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2. Under instructions from His Majesty’s Government I now enclose a copy
of an Agreement which was concluded in London on 27th September 1938 between
His Majesty’s Government and Petroleum Development (Oman and Dhofar) Ltd.,
to which Company the said concessions have been assigned by Petroleum Con­
cessions Ltd.
3. It is desirable that there should be a clear understanding as to the position
which would arise in certain eventualities in connexion with these Agreements and
I am to inform you that in these circumstances the following understanding has
been reached with the Company, viz.: —
If the Company should fail to observe any of the terms of the Agreement
betweeen the Company and His Majesty’s Government signed in
London on 27th September 1938 or if the alleged failure having been
disputed by the Company the matter has been referred to arbitration
under Article 26 of the Company's Agreements with Your Highness
(which it is hereby agreed shall be applicable to the case) and the
Company should not remedy such failure within the reasonable time
which should be fixed by the arbitrators for so doing then in these
cases, as in the cases mentioned in Article 21 of the Company’s Agree­
ments with Your Highness, but in no other, the Company agrees that
you will be entitled to terminate the Agreements between the Company
and yourself, and that all properties of the Company within the terri­
tories covered by the Company's Agreements with Your Highness
shall become your property, and that they will hand over to you free
of cost land granted to the Company by you and any lands or buildings
which the Company may have bought and any houses or buildings con­
structed by the Company and all other irremovable property of the
Company within the said territories including the producing wells and
boring which shall be handed over in reasonably good order and repair.
4. It is assumed that Your Highness will be guided by the advice of His
Majesty’s Government in regard to exercising the right of termination of the Agree­
ments between the Company and Your Highness in respect of breaches of the
Agreement between His Majesty’s Government and the Company, as described
in paragraph 3 above.
5. As regards Article 7 of the Agreement between His Majesty’s Government
and the Company it will be understood that the words “ sites which may have been
selected by or on behalf of, the Sultan ” shall be deemed to include any sites which
Your Highness has leased to His Majesty’s Government and that Your Highness
will not, without the consent of His Majesty’s Government, give permission to the
Company to use or occupy for the purposes of its operations, any sites which have
been leased to His Majesty’s Government or their Agents.
6. Please let me have a reply to this letter to the effect that Your Highness
understands the nature of the arrangements as set out above and that you are
prepared to agree to them. On receipt of your reply His Majesty’s Government
will obtain from the Company formal confirmation of their acceptance of the
arrangements in question.

(b)
Letter, dated November 15, 1938, from the Sultan of Muscat and Oman to the
Political Agent, Muscat, accepting the Terms set out in (a) above, subject
to the amendment of Article 4 of the Political Agreement
We thank you for your letter No. C/155 dated 2nd November, 1938.
We understand the nature of the Agreements as set out therein, and we are
prepared to agree to them except Article 4 of the Agreement between His Majesty’s
Government and the Company.
What we understand from the above Article is that the local employees, and
these include subjects of our Government and persons under its control and
administration shall have no right to approach the Sultanate Authorities with their
complaints and grievances except through the Chief Local Representative of the
Company, who shall be a British subject. This is an objectionable point to us.
Our subjects and those under our Government’s control and administration should