15._The_Arabian_Oil_Concession_Revised_S - 15 The Arabian...

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Unformatted text preview: 15. The Arabian 15. The Arabian Concession The World that Frank Holmes Made Major Themes Americans beat the Brits to Saudi oil Increasing ties between Saudi Arabia & United States Economics & oil The host countries wanted the companies Cultural differences are profound in just as much as we wanted their oil 2 Major Frank Holmes On a beef­buying expedition in Ethiopia in 1918 when he first heard about oil seepages in Arabian coast on the Persian Gulf After the war, set up a company – the Eastern and General Syndicate – to develop business opportunities in the Middle East Convinced the Arabian coast would be a fabulous source of petroleum Arabs called him “Abu Naft” the “Father of Oil” His nose was his geologist! 3 Major Frank Holmes Set up headquarters on the small island, Bahrain Sheikh wanted fresh water Holmes drilled for water, struck it, and then was rewarded an oil concession in 1925 The syndicate was in deep trouble After getting rejected from Britain, Holmes turned to the U.S. for financial backing 4 Gulf Oil Showed interest in Holmes’s expedition Took over rights claimed by Eastern and General to Arabian concessions Agreed to help secure a concession in Kuwait But, then Gulf became part of the Turkish Petroleum Co. and due to the Red Line Agreement could not search for oil in Iraq 5 Socal Standard of California Aggressively committed to developing foreign oil supplies Set up a Canadian subsidiary, the Bahrain Petroleum Co., to hold the concession Ran into opposition from the British gov’t when they attempted to enter the area In 1929, however, British gov’t reconsidered its Oct 1931: The Bahrain Petroleum Co. began opposition, because the American capital would encourage widespread development drilling May 1932: It hit oil 6 Oil in Saudi Arabia? Ibn Saud Had a very imposing physical appearance Built and created the nation of Saudi Arabia During 1913 and 1914, brought eastern Arabia under his control Last critical territories were added after WWI In Dec 1925, captured the Hejaz, the holy land of Islam In 1932: the collective area was renamed Saudi Arabia 7 Saudi Arabia Needs $$ During the Great Depression, the major source of the King’s revenues – pilgrimages to Mecca, slowed to a trickle The kingdom’s finances fell into a desperate straits On a car ride with his English friend, Harry St. John Bridger Philby, known as Jack, suggested the possibility the kingdom was rich in petroleum 8 Jack Philby Former official of the Indian Civil Service Quit in 1925 because he was angered the eastern world” Set himself up as a merchant in Jidda, and had just a few months earlier converted to Islam Father of Harold “Kim” Philby one of the most notorious double­agents in the 20th century. by British policy in the Middle East He remained at odds with Britain and British policy, which he saw as “traditional western dominance in 9 Video: Saudi Oil I How did QuickTime™ and a YUV420 codec decompressor are needed to see this picture. Saud create his country? What did he do to maintain loyalty & unity? 10 10 Image of Ibn Saud Who was Errol Flynn? Zorba the Greek? 11 11 Philby’s Acquaintance Charles Crane Karl Twitchell American plumbing tycoon and philanthropist Invited through Philby to meet with the king about drilling for water and oil in Arabia Working for one of Crane’s projects in Yemen Investigated the water potential for the kingdom Reported that there were no prospects for artesian wells, however there were some promising oil prospects in the eastern part of the country The King was hesitant to grant concessions to foreigners, but after Socal hit oil in 1932, he became much less averse to foreign capital in his kingdom The King used Karl Twitchell to be his promoter for the U.S. 12 12 Negotiations Twitchell returned to Saudi Arabia in Feb 1933 with Lloyd Hamilton, a lawyer for Socal to initiate negotiations with Ibn Saud’s minister of finance, Abdullah Suleiman Suleiman Cunning and masterly opponent One of the most important men outside the royal family 13 13 Negotiations Iraq (Turkish) Petroleum Co. also interested in Arabia Philby signed as an adviser to Socal Kept the arrangement secret Took pleasure in helping an American company The interests of the companies were completely succeed over British interests in the area For his services: paid $1000/month for 6 months plus bonuses for a contract for a concession & oil discovery Socal: Needed oil concessions different: IPC: Wanted to keep all competitors out of the area 14 14 Socal Wins the Concession Socal was willing to offer a great deal more money than IPC May 1933: Agreement was signed with Socal Provided the King with money up front, an additional Britain’s loss would definitely be America’s gain, loan 18 months later, and another loan after the discovery of oil – all paid in gold Concession was good for 60 years and covered about 360,000 square miles though it was slow to be realized at first 15 15 Saudi Oil To Discovery QuickTime ™ and a YUV420 codec decompressor are needed to see this picture. 16 16 Discussion Why did the Saudi prefer the Americans? What are your impressions of Saudi Arabia in the 1930s? Why did Barger become fascinated with Saudi Arabia? 17 17 Kuwait Small state trying to assure its independence and freedom of action midst larger powers Britain assumed responsibilities for Kuwait’s foreign affairs and later established a protectorate over the empire 18 18 Sheikh Ahmad Amir of Kuwait Upset when exploration effort occurred in Bahrain and not in Kuwait Courted by Anglo­Persian and Gulf Anglo­Persian was skeptical about oil in Kuwait, but didn’t want to take the chance of any other company receiving concessions 19 19 Kuwait Economy Sheik Ahmad desperately needed finances because Kuwait was suffering severe economic hardship Japanese cultured pearls destroyed the demand for natural pearls, which was Kuwait’s #1 industry and principle source of foreign earnings Great Depression also crippled the economy 20 20 Competition over Kuwait Oil Concessions The Sheikh was upset with Britain over diplomatic measures He believed that an American oil company would bring American political interest, which would bolster his position against Britain and other rivals The British believed American capital could contribute to political stability and economic interests in the area However, the competition between Gulf and Anglo­Persia continued to increase cooperation 21 21 A possible alternative to the continuing bidding war was Kuwait Oil Company Dec 1933: Formed as joint­venture between Gulf and Anglo­Persian 50­50 joint­venture, but there would be British Sheikh Ahmad proved to be a tough negotiator Upset with decision for British dominance Dec 1934, finally signed an agreement which granted dominance over development within the country a 75 year concession to Kuwait Oil Co. In return, the Sheikh would receive an immense amount of royalties The Sheikh appointed Frank Holmes to be the representative for the company 22 22 Casoc California­Arabian Standard Oil Company Socal’s branch in Saudi Arabia Set up administrative headquarters in Jidda Dammam Dome, believed to have been a sure shot Experienced many difficulties: for oil was basically a failure Weather conditions were extreme – extremely hot days (115 0F), with bitter cold nights; also sand storms Socal became increasingly anxious about its Arabian project Due to oversupply, really didn’t have a market even if it did discover oil 23 23 Blue Line Agreement Socal had to cut back on its production due to lack of market access Texaco had extensive marketing network in Also, crude had a high sulfur content Africa and Asia, but no crude in the Eastern Hemisphere Socal and Texaco delineated their consolidated area by what they called the “Blue Line” Caltex – the California­Texas company This joint­venture would provide an outlet for both Bahrain production and any oil eventually found in Saudi Arabia 24 24 Discovery Exploration in Kuwait begun in 1935 1936: Seismic work undertaken Feb 1938: petroleum was struck, unexpectedly and March 1938: Large quantities of oil were tapped with a surprising flow in Well #7 in Arab Zone (Dammam #7) Immediately after the well was tapped, a pipeline was Jack Philby prospered in Saudi Arabia through begun King Ibn Saud turned the valve through which the first trickle of oil flowed out of Saudi Arabia He died in 1960 in Beirut, Lebanon. the 1930s and continued explorations 25 25 Video: Opening the Saudi Taps QuickTime ™ and a YUV420 codec decompressor are needed to see this picture. 26 26 ...
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