The
Iraq Petroleum Company (IPC), until 1929 called
Turkish Petroleum Company (TPC), was an
oil companyPetroleum or crude oil is a naturally occurring, flammable liquid found in rock formations in the Earth consisting of a complex mixture of hydrocarbons of various molecular weights, plus other organic compounds.The term "petroleum" was first used in the treatise De Natura Fossilium, published in...
jointly owned by some of the world's largest oil companies, which had virtual
monopolyIn economics, a monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it...
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 EmpireThe Ottoman Empire or Ottoman State , also known by its contemporaries as the Turkish Empire or Turkey , was an empire that lasted from 1299 to November 1, 1922 The Ottoman Empire or Ottoman State (Ottoman Turkish: دَوْلَتِ عَلِیَّهِ عُثْمَانِیَّه Dawlet-il ʿAliyyat-il ʿOs̠māniyye, Modern Turkish:...
to explore for
IraqIraq , officially the Republic of Iraq , also known as Mesopotamia, is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert.Iraq shares borders with Jordan to the west, Syria...
i
oilPetroleum or crude oil is a naturally occurring, flammable liquid found in rock formations in the Earth consisting of a complex mixture of hydrocarbons of various molecular weights, plus other organic compounds.The term "petroleum" was first used in the treatise De Natura Fossilium, published in...
. 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 GulbenkianCalouste Sarkis Gulbenkian was an Armenian businessman and philanthropist. He played a major role in making the petroleum reserves of the Middle East available to Western development...
, 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/ShellRoyal Dutch Shell plc, commonly known simply as Shell, is a multinational petroleum company of Dutch and British origins. One of the six "supermajors" , Shell was listed as the world's largest corporation for 2009 by Fortune...
. TPC received a promise of a concession from the Ottoman government but the outbreak of
World War IWorld War I , also known as the First World War, the Great War, and the War to End All Wars, was a global military conflict which involved most of the world's great powers, assembled in two opposing alliances: the Triple Entente and the Triple Alliance...
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 conferenceThe San Remo Conference was an international meeting of the post-World War I Allied Supreme Council, held in Sanremo, Italy, from 19 to 26 April 1920. It was attended by the four Principal Allied Powers of World War I who were represented by the Prime Ministers of Britain , France and Italy and...
in 1920 (where the future of the non-
TurkishTurkey , known officially as the Republic of Turkey
, is a Eurasian country that stretches across the Anatolian peninsula in Western Asia and Thrace in the Balkan region of southeastern Europe...
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
GermanGermany , officially the Federal Republic of Germany , is a country in Central Europe. It is bordered to the north by the North Sea, Denmark, and the Baltic Sea; to the east by Poland and the Czech Republic; to the south by Austria and Switzerland; and to the west by France, Luxembourg, Belgium,...
oil company, and the
FrenchFrance , officially the French Republic , is a country located in Western Europe, with several overseas islands and territories located on other continents. Metropolitan France extends from the Mediterranean Sea to the English Channel and the North Sea, and from the Rhine to the Atlantic Ocean...
had seized those shares as enemy property and demanded entrance into TPC through those. And both the
ItalianItaly , officially the Italian Republic , is a country located on the Italian Peninsula in Southern Europe and on the two largest islands in the Mediterranean Sea, Sicily and Sardinia. Italy shares its northern, Alpine boundary with France, Switzerland, Austria and Slovenia...
and
United StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
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 GurgurBaba Gurgur is a large oil field near the city of Kirkuk which was the first to be discovered in Northern Iraq in 1927.It was considered the largest oil field in the world until the discovery of the Ghawar field in Saudi Arabia in the 1950s...
just north of
KirkukKirkuk , , , Kurdish: Kerkûk/کهرکووک , Turkish: Kerkük is a city in Iraq and capital of Kirkuk Governorate....
. 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
BPBP plc is the third largest global energy company, the 5th largest company in the world, the UK's largest company, a multinational oil company with headquarters in St James's, City of Westminster, London...
), Royal Dutch/Shell, the Compagnie française des pétroles (CFP, which in 1991 became
TotalTotal S.A. is a French oil company and one of the six "Supermajor" oil companies in the world. Its businesses cover the entire oil and gas chain, from crude oil and natural gas exploration and production to power generation, transportation, refining, petroleum product marketing, and international...
), and the Near East Development Corporation (a
consortiumA consortium is an association of two or more individuals, companies, organizations or governments with the objective of participating in a common activity or pooling their resources for achieving a common goal....
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 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
MediterraneanThe Mediterranean Sea is a sea connected to the Atlantic Ocean surrounded by the Mediterranean region and almost completely enclosed by land: on the north by Anatolia and Europe, on the south by Africa, and on the east by the Levant. The sea is technically a part of the Atlantic Ocean, although it...
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
SyriaSyria , officially the Syrian Arab Republic , is a country in Western Asia, bordering Lebanon and the Mediterranean Sea to the west, Turkey to the north, Iraq to the east, Jordan to the south and Israel to the southwest....
and
LebanonLebanon , officially the Republic of Lebanon
[Republic of Lebanon is the most common term used by Lebanese government agencies...]
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. In 1934, the pipelines were completed from Kirkuk to
Al HadithahHaditha is a city in the western Iraqi province of Al Anbar, about 240 km northwest of Baghdad. It is a farming town situated on the Euphrates River at . Its population of around 100,000 people is predominantly Sunni Muslim Arabs...
, 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 IIWorld War II, or the Second World War , was a global military conflict which involved a majority of the world's nations, including all great powers, organized into two opposing military alliances: the Allies and the Axis...
, 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.
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
DubaiDubai is one of the seven emirates and the most populous state of the United Arab Emirates . It is located along the southern coast of the Persian Gulf on the Arabian Peninsula. The Dubai Municipality is sometimes called Dubai state to distinguish it from the emirate...
and other Persian 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 1972, the Iraqi government nationalised the IPC's last interests into the
Iraq National Oil CompanyThe Iraq National Oil Company was founded in 1966 by the Iraqi government. It was empowered to operate all aspects of the oil industry in Iraq except for refining which was already being run by the Oil Refineries Administration and local distribution which was also already under government...
; the IPC and the Iraqi government settled the ensuing legal claims the following year. This resulted in major increases in revenues for the
Baath partyThe Arab Socialist Ba'ath Party was founded in Damascus in the 1940s by Michel Aflaq and Salah al-Bitar, both Syrian intellectuals, as the original secular Arab nationalist movement, to unify all Arab countries in one State and to combat Western colonial rule that dominated the Arab region at that...
government under
Saddam HusseinSaddam Hussein Abd al-Majid al-Tikriti was the President of Iraq from 16 July 1979 until 9 April 2003...
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 reservesOil reserves are the estimated quantities of crude oil that are claimed to be recoverable under existing economic and operating conditions.The total estimated amount of oil in an oil reservoir, including both producible and non-producible oil, is called oil in place...
. 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 WarThe Persian Gulf War , known also as the Gulf War, the First Gulf War,or often as the Second Gulf War and by Iraqi leader Saddam Hussein as The Mother of all Battles, or commonly as Desert Storm, for the military response...
. 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.
Sources
- Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power, Simon and Schuster, 1991.