August 6, 1954
Statements on Iran Oil Accord
By THE ASSOCIATED PRESS
are the texts, as supplied by The Associated Press, of a joint
statement in Teheran by the Iranian Government and the consortium of
oil companies that will operate Iran's oil industry; of a statement by
the British Government on the Iranian oil agreement and of a message
from British Foreign Secretary Anthony Eden to Iranian Foreign Minister
The Iranian Government, the National Iranian Oil Company and
the negotiators representing a consortium of eight oil companies have
reached accord on necessary points of an agreement which will restore
the flow of Iranian oil to world markets in substantial quantities. An
essential part of the consortium agreement was settlement of the
question of compensation to Anglo-Iranian Oil Company. A separate
announcement has been made in this respect.
The agreement must now be put into proper legal form, approved
by the boards of directors of the participating companies, and signed
by the parties concerned. It will then be submitted for enactment as
part of the law of Iran and for formal approval of the Shah. It is
estimated that these requirements can be concluded in about two months,
after which large volumes of Iranian oil will once again be loaded at
Iran's great oil ports at Abadan and Bandar Mashur bound for the
consuming and refining centers of the world. In the interim period,
preparations for resumption of activities will commence.
Two operating companies will be formed to operate the oil fields
and refinery. These companies will receive the necessary rights and
powers from the Government and the National Iranian Oil Company and
exercise them on their behalf to the extent specified in the agreement.
The consortium companies will pay the National Iranian Oil Company for
all the oil required for export, and sell the crude and products
Provision is made for the National Iranian Oil Company to take
crude oil in kind, in lieu of payments, up to 12.5 per cent of total
exports. Products for consumption within Iran will be available to the
National Iranian Oil Company at substantially their cost. The
agreement covers a period of twenty-five years, with provisions for
three five-year extensions.
Income Is Estimated
Through payments to the National Iranian Oil Company and
application of Iranian tax laws, it has been estimated that total
direct income to Iran from increased scale of operations for the first
three full years, following a starting-up period of three months, will
be 150,000,000 on the basis of present prices and costs. The
estimated figures begin at 31,000,000 for the first full year of
operation, increasing to 67,000,000 for the third.
The National Iranian Oil Company will continue to operate the
Naft-i-Shah oil field and Kermanshah refinery to produce a part of
Iran's own oil needs, and will continue to handle the distribution of
oil products in Iran.
The National Iranian Oil Company will also be responsible for
all facilities and services not directly a part of producing, refining
and transportation operations of the operating companies. These will
include such functions as industrial training, public transport, road
maintenance, and facilities such as housing, medical care and social
welfare. The National Iranian Oil Company will be reimbursed for a
major part of the cost of such facilities and services by the operating
companies, with whom close cooperation will be maintained.
Production of crude oil from Iran, following a starting-up
period of three months, will be increased progressively, bringing total
exports of crude and products to a minimum of 80,000,000 cubic meters
(78,000,000 tons; 500,000,000 barrels) for the first three-year period.
In addition, some 5,000,000 cubic meters will be produced for internal
Supply and Demand
Following the third year it would be the policy of the
consortium companies to continue taking quantities of crude oil which
would reasonably reflect the supply and demand trend for Middle East
crude oil, assuming favorable operating and economic conditions in
Large-scale operations at the Abadan refinery will be resumed as
quickly as possible. It is expected that, again following the initial
period of three months, a total of nearly 35,000,000 cubic meters
(30,000,000 tons; 220,000,000 barrels) of crude will be processed for
export during the first three years of operation. Of this, some
15,000,000 cubic meters (13,000,000 tons; 94,000,000 barrels) will be
processed during the last three years, a rate which will once again
establish Abadan's output as the largest in the Eastern Hemisphere,
despite sharp increases in refinery capacity in that area during the
last three years.
The two operating companies will be organized by the consortium
and will carry on operations in Iran within a specified area. One of
the companies will deal primarily with exploration and production, the
other with refining. The companies will be registered in Iran and have
their management and operating headquarters there. They will be
incorporated under the laws of the Netherlands. There will be seven
directors of each company, two of whom will be named by Iran and five
by the consortium. Operating data and records of the companies will be
available to Iran and the National Iranian Oil Company.
The consortium is expected to consist of the Gulf Oil
Corporation, Socony Vacuum Oil Company, Inc.; Standard Oil (New
Jersey); Standard Oil Company, California; the Texas Company; the
Anglo-Iranian Oil Company; Compagnie Francaise des Petroles and Royal
Details have been announced today in Teheran of the
arrangements to be made between the Persian [Iranian] Government and
the consortium of oil companies with the object of restoring the oil
industry in south Persia and providing an outlet for Persian oil.
The consortium, in which the Anglo-Iranian Oil Company will have
a 40 per cent holding and Royal Dutch Shell 14 per cent, the remainder
being held by American and French companies, will form two companies,
incorporated in the Netherlands, for the purpose of carrying on
producing and refining operations in Persia, where they will have their
operating headquarters. The shares of these companies will be held by
a company incorporated in London with its headquarters here. The
consortium will also form a company in London to undertake procurement
and servicing for the operating companies.
As part of a general settlement, agreement has also been reached
on payment of compensation by Persia to the Anglo-Iranian Oil Company,
as announced separately in Teheran. A statement on this subject is
also being issued by the company.
An announcement has also been made in Teheran about the
conclusion of payments arrangements between Her Majesty's Government
and the Persian Government which will come into force on ratification
of the oil and compensation agreements. All transactions, including
those of the consortium with Persia, will normally be settled in
Boon to Area's Stability
When the oil and compensation agreements have been signed
and ratified in Persia, the dispute between the Persian Government on
the one hand and Her Majesty's Government and the Anglo-Iranian Oil
Company on the other will have been resolved. Her Majesty's Government
warmly welcome this development as a major contribution to the
stability of the whole of the Middle East area. They hope and believe
that it will mark a new stage in the history of Anglo-Persian
Her Majesty's Government wish to pay tribute to the realism
which the Persian Government and the company have displayed in the
interests of a settlement. They are also glad to acknowledge the
helpful and constructive part played by the United States Government
and its representatives.
No settlement, however, would have been possible without the
participation of the other major oil companies which can help to
provide an outlet for sufficient quantities of Persian oil. The
agreement demonstrates the genuine identity of interest between Persia
and the Western powers and shows that the oil companies have an
essential part to play in cooperation with the Governments and peoples
of the Middle East.
Her Majesty's Government, for their part, will do all in their
power to insure the smooth working of the new agreement, which they
regard as consistent with the present pattern of the oil industry in
the Middle East and from which they believe that Persia will secure
substantial and lasting benefit.
I send you my warmest congratulations on the announcement
that agreement in principle has been reached on all aspects of the oil
I am convinced that a settlement on the lines that have been
negotiated will be in the interests of Persia and can bring great
benefits to her. I am particularly glad to know that it has been
possible to satisfy both Persia's aspirations and the practical
requirements of the oil industry. I see in this the best assurance
that the agreement will endure.
We have now the opportunity of restoring relations between our
two countries to their traditional friendship. You know how much I
have desired this and I know full well how hard [Premier] General
Zahedi and you have worked for the same cause. I am sure that our two
countries can now go forward together in confidence and good-will.