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uy a 23.75% share of the I urkish Petroleum Company (TPC) which was to be renamed the
raq Petroleum Company (IPC) in 1929. The Red Line Agreement stipulated that all the
urtners of the I PC would defer to the IPC the sole right to seek and obtain oil concessions
* * thin a defined area (drawn on the map with red ink, hence the name of the Agreement)
• hicli included Bahrain.

In the meantime, the pursuit of an oil concession for Bahrain had created keen competi-
ion between two British companies: APOC’and the Eastern and General Syndicate (EGS).
The moving spirit behind EGS was Frank Holmes, a mining engineer from New Zealand who
oresaw the petroleum potential of the eastern coast of the Arabian peninsula with almost
»rophctic insight and who for years tried repeatedly and often unsuccessfully to interest the
najor oil companies in the region.

EGS was a small company established in London in 1920 with the object of gaining
oncessions in the Gulf and Saudi Arabia, and then selling these options to the large oil
companies. In 1923, with Bahrain as his headquarters, Holmes obtained from King Abdel
•Vziz of Saudi Arabia an exclusive option for EGS to explore oil in the province of Hasa.
Mthough Holmes was finally obliged to drop the Saudi option in 1927 because he was unable
o interest the major oil companies in it, he was more successful in Bahrain.

In December 1925, he obtained from Shaikh Hamad bin Isa AI-Khalifah the oil conces-
ion for Bahrain; EGS was granted an exclusive exploration licence for a period of two years,
iter which the option had to be renewed. EGS then offered to transfer its options in Hasa and
Bahrain to APOC in early 1926. But APOC was uninterested because, surprisingly, its
;eologists had produced unfavourable reports regarding the petroleum potential of both
daces. So EGS then tried to sell its options to an American company, and here it was
uccessful. The Gulf Oil Corporation (GOC) of Pennsylvania in November 1927 acquired the
EGS option in Bahrain and Hasa. But when, a year later, GOC became a party to the Red Line
Agreement, it transferred its interests in the Bahrain concession to another American com­
pany, the Standard Oil Company of California (SoCal).

But at this juncture, the Colonial Office, which had charge of Gulf affairs, informed EGS
n London in late 1928 that the British government required the insertion of a British
lationality clause in the Bahrain oil concession. This required clause was also made a
ondition by the British government of the Kuwait oil concession which was still being
legotiated by both GOC and APOC.

The US government reacted strongly to a British clause which it regarded as an obstacle
eliberately created to exclude American companies from entering the Gulf. Long diplomatic
egotiations were initiated, but it was not until January 1930 that a compromise solution was
inally reached. The Colonial Office then agreed that, for the nationality clause to be lifted,
ertain conditions had to be met by the company which was to acquire the original EGS option.
"Tiis was the Bahrain Petroleum Company (BAPCO), a subsidiary of SoCal, which accepted
ie following provisos which were then attached to the EGS option:

1. that BAPCO would be a British company registered in Canada;

2. that one of the five directors of BAPCO would at all times be a British subject
and that his appointment would be made in consultation with the British
government;

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