Page 96 - Historical Summaries (Persian Gulf - Vol II) 1907-1953

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kind nor to enter into discussion with any party in regard to any concession
whatsoever save with the approval of His Majesty’s Government. The Ruler
sent an evasive reply to the first letter and in his reply to the second letter stated
that he could not see his way to agree to the proposals except in so far as they
concerned any oil concession in the Neutral Zone(200) (Appendix G). Traders,
Limited, sent a letter to the Shaikh refusing to accept his decision to grant a
concession to the Kuwait Oil Company and threatening legal proceedings.
90. The concession granted by the Ruler to the Kuwait Oil Company was
for 75 years and covered “ the State of Kuwait including all islands and territorial
waters as shown generally on the maps annexed hereto.” A time-limit was set
for drilling. The royalty was fixed at Rs. 3/- per ton and there was a down
payment of Rs. 475,000. Annual payments were provided for of Rs. 95,000 before
the company declared that oil had been found in commercial quantities, and of
Rs. 250,000 after such declaration unless royalty was paid in excess of these sums.
91. In 1935 the company installed their local manager in Kuwait town and
in 1936 they started drilling at Bahrah north of the Kuwait Bay. In 1937 they
abandoned Bahrah where they had only found a show of oil, established a camp
at Maqwa and started drilling at Burgan where they struck oil in the following
year. In 1936 the Anglo-Iranian Oil Company transferred the “ beneficial
ownership ” of their holdings in the Kuwait Oil Company to the D’Arcy
Exploration Company with His Majesty’s Government’s approval.(201) In 1939 the
Ruler, who had presumably heard of the negotiations for the Bahrain “ additional
area ” (Chapter 2, paragraph 63), enquired whether the Kuwait Oil Company
would be interested in a concession for his sea-bed area outside his territorial
waters. The company were of opinion that their concession already automatically
covered this area but enquired whether His Majesty’s Government would have any
objection to their negotiating a concession for it. His Majesty’s Government
replied that they would have no objection subject to certain conditions,(20S) but the
matter does not appear to have been pursued presumably owing to the curtailment
of the company’s activities as a result of the war. His Majesty’s Government also
expressed the opinion that the Ruler could not grant any rights over any area lying
outside his territorial waters but that he could grant a concession for his
“ submerged land ” and that under such a concession the company could
appropriate “ such land for the Shaikh outside territorial waters by sinking shafts
in it.”

92. In June 1939 the Ruler began to press the company to declare commercial
production. The company feared that under the Political Agreement such action
would involve them in an obligation to construct a refinery. His Majesty’s
Government agreed not to raise the refinery question for the time being but
reserved their right to raise it when the oilfield developed.(203) With the outbreak of
war however the company decided not to declare commercial production and
“ mudded off ” their wells. This led to difficulties with the Ruler but the company
agreed to make to him the annual payment of Rs. 250,000 which would have been
due if commercial production had been declared and to make advances against
future royalties.^04)

93. In 1942 the company suspended all drilling operations and did not resume
them until 1945. In 1946 they started the construction of their main camp at
Ahmadi about 25 miles south of Kuwait and at the end of June made their first
shipment of oil from pipes taken into the sea at Fahahil about 5 miles east of
Ahmadi. In 1949 they completed the construction of a large wharf at Fahahil and
gave the port the name of Mina al Ahmadi. A power house and a small refinery
were constructed close to the wharf. Regulations issued for the port by the Ruler
in 1950 on the advice of His Majesty’s Government were applied to persons subject
to the Order in Council by a King’s Regulation^20’)
(*") I.O. to F.O. P.Z. 7069/1935 of October 7. 1935 (E 6052/19/91 of 1935).
(m) I.O. to F.O. P.Z. 3510/37 of May 20. 1937 (E 3100/286/91 of 1937).
(”*) I.O. to F.O. P.Z. 2333/40 of May 20. 1940 (E 1229/19/91 of 1940).
(m) I O. to F.O. P.Z. 5999/39 of September 29. 1939 (E 6727/68/91 of 1939).
O I.O. to F.O. P.Z. 2020/40 of April 11. 1940 (E 1645/19/91 of 1940).
(”•) No. 1 of 1951.