should use manpower in the Army or in manufacturing and production. In oil production itself there also arose the question as to the most efficient source of supply, where the largest amounts of oil could be produced by the smallest amount of steel, and manpower to supply a special theater of operations. The Middle East and South America used less steel in production than the United States, but processing plants were not available and some of the areas were subject to the hazards of attack. In the early stages of the last war, the Middle East was a very unsafe zone and it was hardly the place at that time to invest steel and manpower. Later as the enemy was driven back into Italy from northern Africa, it became desirable to build up production for these military supplies. First I present chart 1. (Copies of charts presented by James Terry Duce are enclosed in pocket at end of this book.) This chart is for the purpose of showing the size of the Middle East. On it you will notice we have thrown a shadow of the United States on the same scale, so you can compare roughly the area of the Middle East to that of the United States. The prospective area for oil in the Middle East extends from the Turkish border to the southern boundary of Saudi Arabia, a distance equal to the distance from the Canadian line to Houston, Tex. I did not say anything about the width, in my statement here, but it is about 500 miles wide. Mr. HESELTON. Before you leave that, will you tell me where Palestine is on that map? Mr. DUCE. Yes, sir; right here [indicating]. Chart 2 shows the concessions already held with the present interest in these concessions. You will note first the Anglo-Iranian concession. in Iran owned by Anglo-Iranian Oil Co., a British corporation. Second, there is the Iraq Petroleum Co. group of concessions which include all of Iraq, part of Syria, Lebanon, Palestine, Cyprus, Oman, Qatar, Trucial Coast, and the Hadramout. I see I have forgotten to put in Transjordan, which you just mentioned. There used to be a concession to an Iraq Petroleum Co. affiliate in Saudi Arabia, but this has been surrendered. That ran down the west coast. The concession on the Sheikhdom of Kuwait is held jointly by the AngloIranian and the Gulf, and American companies. The Saudi Arabian concession is held by the Arabian American Oil Co., whose stock is owned by the Texas Co. and the Standard Oil Co. of California, and will, as and when certain conditions are satisfied, also be owned by the Standard Oil Co. of New Jersey and the Socony Vacuum Oil Co.; the division of ownership will then be 30 percent by the Texas Co., 30 percent by the Standard Oil Co. of California, 30 percent by the Standard Oil Co. of New Jersey and 10 percent by the Socony Vacuum Oil Co. In the case of the Iraq Petroleum Co., this stock is owned 23% percent by the Anglo-Iranian Oil Co., a British corporation, 23% by Compange Francaise des Petroles, a French company, 234 percent by the Near East Development Co., which in turn is owned 50 percent by Standard Oil of New Jersey and 50 percent by the Socony-Vacuum Oil Co. In addition, a gentleman by the name of Gulbenkian owns a 5-percent interest in the corporation. The areas of these concessions are shown on the chart. The CHAIRMAN. Is there some additional information on the chart with reference to corporate set-ups? I notice on the right-hand side of the chart there is considerable information there. Mr. DUCE. Yes, sir. When I spoke of the Iraq Petroleum Co. group, I spoke of this group of companies [indicating on chart], because on each case where you have a separate concession to the Iraq Petroleum group, it is granted to a separate company with the same owner interests. For instance, this is your original Iraq Petroleum Co. concession in Iraq [indicating]. Then, we have the British Oil Development Co. concession in western Iraq. The Bash Petroleum Co. holds a concession on southern Iraq. And then there are special concession companies for each concession held by the Iraq group in each of the separate areas of the Middle East. They are all listed on the chart. The CHAIRMAN. My purpose in asking was so that the committee in its record may have as complete information in that respect as possible. Mr. DUCE. Chart III shows the reserves of the world. Mr. SCOTT. Before you leave chart II, you mentioned the Dukan field. That is the only one that they have any production in outside of Iraq? Mr. DUCE. Yes; in fact it is the only drilling they have done in this whole southern area so far, but Dukhan looks like a major field. Mr. HALE. The Soviet Iranian Oil Co. has not done anything in Arabia at all? Mr. DUCE. I have a note here on that. The Meihis (Pahament) in Persia refused approval of a contract between the Persian Government and the Russian Government for this area south of the Caspean [indicating]. Mr. ELLSWORTH. I had heard that there had been the formation of a new company within the last 6 months. I think it was known as the Independent Arabian Oil Co. Do they appear in this picture in any way? Mr. Duce. No; they have people in the Middle East at the present time looking around on that situation to see where---Mr. ELLSWORTH. But they are not operating? Mr. DUCE. Not that I know of. The CHAIRMAN. Mr. Duce, I think it might be well if we did make part of the record the information that is contained in that right-hand column on the chart. You do not need to do it at the present moment. It can be made available for the record so that the members of the committee may have it. Mr. Duce. Mr. Chairman, I am going to sent to you maps which show all of the information that is contained on the chart and it can be placed in the record. The CHAIRMAN. Thank you. Mr. Duce. And also I think we have sent to the committee for the record this digest of information on the various companies in the Middle East. The CHAIRMAN. Thank you. Mr. DUCE. There are certain maps and charts which are in there which we will be glad to have included in the record. (Copies of these charts filed with the committee.) Mr. LEA. Mr. Chairman. The CHAIRMAN. Mr. Lea. Mr. LEA. In that connection I wonder if it would be convenient to show the distribution of the stock ownership in each company? Mr. DUCE. That is shown here. Mr. LEA. It is? Mr. DUCE. Yes. Mr. LEA. I do not read it from here. Does it show the number of stockholders? Mr. DUCE. Well, it goes back to the stockholders of companies that own the stock in these companies. That it shows. But it does not show the ultimate beneficiaries. Mr. LEA. What I really had in mind was a statement to show the distribution of the stocks from the standpoint of each corporation. Are they centered in a few people or is there widespread distribution of the stock? Mr. DUCE. The stock in the concession areas is held almost entirely by corporations. If you would like me to give you a sketch as to who the beneficiaries are in the various companies that is, the ultimate beneficiaries, the stockholders of the parents-I shall be glad to do that. Mr. LEA. Well, that would be the thing I had in mind-the ultimate ownership of the stock. Mr. DUCE. We shall be glad to do that. Chart 3 shows the reserves of the world and on the same chart I show roughly the prospective areas of the world. They are marked in red. I might add one thing about this chart. When you look at this chart, remember it is a Mercator's projection, which exaggerates the areas to the north, such as northern Russia [indicating]. Such areas are really smaller than they look. I have done some reestimating of the reserves on the basis of the discoveries during the past year and it is to be noted, for instance, that we have somewhat increased the reserves in the Middle East as the Anglo-Iranian has discovered a new field at Lali and there have been extensions to the Kuwait field, and in Saudi Arabia we have extended the Abqaiq field to the north and discovered a new producing horizon. The intial well at Lali made something over 25,000 barrels and so this is apparently a very good field. The United States estimate I have used is the American Petroleum Institute estimate for 1946. I believe there will be a slight upward revision of the reserves in this country for 1947. Preliminary estimates indicate that this may mean a proved reserve of 21,345,000,000 barrels. That is Oil and Gas Journal figures. The American Petroleum Institute Committee has not reported yet. This figure does not include distillate, casinghead gasoline, and similar hydrocarbon products not ordinarily counted as crude oil. And all of these figures, by the way, are proved reserves. There is nothing speculative about them. I would like to point out that with a reserve of 32,000,000,000 barrels in the Middle East, we are now approaching a point where the reserves are one-half greater than those in the United States. If we were producing those at the same rate as we are producing the reserves of the United States, we would be producing about 9,000,000 barrels per day. I am talking about all companies, not the Arabian; but the middle eastern production is still somewhat under 1,000,000 barrels per day. It is divided about as follows Mr. DOLLIVER. Before you leave that, may I make one inquiry? Mr. DUCE. Yes, sir. Mr. DOLLIVER. I notice that no reserves are shown on the continent of Africa. Does that mean that there has been no exploration down there? Mr. DUCE. There has been a little exploration. The continent of Africa-the reserves are so small that you cannot even see them on the chart. They consist of two fields on the Gulf of Suez, about there, at Ras Gharib, Jemsa, and Hurghada. Recently the Socony-Vacuum have also found a little oil over on the east side of the Gulf of Suez. I think that you would put that in Asia. It is on the other side of the canal. It would depend where you put the boundary. (See chart No. 6.) |