D'Arcy Concession
Encyclopedia
The D'Arcy Concession was a petroleum
oil concession
that was signed in 1901 between William Knox D'Arcy
and Shah Mozzafar al-Din of Persia. The oil concession gave D’Arcy the exclusive rights to prospect for oil in Persia (What is now mostly present day Iran
). During this exploration for oil, D’Arcy and his team encountered financial troubles and struggled to find sellable amounts of oil. They were about to give up but eventually struck large commercial quantities of oil in 1908. After these large commercial quantities of oil were found, the Anglo-Persian Oil Company
took over the concession in 1909.
, England
in 1849. D’Arcy was always willing to take a chance when it came to business ventures. When he emigrated to Australia
, he took a chance by organizing a syndicate
to reopen and get an Australian gold mine back into operation. It turned out that this gold mine still had a lot of gold
yet to be found. From this, D’Arcy became a very wealthy man and he returned to England looking for a new investment and to take another chance. This investment and chance would eventually be to prospect for oil in Persia and the venture later became known as the D’Arcy Concession.
to win a concession that would give him the exclusive rights to prospect for oil in Persia. On April 16, 1901, negotiations commenced between D’Arcy’s representatives and Shah Mozzafar al-Din over the potential oil concession.
and Russia
had a great rivalry over the influence each wanted inside Persia. Both imperial powers believed that Persia and the Middle East
were important to their imperial economic and military interests. Russia wanted to expand its influence into Persia and Britain believed that this would be a direct threat towards its precious India
n possessions. These two countries fought for influence in Persia through numerous concessions and loans throughout the 19th century. Many British government officials believed that this was where the D’Arcy concession could help. A British oil concession would help tip the balance of power in Persia in Britain's favour. As a result, the British government and its officials in Persia gave full political support to D’Arcy and his potential oil concession. Once the Russians found out about the negotiations between D’Arcy and the Shah, the Russian prime minister tried to block the impending negotiations. The Russian prime minister was able to slow the pace of the agreement until D’Arcy’s representative in Tehran offered the Shah an extra £5,000 to close the agreement.
, petroleum
, asphalt
and mineral waxes in Persia. This concession also granted D’Arcy these rights for a 60 year period and it covered an area of 1,242,000 square kilometers. 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.
border.
The task for D’Arcy and his team would prove to be very difficult. 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
. The local population near the site also had a hostile culture towards Western ideas, technology and presence. 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 Christian
s and Sunni Moslems. Not only was the region and terrain hostile, but shipping each piece of equipment to the drilling sites was also extremely difficult. The equipment often had to be carried by man and mule
through mountainous terrain.
s that often bothered the workers. In 1903 D’Arcy began to worry as very little oil had been found and he began to run out of money. Expenses continued to mount as he already spent £160,000 and needed at least another £120,000. It became evident that D’Arcy would either need more funding through loans or he would need to be bought out.
for foreign investors, without much success. To make matters worse, shortly after they struck oil, the well at Chiah Surkh began to run out and turn into a trickle.
, the British Admiralty began to reconsider and feared that if they did not intervene, then D’Arcy would sell out his concession to other foreign investors or lose the concession altogether. They feared that the French or the Russians would take over the concession and then have a major influence in Persia. The British Admiralty decided to intervene and try to play matchmaker and find an investor to help out D’Arcy and keep the concession under British control. They were successful and with the help of Redwood they were able to strike a deal with the firm called Burmah Oil. D’Arcy and Burmah Oil made the deal in London in 1905 that made an agreement establishing the Concession Syndicate.
.
In 1907, without any major findings of oil, D’Arcy once again became anxious. He decided to sell off the majority of his shares to Burmah Oil for £203,067 cash and £900,000 in shares. This meant Burmah acquired the majority of D’Arcy’s interests in the exploitation company.
. At last, commercial quantities of oil had been struck at the Masjid-i-Suleiman site.
(APOC) and Burmah Oil made it a publicly traded company, by selling shares off to the public in 1909. At this time Burmah Oil maintained control and the majority of the ordinary shares. For William Knox D’Arcy, he was compensated for his exploration costs and became a director of the new company, but his role quickly faded out of the concession and he died in 1917. Regardless, APOC became one of the most powerful oil companies in the world with the largest oil refinery
in the world and became an asset to British Imperial interests
for the next 50 years.
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
oil concession
Concession (contract)
A concession is a business operated under a contract or license associated with a degree of exclusivity in business within a certain geographical area. For example, sports arenas or public parks may have concession stands. Many department stores contain numerous concessions operated by other...
that was signed in 1901 between William Knox D'Arcy
William Knox D'Arcy
William Knox D'Arcy was one of the principal founders of the oil and petrochemical industry in Persia .-Early life:...
and Shah Mozzafar al-Din of Persia. The oil concession gave D’Arcy the exclusive rights to prospect for oil in Persia (What is now mostly present day Iran
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
). During this exploration for oil, D’Arcy and his team encountered financial troubles and struggled to find sellable amounts of oil. They were about to give up but eventually struck large commercial quantities of oil in 1908. After these large commercial quantities of oil were found, the Anglo-Persian Oil Company
Anglo-Persian Oil Company
The Anglo-Persian Oil Company was founded in 1908 following the discovery of a large oil field in Masjed Soleiman, Iran. It was the first company to extract petroleum from the Middle East...
took over the concession in 1909.
William Knox D’Arcy
William Knox D’Arcy was born in DevonDevon
Devon is a large county in southwestern England. The county is sometimes referred to as Devonshire, although the term is rarely used inside the county itself as the county has never been officially "shired", it often indicates a traditional or historical context.The county shares borders with...
, England
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
in 1849. D’Arcy was always willing to take a chance when it came to business ventures. When he emigrated to Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
, he took a chance by organizing a syndicate
Syndicate
A syndicate is a self-organizing group of individuals, companies or entities formed to transact some specific business, or to promote a common interest or in the case of criminals, to engage in organized crime...
to reopen and get an Australian gold mine back into operation. It turned out that this gold mine still had a lot of gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
yet to be found. From this, D’Arcy became a very wealthy man and he returned to England looking for a new investment and to take another chance. This investment and chance would eventually be to prospect for oil in Persia and the venture later became known as the D’Arcy Concession.
Oil potential in Persia
During the 1890s, research and reports were being published that Persia had great oil potential. Some of D’Arcy’s advisers made D’Arcy aware of these reports and promised him wealth if he invested in this venture. D’Arcy agreed and sent out representatives to TehranTehran
Tehran , sometimes spelled Teheran, is the capital of Iran and Tehran Province. With an estimated population of 8,429,807; it is also Iran's largest urban area and city, one of the largest cities in Western Asia, and is the world's 19th largest city.In the 20th century, Tehran was subject to...
to win a concession that would give him the exclusive rights to prospect for oil in Persia. On April 16, 1901, negotiations commenced between D’Arcy’s representatives and Shah Mozzafar al-Din over the potential oil concession.
The rivalry of Britain and Russia over influence in Persia
During this time period Great BritainGreat Britain
Great Britain or Britain is an island situated to the northwest of Continental Europe. It is the ninth largest island in the world, and the largest European island, as well as the largest of the British Isles...
and Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
had a great rivalry over the influence each wanted inside Persia. Both imperial powers believed that Persia and the Middle East
Middle East
The Middle East is a region that encompasses Western Asia and Northern Africa. It is often used as a synonym for Near East, in opposition to Far East...
were important to their imperial economic and military interests. Russia wanted to expand its influence into Persia and Britain believed that this would be a direct threat towards its precious India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
n possessions. These two countries fought for influence in Persia through numerous concessions and loans throughout the 19th century. Many British government officials believed that this was where the D’Arcy concession could help. A British oil concession would help tip the balance of power in Persia in Britain's favour. As a result, the British government and its officials in Persia gave full political support to D’Arcy and his potential oil concession. Once the Russians found out about the negotiations between D’Arcy and the Shah, the Russian prime minister tried to block the impending negotiations. The Russian prime minister was able to slow the pace of the agreement until D’Arcy’s representative in Tehran offered the Shah an extra £5,000 to close the agreement.
The oil concession
The extra £5,000 worked and influenced the Shah to sign the concession. At Tehran’s Sahebqaraniyyeh Palace on May 28, 1901, Shah Mozzafar al-Din signed the 18 point concession. This 18 point concession would give D’Arcy the exclusive rights to prospect, explore, exploit, transport and sell natural gasNatural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
, petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
, asphalt
Asphalt
Asphalt or , also known as bitumen, is a sticky, black and highly viscous liquid or semi-solid that is present in most crude petroleums and in some natural deposits, it is a substance classed as a pitch...
and mineral waxes in Persia. This concession also granted D’Arcy these rights for a 60 year period and it covered an area of 1,242,000 square kilometers. 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.
Early business
Once D’Arcy was granted the oil concession, his first order of business was to assemble a team to carry out the exploration for oil. The assembled team would carry out the daily operations in Persia for D’Arcy, as he would never set foot on Persian soil. D’Arcy hired Alfred T. Marriot to secure the concession and Dr. M. Y. Young to be the company’s medical officer in Persia. George Reynolds was hired for the exploration because of his previous drilling experience. The first area chosen to explore for oil was Chiah Surkh, which is located near what is today’s Iran-IraqIraq
Iraq ; officially the Republic of Iraq is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert....
border.
The task for D’Arcy and his team would prove to be very difficult. 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
Persian Gulf
The Persian Gulf, in Southwest Asia, is an extension of the Indian Ocean located between Iran and the Arabian Peninsula.The Persian Gulf was the focus of the 1980–1988 Iran-Iraq War, in which each side attacked the other's oil tankers...
. The local population near the site also had a hostile culture towards Western ideas, technology and presence. 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 Christian
Christian
A Christian is a person who adheres to Christianity, an Abrahamic, monotheistic religion based on the life and teachings of Jesus of Nazareth as recorded in the Canonical gospels and the letters of the New Testament...
s and Sunni Moslems. Not only was the region and terrain hostile, but shipping each piece of equipment to the drilling sites was also extremely difficult. The equipment often had to be carried by man and mule
Mule
A mule is the offspring of a male donkey and a female horse. Horses and donkeys are different species, with different numbers of chromosomes. Of the two F1 hybrids between these two species, a mule is easier to obtain than a hinny...
through mountainous terrain.
Drilling for oil
The actual drilling did not begin until the end of 1902. 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 insectInsect
Insects are a class of living creatures within the arthropods that have a chitinous exoskeleton, a three-part body , three pairs of jointed legs, compound eyes, and two antennae...
s that often bothered the workers. In 1903 D’Arcy began to worry as very little oil had been found and he began to run out of money. Expenses continued to mount as he already spent £160,000 and needed at least another £120,000. It became evident that D’Arcy would either need more funding through loans or he would need to be bought out.
Search for funding
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. At this time, before oil was considered a critical resource, the loan was ultimately denied. Shortly after D’Arcy’s loan was denied, one of the wells at Chiah Surkh, in early 1904, became a producer. The output of oil was small, as the well only produced about 200 gallons per day. With or without this well being turned into a producer, D’Arcy still needed money to continue his venture. D’Arcy became busy looking around for investors and he even began to search in FranceFrance
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
for foreign investors, without much success. To make matters worse, shortly after they struck oil, the well at Chiah Surkh began to run out and turn into a trickle.
The Admiralty intervenes
Back in LondonLondon
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, the British Admiralty began to reconsider and feared that if they did not intervene, then D’Arcy would sell out his concession to other foreign investors or lose the concession altogether. They feared that the French or the Russians would take over the concession and then have a major influence in Persia. The British Admiralty decided to intervene and try to play matchmaker and find an investor to help out D’Arcy and keep the concession under British control. They were successful and with the help of Redwood they were able to strike a deal with the firm called Burmah Oil. D’Arcy and Burmah Oil made the deal in London in 1905 that made an agreement establishing the Concession Syndicate.
New drilling site
With new capital being provided by the agreement with Burmah Oil, the exploration was able to continue. The focus for drilling now shifted towards southwestern Persia. The drilling site was closed at Chiah Surkh and the equipment was shipped to the southwest of Persia. The new drilling site was established at Masjid-i-Suleiman. Once again Reynolds encountered problems in this region with hostile tribes and the local population. Reynolds often had to pay them a high fee and guarantee them a share of profits in order to protect the concession. Disease also slowed down production and even Reynolds became very ill from contaminated drinking waterDrinking water
Drinking water or potable water is water pure enough to be consumed or used with low risk of immediate or long term harm. In most developed countries, the water supplied to households, commerce and industry is all of drinking water standard, even though only a very small proportion is actually...
.
In 1907, without any major findings of oil, D’Arcy once again became anxious. He decided to sell off the majority of his shares to Burmah Oil for £203,067 cash and £900,000 in shares. This meant Burmah acquired the majority of D’Arcy’s interests in the exploitation company.
Major discovery
After mounting expenditure, continuous funding from Burmah Oil and very few results, Burmah also began to grow impatient. It was now 1908 and no commercial quantities of oil had been found and it began to seem as if the beginning of the end was near. Burmah Oil sent a letter to Reynolds telling him to slow down production and pack up the equipment because the project was nearly over. Just as the letter was making its way to Reynolds, at 4:00 am on May 26, 1908, people at the site woke up to shouting, as a fifty foot gusher of petroleum shot up the drilling rigDrilling rig
A drilling rig is a machine which creates holes or shafts in the ground. Drilling rigs can be massive structures housing equipment used to drill water wells, oil wells, or natural gas extraction wells, or they can be small enough to be moved manually by one person...
. At last, commercial quantities of oil had been struck at the Masjid-i-Suleiman site.
Creation of Anglo-Persian
In 1909, shortly after the commercial quantities of oil were found, Burmah Oil thought that a new corporate structure needed to be created in order to work the concession. This led to the creation of the Anglo-Persian Oil CompanyAnglo-Persian Oil Company
The Anglo-Persian Oil Company was founded in 1908 following the discovery of a large oil field in Masjed Soleiman, Iran. It was the first company to extract petroleum from the Middle East...
(APOC) and Burmah Oil made it a publicly traded company, by selling shares off to the public in 1909. At this time Burmah Oil maintained control and the majority of the ordinary shares. For William Knox D’Arcy, he was compensated for his exploration costs and became a director of the new company, but his role quickly faded out of the concession and he died in 1917. Regardless, APOC became one of the most powerful oil companies in the world with the largest oil refinery
Oil refinery
An oil refinery or petroleum refinery is an industrial process plant where crude oil is processed and refined into more useful petroleum products, such as gasoline, diesel fuel, asphalt base, heating oil, kerosene, and liquefied petroleum gas...
in the world and became an asset to British Imperial interests
British Empire
The British Empire comprised the dominions, colonies, protectorates, mandates and other territories ruled or administered by the United Kingdom. It originated with the overseas colonies and trading posts established by England in the late 16th and early 17th centuries. At its height, it was the...
for the next 50 years.