The Iraq Petroleum Company (IPC), formerly known as the Turkish Petroleum Company (TPC), is an oil company that had a virtual monopoly on all oil exploration and production in Iraq between 1925 and 1961. It was jointly owned by some of the world's largest oil companies and headquartered in London, England.
In June 1972, the Ba'athist government in Iraq nationalized the IPC, and its operations were taken over by the Iraq National Oil Company. The company "Iraq Petroleum Company" still remains extant, although only in paper form. One associated company – the Abu Dhabi Petroleum Company (ADPC, formerly Petroleum Development (Trucial Coast) Ltd) – also continues with its original shareholding intact.
The related Iraq Petroleum Group was an association of companies that played a major role in the discovery and development of oil resources in areas of the Middle East outside Iraq.
History
Turkish Petroleum Company
The forerunner of the Iraq Petroleum Company (IPC) was the Turkish Petroleum Company (TPC), which was established in the early 20th century in the belief that Mesopotamia (Iraq and parts of Syria) contained substantial reservoirs of oil. It was created by Calouste Gulbenkian, a British-Armenian oil magnate.
Since Mesopotamia was an Ottoman possession, early negotiations for an oil concession centered in the empire's capital, Constantinople. The first interest was shown by Imperial German banks and companies, already involved in building the Berlin-Baghdad railway. On January 31, 1911, in an attempt to bring together the competing British and German interests in the region, a British company known as African and Eastern Concessions Ltd, was formed in which Deutsche Bank held 25% in exchange for their railway concessions and Gulbenkian held 40%. Germans working on the Berlin-Baghdad Railway had struck some oil prior to World War I and the wells were afterwards operated by the British military in a very limited capacity.
On October 23, 1912, this company became the Turkish Petroleum Company (TPC). The owners were:
Deutsche Bank: 25% National Bank of Turkey (British-owned): 50% Anglo-Saxon Petroleum Co. (Royal Dutch-Shell): 25% Gulbenkian: 15% (held by National Bank of Turkey)
The Royal Navy under First Lord of the Admiralty Winston Churchill was in the process of switching from coal (available in abundance in the United Kingdom) to fuel oil, but wanted to remain in control of the production of its fuel. It undertook to acquire a controlling interest in The Anglo-Persian Oil Company, which had been in possession of the D'Arcy Concession in Persia since 1909 and was the only producer of crude oil (Masjed Soleyman oil field) and refined products (Abadan Refinery) in the Middle East outside of Egypt (which had a fledgling, but small scale oil industry). With the weight of the British government behind the enterprise, the TPC felt that it was necessary (or perhaps beneficial) to concede to the demands of these rival interests to become part of TPC. On March 19, 1914, at the British Foreign Office, an agreement was adopted, with Gulbenkian's share reduced to 5%, taken care of equally by Shell (22.5%) and APOC (47.5%), leaving 25% to Deutsche Bank. The capital was increased from 80,000 to 160,000 £1 ordinary shares, the new shares were purchased by APOC, while those of the National Bank of Turkey were distributed among the remaining two parties. The Board now had 8 members (APOC: 4, Deutsche: 2, Shell: 2). Gulbenkian's interest, from which he was entitled to reap all financial benefits, was nonvoting and his shares held in custody by APOC and Shell. In clause 10 of this agreement was formulated in short form the Red Line Agreement of 1928. The investment decision of the British government in APOC was ratified in the House of Commons on June 17, 1914, in a 254–18 vote, after a long debate in which the Turkish Petroleum Co. was apparently not even mentioned.
Deutsche Bank brought a concession granted to the Anatolian Railway Company to explore for minerals and oil along a -wide strip on either side of its proposed railway in Mesopotamia. On 28 June 1914, the Turkish grand vizier confirmed the promise of a concession to TPC, but the outbreak of World War I ended TPC's plans.
When the Ottoman Empire was broken up in the aftermath of the war, the question of shareholding in TPC became a major issue at the 1920 San Remo conference, where the future of all non-Turkish and Arab-majority areas of the former Ottoman Empire were mostly decided with the creation of the League of Nations mandates for Palestine, Syria and Mesopotamia. A rising demand for petroleum during the war had demonstrated to the big powers the importance of having their own sources of oil. Since one of the original partners of TPC had been German, the French demanded this share as the spoils of war. This was agreed upon by the San Remo Oil Agreement, much to the annoyance of the Americans, who felt excluded from Middle Eastern oil and demanded an open door. After prolonged diplomatic exchanges, U.S. oil companies were permitted to buy into the TPC, but it would take several years until the negotiations were completed.
During the 1920s the Naft Khana field was discovered and brought into commercial operation by the Anglo-Persian Oil Co. in lands covered by the 1901 d'Arcy concession, including some 20 miles of pipeline to a refinery at Khanaqin on the Iraq-Iran border northeast of Baghdad. Oil production from this first commercial field and first refinery in Iraq was just a fraction of what Kirkuk was going to produce.
The 1925 concession and the policy of the Open Door
By 1925 a consortium of six American oil companies were allowed entry into TPC: Mexican Petroleum, Gulf Refining, Atlantic Refining, Sinclair Consolidated Oil, Standard Oil of NJ, Standard Oil of NY. The American group, the French, Shell and APOC each held a 25% interest, but with an overriding 10% oil royalty payable by TPC to the British APOC. The concession signed in Baghdad on March 14, 1925 (full text:) covered the provinces of Mosul (35,130 square miles) and Baghdad (54,540), but excluded the Basra province (53,580) and ran for 75 years. Gulbenkian was left out, no agreement had been reached on his share and it was to be decided at a later date. The composition of TPC in 1925 was from the outset a preliminary one.
Under the terms of the concession TPC was to conduct a comprehensive survey beginning within 8 months of March 14, and make the findings available to any future interested party. Within 32 month, TPC had to choose 24 blocks of 8 square miles each for exclusive exploitation and begin drilling within 3 years. Another 12 months later and from thereon in intervals of 1 year, an auction was to be held in which 24 new blocks were to be awarded to any interested party, which would then enter into a sub-lease agreement with the TPC. The TPC would be the recipient of the sale proceeds of these auctions. All sub-leases were under a predefined set of conditions, including a 4 shilling ($0.96) royalty per ton payable to the Iraq government and subject to a future adjustment peg to world oil market prices; the obligation to drill (in each block) 1,500 feet in the first 3 years and 500 feet in subsequent years until a block had been fully tested. The same conditions applied to TPC on their blocks and their royalty obligations. Additionally, TPC was obliged to reserve 30% of pipeline capacity for sublessees and then on a day-by-day basis buy oil from producers in a competitive market to fill that shared capacity. In 1927 the deadline for TPC's selection of its 24 blocks was extended by one year to November 14, 1928, after ongoing border disputes had caused disruptions to the geological survey parties.
Secondary Iraqi interests that were safeguarded by other clauses included: the right to appoint one government official to serve on the TPC board of directors, the obligation to TPC to employ Iraqi citizens to the extent practically possible and to also train them towards becoming capable of employment. Whenever new shares were to be issued by TPC, Iraqi interests were to be given the first right to purchase them on 20% of the new stock. These terms specifically resulted in the strongest official criticism of a generally unpopular government decision. The ministers of Justice and Education resigned over the successful refusal of TPC to honor the clause of the San Remo Oil Agreement that granted local national interests a general right to acquire 20% participation in TPC, not limited to only new shares issued.
The American group got an open door and were invited to join TPC. They managed to influence TPC policy and created an open door for further participation. But this policy was weak. Since IPC received the auction proceeds and the procedure used sealed bids which IPC processed, IPC could shut out any competitor at zero upfront cost for the lease to itself. In any event, in the revision of the 1925 concession signed in 1931 IPC was granted a blanket concession for the territory east of the Tigris and no block auction ever took place.
Oil found in 1927
The first 30 geologists were on the ground in Iraq in September 1925.
In 1925 the IRR Eastern Line meter-gauge railway extension from Eskikifri was completed via Tuz Khurmatu to Kirkuk. The headquarters for the exploration effort were erected at Tuz Khurmatu. At Qarah Tappah and at Sulaiman Beg 1,000 ft railroad sidings were laid. From Qarah Tappah 26 miles of road were built to a new road junction from which 5 miles of road were built to the drill site at Khashm Al Ahmar and 9 miles to the Injanah site. From Qarah Tappah 36 miles of 3-inch fuel pipe were laid. At Umr Mandan a 270 ft timber bridge was built. From Umr Mandan, 14.25 miles of mixed 3 and 4-inch water pipe were laid to Khashm Al Ahmar. From the siding at Sulaiman Beg 5 miles of road were built to the Palkhanah drill site. Seven miles of mixed 3 and 4-inch water pipe led from Tuz Khurmatu to Palkhanah. At a conference held in London on September 2, 1926, 10 drilling locations were selected. The road and pipe construction was carried out in the second half of 1926, 50 British company men directed a workforce of 2,500 Iraqis. (further activities of infrastructure construction in 1927 are not covered by the above cited sources). Sharqat, on the banks of the Tigris, was at the time the northern terminus of an isolated standard-gauge stretch to Baghdad of the Berlin-Baghdad railway, but was not yet connected to the main portion ending at Nusaybin on the Turkish border, because World War I had put an end to the German-led effort.
TPC planned to drill 8 holes with rotary drills to a maximum depth of 4,500 feet widely spaced east of the Tigris and 2 holes with cable-tool rigs, near the Tigris, to a maximum depth of 1,500 feet. The drilling crews were from California.
Geologist J. M. Muir located the well at Baba Gurgur, just north of Kirkuk. Drilling commenced, and on October 14, 1927, oil was struck at a depth of 1,521 feet. The initial uncontrolled gushing spilled many tons of oil, but the oil field was soon brought under control and proved to be extensive."Discovery of the Kirkuk Field", IPC Newsletter, Issue 96, October 1997.
+ 1927 drilling locations Area Name of Well Drilling started Approx. Location near Tuz Khurmatu Palkhanah No. 1 April 5, 1927 Palkhanah No. 2 April 1927 Jebel Hamrin (south) Khashm Al Ahmar April 1927 Injanah June 1927 near Kirkuk Baba Gurgur July 1927 Tarjil August 1927 Kor Mor Ali Khan Beg near Tauq, SE of Kirkuk Jambur September 14, 1927 north of Sharqat Qaiyarah July 1927 south of Sharqat Jabal Khanuqah
TPC drilled a total of 14,646 feet in 1927 and 17,781 feet in 1928.
Red Line Agreement and the creation of IPC