D'Arcy Concession

When he emigrated to Australia, he took a chance by organizing a syndicate to reopen and restore an Australian gold mine to operation.

D'Arcy agreed and sent out representatives to Tehran to win a concession that would give him the exclusive rights to prospect for oil in Persia.

On 16 April 1901 negotiations commenced between D'Arcy's representatives and Shah Mozzafar al-Din over the potential oil concession.

Russia wanted to expand its influence into Persia, and Britain believed that this would be a direct threat towards its precious Indian possessions.

[6] As a result, the British government and its officials in Persia gave full political support to D'Arcy and his potential oil concession.

This 18 point concession would give D'Arcy the exclusive rights to prospect, explore, exploit, transport and sell natural gas, petroleum, asphalt and mineral waxes in Persia.

[9] This covered three quarters of the country and D'Arcy purposely excluded the five most northerly provinces from the concession because of their proximity to Russia.

In return, the Shah received £20,000 cash, another £20,000 worth of shares, and 16 percent of annual net profits, from the operating companies of the concession.

[7] Between the Government of His Imperial Majesty the Shah of Persia, of the one part, and William Knox D'Arcy, of independent means, residing in London at No.

The Government of His Imperial Majesty the Shah grants to the concessionnaire by these presents a special and exclusive privilege to search for, obtain, exploit, develop, render suitable for trade, carry away and sell natural gas petroleum, asphalt and ozokerite throughout the whole extent of the Persian Empire for a term of sixty years as from the date of these presents.

This privilege shall comprise the exclusive right of laying the pipelines necessary from the deposits where there may be found one or several of the said products up to the Persian Gulf, as also the necessary distributing branches.

As three petroleum mines situate at Schouster, Kassre-Chirine, in the Province of Kermanschah, and Daleki, near Bouchir, are at present let to private persons and produce an annual revenue of two thousand tomans for the benefit of the Government, it has been agreed that the three aforesaid mines shall be comprised in the Deed of Concession in conformity with Article 1, on condition that, over and above the 16 per cent mentioned in Article 10, the concessionnaire shall pay every year the fixed sum of 2,000 (two thousand) tomans to the Imperial Government.

Notwithstanding what is above set forth, the privilege granted by these presents shall not extend to the provinces of Azerbadjan, Ghilan, Mazendaran, Asdrabad, and Khorassan, but on the express condition that the Persian Imperial Government shall not grant to any other person the right of constructing a pipe-line to the southern rivers or to the South coast of Persia.

The concessionnaire shall immediately send out to Persia and at his own cost one or several experts with a view to their exploring the region in which there exist, as he believes, the said products, and in the event of the report of the expert being in the opinion of the concessionnaire of a satisfactory nature, the latter shall immediately send to Persia and at his own cost all the technical staff necessary, with the working plant and machinery required for boring and sinking wells and ascertaining the value of the property.

The concessionnaire shall pay the Commissioner thus appointed an annual sum of 1,000 sterling for his services as from the date of the formation of the first company.

The workmen employed in the service of the company shall be subject to His Imperial Majesty the Shah, except the technical staff, such as the managers, engineers, borers and foremen.

The assembled team would carry out the daily operations in Persia for D'Arcy, as he would never set foot on Persian soil.

This first site at Chiah Surkh had hostile terrain, warring tribes that often refused to recognize the Shah's authority and any concessions he granted, very few roads for transportation, and was nearly three hundred miles away from the Persian Gulf.

[12] Local religion also played a factor as the dominating Shia sect in this region also resisted political authority and had a hostile attitude towards the outside world, including Christians and Sunni Muslims.

The working conditions were rough, as temperatures reached as high as 120 degrees Fahrenheit, equipment often broke down, there were shortages of food and water, and there was an abundance of insects that often bothered the workers.

After being advised by Thomas Boverton Redwood, who was very knowledgeable on international oil developments, D'Arcy tried applying for a loan from the British Admiralty.

To make matters worse, shortly after they struck oil, the well at Chiah Surkh began to run out and turn into a trickle.

One way they did this was using a British spy named Sidney Reilly who allegedly disguised himself as a priest, and convinced D'Arcy to sell the majority of his concession to a "good 'Christian' enterprise.

[22] Just as the letter was making its way to Reynolds, at 4:00 am on 26 May 1908, people at the site woke up to shouting, as a fifty-foot gusher of petroleum shot up the drilling rig.

[26] And in 1951 the D’Arcy Concession was cancelled for good, and Iranian oil was nationalized for reasons that are not debated by historians.

According to J. H. Bamberg, in his book The History of the British Petroleum Company, Volume 2: The Anglo-Iranian Years, Reza Shah's cancellation of the D’Arcy concession in 1932 and the negotiation of a new concession in 1933 resulted from the global economic depression of the 1930s that brought a decline in D’Arcy oil demand, profits, and royalty payments to Iran.

1, published in 1995 by Taylor & Francis Ltd, Bamberg's excuse that “economic fluctuations… resulted in concessionary instability” was a way of diverting responsibility and attention away from the Anglo-Persian Oil Company business practices, British fiscal policy, and the broader Iranian attitude towards the company, and pin the blame on something the company had no control over; and it most certainly doesn't explain the nationalization crisis of 1951 that saw Iranian oil nationalized, because profits peaked in 1950, and dividends had remained constantly high from 1946 up to the point of nationalization in 1951.

[26] Iran’s inability to gain full access to the Company’s books robbed the Iranian government of any possibility of either confirming or dispelling its suspicions concerning the methods by which profits and royalties were calculated,” which further inflamed relations between the two bodies.

[26] This argument of legality resurfaced again in the late 1940s, but were based on the fact that the 1933 renegotiated concession was granted in an unconstitutional manner.

In 1951 it was renegotiated and after a grace period the concession ended in 1958 with the assets at Naft Khana becoming property of the government of Iraq.