Anglo-Persian Oil Company Totally Explained

Everything about The Anglo-persian Oil Company totally explained

The Anglo-Persian Oil Company (APOC) was founded in 1908 following the discovery of a large oil field in Masjed Soleiman, Iran. It was the first company using the oil reserves of the Middle East. APOC was renamed Anglo-Iranian Oil Company (AIOC) in 1935 and eventually became the British Petroleum Company (BP) in 1954, as one root of the BP Company today.

The D'Arcy Oil Concession

Exploration and discovery

In 1901 William Knox D'Arcy, a millionaire London socialite, negotiated an oil concession with the Shah Mozzafar al-Din Shah Qajar of Persia. He assumed exclusive rights to prospect for oil for 60 years in a vast tract of territory including most of Iran. In exchange the Shah received £20,000, an equal amount in shares of D'Arcy's company, and a promise of 16% of future profits.
D'Arcy hired George Reynolds to do the prospecting in the Iranian desert. Conditions were extremely harsh: "small pox raged, bandits and warlords ruled, water was all but unavailable, and temperatures often soared past 50°C". After several years of prospecting, D'Arcy fortune dwindled away and he was forced to sell most of his rights to a Glasgow-based syndicate, the Burmah Oil Company."
By 1908 having sunk more than £500,000 into their Persian venture and found no oil, D'Arcy and Burmah decided to abandon exploration in Iran. In early May 1908 they sent Reynolds a telegram telling him that they'd run out of money and ordering him to `cease work, dismiss the staff, dismantle anything worth the cost of transporting to the coast for re-shipment, and come home.` Reynolds delayed following these orders and in a stroke of luck, struck oil shortly after on May 26 1908.

Creation of APOC

Burmah Oil Company Ltd. created the Anglo-Persian Oil Company (APOC) as a subsidiary and also sold shares to the public.
   Volume production of Persian oil products eventually started in 1913 from a refinery built at Abadan, for its first 50 years the largest oil refinery in the world. (see Abadan Refinery). The British government, at the impetus of a middle-aged Winston Churchill, First Lord of the Admiralty, partly nationalized the company in 1913 in order to secure British-controlled oil supplies for its ships.

   Conditions for Iranian oil workers and their families were very bad. The director of Iran's Petroleum Institute wrote that

Wages were 50 cents a day. There was no vacation pay, no sick leave, no disability compensation. The workers lived in a shanty town called Kaghazabad, or Paper city, without running water or electricity, ... In winter the earth flooded and became a flat, perspiring lake. The mud in town was knee-deep, and ... when the rains subsided, clouds of nipping, small-winged flies rose from the stagnant water to fill the nostrils ....
Summer was worse. ... The heat was torrid ... sticky and unrelenting - while the wind and sandstorms shipped off the desert hot as a blower. The dwellings of Kaghazabad, cobbled from rusted oil drums hammered flat, turned into sweltering ovens. ... In every crevice hung the foul, sulfurous stench of burning oil .... in Kaghazad there was nothing - not a tea shop, not a bath, not a single tree. The tiled reflecting pool and shaded central square that were part of every Iranian town, ... were missing here. The unpaved alleyways were emporiums for rats.

   Under the 1933 agreement with Reza Shah, AIOC had promised to give laborers better pay and more chance for advancement, build schools, hospitals, roads and telephone system. It hadn't done so.
   In May of 1949 Britain had offered a "Supplemental oil agreement" which guaranteed royalty payments wouldn't drop below £4 million, reduced the area in which it would be allowed to drill, and promised more Iranians would be trained for administrative positions." But gave Iran no "greater voice in company's management" or right to audit the company books. When the Iranian Prime Minister tried to dicker with AIOC head Sir William Fraser. Fraser "dismissed him" and flew back to UK.
   In late December of 1950 word reached Tehran that the American-owned Arabian American Oil company had agreed to share profits with Saudis on a 50-50 basis. The UK Foreign Office rejected the idea of any similar agreement for AIOC.
   By now expressions of Iranian anger against lack of support for nationalization included a distinct lack of mourning following the assassination of anti-nationalization prime minister Haj Ali Razmara, and a raucous walkout of protest by newspaper reporters when a visiting American diplomat urged `reason as well as enthusiasm` to deal with the British embargo of Iran.

Nationalization

In March 1951, the Iranian parliament (the Majlis) voted to nationalise the Anglo-Iranian Oil Company (AIOC) and its holdings, and shortly thereafter elected a widely respected statesman and champion of nationalization, Mohammed Mossadegh, Prime Minister. This led to the Abadan Crisis where foreign countries refused to take Iranian oil and Abadan refinery was closed. AIOC withdrew from Iran and increased output of its other reserves in the Persian Gulf.
Mossadeq broke off negotiations with AIOC in July 1951 when the latter threatens to pull its employees out of Iran and warned "tanker owners the receipts from the Iranian government wouldn't be accepted on the world market." The British ratcheted up the pressure on the Iranian government and explored the possibility of an invasion to occupy the oil area. US President Harry S. Truman and US ambasador to Iran Henry Grady opposed intervention in Iran but needed Britain's support for the Korean War. Efforts by America, the International Court of Justice were made to settle the dispute, but a 50/50 profit-sharing arrangement, with recognition of nationalisation, was rejected by both the British government and Prime Minister Mossadegh.
As the months went on the crisis became more acute. By mid-1952 an attempt by the Shah to replace Mossadegh had backfired in nationwide riots and Mossadegh returned with even greater power. But at the same time his coalition was "fraying," as Britain’s boycott of Iran eliminated a major source of government revenue and made Iranians "poorer and unhappier by the day."

Coup

By 1953 both the US and the UK both had new, more conservative, more anti-communist and more interventionist administrations. America no longer opposed intervention in Iran. British was unable to subvert Mossadegh as its embassy and officials had been evicted from Iran in October of 1952, but successfully appealed to American anti-communist sentiments, depicting both Mossadegh and Iran as unstable and likely to fall to communism in their weakened state. If Iran fell, the "enormous assets" of "Iranian oil production and reserves" would fall into Communist control, as would "in short order the other areas of the Middle East" In August the American CIA with the help of bribes to politicians, soldiers, mobs, and newspapers, and contacts/information from the British embassy and secret service, organized a coup. Mossadegh was overthrown, and the pro-Western Shah Mohammad Reza Pahlavi restored.

Consortium

After the regime change the Iranian oil started flowing again and the Anglo-Iranian Oil Company, which later changed its name to British Petroleum, tried to return to its old position. However "public opinion was so opposed that the new government couldn't permit it." Instead an international consortium under the nationalized name (National Iranian Oil Company) was created, the Anglo-Iranian Oil Company being just one member and holding 40% of the shares. The consortium agreed to share profits on a 50-50 basis with Iran, "but not to open its books to Iranian auditors or to allow Iranians onto its board of directors."

Subsidiary companies

Scottish Oils Ltd

Scottish Oils Ltd (owned by Anglo-Persian) was a producer of shale oil. It was formed between 1918 and 1920 by the merger of five smaller Scottish shale oil companies: Youngs, Broxburn, Pumpherston, Oakbank and Philpstoun . Shale oil production in Scotland ceased in the early 1960s but there was an unsuccessful attempt to revive it in 1973 . The company still exists but is no longer in the shale oil business.

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