Page 347 - Arabia the Gulf and the West

344 Arabia, the Gulf and the West

arrangements between the companies and the OPEC governments. As the
continuous series of claims being made by individual members of OPEC made
the attainment of such stability impossible, the companies had decided that the
only basis upon which they were henceforth prepared to negotiate was ‘one
which reaches a settlement simultaneously with all producing governments
concerned’. To this end the companies proposed ‘that an all-embracing negoti­
ation should be commenced between representatives of ourselves, together
with such other oil companies as wish to be associated with this proposal, on
the one hand, and OPEC as representing all its member countries, on the other
hand, under which an overall and durable settlement would be achieved’. To

ensure both stability and mutual respect for contractual arrangements, and at
the same time to demonstrate their genuine desire to achieve a comprehensive
and lasting settlement, the companies were prepared to offer a revision of
posted prices for all member countries of OPEC, together with a further
provision for a ‘moderate annual adjustment’ to reflect any world-wide infla­
tion that occurred. They were also willing to agree to a further, variable,
temporary adjustment for Libyan and other ‘short-haul’ crudes. These offers
were contingent upon there being no increase in the tax rate percentage beyond
that already in force, no imposition of retroactive payments and no new

provision for the obligatory re-investment of earnings. The offers were also
subject to the settlement’s remaining in force for five years from the date of its
signing.
Unsure of what the Libyan government’s reaction to this joint statement
might be, but fearing it might take a drastic form, the companies operating in
Libya quietly concluded among themselves a ‘safety net’ agreement. They
undertook, if any one company was forced (as a consequence of refusing to
comply with the Libyan government’s demands) to reduce or halt production,
that the other Libyan producers would replace the crude lost at cost, or near
cost. It was further agreed that, under certain circumstances, those Libyan
producers with Persian Gulf concessions would share their Gulf production

with any Libyan producer whose wells had been shut down. The agreement,
which was mainly designed to protect the independent producers, was for this
very reason a measure of the anxiety felt by the companies over the situauon
which confronted them. For there was no love lost between the majors and t e
independents, whom the former had often accused in the past of poaching on
their preserves and concluding arrangements with local governments w ic
adversely affected the majors’ interests. (Esso, it will be recalled, had only t e

previous summer refused to guarantee supplies to Occidental.)
Shortly after the drafting and signature of the message to OPE an
conclusion of the Libyan producers’ agreement the Justice Department issue
business review letters to the American oil companies involved, ass“ringaws in
that proceedings would not be taken against them under the anu.
respect of their actions. Other oil companies, including Gelsenbe g