Page 48 - The Persian Gulf Historical Summaries (1907-1953) Vol II

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crude oil brought into and refined in Bahrain with effect from January 1, 1952,
(b) the payment of all sums due to the Ruler under the Lease of 1934 and its
subsequent modifications in sterling, (c) a guarantee by the company to produce
oil from the Bahrain field for the next five years up to the limit allowed by good
oil practice, (d) a guarantee by the company to pay to the Ruler £750,000 a year up
to a total of £1,500,000 if compelled to suspend operations by force majeure and
(c) the extension of the Lease of 1934 as amended up to December 31, 2024. The
agreement was accompanied by three letters(m) from the company’s representative.
The first of these describes how the price of crude oil will be fixed for computing
the company’s income. The second records the cessation of the voluntary
payment of Rs-500,000/- a month and deals with the adjustment of payments made
during 1952 against payments due under the new agreement, and the third
promises to review the situation should other States bordering the Persian Gulf
subsequently receive substantially better terms.
71. The Supplemental Agreement contains no profit sharing clause, but this
was provided for by an Income Tax Decree which the Ruler signed on the same
date. Under this the company have to pay to the State 50 per cent, of their income
after deducting from this share of it all royalties, rentals and other payments due
under their lease and its subsequent modifications. The Decree was applied to
persons subject to the Order in Council by a Queen’s Regulation(135) issued on
December 15 and the company then wrote to the Ruler a letter of submission to
the tax and also letters(‘36) agreeing to the settlement by arbitration of any dispute
arising about the amount of tax payable under the Decree, and undertaking that
in the computation of its income no deduction would be made on account of any
fine which might be imposed on it as a result of the investigation into alleged
oil cartels which the United States Government was then conducting. Her
Majesty’s Government’s formal approval of the Supplemental Agreement was
conveyed to the Ruler in February 195 3.(137)
72. It will be noted that under the Supplemental Agreement the company
have undertaken to produce oil from the Bahrain field up to the maximum for five
years only. This is because its life is expected to be short and the company are of
opinion that it will be desirable to taper off production after five years in order
to conserve its resources for as long as possible.f3*) They have drilled several deep
wells in the field but have found no further reserves. They have explored all the
additional area and the only region which gives much promise of oil may fall to
the Saudis when the sea-bed boundary is determined (paragraph 58 above). The
Ruler is aware of the situation but bitterly resents the fact that his revenue from
oil is so much less than that of Qatar and unreasonably blames the company for
not producing more. As a result, his personal relations with the company’s
representatives have deteriorated, and at the end of 1953 he informed them that
he would like them either to dig wells for oil in the sea-bed area of the concession
or to give the area up so that a concession for it could be sold to another
company.(13*) As a result they were considering the possibility of drilling at Fasht
al Adham between Bahrain and Qatar where there is a small structure, but the
presence of oil is quite uncertain.
73. Before the evacuation of Abadan in 1951 the Anglo-Iranian Oil Company
used to supply oil products to the Gulf Shaikhdoms other than Bahrain and
Kuwait. When this ceased some supplies of Persian oil continued to arrive and
order to stop this it became necessary to find an alternative source of supply.
The Bahrain Petroleum Company very reluctantly undertook the responsibility.^*0)
Their products have to be fetched from Sitrah but they maintain agents at Dohah,
Dubai and Muscat.
74. The relations of the company with the local political authorities and with
the Bahrain Government have always been conducted strictly in accordance with
their Political Agreement. They have assisted the Bahrain Government, especially
w the field of education, by the provision of teachers, schools and scholarships for
the American University, Beirut (paragraph 26 above), but have always been
<m) No. 4 (oHc) I. O.A.C.
(m) No. 4 of 1952.
(m) No. 4 (</M/) r. O.A.C.
(m) P.R. to F.O. 15312/7/53 of March 25. 1953 (EA 1539/3 of 1953).
('*•) Tel. from P.R. to F.O. 157 of May 29. 1951 (EA 1532/15 of 1951).
(**•) P R- to F.O. Despatch No. 107 of December 7. 1953 (EA 1539/4 of 1953).
( ') P.R. to F.O. 1530/3/2/53 of February 10. 1953 (EA 15310/6 of 1953).