Page 100 - Historical Summaries (Persian Gulf - Vol II) 1907-1953

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Company approached the Ruler for a concession from the Zone. He rejected the
approach and informed the Political Agent accordingly. Approaches by the same
company in 1940 and 1943 were similarly rejected.
105. In April 1946 the Ruler rejected another approach by the Gulf Oil
Company but in September of the same year he wrote to the Political Agent saying
that as he heard that Ibn Saud had granted a concession for his share of the Zone
he considered it advisable to negotiate with any company wishing to take up a.
concession for his own share of it.!232) He accordingly asked for His Majesty’s
Government’s consent to his opening discussions with anyone coming forward.
Ibn Saud had actually conceded his oil rights in the Zone to the Arabian American
Oil Company in 1939. His Majesty’s Government asked that Petroleum Concessions
Limited’s representative should be given a hearing before a concession was granted
to any other party, in accordance with the Ruler’s promise, but otherwise raised no
objection provided the Ruler consulted the Political Agent before concluding an
agreement.!”3) The Ruler agreed that Petroleum Concessions Limited might bid and
announced his intention of giving the concession to the highest bidder. Competition
for the concession continued throughout 1947 and in March 1948 the Ruler
informed the Political Resident that he intended to close the auction in May and
that he was proposing to ask the only four competitors whom he recognised, viz.,
Petroleum Concessions Limited, the Burma Oil Company, the Gulf Oil Corporation
and the American Independent Oil Company to send representatives to Kuwait in
that month if they wished to be considered.(S3<) Petroleum Concessions Limited
dropped out of the competition and an American company called Amerada was
admitted to it after the Shaikh’s announcement. Eventually June l was fixed as
the closing day. A representative of the Royal Dutch Shell Company arrived in
Kuwait on May 28 but was not allowed to compete. When the bids v/ere scrutinised
the offer of the American Independent Oil Company was found to be the most
favourable one and on June 4 the Ruler decided to grant the concession to that
company. He refused to sign the agreement until His Majesty’s Government had
approved and obtained a satisfactory Political Agreement from the company.
These conditions were fulfilled and the concession agreement!233) was signed on
June 28, 1948.
106. The concession was for 60 years and covered the Neutral Zone including
all islands and territorial waters pertaining to it. Provision was made for drilling
to be undertaken within specified periods. The signature payment was fixed at
7± million dollars with an annual payment of 625,000 dollars until oil was found
and a royalty of 2\ dollars per ton. The Ruler was also to receive 15 per cent, of
the shares of a subsidiary company to be formed for the working of the concession.
All payments were to be made in dollars. The company are under an obligation
within four years from the date of the discovery of oil to begin the construction
of a hospital and a “ program of education.”
107. The Political Agreement!230) was signed in London on June 26, 1948. It
provided that the company operating the concession must be either American or
British and that its employees must as far as possible be Americans, British or
subjects of the Ruler. Under it the company acknowledged the 1899 agreement with
Shaikh Mubarak,(23T) and His Majesty’s Government agreed not to insist upon its
observance provided the company did not use for its operations sites selected for
defence and certain other purposes. The company also acknowledged the special
treaty relations existing between His Majesty’s Government and the Ruler and it
was provided that nothing in the agreement should be construed as interfering with
Saudi rights in the Zone. Authority was granted for a copy of the agreement to be .
given to the Ruler in 1950(23") but it does not appear that he was asked to take
cognisance of its terms.
108. Ibn Saud was not consulted before the concession agreement was signed
and in July 1948 he wrote to the Ruler complaining about this and saying he could
not express an opinion about it until he had seen it.(”*) In September he informed
(”*) I.O. to F.O. Ext. 6973 of October 14. 1946 (E 10356/5706/91 of 1946).
(*”) I-O. to F.O. Ext. 6973/46 of October 16. 1946 (E 10451/5706/91 of 1946).
O P-R. to F.O. Despatch 122 of July 23. 1948 (E 10041/72/91 of 1948).
(MS) No. 5 II. O.A.C.
(”•) No. 6 II. O.A.C.
(”’) No. 1 II. T.C.
(”*) F.O. to P.R. EA 1535/1 of January 31. 1950.
(***) Tel. from P.R. to F.O. 125 of July 14. 1948 (E 9546/72/91 of 1948).
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