Page 46 - Historical Summaries (Persian Gulf - Vol II) 1907-1953

33
from the Bahrain Petroleum Company that they would slow down production
if the whole of the area were not conceded to them, in 1938 decided that it was
desirable to grant their demand. At the beginning of 1939 he enquired whether
His Majesty’s Government had any objection to this course. He was told that
there was no objection but it was at the same time suggested that he should award a
concession for the Hawar Islands (paragraph 41 above) to Petroleum Concessions
Limited.(,lT) He still feared with some reason the effect that compliance with this
suggestion would have on the Bahrain Petroleum Company and in May announced
his decision to grant a concession for the whole of the additional area to that
Company. The agreement which is described as a Deed of Further Modification(1,#)
of the Lease of December 29, 1934, was signed on June 19, 1940. It was for a
period of 55 years from its date of signature and covered “ all lands, islands, shoals,
reefs, waters and submerged lands over which the Ruler had or might in future
obtain dominion.” As a result when the Ruler made his declaration of rights over
the sea-bed in June 1949 no question arose of granting a separate concession for
the oil rights thereby acquired by the Ruler and no dispute ensued between him
and the company such as that which occurred in some of the other Shaikhdoms.
The deed provided for the same rate of royalty as the original Lease but Article
VIII of the Lease was revised so as greatly to increase the minimum annual royalty
payable under it for a period of 15 years from the date of the deed. The provisions
of the Lease relating to protection and force majeure were also modified. There was
an obligation to drill within two and a half years from the date of the deed if a
favourable area had been found. The company started exploration in the additional
area before the deed was signed and though this work was suspended for a few
years during the last war they have covered all or most of the area and the only part
of it they regard as showing promise of oil is in the vicinity of the Bu Sa’afah shoal
about 50 miles north of Bahrain. They were permitted to carry out structure
drilling here in 1941("*) but were unable to avail themselves of the opportunity
owing to the suspension of exploration work on account of the war. They under­
took some operations in the area at the end of 1949 and the beginning of 1950 but
abandoned them at the request of His Majesty’s Government pending the
determination of the sea-bed boundary between Bahrain and Saudi Arabia
(paragraph 52 above).
65. A Political Agreement^20) between His Majesty’s Government and the
company was signed on June 29, 1940, and the Ruler’s cognisance of it obtained
by an exchange of letters.(‘21) Amongst other things it incorporated the conditions
attached to the 1930 indenture (paragraph 59 above) and embodied in the Mining
Lease. With regard to the appointment of a Chief Local Representative it was
provided that he should always be British. In spite of this provision it was found
convenient during the last war that the local American Manager of the company
should hold the appointmentC”) and this practice has been followed since, although
in 1949 the Ruler asked in writing for the appointment of a British Chief Local
Representative. (123) On August 2, 1940, the company signed a memorandum^24)
agreeing that in the event of any inconsistency the Political Agreement should take
precedence over their agreements with the Ruler and that if they failed to observe
its terms the Ruler would be entitled to terminate his agreements with them.
66. In 1944 a dispute arose between the Bahrain Petroleum Company and
the Anglo-Iranian Oil Company. The latter company under an informal
arrangement were supplying fuel for both the Royal Air Force and British Overseas
Airways Corporation aircraft at Bahrain and wished to erect storage tanks. The
Bahrain Petroleum Company claimed that under their Deed of Further
Modification (paragraph 64 above) they had the sole right to erect storage tanks
for oil products at Bahrain.(123) Much correspondence and discussion ensued and
opinions about the legal position differed. In the event the Bahrain Petroleum
Company erected tanks on behalf of the Royal Air Force on Muharraq Island at
a distance from the airfield. The tanks became the property of the Royal Air
(j'j) I.O. to F.O. P.Z. 303/39 of January 14. 1939 (E 399/196/91 of 1939).
(;;;> LO. to F.6. Ext. 7436/41 of December 13, 1941 (7893/1505/91 of 1941).
(|,#) No. 3 I, O.A.C.
O No. 3 (b) C (c) I. O.A.C.
(*”) I.O. to F.O. P.Z. 2400/41 of May 20. 1941 (E 2480/1505/91 of 1941)
<!”> f:R-f?*Despatch 19 of March 9. 1949 (E 4038/1536/91 of 1949).'
( ) No. 3 (a) I. O.A.C.
('”) hO. to F.O. Ext. 847 of February 24. 1944 (W 3096/34/76 of 1944)
46639
F 2