Page 76 - The Persian Gulf Historical Summaries (1907-1953) Vol III

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(C) The Company shall conduct its operations in a workmanlike manner
and by appropriate scientific methods and shall take all reasonable measures to
prevent the ingress of water to any petroleum-bearing strata and shall duly
close any unproductive holes drilled by it and subsequently abandoned. The
Company shall keep the Shaikh and His Foreign Representative informed
generally as to the progress and result of its drilling operations but such information
shall be treated as confidential.

Article 3
In consideration of the rights granted by the Shaikh to the Company by this
Agreement and of the assistance and protection which the Shaikh hereby under­
takes to afford by all means in His power to the Company and its operations,
employees and property, the Company shall pay to the Shaikh the following sums
and considerations: —
(a) On date of signature of this Agreement Six Hundred and Twenty Five
Thousand United States Dollars ($625,000) which sum is payment in
advance of the first minimum Annual Payment to be paid as described
in paragraph (c) of this Article.
(b) Within thirty (30) days after signature of this Agreement Seven Million,
Two Hundred and Fifty Thousand United States Dollars ($7,250,000).
If the Company does not pay the sum of Seven Million, Two Hundred
and Fifty Thousand United States Dollars ($7,250,000) within thirty (30)
days of the date of signature of this Agreement then this Agreement
shall terminate without damages or penalty of any kind being imposed
against the Company and the Company shall be relieved of any and all
responsibilities under this Agreement.
(c) On each anniversary of the date of signature of this Agreement: —
Either, Royalty of Two and One-half United States Dollars
($2-50) for Every English ton (2,240 pounds) of said Neutral Zone
petroleum won and saved by the Company in said Neutral Zone during
the year ending three (3) months prior to the anniversary of the date
of signature.
Or, Six Hundred and Twenty Five Thousand United States Dollars
($625,000) whichever shall be the greater sum.
(d) For the purpose of this Agreement and to define the exact product to
which the Royalty stated above refers, it is agreed that the Royalty is
payable on each English ton (2,240 pounds) of net crude petroleum won
and saved by the Company from within the said Neutral Zone; that
is after deducting water, sand and other foreign substances and the
oil required for the customary operations of the Company’s installations
in the Shaikh’s territories: —
(e) One Eighth (J) of the gross proceeds received by the Company from
the sale of any natural gas or natural gas products produced, manu­
factured and sold from said Neutral Zone by the Company, less the
cost of handling and transportation of such natural gas or natural
gas products from the place of production to final destination or point
of consumption.
if) Fifteen (15) Percent of the shares of a subsidiary company to be organized
by the American Independent Oil Company, which subsidiary company
will be formed for the purpose of exploring and exploiting said Neutral
Zone under terms of this Agreement. The shares owned by the Shaikh
shall be non-assessable and will represent a net interest of Fifteen (15)
Percent in the above-mentioned subsidiary company, and shall involve
no financial contributions on the part of the Shaikh.
(g) If and when there is reached a daily production of Fifteen (15) Thousand
English tons of 2,240 pounds, the Company pledges itself to construct
a modern and suitable oil refinery having a capacity of not less than
Ten (10) Percent of the Fifteen (15) Thousand tons daily production
The site of the refinery will be the subject of mutual agreement between
the Shaikh and the Company.
The above mentioned refinery shall be owned by a company to be
formed as a subsidiary of the American Independent Oil Company
Of the total shares of said subsidiary refining company, the Shaikh shali
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