Definitions

Iraqi Petroleum Company

Iraq Petroleum Company

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, which had virtual monopoly on all oil exploration in Iraq from 1925 to 1961.

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 big 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.

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).

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 short crude oil supplies. This conflict of interest delayed the development of the Iraqi fields, and IPCs concession eventually expired because the companies failed to meet certain performance requirements, such as the construction of pipelines and shipping terminals. IPCs 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.

In 1934, a pipeline was completed from Kirkuk to Al Hadithah, where it split into two branches: one going to Tripoli in Lebanon, and the other to Haifa, in what then was Palestine, and the same year the Kirkuk field was brought online. But not until 1938, nine years after the discovery, did IPC begin to export oil in significant quantities. The same year the company also got the concession rights to southern Iraq, and founded the Basrah Petroleum Company (BPC) as their wholly owned subsidiary to develop that region.

The Kirkuk production averaged 4 million tons per year until World War II, when restricted shipping in the Mediterranean forced down the production sharply.

Monopoly maintained until 1961

The production delays after the 1927 find in Kirkuk made many Iraqis believe that IPC was deliberately withholding Iraqi crude from the market, in order to boost the price of the parent companies' oil produced elsewhere. Because of this, Iraq had in 1932 granted a 75 year concession to the British Oil Development Company (BODC), created by a group of Italian and British investors, to 120,000 km². west of the Tigris River. BODC financing was insufficient, however, and the company was bought out by IPC in 1941 and was renamed the Mosul Petroleum Company (MPC), thus maintaining IPCs monopoly in Iraq.

During the 1940s and 1950s, the company also obtained concessions to explore for oil in Dubai and other Gulf states. It retained its monopoly of exploration and development in Iraq until 1961, when the revolutionary government of General Qassem nationalised 99.5 % of its concession areas in Iraq, leaving only the producing oilfields in the company's control. In 1971, the Iraqi government nationalised the remaining interests into the Iraq National Oil Company. This resulted in major increases in revenues for the Baath party government under Saddam Hussein to pursue massive infrastructure projects.

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.

See also

Sources

  • Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power, Simon and Schuster, 1991.

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