Page 45 - Historical Summaries (Persian Gulf - Vol II) 1907-1953

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grant a prospecting licence to the company under the terms of the 1925 agreement
for a period of two years from December 2, 1930. Oil was struck on June 1, 1932.
The prospecting licence was subsequently extended first for 12 months up to
December 2, 1933,(,ia) and then for 13 months up to January 2, 1935. The second
extension was only obtained after certain payments had been made or promised to
the Ruler. In 1934 land was taken over on Sitrah Island for a tank farm and a
submarine pipe was laid to a deep-sea mooring. The first shipment of oil was made
on June 17. In the same year work began on the construction of the Company’s
camp at Awali and a topping plant was installed for producing petrol.
61. A Mining Lease (,l3) as provided for in the 1925 concession agreement was
signed by the Ruler and the company’s representatives on December 29, 1934, and
became effective from January 1, 1935. It was based on the mining lease attached
to the concession agreement but contained many additions and alterations. It
applied to the area selected by the company under Article V of the agreement which
was shown on a map attached to it and described as the “ leased area.” The royalty
stipulated was Rs. 3 as. 8 per ton subject to revision after 15 years. The conditions
attached to the 1930 indenture (paragraph 59 above) were embodied in the lease.

62. In 1935 the company decided to build a refinery, but before doing so
desired to obtain a modification of Article III of the 1934 Mining Lease which
provided for exemption from taxes and customs duties for ten years only. The
Ruler when approached approved of the proposal to erect a refinery and agreed that
oil from outside Bahrain should be refined in it provided the quantity of oil
produced in Bahrain did not diminish, and that the period for exemption from
taxes and customs duties should be coterminous with the peiiod of the lease
provided that certain minor taxes such as motor vehicle and municipal taxes were
paid.(lu) In June 1936 a Deed of Modification(m) was signed by the Ruler and the
company’s representatives which introduced an amended Article III and a few
other minor alterations in the 1934 Mining Lease. Work on the refinery was started
in 1935 and it was opened at the end of 1937. Oil was brought to it from Saudi'
Arabia first by small tankers to a jetty at Zallaq and subsequently by submarine
pipe-lines. In 1953 about five-sixths of the oil refined in it was the produce of
Saudi Arabia. During the last war a plant was erected for the production of
aviation spirit, but its use has been discontinued since the war.
63. In 1936 the Texas Corporation obtained a one-half interest in the Bahrain
Petroleum Company and a company called the California Texas Oil Company
Limited (Caltex) was formed for the marketing of its oil.(“*) In 1953 the position
was as follows. The Bahrain Petroleum Company Limited was a company
incorporated under the Federal Law of Canada with share capital owned 50 per
cent, by the Standard Oil Company of California and 50 per cent, by the Texas
Company. Both these companies were “ Public ” companies incorporated under the
laws of the State of Delaware in the United States of America. The California
Texas Oil Company Limited was incorporated in the Bahamas and was owned by
the same two companies. It had sold its marketing interests and was merely acting
as a service company in New York for the various companies with which it was
associated. Caltex (U.K.) Ltd., a company incorporated in the United Kingdom
and owned by the same two American companies, was concerned with the
processing and marketing of all the oil produced in Bahrain except that sold
locally. The United Overseas Petroleum Company Ltd. a company incorporated
in the United Kingdom, was the service company in London of the Bahrain
Petroleum Company and Caltex (U.K.) Ltd.
64. In 1936 Petroleum Concessions Limited a subsidiary of the Iraq
Petroleum Company were permitted by His Majesty’s Government to approach the
Ruler for a concession over the portions of his territory which had not been allotted
to the Bahrain Petroleum Company, and which came to be known at the “ additional
area.” The latter Company also decided to negotiate for such a concession. A
competition ensued which lasted for some years. The Ruler was for a long time
anxious to divide the area between the two companies, but as a result of a threat

(”*) I.O. to F.O. P.Z. 7763/33 of December 2. 1933 (E 7452/167/91 of 1933).
(»«») No. 2 I. O.A.C.
(«“) I.O. to F.O. P.Z. 7523/1935 of October 30. 1935 (E 6472/18/91 of 1935).
("») No. 2 (a) J, O.A.C.
(»•) I.O. to F.O. P.Z. 5831/26 of August 14. 1936 (E 5145/6/91 of 1936).