important figures and in connection with those figures the question of peace and disturbance enters into it very materially, does it not? Mr. DUCE. Yes, sir. (Charts that appear in this booklet are filed with committee. Reference is made where possible to charts that appear in pocket of this text.) (The book referred to above is as follows:) SUMMARY OF MIDDLE EAST OIL DEVELOPMENTS (Prepared by Arabian American Oil Co.) Charts and illustrations Comparative areas, Middle East versus United States: Chart No. 1. Daily average crude-oil production, Middle East: On file with committee. Middle East, Iran fields: Chart No. 6. Middle East, Iraq fields: Chart No. 6. Middle East, Kuwait fields, Chart No. 6. Middle East, Saudi Arabia, Bahrein, and Qatar fields, Chart No. 6. GENERAL SURVEY (See map in pocket) As thus far explored and developed, the oil region of major importance in the Middle East lies in and adjacent to the great basin occupied by the Tigris and Euphrates Rivers and the Persian Gulf. It covers portions of Iran, Iraq, and Saudi Arabia and the smaller sheikdoms of Kuwait, Bahrein, and Qatar. That is the picture today. It is possible, however, that oil production may later be discovered on the other side of the great Iranian mountain ranges in northern Iran, and west of the region above described in Syria, Lebanon, Palestine, and Trans-Jordan. Exploration and test drilling are either under way or anticipated in those areas and on the island of Cyprus. Also remaining to be tested are the Trucial Coast sheikdoms, Oman, Dhufar, Muscat, and Hadhramaut, all lying in the southern portion of the Arabian Peninsula. Oil has been produced in Egypt for a great many years but not in important quantities. Active exploration is still under way in that country. The western portion of Saudi Arabia is not regarded as attractive. Great Britain, the United States, France, and Holland are all substantially represented in Middle East oil developments. (See chart No. 2.) On the northeastern side of the Persian Gulf-Mesopotamian Basin lies the important concession in southwest Iran held by a British company, while, on the opposite side, the concessions in Saudi Arabia and Bahrein are held by American interests. In between, the concession covering Kuwait is held by a company half British and half American owned, and the concessions in Iraq by companies jointly owned by British, French, Dutch, and American groups. The same international group represented in Iraq, also own companies holding concessions or exploration rights in Cyprus, Syria, Lebanon, Palestine, and TransJordan and, to the southward, in Qatar, the Trucial Coast, Oman, Dhufar, and Hadhramaut. There are two "neutral zones" along the northern border of Saudi Arabia. The westerly of these is jointly shared by the Governments of Iraq and Saudi Arabia, the easterly one by Kuwait and Saudi Arabia. Arabian American Oil Co. holds concession rights on the undivided half interest of the Saudi Arabian Government in both zones. The Basrah Petroleum Co., Ltd., holds the Iraq interest in the westerly one. The Kuwait interest in the so-called Kuwait neutral zone has not yet been leased, although several companies, both British and American, have been negotiating for it. The U. S. S. R., which holds no interest in the concessions southwest of the Iranian mountain ranges, negotiated a proposed concession in April 1946 covering a portion of northern Iran adjacent to the Caspian Sea, to be operated by a company owned 51 percent by the U. S. S. R. and 49 percent by Iran. The concession was rejected by the Iranian Parliament (Majlis) in October 1947. Although in the same country as the British-owned Anglo-Iranian concession in southwest Iran, the area concerned belongs in a different geographic and economic province as regards the movement and use of oil. In other words, the natural outlet for oil exports from northern Iran would be into or through Russia, which is strictly not the case as regards oil produced in southwest Iran or the Arabian countries. In the opinion of most geologists, there are very large undeveloped areas within Russia itself that are capable of abundantly supplying the requirements of that country and which offer much greater promise for substantial oil production than the proposed concession in northern Iran. Historical highlights Oil exploration in the Middle East began in the early part of this century in southwest Iran, and oil was discovered there in 1908. By 1913 the oil developed in this area had assumed sufficient importance to induce the British Government to acquire a 51 percent interest in the Anglo-Iranian Oil Co., (This interest has since been increased to about 56 percent.) The Kirkuk field in Iraq was discovered in 1927 and pipe lines to the Mediteranean Sea were completed in 1934. The wholly American enterprises entered the Persian Gulf region in the early thirties, discovering oil in Bahrein in 1932 and in Saudi Arabia in 1938 (Some oil was discovered in Saudi Arabia in 1936 but not in commercial quantities). Although Iran and Iraq produced substantial quantities of oil before World War II, the real importance and magnitude of Middle East oil resources were not fully appreciated until recent years. Worldwide attention was drawn to them by the rapid increase in Iranian production and refining facilities as a war measure, and by the spectacular increase in Saudi Arabian production during 1946 and 1947, the development of which had been retarded by lack of facilities during the first few years of the war. Reserves; current and future production Although the exploration and development of the Middle East region are still in an early stage, the reserves already proven are believed to equal or exceed those of the entire Western Hemisphere (see chart No. 3). The region has been without parallel in previous oil experience for the large extent of its oil pools, the large average magnitude of its wells, and the small number of failures in wildcatting. Although exploration has been difficult and has required the most scientific technique known to the industry, a large number of favorable structures have been found which, although yet untested, promise greatly to augment present proven reserves as the need arises. Total production from the Middle East is in the order of 850,000 barrels daily in the latter part of 1947 as compared to less than 350,000 barrels in 1939. The output is expected at least to double within the next few years with the completion of large pipe-lines projects, either under way or in preparation, for the movement of oil from Saudi Arabia, Iraq, Iran, and Kuwait to the eastern shores of the Mediterranean. The oil companies are planning to invest hundreds of millions of dollars in these facilities and the development of production and ancillary facilities to support them in order to move Middle East oil into Europe, Asiatic, and other world markets where it seems certain to be needed. General economic aspects.-Western Europe and other regions which have not been so fortunate as the United States in the ready availability of oil supplies will doubtless benefit greatly by the abundance of oil found in the Middle East. The United States will likewise benefit from the development of a new source of oil to relieve the drain on Western Hemisphere reserves in supplying Eastern Hemisphere requirements, and, in case of need, can import oil from the Middle East (the United States Navy already draws heavily from Persian Gulf refineries). However, of equal importance is the benefit to the Middle East countries which results from the development of a new source of wealth and revenues in these generally unproductive, desert lands. The reserves of oil are so vast that they far exceed any forseeable utilization within the Middle East countries themselves which are not, and for lack of other raw materials and sparsity of population are not likely to become, highly industrialized. The returns from the oil, however, can be and are being used for the importation of goods and services which otherwise could not be afforded, resulting both in a better immediate standard of living and the permanent improvement of facilities, such as irrigation works, within the countries. While the greatest promise in this respect lies in the future, the countries have already benefited greatly. Considered in a general economic sense, therefore, what is happening in the Middle East amounts to bringing together of complementary factors in large-scale projects of mutual interest. The Middle East people who own the oil in the ground but do not need it and would have been unable to find or develop it, have brought in western associates who have the technical knowledge, the markets, and the enormous amounts of capital necessary to find the oil in the ground and to produce, refine, transport, and sell it in the form of usable products which will bring a monetary return. In a political and sociological sense it amounts to the bringing together of peoples of the West and the Middle East in a cooperative personal effort of mutual benefit. While the oil companies involved in these great projects are predominately private enterprises, they have shown a full sense of responsibility in the role that they are playing. They have not hesitated to risk huge capital investments in the face of political uncertainties; they have made every effort to promote the friendship and confidence of the people and governments with whom they live and deal; they have promoted the welfare and education of their local employees and have recognized that, to be successful, the enterprises must be of fair and lasting benefit to the local people as well as to themselves and to the countries who need the oil. Returns to governments Oil royalties in the Middle East are among the highest, if not the highest, payable anywhere in the world: The annual returns to the respective governments, based upon rates of production in late 1947 would be approximately as follows, as expressed in terms of dollars at present rates of exchange: Iran__ Saudi Arabia.. Kuwait.. $31, 000, 000 7, 250, 000 21, 000, 000 1, 275, 000 2, 000, 000 Payments to the Saudi Arab Government are currently being made in United States dollars. The rate of Saudi Arabian production has been increasing rapidly and the figure shown above is considerably more than the Saudi Arab Government has received in any previous calendar year. However, the production is expected greatly to increase still further in the future. The other countries (perhaps with the exception of the small island of Bahrein) will also show substantial increases as additional pipe-line facilities can be constructed. Profits of oil companies.-The oil companies operating in the Middle East are still faced with enormous capital investments before they can round out a balanced picture of available daily production and oil-handling facilities commensurate with the potential oil available in the ground and potential demand. In view of the unsettled conditions existing in the world today and the unusual risks attendant upon investments of this kind, they cannot be sure of making any ultimate net profit (or of not suffering a heavy loss) until their investment has been repaid. Until recently, the Arabian American Oil Co., for example, has paid no dividends in the 14 years of its operation in Saudi Arabia notwithstanding that what started and continued for several years as a highly speculative venture eventually proved very successful. Its owners were obliged to provide it with new capital until the end of 1945, and while it is now making substantial earnings, the bulk of these earnings are being "plowed back" and will continue to be "plowed back" for several years to come. The Anglo-Iranian Oil Co., the oldest company in the field, showed profits after taxes of £9,624,938 in 1946 as compared to £5,792,447 in 1945. Dividends declared against 1946 earnings amounted to £6,041,250, which was over £1,000,000 less than the total payment to the Iranian Government covering the same period. No figures are presently available as to earnings of other companies operating in the Middle East. Refineries.-The major refineries in the region in 1947 are: Smaller refineries are located at Tripoli (Lebanon); Kermanshah (Iran); Khanagin (Iraq). At Kirkuk (Iraq) a stabilization plant has been used to "top" some of the oil production. (A stabilization plant is designed normally to remove noxious hydrogen sulfide gas from the crude oil.) Major pipe-line projects.-There are three major projects planned for movement of Middle Eastern oil to the Levant coast of the Mediterranean: 1. The Iraq Pteroleum Co. is now constructing or planning to construct_two 16-inch pipe lines from the Kirkuk field adjacent to the 12-inch lines which have been in operation since 1934. The new line to Haifa is expected to be completed in 1949, the one to Tripoli by 1951. 2. The Trans-Arabian Pipe Line Co. has commenced operations in the construction of a 30-31-inch pipe line from the Saudi Arabian oil fields to the Levant coast, expected to be completed in 1949. 3. A 34-inch line is proposed from Iran to the Mediterranean to be built jointly by the Anglo-Iranian Oil Co. and the Standard Oil Co. (New Jersey) and SoconyVacuum Oil Co. The latter two American companies have agreed to take substantial quantities of Iranian crude oil after the project is completed. Kuwait production is also to be tied into this line. Relations between companies.-The companies holding concessions in the separate countries operate entirely independently of each other notwithstanding that there is some overlapping in ownership, viz: The Anglo-Iranian Oil Co., which exclusively holds the concession rights in southwest Iran, owns a 50 percent interest in the Kuwait Oil Co. (operating in Kuwait) and a 23% percent interest in the Iraq Petroleum Co. and its sister companies. (See below.) It also holds a half interest in Consolidated Refineries, Ltd., which owns and operates a 90,000-barrel refinery at Haifa. (See chart No. 2.) The Standard Oil Co. (New Jersey) and Socony-Vacuum Oil Co. which jointly own 23% percent of the Iraq Petroleum Co. and its sister companies have all but completed arrangements to acquire interests of 30 percent and 10 percent, respectively, in Arabian American Oil Co. (operating in Saudi Arabia) and TransArabian Pipe Line Co., which up to the present have been jointly owned by Standard Oil Co. of California and the Texas Co. The British, American, French, and Dutch owners of the Iraq Petroleum Co., Ltd. (see p. 16), are also the owners of two other companies, Mosul Petroleum Co., Ltd., and Basrah Petroleum Co., Ltd., holding separate concessions in Iraq. They are also the owners of Petroleum Concessions, Ltd., which directly holds an exploration permit in Hadhramaut and which wholly owns subsidy companies holding rights in other Middle East countries as follows: Standard Oil Co. of California and the Texas Co. which, as mentioned above have been joint equal owners of Arabian American Oil Co., and Trans-Arabian Pipe Line Co., are still equal owners of the Bahrein Petroleum Co., Ltd. In 1928 the individual owners of Iraq Petroleum Co. entered into an agreement (so-called red-line agreement) under which they committed themselves not to act independently "directly or indirectly in the production or manufacture of crude oil" within most of the area of the old Ottoman Empire. This agreement was believed to have been largely nullified by events of the war and steps are now being taken to dissolve it completely. The concessionaire companies confine their direct activities almost entirely to the production and refining of oil within their respective spheres. The owners of the Iraq Petroleum Co. have the right to take oil produced by that company according to the proportion owned by each. Likewise the present owners and prospective owners of Arabian American Oil Co. have agreed to take crude oil and products from that company. In both cases the individual owners compete against each other in the marketing of the oil and oil products. (In marketing outside the Western Hemisphere, Standard of California and Texas Co. operate jointly through the marketing subsidiary California-Texas Oil Co., Ltd., owned by Bahrein Petroleum Co., Ltd.) Characteristics of Middle East crude oil.-Although the oil is produced from widely separated fields and from different geologic formations, the oils now produced in the Middle East are generally similar in type. They are generally comparable to the crude produced in west Texas. They contain sulfur (although of an inert type) and require stabilization for handling in tankers. range from 32° to 38° API gravity. Their yield on straight run is approximately as follows, with variations, of course, in individual crudes: They The straight-run gasoline is low in octane rating but can be easily improved up to standard by reforming, cracking, and leading. The fuel oil has responded readily to cracking by both thermal and catalytic methods. Some of the crudes contain good lubricating-oil stock, but no lubes have been manufactured in the Middle East up to the present. The Anglo-Iranian Oil Co. is now building a plant for this purpose at Abadan. The oil so far discovered in the Mosul area in Iraq has been of low gravity, (19°), and has not been produced or utilized to any large extent. IRAN (SOUTHWEST) SUMMARY OF OPERATIONS Concession.-Original concession granted to William D'Arcy in 1901 by Iranian Government. Concession contract revised, May 29, 1933. Area: 100,000 square miles. Term: To December 31, 1999. Holder.-Anglo-Iranian Oil Co., Limited. (See chart No. 2.) Nationality.-British. British Government.. Burma Oil Co_____ Public... |