Rise and fall of the Iraq Petroleum Company

The Iraq Petroleum Corporation was a consortium of Western major oil companies which held a monopoly on all Iraqi production from the start of the industry until 1962, and continued to dominate production until nationalisation in the early 1970s.

Foundation
The company was founded in 1912 as the Turkish Petroleum Company (TPC), so called because although it was formed to prospect for oil inside Iraq, Iraq was then a province of the Ottoman Turkish empire. The largest shareholder in the company was the Anglo-Persian Oil Company, an antecedent of the today's BP, at the time controlled directly by the British government. Other major shareholders on its creation were Shell and Armenian oil magnate Calouste Gulbenkian, who owned 5% of the shares.

The company received a concession from the Ottoman authorities but then the First World War broke out, ceasing all exploration activity. It would be 15 years before any oil at all was discovered in Iraq but that did not prevent IPC from being the subject of fierce political battles. The Allies realised the importance of oil during the world war. The status and ownership of the company was a prominent issue at the San Remo Conference of 1920 which discussed the fate of non-Turkish parts of the Ottoman Empire.

Discovery of oil
In 1925 the British government, now ruling Iraq as a direct mandate after the collapse of the Ottoman Empire, granted a fresh concession to the TPC. According to Rex Zedalis of the University of Tulsa, the modern history of oil and gas in Iraq begins with this agreement. This concession covered the whole of the Mosul and Baghdad provinces, constituting most of Iraq but excluding the southern Basra province. At the time the shareholders in the TPC were the Anglo-Persian Oil Company with 45 percent, Royal Dutch-Shell with 22.5 percent, the Compagnie Francaise des Petroles with 25 percent, and Calouste Gulbekian with 5 percent. Subsequently in 1927 oil was struck at Baba Gurgur, just outside Kirkuk, transforming Iraq into one of the most valuable concessionary areas in the world. By the end of 1930 twenty producing wells had been completed.

In July 1928 the Americans, under the Near East Development Corporation, were allowed into the concession by taking some of Anglo-Persian's share to hold a 23.75% stake, and in 1929 the TPC reorganised itself as the Iraq Petroleum Company (IPC).

According to John Blair's book 'Control of Oil', the US and UK-based companies in the TPC consortium deliberately held down production in their Iraq concessions in order to maximise their worldwide profits, during an era in which the Great Depression had resulted in a global glut of oil and low prices. These delaying tactics were employed in drilling and development activities, as well as negotiations over pipelines and export routes. Although the 1925 concession covered most of Iraq, the IPC limited its production to fields constituting only one-half of 1 percent of the country's total area. By 1950 the only field being developed was Kirkuk and commercial production in substantial quantities did not begin until this year, eighteen years after the first exploration of the area.

In 1960, the same year in which the Organisation of Petroleum Exporting Countries (OPEC) was established in Baghdad, the Iraqi government revoked the IPC's concession for 99 percent of Iraqi territory, limiting their concession area to plots in operation at the time.

Creation of the Iraq National Oil Company
The Iraq National Oil Company (INOC) was created in 1964, leaving the country in the unusual situation of having two production tracks which were in competition with each other. IPC and its subsidiaries the Mosul Petroleum Company and the Basra Petroleum Company were still responsible for the vast majority of Iraqi production, which by the 1960s was reaching 1 million barrels per day. Therefore in the late 1960s, Iraq signed a series of deals with other foreign companies, notably Entreprise des Recherches et des Activites Petrolieres (ERAP) for offshore areas in southern Iraq, and the Soviet Union under the Iraq-Soviet pact of 1967 which eventually led to the development of the Rumaila field.

Meanwhile relations between the government and the IPC continued to deteriorate. When Syria raised transit fees on the Banias pipeline in 1966, IPC refused to pay, the Syrians closed the pipeline and the Iraqi government lost a lot of revenue. When the Suez Canal was closed as a result of the 1967 Middle East War, the government demanded a premium on oil arriving directly at the Mediterranean by pipeline that was comparable to rates paid to Libya. IPC refused, responding that Iraqi oil was a heavier grade and more expensive to process. IPC continued to control the core of Iraqi production but the government maintained its power by at one stage increasing transit fees through Basra port overnight by 1200%. In 1970 the IPC was fully nationalised.

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