Iraq Petroleum Company
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The Iraq Petroleum Company (IPC), until 1929 called Turkish Petroleum Company (TPC), was an oil company jointly owned by some of the world's largest oil companies,[1] which had virtual monopoly on all oil exploration in Iraq from 1925 to 1961.
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[edit] History
In 1912, the Turkish Petroleum Company (TPC) was formed to seek a concession from the Ottoman Empire to explore for Iraqi oil. The owners were a group of large European oil companies and the purpose of the company was to avoid rivalry among the partners and to outflank other concession seekers. The brain behind the creation was the Armenian-born businessman Calouste Gulbenkian, and the largest single shareholder was the British government-controlled Anglo-Persian Oil Company, which by 1914 held 50% of the shares. Another important shareholder was Royal Dutch/Shell. TPC received a promise of a concession from the Ottoman government but the outbreak of World War I in 1914 put a stop to all exploration plans.
Following the defeat, and break-up of the Ottoman Empire after the war, shareholding in TPC became a major issue at the San Remo conference in 1920 (where the future of the non-Turkish areas of the Ottoman Empire was finally decided), as the war had demonstrated to the big powers the importance of having their own sources of oil. One of the original partners had been a German oil company, and the French had seized those shares as enemy property and demanded entrance into TPC through those. And both the Italian and United States governments demanded that their oil companies should be partners as well. After prolonged and sharp diplomatic exchanges, US oil companies were permitted to buy into the TPC, but it would take several years until the negotiations were completed.
[edit] Oil found in 1927
TPC obtained a concession to explore for oil in 1925, in return for a promise that the Iraqi government would receive a royalty for every ton of oil extracted, but linked to the oil companies' profits and not payable for the first 20 years. Drilling started immediately, and on October 15, 1927 oil was discovered at Baba Gurgur just north of Kirkuk. Many tons of oil were spilled before the gushing well was brought under control, and this sign of a large, valuable field soon proved to be true.
The discovery hastened the negotiations over the composition of TPC, and in July 1928 the shareholders signed a formal agreement: the Anglo-Persian Oil Company (which in 1935 became the Anglo-Iranian Oil Company (AIOC) and in 1954 BP), Royal Dutch/Shell, the Compagnie française des pétroles (CFP, which in 1991 became Total), and the Near East Development Corporation (a consortium of five large US oil companies, among them Standard Oil) each received 23.7% of the shares, and Calouste Gulbenkian the remaining 5%. TPC was to be organized as a nonprofit company, registered in Britain, that produced crude oil for a fee for its parent companies, based on their shares. The company was only allowed to refine and sell to Iraq's internal market, in order to prevent any competition with the parent companies.
The big loser was Iraq. The San Remo conference had stipulated that Iraqis should be allowed 20% of the company if they wanted to invest in it, but the oil companies successfully resisted Iraqi efforts to participate, despite pressure by the British government to accept Iraqi shareholders. In 1929 the TPC was renamed the Iraq Petroleum Company (IPC).
As well as developing the oilfields of Iraq, the Iraq Petroleum Company looked for oil elsewhere in the Middle East. It created subsidiary companies, one for each territory to be explored. These companies would obtain from the sovereign power an exploration licence covering simple exploration over a defined geographical area, or a concession permitting exploration and the production of oil. By 1948, the Company had 12 subsidiary companies with concessions or exploration licences: Petroleum Development (Cyprus Ltd), Lebanon Petroleum Company Limited, Petroleum Development (Palestine) Ltd., Syrian Petroleum Company Limted, Trans-Jordan Petroleum Company Limited, Mosul Petroleum Company Ltd., Basrah Petroleum Company Ltd., Petroleum Development (Qatar) Ltd., Petroleum Development (Trucial Coast) Ltd., Petroleum Development (Oman and Dhofar) Ltd., Petroleum Concessions Limited (for the Aden Protectorates), Petroleum Development (Western Arabia) Ltd.
[edit] Delayed production start
The owners of IPC had conflicting interests: the Anglo-Persian Oil Company, Royal Dutch/Shell and Standard Oil had access to major sources of crude oil outside Iraq, and therefore wanted to hold the Iraqi concessions in reserve, whilst CFP and the other companies pushed for rapid development of Iraqi oil as they had limited crude oil supplies. These competing interests delayed the development of the Iraqi fields, and IPC's concession eventually expired because the companies failed to meet certain performance requirements, such as the construction of pipelines and shipping terminals. The concession was renegotiated in 1931, however, giving the company a 70 year concession on an enlarged 83,200 km². area east of the Tigris River. In return, the Iraqi government demanded, and received, additional payments and loans, as well as the promise that IPC would complete two oil pipelines to the Mediterranean by 1935 - something CFP had demanded for a long time, in order to get its share of the oil quickly to France.
Differing routes and terminal locations on the Mediterranean coast were favored by the French, who favored a northern route through Syria and Lebanon terminating at Tripoli, and the British and the Iraqis who preferred a southern route, terminating at Haifa, in what then was Palestine. The issue was settled by a compromise which provided for the construction of two pipelines, each with a throughput capacity of 2,000,000 tons a year. The length of the Northern line would be 532 miles, that of the Southern line 620 miles.[2] In 1934, the pipelines were completed from Kirkuk to Al Hadithah, and from there, to both Tripoli and Haifa; the Kirkuk field was brought online the same year. Only in 1938, nine years after the discovery, did IPC begin to export oil in significant quantities.
The Kirkuk production averaged 4 million tons per year until World War II, when restricted shipping in the Mediterranean forced down the production sharply. The company also got the concession rights to southern Iraq in 1938, and founded the Basrah Petroleum Company (BPC) as their wholly owned subsidiary to develop the southern region of Iraq.
[edit] IPC – Government Relations
On 1st June, 1972 the Iraqi Petroleum Corporation was nationalized. The nationalization of the IPC was the result of a long-running battle for control between the government and the IPC. Historically, since the overthrow of the Hashemite Monarchy there had been a lot of tension between the two. Relations between the two can be examined on two major factors. First, oil was a vital part of the Iraqi economy. Because of this, the IPC had a huge impact on the amount of revenue that the government generated and thus had a certain amount of influence over the government. The second major factor was the ability or lack thereof of the Iraqi government to nationalize or neutralize the IPC. Over time, the Iraqi government became more powerful and thus was able to nationalize the IPC. There was no serious issues between the IPC and the Iraqi government until the overthrow of the Hashemite Monarchy. The Hashemites had been extremely pro-west - in fact it had been installed by the British- and therefore tensions had been minimized. They were dependent on the British militarily and had essentially pledged allegiance to them through the Baghdad Pact. The Hashemites’ main disputes centered on increasing the amount of crude oil extracted, getting more Iraqis involved in the process of producing the oil and getting more royalties. In 1952, terms that were more generous to the Iraqi government were negotiated. These terms were largely based on the far more lucrative terms of the Aramco-Saudi agreement of December 1950. One could argue that a determinant in these negotiations was the friendly atmosphere in which they were conducted. This atmosphere did not exist during negotiations between the IPC and revolutionary governments.
[edit] Qasim Era
Beginning in the early 1950s a wave of nationalism was gripping Iraq and one natural area of focus was the oil production in the country. General Qasim, who would overthrow the government, used the fact that the IPC was producing oil for western nations and not to the benefit of Iraq as one of his main points of contention with the existing Iraqi government. When Qasim came to power, he was critical of several aspects of the IPC. First, he was critical of the monetary arrangement between the IPC and the government. He also did not appreciate the monopoly that the IPC had been granted. However the economic situation at the time did not permit Qasim to nationalize the IPC – western nations had boycotted Iranian oil when Mossadeq nationalized its oil company and could be expected to do the same in this case. (It is likely that nationalization would have been Qasim’s favored route had he had the necessary capabilities). Further Iraqis lacked the technical and managerial capabilities to run the IPC. Qasim needed the oil revenues to run his government and to keep the military satisfied. Therefore, Qasim resorted to many other tactics including increasing transit rates at Basra by 1,200%. In response, the IPC stopped producing oil that used Basra as a shipping point. The ensuing confrontation was the lowest point in relations between the two up to this point. By the end of the confrontation, Qasim had appropriated 99.5% of the lands given to the IPC. One major difference between these negotiations and the negotiations of 1952 was the negotiating stance of the Iraqi government. Whereas they had been more willing to accommodate the IPC in 1952, many of Qasim’s positions were non-negotiable. However this should not be surprising because it was expected that Qasim would take advantage of the sense amongst many ordinary Iraqis that they were being exploited by the west.
[edit] 1972 Nationalization
Throughout the 1960s, the Iraqi government criticized the IPC and used the IPC as a central piece of their anti-western propaganda. The Soviet-Iraqi agreement of 1969 emboldened the Iraqi government and in 1970 they made a list of demands including ownership of 20% of the company’s assets and more control. The IPC by this time was taking the Iraqi government very seriously and made some huge concessions. They agreed to increase oil production substantially and also increase the price of its crude oil in certain areas. They also offered an advance payment on royalties. However this was not enough for the Iraqi government and they issued a new set of demands in November of 1970 which essentially involved more Iraqi control of operations and more Iraqi profit-taking. Unsatisfied with the IPC’s unwillingness to negotiate on Iraq’s terms, the Iraqi government gave the IPC an ultimatum with similar demands in May 1972. The IPC tried to offer a compromise solution but the Ba’athist Iraqi government rejected the offer and nationalized the IPC on June 1st 1972.
The Kirkuk field still forms the basis for northern Iraqi oil production. Kirkuk has over 10 billion barrels (1.6 km³) of remaining proven oil reserves. The Jambur, Bai Hassan, and Khabbaz fields are the only other currently producing oil fields in northern Iraq. While Iraq's northern oil industry remained relatively unscathed during the Iran-Iraq War, an estimated 60% of the facilities in southern and central Iraq were damaged in the Gulf War. Also, post-1991 fighting between Kurdish and Iraqi forces in northern Iraq resulted in temporary sabotage of the Kirkuk field's facilities. In 1996, production capacity in northern and central Iraq was estimated at between 0.7 to 1 million barrels (110,000 to 160,000 m³) per day, down from around 1.2 million barrels (190,000 m³) per day before the Gulf War.
[edit] Iraq Petroleum
The company published a monthly magazine, titled Iraq Petroleum, from August 1951 until April/May 1957. An insert in the January 1957 edition read "In the light of present circumstances it has been found necessary to restrict the production of Iraq Petroleum and ... publication will be bi-monthly until further notice."
[edit] See also
[edit] Sources
- ^ Metz, Helen Chapin, ed (1988). "The Turkish Petroleum Company". Iraq: A Country Study. http://countrystudies.us/iraq/53.htm. Retrieved 2008-06-28.
- ^ The History of the British Petroleum Company, p.164-165
- Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power, Simon and Schuster, 1991.
- Michael Brown, The Nationalization of the Iraqi Petroleum Company, International Journal of Middle East Studies: Vol 10. No 1. (Feb 1979). pp107-124. Cambridge University Press
