On 11 January an agreement expired in Abu Dhabi which stood the test of time for 75 years. This not only marked the end of an era in Abu Dhabi, it was the final heartbeat of the once mighty Middle East oil consortium: the London-based Iraq Petroleum Company (IPC) and its associates, a group which once operated from Kirkuk to Aden, from the Red Sea to Arabia’s eastern-most promontory at Ra’s al Had in the Sultanate of Oman.
The IPC’s origins were pre-World War 1; it assumed its final composition in 1928 when the companies known today as BP, ExxonMobil, Shell, Total and Partex (Gulbenkian Foundation) signed the Red Line Agreement. In this the companies undertook to operate together, and not individually, within the area on a map enclosed by a Red Line encircling most of Arabia.
Relations were not always harmonious. When in 1935 the French thanked the British for a particular action, the meeting’s chair noted that he had never before heard one group thank another, unless for misrepresentation. But, in spite of wrangling among its constituent firms, the IPC was for decades a very successful company.
It was the pioneer of Middle East oil. IPC exploration geologists set out on foot, camels or in the cars of the day, hammer and map case in hand, to survey Arabia’s rock outcrops. Their reports, rock samples and half-million microscope slides form a unique collection. IPC engineers performed the record breaking feat of building the 1,200mile Kirkuk-Mediterranean pipeline, through which oil started to flow in 1934.
The Company in those early years opened offices across the Middle East, including Baghdad, Damascus, Beirut, Jerusalem, Haifa, Cairo, Bahrain and Dubai.
By the start of World War 2 in 1939 the IPC and its associated companies had negotiated concessions or exploration agreements with the governments of Iraq, Syria, Palestine, Lebanon, Jordan, Cyprus, western Saudi Arabia, Aden, the Sultanate of Oman, Qatar and the individual states of the Trucial Coast (the forerunners to the UAE). Alongside APOC (later BP) in Iran, it was one of only two large Middle Eastern oil producing companies.
Concession negotiators set out to achieve agreements with the various authorities, Kings, Sultans and Shaikhs. They arranged for the Company to make regular payments in return for exclusive access and security guarantees. Only then could a geologist set foot on the ground and surveys begin, sometimes in the face of dissident tribes.
The first oil-related mention of Abu Dhabi came in 1922, when ruler Shaikh Hamdan bin Zayed agreed to refuse to grant a concession to anyone except a British appointee. In 1935 the first oil company geologist arrived after ruler Shaikh Shakhbut bin Sultan asked for help finding fresh water; but when it rained before the geologist’s second visit he was sent home. An initial two-year agreement with the rulers of several emirates including Abu Dhabi and Dubai was arranged for the Company in 1935 by the colorful English adventurer ‘Haji’ Williamson.
The Company engaged Mr Williamson’s rival Major Frank Holmes to negotiate longer term concessions. Holmes had some previous success in Bahrain and Kuwait, but the Trucial Coast proved too difficult. Holmes blamed Williamson, probably unfairly, for his failure. In due course concessions were signed with several of the rulers. But the new negotiator, Lermitte, was no match for Shaikh Shakhbut bin Sultan, the well-informed ruler of Abu Dhabi.
His manager Stephen Longrigg was sent from London to negotiate a 75-year concession, signed with Shaikh Shakhbut in Abu Dhabi on 11 January 1939.
During the Second World War the Company’s operations were severely curtailed; in the early post-war years they were inhibited by a shortage of finance, men and materials. Drilling resumed in Iraq, Palestine and Qatar, but operations on the more inaccessible and inhospitable Trucial Coast were limited to geological and geophysical surveys. Oil exports started to flow from the Qatar wells in 1949.
By 1950, IPC subsidiary Petroleum Development (Trucial Coast), or PD(TC), was drilling the first well at Ra’s Sadr in Abu Dhabi. This was the deepest well in the Middle East, a record that the company achieved again in 1964 at Bida Hamama.
The Company was able to tell the Shaikh that oil had been found in commercial quantities in October 1960, following the drilling of eight exploration wells to twice the depth of wells elsewhere in the Middle East. Two years later PD(TC) was renamed the Abu Dhabi Petroleum Company (ADPC) in preparation for the start of exports in December 1963.
The Company was a pioneer in engineering, transport and construction in the difficult desert conditions. Drilling rigs, previously built on site and then taken down to rebuild elsewhere, were replaced with new transportable rigs, moved – mast in one piece – using giant Kenworth trucks over rough dunes that only a few years earlier had been the realm of the camel and almost impassable for wheeled transport.
By the start of initial oil exports from Abu Dhabi territory in 1963, the IPC had divested itself of all its Middle Eastern interests outside the three oil producing countries, Iraq, Qatar and Abu Dhabi.
A new agreement was negotiated in 1965. Over the years there were further alterations to take account of changing circumstances. The companies no longer wished to be restricted by the Red Line, but few could foresee the turbulence in the Middle Eastern oil industry that was to explode in the coming decade.
Nationalization came to Iraq, Qatar and many other countries. Abu Dhabi and Oman chose to keep foreign shareholders as minority partners, but newly-established Abu Dhabi National Oil Company (ADNOC) took 60%. In 1979 ADPC handed over operations to the Abu Dhabi Company for Onshore Oil Operations (ADCO) – ADPC’s role was reduced to that of Concession holder with responsibilities, such as providing personnel and technical assistance to ADCO, as per the concession agreement.
The IPC rapidly shrank to a shadow of its former self, sending into retirement or dispersing among the group companies most of its geophysicists, geologists, engineers, finance experts and support staff.
The UAE oil industry has flourished over the last 35 years as nationals have taken on ever greater responsibilities and now occupy all the leading positions. The original ADPC shareholders have played a significant part in this success story. In a world where one cannot live in isolation it is anticipated that the major oil companies will continue to play a significant role in Abu Dhabi’s oil industry.
In the (adapted) words of Longrigg at the end of his history of the Iraq Petroleum Company: “What destinies the next years will bring to the Abu Dhabi oil industry is known only to Allah—who will justify, one must be confident, his supreme titles of The compassionate, The Merciful.”
*David Heard is author of “From Pearls to Oil: How the oil industry came to the United Arab Emirates,” Published by Motivate Publishing in Dubai and based on Company archives. www.booksarabia.com