Bahrain Petroleum Company — BrandWiki

Bahrain Petroleum Company

Overview

Bahrain Petroleum Company

type	State-owned enterprise
trade name	BAPCO
foundation	1929 (original company) 1999 (current company)
founder	Standard Oil Company of California (original company)
location city	Awali
location country	Bahrain
key people	Abdulrahman Jawahery (CEO)
industry	Petroleum
owner	Bapco Energies
homepage	www.bapco.net

The Bahrain Petroleum Company (BAPCO) is an integrated petroleum company that is the national oil company of Bahrain.

It was founded in 1929 and discovered the first oil field in the Persian Gulf outside of Iran in 1932. Shipments of crude oil commenced in 1934 and in 1936 the first refinery in the Gulf outside of Iran was built. The founders were the American Standard Oil of California, which was soon joined by Texaco, operating under British rule.

While Bahrain never was a high-volume crude oil producer, the American joint venture a few years later came into possession of the vast Saudi Arabian oil reserves, which are located on the mainland in the vicinity of Bahrain Island. Supplied from the mainland, the refinery though exceeded the capacity of the Bahrain oil field from its inception and was among the largest in the region.

The Bahrein concession was the first of 3 concessions awarded exclusively to American interests in the Middle East and was followed by Aramco in Saudi Arabia and by the joint venture active in the Saudi Arabian–Kuwaiti neutral zone.

Overview

BAPCO was established in 1929 in Canada by Standard Oil Company of California for oil exploration activities in Bahrain.[1][2]

History

On December 2, 1925 the British Eastern and General Syndicate, headed by Frank Holmes, acquired from the Sheik of Bahrain (Isa bin Ali Al Khalifa) an oil concession over 100,000 acres with exclusive right to develop the area. Shortly thereafter the concession was extended to cover all of Bahrain. On November 30, 1927, the Eastern Gulf Oil Co. subsidiary of Gulf Oil bought an option on the concession, to be exercised before January 1, 1929.

Gulf Oil was at the time a shareholder in the Near East Development Corporation which held a 23.75% stake in the Iraq Petroleum Company. Thus, Gulf Oil was bound by the Red Line Agreement, which stipulated that the company would not be allowed to exploit Bahrain oil without the involvement of the other members of IPC, or rather, if they did, they would bear all the downsides of exploration and still would have to share the spoils with the rest of the group. When IPC was unwilling to exercise the option jointly, Gulf Oil on December 21, 1928 sold it to the Standard Oil Company of California.[31]

Terms of the concession and British resistance to American participation

The agreement was divided into a 2-year exploration phase ("First Schedule"), covering all of Bahrein, a surface search not exceeding 20 feet of depth for signs of hydrocarbons, followed by a 2-year prospecting (exploratory drilling) phase ("Second Schedule") at the end of which a mining lease over 100,000 acres (ca 51% of the area of the country) divided into no more than 3 blocks was to be awarded, followed by a 55-year mining lease period ("Third Schedule").[32]

A considerable diplomatic back-and-forth developed during the following years in which the British government asserted its political influence when after a lack of British investment United States capital was attempting to gain access under the terms that were apparently, in the eyes of Britain, not meant to apply to foreigners.

On December 2, 1927 the exploration license was extended for one year by the Sheikh.[33] The British Secretary of State for the Colonies Leo Amery in June 1928 instructed his Political Resident in the Persian Gulf to effect an alteration of the concession to include the stipulation that the lease holder had to be a company under British or British Dominion law.[34] The Eastern and General Syndicate (EGS) sent 3 geologists to the island in the winter of 1927/1928 and by October 1928 had decided to attempt to get a further extension of the exploration phase and send more geologists.[35]

When EGS could not find a British company willing to invest in the enterprise, they turned to an American company that was as member of the Iraq Petroleum Company subject to the Red Line Agreement and thus not outright able on their part to work the concession without first getting approval from the consortium. EGS had received one pessimistic prospect for oil from their first geologist, 4 optimistic prospects thereafter and were at the time planning to send geologist #1 back again to reexamine all available evidence.[36]

Secretary Amery, acting via the Colonial Office (the conduit for all communication with EGS), then tried to get the British company clause inserted by asking EGS to try and insert it in the course of obtaining their second licence extension,[37] to which EGS objected, because it would have alienated their option holder Gulf Oil and would have put EGS at risk of losing the concession and stranded their investment. EGS wanted the British government to lean on the Anglo-Iranian Oil Company (AIOC) or through AIOC on the Iraq Petroleum Company (IPC).

The lack of interest shown by AIOC and the Gulf Oil purchase of an option applied also to other EGS concessions that had been won: in Kuwait, Hasa province (Saudi Arabia, May 6, 1923) and the Neutral Territory between Saudi Arabia and Kuwait (May 17, 1924). It was Gulf Oil who had approached EGS after talking to an EGS geologist (T. George Madgwick) who had returned from the Middle East to the United States.

Two agreements were signed on November 30, 1927: (1) Gulf Oil's option on the Bahrein concession and (2) Gulf Oil's option on all other (Mainland) EGS concessions.[38][39] EGS paid the 10,000 rupees annual royalty (Article VI) to the Bahrein state on December 2, 1928.[40] Standard Oil of California (SOCAL), not restricted by the Red Line Agreement, had in the meantime bought the option from Gulf Oil and on January 11, 1929[41] had incorporated a Canadian subsidiary, the Bahrein Petroleum Company in anticipation of what would be acceptable to the British government and stood ready to begin work on the concession. In April 1929, EGS was still trying to get approval for the transfer of the concession to SOCAL from the British Colonial Office.[42]

In an interdepartmental conference held in the Colonial Office on June 7, 1929, representatives of the British government prepared arguments to present to EGS that either their concession had lapsed (which was the result of British resistance), or that the request for an extension was (would have been) without merit. The conference then compiled a list of stipulations beneficial to the British government under which they would be willing to recommend to the Sheikh to extend the licence. The company was to be registered in Britain, the chairman, managing director, local general manager and the whole local staff with some exceptions were to be British.[43]

The Colonial office was delighted when in a July 19, 1929 meeting EGS did not dispute the right of the British government to impose restrictions and it was not necessary to make use of the prepared arguments.[44] The American reply was essentially a refusal of all conditions. They opposed most strongly lack of control over local personnel in charge.[45]

...

EGS paid the 10,000 rupee annual royalty on December 2, 1929.[46]

...

The concession was formally assigned to the Bahrein Petroleum Company Ltd on August 1, 1930.[47] BAPCO applied for the prospecting licence to run for 2 years from December 2, 1930.[48]

The following 4 conditions were eventually imposed (June 12, 1930):

1) BAPCo had to be a British Company registered in Canada, but maintain an office in Great Britain run by a British citizen as a conduit for communication between the company and the British government.
2) 1/5 directors had to be a British citizen, appointed in coordination with the British government, with the salary paid by the company.
3) The company had to maintain a Chief Local Representative, approved by the British government, who would be authorized to deal with the local population, local authorities and through the British Political Agent in Bahrein with the Sheikh. Frank Holmes was appointed to the position for the first 5 years.
4) As many employees as is consistent with the efficient operation of the business had to be either British or Bahreini citizens.[49]

Oil found in 1932

In June 1932 the Jebel Dukhan No. 1 well (Dukhan Hill No. 1) at the southern base of the hill struck oil at a depth of 2,008 feet and flowing at a rate of 2,400 bbl/day, in January 1933 No. 2 well, 2.5 miles north of No. 1 and drilled with the same cable tool rig, struck 33° API gravity oil at the same depth flowing at a rate of 1,500 bbl/d. A rotary drill was substituted at No. 3 well at a depth of 1,635ft in order to explore lower lying strata.[52][53]

Once oil was found, the conditions were very favorable. All the technical equipment needed to lay a pipe and construct a loading dock from local building materials could be fitted on a single ship. The tanker El Segundo with a crew of 45 sailed from San Pedro on December 28, 1933[56] and arrived via Mumbai on February 22, 1934. She anchored 16,000 feet offshore beyond the stretch of shallow water that was to be bridged by a 12-inch pipeline resting on the ocean floor.

Five 8-ton anchors at the loading berth held in place 5 marking buoys at a depth of 50 feet of water. On the island of Sitra, 3 tanks totalling 250,000 barrels and one 7,500 barrel tank for ballast water were erected from sheet steel brought by the El Segundo.