Forming A Consortium
William Fraser’s Statement To AIOC Stockholders

Arash Norouzi
The Mossadegh Project
| July 13, 2018                                                     


The Spectator (UK) | May 21, 1954 Prior to their annual meeting, Anglo-Iranian Oil Company chairman William Fraser wrote a statement to shareholders on the financial condition of AIOC holdings and the formation of negotiations with Iran for a Consortium.

The undated statement was then condensed into a press release and published in petroleum and shipping trade publications, The Economist, The Spectator, and Australian and Canadian newspapers in late May to early June 1954. Though it was actually an advertisement, few of the publications in question labeled it as such. Some, like The Economist, ran a much longer version.

Relations between Iran and Britain had been restored in December 1953, leading up to serious negotiations in April. By August, the Consortium agreement was finalized, and it was ratified and enacted in October. The AIOC subsequently rechristened itself as British Petroleum (BP).




COMPANY MEETING
ANGLO-IRANIAN OIL COMPANY
FORMATION OF CONSORTIUM TO NEGOTIATE SETTLEMENT OF IRANIAN DISPUTE
Total Sales in 1953 Increased by 14% to 37,000,000 Tons

SIR WILLIAM FRASER’S STATEMENT


THE 45th annual general meeting of the Anglo-Iranian Oil Company, Ltd. will be held on June 10 in London, England.

The following is an extract from the statement to stockholders by the Chairman, Sir William Fraser, C.B.E., LL.D., circulated with the report and accounts:


Consolidated trading profit and other income for 1953 was £43,827,585 after provision of £20,056,243 for depreciation. The gross consolidated profit thus totalled £63,883,828, comparing with £61,260,584 for 1952, when depreciation and other write-offs totalling £14,198,946 were provided.

Total capital expenditure during 1953 was just under £75,000,000, financed by the proceeds of the debenture Issue in January, 1953, retained profits and reduction of net current assets. This capital expenditure included the following main items:—Aden Refinery, £26,500,000; Kent Refinery, £14,600.000; Kwinana (W. Australia) Refinery, £10,700,000; other U.K. Refineries, £4,300,000; Tankers, £8,500,000; Oil Exploration Interest, £4,500,000, and Marketing Interests; £4,000,000 — total of £73,100,000.

Capital expenditure in 1954 continues to be heavy, being of the order of £60,000,000.

After providing £19,342,232 for taxation on profits, the amount available for reserves and dividends is £24,382,850 compared with £25,165,966 for 1952. Your directors have placed £14,000,000 to general reserve and have recommended a final dividend on the ordinary stock of 25 per cent, and in addition a cash bonus of 2s. 6d. per £1 stock unit, both less income tax. The total distribution for the year approximates 7 per cent on the ordinary stock plus general reserve.

THE COMPANY’S INTERESTS IN IRAN.

The statement describes the latest events relating to the Company’s interests in Iran including the resumption of diplomatic relations between Her Majesty’s Government and the Iranian Government. Following inter-Government negotiations and inter-Company discussion of the problem restoring Iranian oil to the world market it has been agreed that the best chain of reaching a solution lies in the formation of a Consortium of Anglo-Iranian and seven other major oil companies concerned with the production and marketing of Middle East oil.

The Consortium of Companies would be as follows: Anglo-Iranian Oil Company, with a 40 per cent share: the five United States Companies, Standard Oil (New Jersey), Socony-Vacuum Company, Standard Oil of California: Gulf Oil, and Texas with interest aggregating 40 per cent; Royal Dutch-Shell with 14 per cent, and the Compagnie Française Pétroles with 6 per cent. The Consortium would not beestablished until there is agreement with the Iranian Government which is acceptable to all the companies participating.

At the invitation of the Iranian Government, a delegation of three negotiators left London for Tehran on 10th April. Mr. J. M. Pattison [former AIOC Managing Director, then 1 of 4 co-managing directors] and members of this and the other companies’ staffs have accompanied the delegation to Tehran.

Parallel with the negotiations between the Consortium delegation and Iranian Government, negotiations with regard to compensation to be paid the Anglo-Iranian Oil Company by the Iranian Government are being conducted by Her Majesty’s Ambassador, who arrived at Tehran in March. [Sir Roger Stevens, who left for Tehran on Feb. 17th, not in March] It had been agreed that this question, which the other members the Consortium are not directly concerned, should be dealt with separately.

The two sets of negotiations are in progress, and developments between now and the annual general meeting will be reported then.

PRODUCTION, EXPLORATION AND REFINING.

Crude oil production in Kuwait, Iraq, and Qatar again substantially increased during 1953, when our off-take from those sources totalled some 32,200,000 tons, compared with 25,600, tons in 1952. Our range exploration activities (excluding Australia, Papua, Canada, East and West Africa, Trinidad, Sicily, and the Persian Gulf) has been further extended.

In Papua, where our joint undertaking with Australian and American interests continues to progress, a test well at Omati has encountered an interesting show of high-pressure gas at 13,743 feet, this is believed to be the deepest so far drilled in the southern hemisphere. Another oil well is being drilled at Omati and the northern delta area at Kura, one of the most promising locations indicated by geological geophysical surveys, is to be test-drilled in the future.

In Australia, the Frome-Broken Hill Company, in which we are associated with Australian and American interests, has resumed its search for oil.

Our total refinery throughput during 1953, at 20,000,000 tons, was 2,000,000 tons greater than in 1952. With the new Aden refinery coming into commission this summer, and Kwinana (W. Australia) refinery early next year, as well as expected increases in capacity of some of our existing refineries, our total refining capacity by the end of next year should be some 30,000,000 tons. Parallel with this expansion in refining capacity our refining operations and the quality of products are being continuously improved by the installation of new plant, [sic] in a constant effort to achieve the most efficient and competitive production.

In Great Britain, our refinery throughput in 1933 was 9,327,000 tons against 6,788,000 tons in 1952.

In Australia, at Laverton (Melbourne) refinery throughput was 165,000 tons against 161,000 tons in 1952.

At Kwinana, in Western Australia, good progress is being made with the construction of our new 3,000,000 capacity refinery, which is expected to be in operation in the spring of 1955.

The statement details the company’s refinery operations in Belgium, France, Germany, Italy, Israel, Kuwait, and Aden.

World demand for petroleum products (excluding the Iron Curtain countiies) increased by about 5 per cent in 1953, a similar rate to that experienced in the preceding year. In the eastern hemisphere the increase in consumption was about 8 per cent, only fractionally less than in the preceding year.

1953 was our second full year without supplies from Iran. As reported last year, although the Anglo-Iranian group’s sales of over 32 million tons of crude oil and products in 1952 were 3 million tons below those for 1951, our position had been improving. This improvement continued, with the result that the group’s sales of crude oil and products in 1953 increased by 4½ million tons, or just over 14% compared with 1952, and totalled just under 37 million tons. This increase occurred mainly in crude oil sales; sales of refined products increased by rather over one million tons and were supplied to a greater extent from our own resources.

In Australia considerable further progress has been made with improving and expanding the distribution and marketing facilities of The Commonwealth Oil Refineries Ltd., a wholly owned Anglo-Iranian subsidiary since our purchase of the Australian Government’s share holding as reported last year. The company is thus enabled to share in the Commonwealth’s growing petroleum business, sales by COE during 1953 showing a very satisfactory increase.

Both in Australia and New Zealand we are still confronted with the problem, mentioned below, of economic supply because of our lack of refinery capacity East of Suez. Also the petroleum industry, particularly in Australia, suffers from a price control system which permits little or no allowance for the considerable increase internal costs, brought about by higher commodity prices and wages; the official cost of-living index in Australia showed an increase of over 50 per cent between 1949 and 1953, without any corresponding increase being recognised in petroleum distribution costs.


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Related links:

Iranian Oil Agreement | State Dept. press release (Oct. 28, 1954)

Sec. of State Dulles Advises British on AIOC Legalities (Jan. 26, 1953)

British Press Reactions To Iran Oil Deal (May 7, 1954)



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