D'Arcy Concession facts for kids
The D'Arcy Concession was an important agreement signed in 1901. It was a deal about petroleum oil between a man named William Knox D'Arcy and Mozzafar al-Din, who was the Shah (king) of Persia (now called Iran). This oil deal gave D'Arcy the special right to look for oil all over Persia.
D'Arcy and his team faced many money problems while searching for oil. They almost gave up because it was so expensive and they weren't finding enough oil to sell. But in 1908, they finally found huge amounts of oil! Because of this big discovery, the Burmah Oil Company created the Anglo-Persian Oil Company in 1909 to take over the oil deal.
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Who Was William Knox D'Arcy?
William Knox D'Arcy was born in Devon, England in 1849. He moved to Australia and took a big risk. He helped organize a group to reopen an old gold mine in Australia. It turned out the mine still had lots of gold!
D'Arcy became very rich from this gold. He then returned to England looking for a new adventure and investment. This new chance led him to search for oil in Persia. This oil search later became known as the D'Arcy Concession.
Why Was Persia Important for Oil?
In the 1890s, many reports suggested that Persia had a lot of oil. Some of D'Arcy's advisors told him about these reports. They promised him great wealth if he invested in finding this oil.
D'Arcy agreed and sent people to Tehran, the capital of Persia. Their goal was to get a special agreement. This agreement would give him the only rights to look for oil in Persia. Talks between D'Arcy's team and Shah Mozzafar al-Din began on April 16, 1901.
The Big Oil Deal Is Signed
The extra money helped convince the Shah to sign the agreement. On May 28, 1901, Shah Mozzafar al-Din signed the 18-point deal. This happened at the Sahebqaraniyyeh Palace in Tehran.
This deal gave D'Arcy the special right to find, use, transport, and sell natural gas, petroleum, and other similar products in Persia. These rights were for 60 years. The area covered was huge, about three-quarters of the country! D'Arcy purposely left out the five northern provinces. This was because they were too close to Russia.
In return for these rights, the Shah received £20,000 in cash. He also got £20,000 worth of shares in the company. Plus, he would get 16 percent of the yearly profits from the oil operations.
What the Oil Deal Said
The D'Arcy Concession was a long document. Here are some of the main points:
- Article 1: D'Arcy got the special right to search for, get, and sell oil and gas across the Persian Empire for 60 years.
- Article 2: He also got the right to build pipelines to carry the oil to the Persian Gulf. He could also build wells, storage tanks, and other necessary buildings.
- Article 3: The Persian government gave D'Arcy free use of unused state lands for his work. If he needed cultivated land, he had to buy it fairly.
- Article 6: The deal did not cover the northern provinces of Persia. But the Persian government promised not to give similar oil rights to anyone else in the south.
- Article 7: All lands, products, and equipment for the oil work would be free of taxes and customs duties.
- Article 9: D'Arcy could create companies to help him with the oil work. These companies would have the same rights and duties as him.
- Article 10: The first company formed had to pay the Persian government £20,000 cash and £20,000 in company shares. It also had to pay 16 percent of its yearly net profits.
- Article 15: When the 60-year deal ended, all buildings and equipment used for the oil work would become the property of the Persian government.
- Article 16: If D'Arcy didn't set up the first company within two years, the deal would become void.
- Article 17: Any disagreements about the deal would be settled by two arbitrators. Their decision would be final.
Starting the Oil Search
After getting the oil deal, D'Arcy put together a team. This team would do the daily work in Persia. D'Arcy himself never went to Persia. He hired Alfred T. Marriot to help secure the deal. Dr. M. Y. Young became the company's doctor in Persia. George Bernard Reynolds was hired for drilling because he had experience in other countries.
The first place they chose to look for oil was Chiah Surkh. This area was near what is now the Iran-Iraq border.
The work was very hard for D'Arcy's team. The land at Chiah Surkh was rough. There were also local tribes who sometimes didn't respect the Shah's authority. There were very few roads, and the site was far from the Persian Gulf. Shipping equipment was very difficult. It often had to be carried by people and mules over mountains.
Drilling for Oil Begins
Actual drilling didn't start until late 1902. Working conditions were tough. Temperatures could reach 120 degrees Fahrenheit. Equipment often broke down. There were shortages of food and water. Lots of insects bothered the workers.
By 1903, D'Arcy started to worry. Very little oil had been found, and he was running out of money. He had already spent £160,000 and needed much more. It became clear D'Arcy needed more money, either through loans or by selling part of his deal.
Finding More Money
D'Arcy tried to get a loan from the British Admiralty (the part of the British government in charge of the navy). At this time, oil wasn't seen as super important yet, so the loan was denied.
Then, in early 1904, one of the wells at Chiah Surkh started producing a small amount of oil, about 200 gallons a day. But D'Arcy still needed a lot more money to keep going. He looked for investors everywhere, even in France, but didn't have much luck. To make things worse, the small oil well at Chiah Surkh soon started to dry up.
The British Government Steps In
Back in London, the British Admiralty started to worry. They feared D'Arcy would sell his oil deal to other countries, like France or Russia. This would give those countries too much power in Persia.
So, the British Admiralty decided to help D'Arcy find an investor. They wanted to keep the oil deal under British control. They were successful. With help, they made a deal with a company called Burmah Oil. In 1905, D'Arcy and Burmah Oil agreed to form a new group called the Concession Syndicate, which was later renamed the Anglo Persian Oil Company.
A New Drilling Spot
With new money from Burmah Oil, the search for oil continued. The focus moved to southwestern Persia. The old drilling site at Chiah Surkh was closed. All the equipment was moved to the new site at Masjid-i-Suleiman.
Again, Reynolds faced problems with local tribes. He often had to pay them and promise them a share of profits to protect the oil work. Sickness also slowed things down. Reynolds himself got very ill from bad drinking water.
By 1907, with no major oil finds, D'Arcy became worried again. He decided to sell most of his shares to Burmah Oil for a large sum of money. This meant Burmah Oil now owned most of D'Arcy's interest in the oil company.
A Huge Discovery!
Burmah Oil was also getting impatient. They had spent a lot of money, and it was now 1908 with no big oil discoveries. It seemed like the project was about to end. Burmah Oil even sent a letter to Reynolds telling him to slow down and pack up the equipment.
But just as the letter was on its way, something amazing happened! At 4:00 am on May 26, 1908, people at the site woke up to shouting. A fifty-foot high stream of oil shot up from the drilling rig! Finally, huge amounts of oil had been found at Masjid-i-Suleiman.
The Anglo-Persian Oil Company Is Born
After the big oil discovery, Burmah Oil decided they needed a new company structure. This led to the creation of the Anglo-Persian Oil Company in 1909. Burmah Oil made it a public company, selling shares to others. Burmah Oil kept control by owning most of the shares. William Knox D'Arcy was paid for his exploration costs and became a director of the new company.
Ending the D'Arcy Oil Deal
The D'Arcy Oil Concession was officially ended on November 27, 1932. It was then renegotiated in 1933 by Reza Shah, the ruler of Iran. Historians debate the exact reasons for this first cancellation and renegotiation.
However, in 1951, the D'Arcy Concession was cancelled for good. Iranian oil was then taken over by the Iranian government, a process called nationalization. The reasons for this 1951 nationalization are not debated by historians.
One reason for the 1932-33 cancellation was that Iran felt it wasn't getting enough say in the Anglo-Persian Oil Company. Reza Shah wanted more Iranians in important jobs. Before the renegotiation, most workers were Iranian, but very few Iranians held senior positions.
A major issue was how the company calculated its profits. The D'Arcy Concession said Iran should get 16 percent of the company's net profits. But the Anglo-Persian Oil Company didn't include profits from its smaller companies. Iran believed it deserved a share of these profits too. The company invested millions of pounds from Iranian oil sales into expanding its business around the world.
The Anglo-Persian Oil Company also sold oil to the British Navy at very low prices. They didn't show Iran all their financial records. This made it hard for Iran to know the company's true profits. This lack of transparency made relations worse.
British tax policies also caused problems. The company paid more in taxes to Britain than it paid in royalties to Iran. For example, in 1950, the company paid over £36 million to Britain, but only about £16 million to Iran.
Finally, the 1951 nationalization of Iranian oil wasn't just about money. After World War I, many Iranians questioned if the oil deal was even legal. They argued it was made by a government that was no longer in power. They also said it was signed before Iran had a proper representative government. This argument came up again in the late 1940s. It was revealed that the 1933 renegotiated deal was signed under pressure.
Images for kids
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A young William Knox D'Arcy around the 1890s.
