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The Columbia University Libraries reserve the right to refuse to accept a copying order if, in its judgement, fulfillment of the order would involve violation of the copyright law. Author: U.S. Federal Trade Commission Title: Report of the Federal Trade Commission on Place: Washington, D.C. Date: 1923 MASTER NEGATIVE # COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD RESTRICTIONS ON USE: *^p^s^""wn^**"-^ W i» ; y» » , » . I . 1 ) ^^ — - ______._.-. "-ri.*- J CoJp.« n e&61 t-TAVW l*> TECHNICAL MICROFORM DATA FILM SIZE: 35mm REDUCTION RATIO: m^ IMAGE PLACEMENT: lA ^ IB IIB DATE FILMED: L~lo A'P INITIALS :_E^ TRACKING # : Msa oGs^y I FILMED BY PRESERVATION RESOURCES. BETHLEHEM, PA, > CO .>> A^' ^ ^. ^^. 0/> > O a m O O o CO X -< e nT*.^ /s- 3 3 > DD a) O o m CD CD do" ^ o o ^ cz N X M ^ o^ % >^ »^ ^1 a? ^•: e nO-. ^i^ <^1 »v v»* >^ O O 3 3 > en O 3 3 &5: <• f<^ V Sf^ f* & .-v^' > Ul i^^ a? 'STj, <#. O O 3 3 ^ V fe fc ^o ?cP fp ¥o> to O rrnnPEEl!!? IS IS m 00 c> 00 to o Ko In 1.0 mm 1.5 mm 2.0 mm ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdetghi|klmtx)pqrsluvwxy; 1234667890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghjjklmnopqrstuvwxyzl234567890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 2.5 mm ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 ^O fp ^is- m H O O ■o m -o > C CO I TJ ^ 7^ O 00 0(/) ; m o m << <^ ^o €p. i> ?.s FGH jklm HIJKLMN nnopqrst IJKLMN nopqrst OPQRST uvwxyzl OPQR uvwxy r^c N" in !:"-« r^c (TiX >vl-< OOM ^^ o CTiX OOM VD O M:" V-", M m Columbia (Bnittem'tp THE LIBRARIES GRADUATE SCIiOOL OF BUSINESS LIBRARY \V\ * I. I H, REPORT OF THE i FEDERAL TRADE COMMISSION ON *l FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY 1 I i FEBRUARY 12, 1923 WASHINGTON GOVERNMENT PRINTING OFFICE 1923 I i\ !;\ '*■% >l«-»|- h. 11 \%> 4/AA/^fJL^ *« # FEDERAL TRADE COMMISSION. I*- n ViCTOK MuRDOCK, Chttirvmn. John F. Nugent. Huston Thompson. Vernon W. Van Fleet. Nelson B. Gaskill. Otis B.Johnson, SecreUiry. ^' ADDITIONAL COPIES or THIS PUBUCATION MA.y BK PROCURFP FBOM THK SUPERINTKNDENT OF DOCUMENTS GOVERNMENT PRINTING OITICE WASHINGTON, D. C. AT 15 CENTS PER COPY PURCHASER AGREES NOT TO RESELL OK DISTRIBUTE THIS COPY FOR PROFIT.— PUB. RES. 67. APPROVED MAY 11, 1022 a ) CONTENTS. Page. Acknowledgment ^''^'^ Letter of submittal ^^ Summary. Origin and scope ^^ Royal Dutch Co xi Shell Transport & Trading Co. (Ltd.) xii Royal Dutch-Shell group *" Oil bunkering stations xiii Shell Union Oil Corporation ^m Union Oil Co. of California xiv Asiatic Petroleum Co xr Other foreign interests xv Discrimination a^inst American citizens XV British Empire xvii France and French possessions xviii The Netherlands xviii Mexico XX Russia and Russian Sakhalin xxi Other European countries xxi Central and South American countries xxii Asiatic countries xxii Protective measures xxii Chapter I. — Origin and Scope of the Report. Sec. 1. Resolution directing the inquiry 1 Sec. 2. Scope of the report 1 Sec. 3. Source of information 2 Chapter XL — The Royal Dutch-Shell Group. Sec. 1. The Royal Dutch Co '. 3 Organization and development 3 Financial statements 5 Income accounts 6 Dividends 7 Sec. 2. The Shell Transport & Trading Co. (Ltd.^ 8 Organization of the Shell Co 8 New affiliations 8 Financial statements 9 Income accounts 11 Dividends paid 11 Voting power 11 Sec. 3. The Royal Dutch-Shell group 11 Organization and development 11 Asiatic Petroleum Co 12 Policy of the group 12 Cooperating and affiliated companies 13 Foreign companies 14 Sec. 4. Outline of activities 14 Crude petroleum production 14 Proportion of world production 16 Petroleum refineries 17 Transportation and marketing 17 Sec. 5. Ix)cation of Royal Dutch production 17 Sec. 6. Oil-bunkering stations 19 III IV CONTENTS. Chaptep. III. — Consolidation op Royal Dutch-Shell Interests with Union Oil Co. (Delaware). Page. Sec. 1. Union Oil Co. (Delaware) 21 Preliminary proceedings 21 Union Oil Co. of California 21 Financial statements 22 Sec. 2. Merger with Royal Dutch-Shell interests 23 Preliminary procedure 23 Shell Union Oil Corporation 23 Financial details of the merger 24 Sec '^. Properties of Shell Union Oil Corporation 27 Acreage of oil lands 27 Crude petroleum production 28 Potroleum refineries and pipe lines 29 Marketing equipment 30 Sec . 4 . Stock ownership of Shell-Union and subsidiaries 30 Shell Union Oil Corporation 30 Foreign interests in Union of Delaware 31 Union Oil Co. of California 32 Dissolution of Union Oil Co. (Delaware) 32 Chapter IV. — Foreign Interests in the United States. Sec. 1 . Policy of the United States 33 Sec. 2. Other forei^ interests in the United States 34 Sec. ^. Recent activities of foreign interests 35 Pacific Oil C9 35 Associated Oil Co 36 Alleged activities of Royal Dutch-Shell 37 Se< 1 JVotective measures 37 Ckmeral leasing law 37 Union Oil Associates -^8 Curtis bill 38 Phelan bill 38 Chapter V. — Restrictive Policies and Administr.\tive Practices of For- eign Governments. Sec. 1 . Statement of the resolution 39 Sec. 2. Sources of information 39 Sec. 3. (leneral attitude of the principal foreign governments 39 Sec. 4 . British restrictions 42 The United Kingdom 42^ liritiah India. 42 The Federated Malay States 45 .\ustralia 45 Northern and Western A ustralia 45 Government activity in Papua 46 Queensland 46 Mandate of New Guinea 46 New Zealand 47 British Borneo 47 British North Borneo 47 J^runei 48 Sarawak - 48 Restrictions in Africa 48 Nigeria 48 Gold Coast Colony 48 T'nion of South Africa 49 British Fast Africa 49 T^ganda and Somaliland 49 Egypt 49 Mesopotamia and Palestine - -50 British Hondurap, British Guinea, and Jamaica 50 Canada and Newfoundland 50 Trinidad 51 Barbados 51 t^ .r ft...r X \ V\ °% Sec. 5. Sec. 6. '•' < Sec. 7. Sec. 8. Sec. 9. Sec. 10. Ser. 11. Sec. 12. CONTENTS. V Page. Restrictions in France and P'rench colonies 52 General policy 52 San Remo agreement 52 Restrictions in the Netherlands 53 Legal restrictions 53 The Djambi concession 54 Policy of the United States 55 Restrictions in Russia 56 Restrictions in other European countries 56 Poland. 56 Rumania 57 Italy - 57 Greece 57 Restrictions in Mexico 58 Excessive taxation 59 Petroleum rights in Federal zones 60 * ' Denouncements ' ' by third parties on American-owned property . 60 Dominican Republic 61 Restrictions in Central and South.America 61 Costa Rica 61 Guatemala 61 Ecuador 61 (Jolombia 61 Venezuela 61 ^ Peru 62 Bolivia 62 Argentina 62 Restrictions in Asiatic countries. . .". 62 Persia 62 China 63 Japan 63 Russian Saklialin 64 LIST OF TEXT TABLES. Table 1. Royal Dutch Co. statement of issued and outstanding common stock, 1890-1921 4 2. Balance sheets, of the Roval Dutch Co., for December 31. 1920 and 1921 1 5 Stock holdings of the Royal Dutch Co., 1920 and 1921 6 Income accounts of the Royal Dutch Co., 1920 and 1921 6 Rates of cash and stock dividends paid on common stock of the Roval Dutch (^o. and the Shell Transport & Trading Co. , (Ltd. ) 1902-1921 . 7 Statement of the authorized capital stock of the Shell Transport & Trading Co. (Ltd.), 1897-1921 9 Balance sheets of the Shell Transport & Trading Co. (Ltd.), Decem- ber 31, 1920 and 1921 9 Stock holdings of the Shell Transport & Trading Co. (Ltd.), 1919-1921. 10 Income accounts of the Shell Transport & Trading Co. (Ltd.), 1920-21 . 11 Petroleum production of the Royal Dutch-Shell group, in barrels, 1920-21 14 Petroleum production for the world, by countries, and the proportion controlled by the Royal Dutch-Shell group, in barrels, 1920 and 1921 16 Balance sheets, of the Union Oil Co. (Delaware), December 31, 1920 and 1921, and June 30, 1922 22 Balance sheet of the Shell Union Oil Corporation, January 2, 1922. . 24 Balance sheet of the Shell Union Oil Corporation, June 30, 1922. . . . 25 Gross assets of predecessor companies and of the Shell Union Oil . Corporation as of December 31, 1921, and of January 2 and June 30,1922 26 Total and proven acreage of predecessor companies December 31, 1921, and the Shell Union Oil Corporation, June 30, 1922, classi- fied by States 27 Crude petroleum production in barrels, of companies now controlled by the Shell Union Oil Corporation, 1921 and first half of 1922. . . 29 3. 4. 5. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. '^ «t'. :.>--.4S fi ) VI CONTENTS. Table 18. Sharea of common stock outstanding of the Shell Union Oil Torpora- tion and subsidiaries, Union Oil Co. CDelaware"*, and the Union Oil Co. of California CHART. 1. List of affiliated and subsidiary companies of the Royal Dutch-Shell group owned and operated in the United States facing page MAPS. 1. Crude-petroleum production and proportions of Royal Dutch-Shell group and of American producers based on 1921 output 2. Location of oil-bunkering stations of Roval Dut<;h-Shell ,gioup, Standard group, and other large companies LIST OF EXHIBITS. Exhibit 1. Tabulation of affiliated and subsidiary companies of Royal Dutch- Shell group owned and operated in foreign countries 2. Circular, Union Oil Co. of California, August 12, 1919 3. Circulars, Union Oil Co., August 17, 1922 4 Agreement between Union Oil Co. (Delaware) and Anglo-Saxon Petroleum Co. (Ltd.), October 19, 1921 5. Circulars, Union Oil Co. (Delaware), November 3, 1921 ^. 6. Circular of Lee Higginson & Co., regarding preferred stock of Shell Union Oil Corporation 7. Circulars, September 26, 1922, regarding dissolution of the Union Oil Co. (Delaware) 8. Circular, October 17, 1921, to the stockholders of Union Oil Co. of California 9. Curtis bill 10. Phelan bill 11. Report of American Petroleum Institute and agreement between Greek Government and D'Arcy Exploration Co. (Ltd.) 12. Editorials on monopoly of Burma Oil Co., The Petroleum Review, London, July 22, 1905 13. Memorandum of British Government on the petroleum situation, April 21, 1921 14. vSan Remo agreement 15. Letter of Standard Oil Co. of New York, February 24, 1922.. ..... 16. Agreement between the Government of Trinidad and the United British West Indies Petroleum Syndicate (Ltd.) 17. Letter Sinclair Consolidated Oil Corporation, August 1, 1922 18. Letter Standard Oil Co. (New Jersey), August 4, 1922 19. Letter Mexican Petroleum Co. (Ltd.), July 28. 1922 20. Letter Sinclair Consolidated Oil Corporation, February 2, 1923 21. Letter Sinclair Consolidated Oil Corporation, November 3, 1922 LIST OF APPENDIX TABLES. Table 1. Balance sheet^s of the Royal Dutch Co., December 31, 1917-1921 2. Stockholdings of the Royal Dutch Co., 1917-1921 3. Income account-s of the Royal Dutch (^o., 1917-1921 4. Balance sheets of the Shell Trans])ort & Trading Co. ^.td.), Decem- ber 31 . 1917-1921 5. Income accounts of the Shell Transport & Trading Co. (Ltd.), 1917- 1921 6. Petroleum production of the Royal Dutch-Shell group, in barrels, 1917-1921 * : . - 7. Petroleum production for the world, by countries, and the proportion controlled by the Royal Dutch-Shell group, in barrels. 1917-1921 . . 8. Petroleum production is Russia (millions of poods\ 1910-1914 9. Location and capacity in barrels of oil-bunkering stations for large American companies, Royal Dutch-Shell group, and Anelo- Persian Oil Co 10. Balance sheet of the Shell Union Oil Corporation, January 2, 1922. . 30 14 18 20 65 70 7 / '^1 73 78 80 85 86 89 90 90 99 100 103 105 107 125 125 126 127 127 129 129 130 1.30 131 131 132 133 134 139 % V ' CONTENTS. VII Page. Table 11. Balance sheets of the Shell Co. of California, December 31, 1920 and 1921, and June 30, 1922: 143 12. Balance sheets of the Roxana Petroleum Corporation, December 31, 1920 and 1921, and June 30, 1922 144 13. Balance sheets of the Ozark Pipe Line Corporation, December 31, 1920 and 1921 144 14. Balance sheet of the Matador Petroleum Co., January 2, 1922 144 15 Balance sheets of the Union Oil Co. of California, December 31, 1920 and 1921 -- 145 16 Balance sheets of the Commonwealth Petroleum Corporation, Decem- ber 31, 1920 and 1921 145 17. Balance sheets of the Columbia Oil Producing Co., December 31, 1920 and 1921 146 18. Balance sheets of the Western ifnion Oil Co., December 31, 1920 and 1921 146 19. Balance sheets of the United Western (Consolidated Oil Co., Decem- ber 31, 1920 and 1921 147 20. Balance sheets of the Dunlop Oil Co., December 31, 1920 and 1921. 147 21 Balance sheets of the Eddystone Oil Corporation, December 31, 1920 and 1921 14S 22 Balance sheets of the National Exploration Co.. December 31, 1920 and 1921 148 23. Balance sheet of the Asiatic Petroleum Co. (Delaware) (Ltd.\ June 30 1922 148 24 Balance sheet of the Asiatic Petroleum Co. (New York) (Ltd.), June 30, 1922 149 25. Balance sheet of the Asiatic Petroleum Storage Co. (Panama) (Ltd. ), June 30 1922 149 26. Balance sheet of the Gold Shell Steamship Co., June 30, 1922 149 27. Balance sheet of the Silver Shell Steamship Co., June 30, 1922 150 28. Balance sheet of the Pearl Shell Steamship Co., June 30, 1922 150 29. Balance sheet of the New Orleans Refining Co. (Inc.), June 30, 1922 . 150 30. Balance sheets of the Dundee Corporation, December 31, 1920, and June 30, 1922 151 31. Balance sheet of the Union Oil Co. (Delaware), October 20, 1922. . . 151 32. Capital investment in the Mexican petroleum industry, in pesos, by national interests, December 31, 1922 152 V ! 'i -r^MJl" -■irf^^'itii^7^ ' ■• f i1 t-'.r v>;vr,>4 LETTER OF SUBMITTAL. ACKNOWLEDGMENT. The commission desires to mention as especially contributinji: to the preparation of this report Messrs. W. H. England, J. B. Peat, T. A. Thibodeau, and A. A. Hartley. ▼m Federal Trade Commission, Washington, February 12, 1923. To the President of the Senate: Sir: The Federal Trade Commission submits herewith a report on foreign ownership in the petroleum industry, pursuant to Senate Resolution 311, Sixty-seventh Congress, second session. This report describes the organization, development, and present status of the Royal Dutch-Shell group, with special reference to its holdings in the iJnited States, and particularly the absorption of the Union Oil Co. (Delaware) ; it relates the facts regarding the present ownership and control of the Union Oil Co. of California and outlines the situation with respect to discrimination of foreign governments against citizens of this country in the acquisition and development of petroleum producing properties in foreign lands. The more important facts developed in this report may be concisely stated as follows: 1. The Royal Dutch-Shell group, a combination of the Royal Dutch Co. and the Shell Transport & Trading Co. of London, has world-wide oil investments, including numerous refineries, an immense fleet of tank ships, and petroleum production in many lands, which, in 1921, was no less than 11 per cent of the world output. 2. The Royal Dutch-Shell group in February, 1922, consummated a merger of the principal properties and investments of the Union Oil Co. (Delaware) with its chief American subsidiaries in a new company, the Shell Union Oil Corporation. 3. The Shell Union Oil Corporation now controls over 240,950 acres of oil lands in the United States; has about 3.5 per cent of the total output of crude petroleum; owns extensive properties in refin- eries, pipe lines, tank cars, and marketing equipment; and is one of the larger companies in the domestic petroleum industry. 4. The Union Oil Co. (Delaware) owned about 26 per cent of the stock of the Union Oil Co. of California, but, to prevent the Royal Dutch-Shell group from gaining control, certain stockholders of the Union of California organized an American controlled holding com- pany, which now o^^^ls more than half of its issued stock. 5. The most important instances of discrimination by foreign governments against citizens of this country are the exclusive policies of the Governments of Great Britain and the Netherlands in respect to the oil fields of India and the Dutch East Indies, and the 1920 San Remo agreement of Great Britain and France covering the undeveloped oil fields of Mesopotamia and of the British and French Colonies. 6. Denial of reciprocity of treatment to citizens of this country appears to exist with respect to the petroleum industr\^ of Australia, British Borneo, certain African colonies, British Honduras, British IX X LKTTKPv OF TRANSMITTAL. Guiana and Trinidad: France and French possessions; Italy, and tlie Netlierlands and its dependencies. 7. Thus forced to modify its historic policy, Congress in 1920 enacted a mineral leasing law for public lands whicTi forbids the acquisition of properties by the nationals of any foreign country that denies reciprocity to Americans, in consequence of which certain applications for petroleum leaseholds have been denied to the Royal Dutch-Shell group. What further efi'orts may^ be made by this coznbinatioTi to accjuiro privately owned petroleum lands or competing oil companies, it is, of course, impossible to predict, or how far antitrust laws may be effective to prevent them. The supply of crude petroleum in this country is being rapidly depleted to meet the requirements of a growing domestic consumption and foreign trade. The sources of supply of the domestic industry are concentrated within its own borders and in Mexico, while those of its principal competitor are widely distributed throughout the whole world. It appears obvious that a nation having widely dis- tributed supply and storage facilities and owning the means of dis- tribution will have certain advantages in world trade against one having concentrated supply. Respectfully, Federal Trade Commission, By Huston Thompson, Acting Chairman. Attest: Otis B. Johnson, Secretary, SUMMARY. \ Origin and Scope. This report on the foreign ownership in the petroleum industry of the United States is made in compliance with Senate resolution 311, Sixty-seventh Congress, second session. This resolution directed the commission to ascertain the ownership by persons who are not citizens of the United States of the shares of the Union Oil Co. (Delaware) ; the Union Oil Co. of California; and the Shell Co. of California; the interrelations between said corporations, their interest in other oil companies in the United States ; the acreage of oil lands in the United States, which is held, by lease or otherwise, by these concerns or their subsidiary and afTiliated companies; the acreage of oil lands which has been acquired bv them within the last year; what measures are now being pursued by them to further extend their holdings of oil lands in this country; and whether Great Britain, the British Domin- ions, Holland, Rumania, or other countries having oil lands within their territories discriminate against American citizens with respect to the ownership of oil lands or with respect to the ownership of shares in corporations which are organized to exploit and develop oil lands or engage in the production of petroleum. In order that the significance of the foreign ownership in the petroleum industry of the United States may be fully presented it is necessary to give a summary of the world-wide operations of the Royal Dutch-Shell group and of their subsidiaries and affiliated companies. Royal Dutch Co. A r6sum6 of the organization of the Royal Dutch-Shell group is given, tracing the parent companies, the Koninklijke Nederlandsche Maatschappij tot Exploitatie van Petroleumbronnen in Nederlandsch- Indie, commonly called the Royal Dutch Co., and the Shell Transport & Trading Co. (Ltd.), from their inception down to their most recent acquisitions in the United States. The Royal Dutch Co., which was organized in the Netherlands in May, 1890, for the purpose of developing petroleum lands in the Dutch East Indies, nas been for many years the most iniportant factor in the petroleum industry of the Dutch East Indies. Its production in the Dutch East Indies increased from about 300,000 barrels in 1893 to 16,069,000 barrels in 1921 and it now has about 90 per cent of the total production of those islands. The issued and outstanding common stock was increased from 1,300,000 florins —$522,600 at normal exchange — at the time of organization in May, 1890, to 321,457,000 florins ($129,226,000) in 1921. A statement of the earnings of this company during its earlier years is not available, but its net income for the 5-year period 1917- 1921 increased from about 44,400,000 florins ($17,850,000) in 1917 to XI fi ii***^' XII SUMMARY. 129,500.000 florins ($52,060,000) in 1920 and then declined to 104,100,000 florins ($41,850,000) in 1921. During the 20-year period 1902-1921 this company paid to the common stockholders an annual average dividend of nearly 42 per cent. As the Royal Dutch Co. is a holding company, its earnings are dependent upon the dividends declared by its subsidiary and affiliated companies and they do not necessarily show the profitableness of the business which it controls. Starting as a local enterprise in the Dutch East Indies in 1890, the company became an important international factor when, in 1907, it affiliated with the Shell Transport & Trading Co. (Ltd.) . These two companies, together with the Rothschild Russian interests, had organized the Asiatic Petroleum Co. in 1903 to act as a joint dis- tributing agent for their products for certain parts of their trade. Subsequently the Royal Dutch Co. acquired additional properties in the Dutch East Indies. When the Royal Dutch and the Shell interests became affiliated in 1907, two new companies were organized, the J3ataafscho Petroleum Co., capitalized at 140,000,000 florins ($56,280,000), and the Anglo-Saxon Petroleum Co., with a capital of £8,000,000 ($38,932,000), which took over the properties of both the Royal Dutch and the Shell companies. The Royal Dutch Co. then became a holding company, owning 60 per cent of the stock of the above-mentioned companies, while the Shell Transport & Trading Co. owned the remaining 40 per cent. Shell Transport & Trading Co. (Ltd.). This company was incorporated in England in October, 1897, as a transporting and distributing company, with an authorized capital stock of £1,800,000 ($8,760,000). As already stated, in 1907 it became closely affili-ated with the Royal Dutch Co. Its authorized capital stock* in 1907 was £3,500,000 ($17,033,000), which was increased to £33,000,000 ($160,595,000) by 1921, with £21,365.000 ($103,973,000) outstanding. This company owns 40 per cent of the stock in the various sul)- sidiaries of the Royal Dutch-Shell group, and the value of its shares in these subsidiary companies increased from about £9,511.000 ($46,285,000) in 1917 to £20,257,000 ($98,581,000) in 1921. A statement of the earnings of the company during its earlier years is not available, but for the five-year period 1917-1921 its earn- ings increased from £2,640,000 ($12,848,000) in 1917 to £7,630,000 ($37,130,000) in 1920, and then declined to £5,490,000 ($26,705,000) in 1921. During the 13-year period 1909-1921 it paid an average annual dividend of 31 per cent to its stockliolders. As in the case of the Royal Dutch Co., it is a holding company and its earnings are dependent upon the dividends declared by its subsidiary and aifiliated companies, consequently they do not necessarily show the profitable- ness of the business which it controls. Royal Dutch-Shell Group. The extraordinar}^ ramifications of the Royal Dutch-Shell group inay be judged from the list of subsidiary companies shown in appen- dix, Exhibit 1, page 65. At the present time the Royal Dutch-Shell group, in addition to its possessions in the Dutch East Indies, owns V < . summary. XIII exclusive or important petroleum properties in Sarawak (British Borneo), Rumania, Egypt, Venezuela, Trinidad, Mexico, and the United States; and it controls 5 refineries in the United States with a daily capacity of 65,000 barrels, 4 in Mexico with a daily capacity of 155,000 barrels, 1 in Venezuela, 1 in Trinidad, 1 in Curacao, 1 in Suez, and others in P^irope^and the Orient, together with compres- sion plants, storage facilities, and other equipment in different parts t)f the world. It has 752 miles of trunk pipe lines in the United States and about 240 miles of pipe line in Mexico. It also owais or controls about 1,144,000 tons of tankers, barges, and tugboats. In 1921 the Royal Dutch-Shell group controlled about 2 per cent of the petroleum production of the United States, wliich was increased to nearly 3 J per cent in the first six months of 1922. From its present holdings it produced 9,043,000 barrels of crude petroleum (about 50.000 barrels daily) during the first half of 1922, and in October, 1922, it was producing at the rate of 80,000 barrels daily.^ OIL BUNKERING STATIONS. The Royal Dutch-Shell ^roup operates about 120 fuel-oil bunkering stations, iO of which are in the United States. Oil bunkering sta- tions (►perated by this group are located at all important seaports throughout the world. For example, a British steamer leaving New Yorkdty on a voyage around the world calling at everv important port in Europe, along the Mediterranean, in India, the fiast Indies, China, Japan, the Philippines, Australia, New Zealand and the west coast of North America, and then returning to New York City through the Panama Canal, would find oil bunkering stations operated by a member of the Royal Dutch-Shell group at ever\' important port of call. Shell Union Oil Corporation. The Union Oil Co. (Delaware), the Roxana Petroleum Corporation, the Shell Co. of California, and their subsidiaries were merged on January 2, 1922, and the Shell Union Oil Corporation was organized February 8, 1922, with 8,000,000 shares of common stock of no par value, to hold their properties. The Union Oil Co. of California, which is specified in the resolution, remains an American controlled corporation, although the Shell Union Oil Corporation owns a little over 26 per cent of its capital stock. Through the acquisition of the assets of the Union Oil Co. (Dela- ware) and merging practically all of its American operations under this newly organized corporation, the Royal Dutch-Shell holdings rank among the largest in the petroleum industry of the United .States, with net assets on June 30, 1922, of $205,000,000. The Shell Union Oil Corporation controls 241,000 acres of oil lands in the United States, 34,000 of which are proven acreage, with 2,114 pro- ducing wells. During the first six months of 1922 it produced 9,043,- 000 barrels of crude petroleum, an average of about 50,000 barrels dailv. During 1922 its daily production has increased rapidly; for example, on June 30, it was 65,000 barrels and in October 80,000 barrels. It has a daily refining capacity of 51,000 barrels, which is* » Its total prodncJion of crude petroleum in 1922 was 17,543,.S62 barrels. l.-'J^' 1 V ■t^ ■■ XIV SUMMARY. now being substantially increased by improvements and enlaroje- ments; it operates 752 miles of pipe line in California and the mid- continent field and has considerable domestic marketing equipment. Of the 8,000,000 shares of common stock issued by the Shell Union Oil Corporation, the Rojral Dutch-Shell group received 5,760,000. or 72 per cent, and the Union Oil Co. (Delaware) 2,240,000, or 28 per cent. The Union Oil Co. (Delaware) is now being dissolved, and 155,000 of its 2,240,000 shares were sold to liquidate indebtedness, leaving 2,085,000 shares which are to be divided on the basis of one and a half shares of Shell Union Oil Corporation stock for one of the Union Oil Co. (Delaware) stock. The commission's recent in- quiry has shown that the control of the Union Oil Co. (Delaware) was clearly domestic, consequently the majority of these shares will apparently pass into the hands of citizens of the United States. According to the merger plan, the Royal Dutch-Shell group nominated 14 of the 19 directors of the Shell Union Oil Corporation and the Union Oil Co. (Delaware) the remainder, but since the latter company is being dissolved, apparently the Royal Dutch-Shell group will name all of trie directors. Sir Heiiri Deterding, managing director of the Royal Dutch Co., is now president of the Shell Union Oil Corporation. Union Oil Co. of California. The Senate resolution directed the commission to ascertain the facts concerning the ownership of the Union Oil Co. of California. Prior to the World War, Andrew Weir, now Lord Inverforth, obtained an option on a block of stock in the Union Oil Co. of California, and on April 16, 1915, there were issued 27,793 shares of Union of Cali- fornia stock to the British Union Oil Co. In 1919 an American syndicate purchased this holding from the British Union Oil Co., and on August 12, 1919, entered into an imderwriting agreement with the Union of California to purchase any and all of tne certificates of rights which might be tendered prior to September 20, 1919. On August 14, 1919, the above-mentioned syndicate organized the Union Oil Co. (Delaware), which, on October 1, 1919, owned 108,135 shares of Union of California stock; this holding was increased to 130,869 shares by December, 1920. As already stated, the Union Oil Co. (Delaware) , was merged with the Royal Dutch-Shell interests in the United States. When the merger plans of the Shell Union Oil Corporation becaine known the California stockholders of the Union Oil Co. of California, foreseeing the acquisition of that company by the Royal Dutch-Shell interests, organized an American controlled holding company called the Union Oil Associates. On June 30, 1922, the Union Oil Co. of California had 500,000 shares issued and outstanding, of which 130,869 (or slightly over 26 per cent) were held by the Shell Union OU Cor- E oration, 651 shares were held by other foreign owners, 273,833 shares y the Union Oil Associates, and 94,647 by other citizens of the United States. • The holding of the Union Oil Associates was increased to 274,738 shares in October, 1922. As the Union Oil Associates was organized ■for the purpose of preventing the Royal Dutch-Shell group from getting control of the Union Oil Co. of California it appears that its control is vested in the hands of citizens of the United States. i* "* '•. SUMMARY Asiatic Petroleum Co. XV In 1903 the Asiatic Petroleum Co. (Ltd.) was organized by the Royal Dutch Co., the Shell Transport & Trading Co., and the Roths- child Russian interest as a distributing agent for their products. This company is now the chief representaitive of the foreign interests ol the Koyal Dutch-Shell group in the United States and is principally engaged in the oil bunkering business. It has incorporated a number of subsidiaries in various States in this country. At the present time (1923) only three of these subsidiaries are active, viz, the Asiatic Petroleum Co. (New York), the Asiatic Petroleum Co. (Delaware), and the New Orleans Refining Co. The New York corporation is a purchasing coinpany and buys petroleum products and oil supplies for export, the Delaware corporation is a holding company, while the New Orleans Refining Co. operates a refinery. Other companies were merely organized in various States to protect the name — Asiatic Petroleum Co. Other Foreign Interests. Prior to 1920 the United States allowed foreign capital the same privileges to acquire and develop its natural resources as was granted its own citizens, and this policy was often taken advantage of by citizens of the more important foreign nations. Foreign interests were active in the development of petroleum-producing properties, particularly in California, Wyoming, and the mid-continent oil fields. Prior to the World War certain British interests had an option on an interest in the Union Oil Co. of California, which was later conveved to the Union Oil Co. (Delaware), and in 1921 about 26 per cent was acquired by the Royal Dutch-Shell group, which is now held by the Shell Union Oil Corporation. At the present time certain British interests apparently not identified with the Royal Dutch-Shell group are actually negotiating for oil-producing properties in the mid-continent oil fields. Discrimination Against American Citizens. In its incjuiry regarding discrimination against citizens of the United States in respect to the acquisition and operation of petro- leum properties in foreign countries the commission considered the question of discrimination from two points of view, viz, (1) dis- crimination in the sense that foreign governments deny to citizens of this country privileges allowed other aliens, and (2) discrimina- tion in the seiise that foreign governments deny to citizens of this country privileges similar to those allowed by the United States to the citizens of such foreign countries. The commission devoted especial attention to the question whether there was discrimination in the sense that foreign govern- ments deny to nationals of the United States privileges in respect to its petroleum resources that are granted to citizens of other (•ountries. The nearest approach to this sort of discrimination found by the commission consisted in the action of the British > and Frencli Governments in 1920 in entering into the San Remo agreement, which agreement is apparently being modified to some extent. ^1!!^^^ . " . I ff ^IMW" ^ *f?f-5l XVI SUMMARY. SITMMARY. XVII Although it is not uncoiuinon for foreign governments to place some restrictions upon the exploitation of the petroleum resources within their domain by aliens, prominent cases of exclusion of citizens of the United States which have been brought to the attention of the commission were in British India and the Dutch East Indies. In the case of British India a single company, the Burma Oil Co., has had a monopoly of the crude petroleum producing business m the oil fields of Burma. The Burma Oil Co. is partly owned by the Anglo- Persian Oil Co. (Ltd.), in which the British Government is mterested. American interests have repeatedly, but unsuccessfully, attempted to obtain oil concessions in British India, and as early as 1902 the United States consul general in India was informed that the Govern- ! ment of India did not desire '' to introduce any American oil companies or their subsidiaries into Burma." At that time, according to, a statement of Samuel Samuel, now a managing director of the Shell Transport & Trading Co., even that company was denied concessions to petroleum lands in Burma because the Government of India believed there was a combination between it and the Standard Oil Co. According to a letter from the Standard Oil Co. of New York to ] the Department of State dated February 24, 1922, tbe policy of the Government of India with respect to foreign participation in the development of its petroleum resources has not been modified. The opposition to American companies was jiot limited to the acquisition or development of oil lands, but extended to the ownership of refining and distributing facilities. For example*, the Standard Oil Co. of New York was not allowed to purchase a warehouse site in Burma. The petroleum agreement entered into by representatives of the Governments of Great Britain and France at San Remo on April 24, 1920, is of particular interest in that it sets forth the establishment of certain reciprocal arrangements as between these two Governments. (See Exhibit 14, p. 104.) In tliis agreement, which refers spedfically to Rumania, Asia Minor, territories of the former Russian Empire, Galicia, the French colonics, and the colonies of the British Crown, both Governments promise to lend aid to each other in the acquiring of rights to petroleum properties. The following excerpts from the agreement are of special interest: 14. Northern Africa ami other colonu's.— The French (;overimieiit will accord facilities to any British grou]) or groups of good standing which can offer the net essary guaranty which will operate in conformitv with French legislation, for the acquisition of petro- leum concessions in the colonies of France, or in French protectorates or zones of influence, including Algeria, Tunis, and xMorocco. It is well to point out that the French Parliament has decided that groups formed ur^der these cotjditions a^^ obliged to contain at least 07 per cent French interests. • » i • 15. The French Government ^vill facilitate the granting of oil concessions in Algeria, which are now liable to examination, as soon as the api)licant8 have complied with all the requirements of French legislation. 16 Colonies of the British Crown.— As far as the existing regulations will permit the British Government will accord to the French dependents who may desire to explore and exploit petroleum regions in the Crown colo lies a ivaitages corresponding to those France has accorded to British subjects in the French colonies. The San Remo agreement also contained provisions in respect to the oil fields of Mesopotamia, as follows: 7. Mesopotamia .^The British Government binds itself to concede to the Frencli (iovernment or the representative appointed by same 25 ])er cent of the net production of crude oil at the current market i)rice which If. B. M. Government may draw from the Mesopotamia petroleum regions in the e\ ent of these regions being made produc- tive by \drtue of Government ex]>loitation: or in the event the Government has recourse to a private company to exploit the Mesopotamia petroleum regions, the British Government will place at the disposal of the French Government a participa- tion of 25 per cent in the said company. The amount to be paid for a participation of this kind should not exceed the amount paid by any other participant in the said petroleum company. It is also agreed that the said petroleum company is to be under the permanent control of Great Britain. It appears that the Turkish Petroleum Co. (Ltd.), a British cor--> poration, owned 50 per cent by the Anglo-Persian Oil Co., 25 per cent by the Roval Dutch-Shell group, and 25 per cent by the French Government , claimed title to all petroleum rights in Mesopotamia, pn the basis of a concession received by the company and of rights acquired under the Bagdad and Anatolian railway grants. On November 20, 1920, in a note to the British Foreign Minister the Secretary of State for the United States stated that, according to this Government's information, prior to the war the Turkish Pe- * troleum Co. possessed no petroleum rights in Mesopotamia. A memorandum issued by the British foreign office in 1921 states: The whole question of Mesopotamia, which has been fully dealt with in correspond- ence with the United States Government, heed not be referred to here beyond saying that while there is no intention of discriminating against non-British interests, account must be taken of legitimate rights acquired before the war, and this applies equally to Palestine, where American claims are understood to exist. According to a dispatch from London, dated October 18, 1922, negotiations concerning the participation of an American interest, >the Standard Oil Co. (New Jersey), in Mesopotamia were progress- ing satisfactorily, although the exact share which it was to receive had not been definitely determined. The principal foreign nations having important petroleum de- • ' posits have discriminated against or denied reciprocal treatment to citizens of this country, with respect to the acqmsition and develop- ment of their petroleum resources, as contrasted with the principle of reciprocity and equal opportunity which was the policy of the United States. The tendency to follow closed-door policies was foimd to exist particularly in those countries having the largest known petroleum deposits. In form, such discrimination was either legislative, as, for example, the enactment of restrictive laws; con- tractural, as in the case of an agreement between the Government and its citizens for the working of large areas to the exclusion of aliens; or administrative, as where the granting of concessions is left to the discretion of some executive officer who favored the nationals of his own country. The policies of the principal foreign governments have been as follows: BRITISH EMPIRE. As indicated above, the British Government adopted a policy of complete exclusion of aliens in respect to the oil fields of British India, particularly those of Burma. According to a memorandum issued Dy the British foreign office on April 21, 1921, the following has-been the British policy in India: Prospecting or mining leases have been, in practice, granted only to British subjects or to companies controlled by British subjects. 35904—23- ii V ^^JP isair !^ pf/'-^- XVIII SUMMARY. The same memorandum stated that Brunei (British Borneo), Nigeria, British Guiana, and British Honduras have similar regula- tions to Trinidad, namely: In the case of private lands there is no nationality restriction, but the lessees of Crown or alienated lands must be British subjects or a British-controlled company. The memorandum stated, also, that there are no nationality re- strictions in the United Kingdom, British North Borneo, Sarawak, Egypt, SomaUland, Jamaica, or Barbados; that exploitation in the northern territory of Austraha is confined to British registered com- panies; and that there is no general prohibition of foreign exploita- tion of oil lands in the Union of South Africa, New Zealand, or New- foundland. According to the commission's information, the mining law of western Australia contained provisions similar to those of the northern territory; and in Queensland the mining law provides that petroleum on or below the surface of all land is the property of the Crown. In the mandate of New Guinea it appears tnat the Australian Government has adopted a poUcy contemplating com- plete jurisdiction over all oil operations to the exclusion of all other nationals. In British East Africa all aliens seem to be excluded, while in the Gold Coast colony the regulations provide that concessions shall be granted only to British subjects or British-controlled companies. Although there are apptft-ently no specific restrictions against aliens in the Federated Malay States, it is said that concessions may be granted only on terms approved by the British Government. In Canada the privilege of exploiting petroleum lands is restricted to British registered companies, and recently there was included in leasing laws of Canada a provision practicall}^ identical with the reciprocity clause in the general leasing law of the United States. FRANCE AND FRENCH POSSESSIONS. It is not clear what the laws of France might provide regarding the matter of petroleum development in contmental France or the French colonies, but the evidence indicates that the granting of concessions is subject to the discretion of the Government, which would probably grant concessions only to companies at least 67 ner cent French-controlled. The commission was informed by the Sin- clair Consolidated Oil Corporation that — In practice it has been found that P>ance and the French colonies are more com- pletely closed to development by American companies than in any other part of th» world. The petroleum agreement between " France and Great Britain signed by representatives of the two Governments at San Remo on April 24, 1920, contained mutual promises to lend aid to each other in the acquisition of petroleum properties, and, also, clauses in respect to reciprocal privileges in the territories of each nation. THE NETHERLANDS. The present important petroleum-producing territories of the Netherlands are located in the Dutch East Indies. According to the mining laws of the Dutch East Indies, the discovery of petroleum i SUMMABY. XIX does not entitle the discoverer to a mining concession; to mine petroleum is the right only of the Government or persons or companies with whom contracts are entered into by the Government, viz, Dutch subjects, inhabitants of the Netherlands or of the Dutch East Indies, and companies incorporated under Dutch laws, either in the Netherlands or in the Dutch East Indies, having on their board of directors a majoritv of Dutch subjects. The Royal Dutch-Shell group appears to have secured possession practically of a monopoly of the production of the Dutch East Indies. Although the Nederlandsche Koloniale Petroleum Maatschappij, a subsidiary of the Standard Oil Co. (New Jersey), has small holdings in the islands, its rights are said to be of little commercial value and were acquired in the first instance not from the Government, but from third parties. Under date of August 4, 1922, the Standard Oil Co. (New Jersey) stated: * * * Practically we have found a discrimination in the Dutch East Indies against American capital through the refusal of the Government of the Dutch East Indies to grant prospecting licenses to the Nederlandsche Koloniale Petroleum Maat- schappij or to grant mining concessions except in cases where the Nederlandsche Koloniale Petroleum Maatschappij had a right to such concessions under the pro- visions of the old mining law which provided that discovery of a mineral under a prospecting license gave the right to a concession. That mining law has Ijeen abro- gated and a new law passed which leaves the granting of concessions to the discretion of the Governor General. All the concessions granted to the Nederlandsche Koloniale Petroleum Maatschappij were granted under the old law on rights secured as a result of the discovery of the mineral on prospecting licenses granted to third parties and purchased by the Nederlandsche Koloniale Petroleum Maatschappij. The Djambi fields, in south-central Sumatra, have been pronounced by American scientists and oil experts as representing substantially the undeveloped oil wealth of the Dutch East Indies. When it be- came known that a bill sponsored by the Government, authorizing the exploitation of these oil fields, was being considered for intro- duction in the Netherlands Parliament the American Government immediately took up with representatives of that GU)vernment the matter of American participation in this exploitation; but on No- vember 22, 1920, the bill was introduced in the Netherlands Parlia- naent, and from an explanatory memorandum accompanying the bill it appeared that the Bataafsche Petroleum Co., a subsidiary of the Royal Dutch-Shell group, was to be granted exclusive rights to the concession. Before the adoption of the Djambi concession bill by the Nether- lands Parliament additional correspondence was exchanged between representatives of the two Governments on the subject of American participation. The United States Government called attention to the fact that American citizens had found it practically impossible to acquire any petroleum properties in the Dutch East Indies, while citizens of the Netherlands had acquired valuable oil properties in the United States. A note sent by the United States Department of State to the Netherlands legation at Washington, under date of November 2, 1920, read in part as follows: While it is recognized that this agreement provides for the dispoeition of only one field, it is understood that this field includes the most valuable of the remaining prospective petroleum territories in the Netherlands East Indies, and that American companies thus far have been unsuccessful in requests for a share in the concession. Frankness requires me to state that the disposition of this field at the present time, in the manner stipulated by the proposed agreement, impresses this Government as -7*.^ *■•.:. ^^^m:- i>:^. -^s XX SUMMARY. an indication of a policy to exclude companies controlled by American citizens from the petroleum industry of the Netherlands East Indies. The representations of the American Government were ineffectual, the bill having been adopted by the Netherlands Parliament without modification. In view of the granting to the Royal Dutch-Shell group of a prac-^ tical monopoly of the production of the Dutch East Indies, and of the exclusion of American interests in those islands, it is not surprising that the United States Department of Interior recently refused to grant the Shell Co. of California— a Royal Dutch-Shell subsidiary— a permit to prospect certain supposed oil-bearing lands in Utah until the Shell Co. is able to satisfy the department that the Governments of Great Britain and the Netherlands do not discriminate against Americans. In its decision the Interior Department followed the provisions of the general leasing law of February 25, 1920. MEXICO. Prior to the adoption of the Mexican constitution of 1917 there was no restriction in Mexican laws against foreign acquisition and development of petroleum properties in Mexico, and immense sums were expended for this purpose by foreign interests, especially by citizens of the United States. At the present time over 70 per cent of the Mexican oil production is controlled by United States interests.' The constitution of 1917, article 27, provided that: The ownership of lands and waters comprised within the limits of the national territory is vested originally in the nation which has had, and has, the right to transmit title thereof to private persons, thereby constituting private property. ♦ ♦ * * * * * * * * In the nation is vested the legal ownership (dominio directo) of all min^ erals * * * petroleum, and all hydrocarbons— solid, liquid, or gaseous. Legal capacity to acquire ownership of lands and waters of the nation shall be governed bv the following provisions: . I Only Mexicans by birth or naturalization and Mexican companies Have tne right to acoration of California, and their subsidiary and affiliated companies; the acreage of oil lands which has been acquired by said corporations, or any of them, within the last year; and what measures are being pur- sued by said corporations to furtlier extend their holdings of oil lands within the United States. The demand for this incjuiry was due apparently to two principal factors, namely, the recent merger of the American subsiaiaries of the Royal Dutch-Shell group with the Union Oil Co. (Delaware), and a recognition of the vital importance of an adequate future supply of petroleum for the United States. Although the Senate resolution did not specifically mention the Royal Dutch-Shell combination, the resolution could not be adequately answered, nor could the real situation be shown without a detailed presentation of the facts regarding the world-wide holdings of this group. Section 2. Scope of the report. This report includes a statement of the organization, investment, earnings, and important subsidiaries and affiliated companies of the Royal Dutch-Shell combination, w^iich includes the holdings of the Royal Dutch Petroleum Co. and of the Shell Transport & Trading Co. (Ltd.). The headquarters of the Royal Dutch Petroleum Co. are at The Hague and those of the Shell Transport & Trading Co. (Ltd.) at London. The information concerning their holdings out- \ l>' 2 FOB ETON OWNERSHIP IN THE PETROLEUM INDUSTRY. side of the United Slates was obtained from their annual reports and other public soiu-ces. A more intensive study was made of the organization, development, and earnings of those companies speci- fied in the resolution, and detailed information is presented regarding the acreage of petroleum lands owned or leased by them, the loca- tion, mileage, and capacity of their trunk pipe lines, the capacity and location of their refineries, and the extensiveness of their market- ing and distributing business. The proportion of the stock owned by foreigners in eacn of the compajiies named in the resolution and thoir holdings in other companies are also presented. Section 3. Source of information. In order to ascertain the facts regarding the extent of the f()reign cimtrol in the companies Jiamed in the resolution the commission obtained from those companies and from their subsidiary and affiliated companies lists of their prijicipal stockliolders and complete lists of all of their stockholders residing in foreign lands. For each of the companies named in the resolutioji the holdings in other com- panies engaged in any branch of the petroleum business were secured and complete information obtained conceniing their crude petroleum production, their holdings of oil lands and the facts concerning the pipe lines, refineries, and marketing equipment owned by them. A questionnaire regarding discriminatioji by foreign governments was sent to every od company known to own foreign holdings or to have attempted to secure concessions in other countries recjuesting them to furnish the facts with reference to any legal or administrative difficulties which they had encountered, either with reference to the acquisition or exploitation of petroleum lands, or with respect to the ownership of sharas in corporations engaged therein. Tne officials of the American Petroleum Institute and of its foreign relations committee cooperated with the commission on this phase of the ijiquiry, and furnished a great deal of information thereon. As already stated, the data concerning the production, prooerties, hohUngs, investment, and earnings of the Royal Dutch-Shell coin- panios operating outside of the United States were secured from their annual reports and from other published sources. The information covering these data was secured from the American members of the Royal Dutch-Shell group by schedules. The reports of the more important companies were carefully checked by the examiners of the commission with their books and records. The statistical and general information regarding the petroleum industry both at home and abroad wivs obtained from Federal bureaus and departments, such as the Departments of State, Com- merce, and Interior, including the Geological Survey and the Bureau of Mines. The compajiies named in the resolution and all of the oil companies from whicJK the commission requested information cooperated heartily and greatly facilitated the commission's work. Officials and members of the American Petroleum Institute also contributed much valuable information, and the legal representative of the Royal Dutcli-Shell group in the United States rendered material assistance regarding its business in this country. ^ t Chapter 11. THE ROYAL DUTCH-SHELL GROUP. Section 1. The Royal Dutch Co. Organization and development.— The Royal Dutch (\). (Konink- lijke Nederlandsche Maatschappij tot Exploitatie van Petroleum- bronnen in Nederlandsch-Indie) was organized in the Netherlands in May, 1890, for the purpose of developing petroleum lands m the Dutch East Indies. The headquarters of the company are at The Hague and the annual meetings are held at Amsterdam. The management of the company is now vested in four directors under the supervision of a board of commissaries. Article 19, of the Articles of Association, states: Art. 19. The company shall be managed by three directors under the supervision of at least five and at most nine commissaries, who must all be owners of registered The directors and the majoritv of the commissaries must be Dutchmen or domiciled in Netherlands-India; the last named must also be resident in the Netherlands or in Netherlands-India. One of the directors shall bear the title of general director. In the event of an equality of votes among the directors themselves the general director has a casting vote. As above stated, there are now four directors. The method of appointment and duties of the commissaries are given in articles 20 and 21, as follows: Art. 20. The commissaries are apix)inted by the general meeting of shareholders from their own number. , -t-i -nu a Each year one of them shall retire, but shall be immediately reeligible. Ihe order in which they retire shall be regulated by rotation, to be determined by drawing lots. The succeeding commissaries shall replace their predecessors according to such rota- tion. The commissaries shall elect from among themselves a chairman and regulate the order or rank wherein they shall replace this official in case of his being prevented from attending or in case of a vacancv- Each commissary shall at all times have the right U> inspect the Iwoks, correspond- ence, and investments of the company. The commissaries jointly shall receive the share of profits pro\'ided for l)y article 31, whilst traveling and living expenses are to be refunded to them. .... Art. 21. When the commissaries are (►f opinion that there is maladministration, they shall have the right to suspend the p stipulate the time and manner of such removal. The provision regarding control by nationals of the Netherlands is strictly enforced. The company's annual report for 1921 states: Dr. J. Th. Erb, who, as stated in our previous report, was elected director on the let of April, 1921. but who was able to take up his functions only after having a^^med Dutch nationality, has since entered upon his office, the bill by virtue of which he has been granted Dutch nationality having been passed. Doctor Erb was a citizen of SwitzerLand. Soon after its organization this company acquired a concession in the Dutch East Indies which had been granted by the Emir of TPr ^p 4 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Langkat for a period of 75 years dating from 1883. The Royal Dutch Co. was the most important factor in the development of petroleum production in the Dutch East Indies. The annual pro- duction in the Dutch East Indies increased from about 300,000 barrels in 1893 to about 7,770,000 barrels in 1905: in this latter year the Koyal Dutch Co. controlled about 3,655,000 barrels, mcludmg 403,000 barrels from Borneo. The petroleum industr^^ of the Dutch East Indies at this time was almost entirely in the nands of a few strong companies which controlled large concessions of land. It is reported that in Java and Sumatra the Royal Dutch Co. had about , 227,000 acres, the Moesi Ilir 135,000 acres, the Dordtsche Co. 1,483,000 acres, while the Shell interests controlled 500 square miles in Borneo. There were a number of other companies, such as the Moeara ICnim, Sumatra Palembang, and Zuid Perlak, which originally were competitors of the Royal Dutch Co., but in the openmg years of this centurv the latter acxjuired a commanding position in the local industry' by means of acquisitions, consolidations, and long- term contracts with competing concerns. At that time there was strong competition in Europe from the petroleum products of the United States and Russia, while some American kerosene was also sold in Java and Sumatra at the very doors of the Royal Dutch reiineries. The outstanding capitalization of the Royal Dutch Co. at the time of organization was 1,300,000 florins,^ or $522,600. As the activities of the company increased additional capital was required from time to time. The following table shows the issued and out- standing common stock for each year as of December 31, 1890-1921: T\BLE 1 —Royal Dutch Co. statement of issued and outstaiylinq common stock, 1890-1921. Year. 1890.. 1892.. 1895.. 1896.. 1897.. 1902.. 1904.. 1905.. 1906.. 1907 «. Florins. 1 1,300,000 1,700,000 2, aOO, 00(1 3, 000, 000 5,000,000 6,000,000 6, m), 000 9,900,000 10,300,000 39,780,000 Year. Florins.' 1909 44,418,000 1911 48,438,000 1912:::;::::::!!.: 51,599,400 1913 54,645,400 1916 1 S.-), 527, 200 1918 » , 171,054,400 1919 ! 213,818,000 1020 1 320,727,000 1921 ' 321,457,000 1 Florin— 40.2 cents. * 200 per cent stock dividend. » 50 per cent stock dividend. The above table shows only the common stock issued and out- standing. It does not include the priority and preference shares, of which there were 30,000, with a value of 30,000,000 florins ($12,- 060,000), outstanding during the period 1917-1921. The total amount of the common stock authorized is not available for the earlier years, but in 1917 it aggregated 120,000 shares, with a par value of 120,000,000 florins, of which 34,472,800 florins were not issued. The common stock authorized was increased to 200,000,000 florins in 1918 and to 370,000,000 florins in 1919, not all of which was issued. There was no change in the amount of common stock FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 5 authorized in 1920, but in 1921 the amount authorized was increased to 570,000,000 florins, of which 321,457,000 florins was issued. Financial statements. — The investments of the Royal Dutch Co. during the years 1920 and 1921 are given in the balance sheets for those years, as shown in the following table: Table 2. — Balance sheets of the Royal Dutch Co. for December SJ , 1920 and 19^1 . Item. 1920 ASSETS, Unissued Shares in Shares in Shares in Shares in Shares in Shares in Shares in Shares in Shares in Shares in shares Bataafsche Petroleum Maal schappij Anglo-Saxon Petroleum Co Shell Co. of California Shell Transport ' n* ' ,' V- 6 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. The Royal Dutch Co. is a holding corporation and therefore the balance sheets show the assets as amounts of stock of the subsidiary companies, debts due, and cash, which are the only items the jparent company owns directly. The following table shows the stock held, distributed by the respective companies for the years 1920-21, while Appendix Table 2 (p. 129) shows similar information for the period 1917-1921: Table ^.—Stockholdings of the Royal DutcJi Co., 1920 and 1921. Item. 1920 1921 Foreign: Bataafschc Pelroleiim Maalschappij. Anglo-Saxon Petroleum Co Shell Transport & Trading Co Asiatic Petroleum Co Soc'iet «^ Anonvme Astra Romana — \arioiis potroieum eomi)anies Total • - • • I^ss difference between par and book value. Total American: Shell Co. of California Roxana Petroleum Corporation. Ozark Pipe Lme Corporation — Total, as per balance sheets . 1 F/ort/M.> 180,000,000 115,200,000 i 26,12l,52H 1 I80,000,00t> 115,200,000 26,l2l,52K 25.200,000 1 4,438,944 j 25.200,000 7,398,144 11,73H,740 i 36,767,138 362,699,212 202,764,641 390,686,810 218,316,601 159,934,571 i 172, 370, '209 nH,210,434 47,040,000 20,672,400 i 118,212,197 47,040,000 20,672,400 345,857,40} ; :J58,294,806 1 Florin =• 40.2 cents. The stock of the principal subsidiaries is held by the Royal Dutch and Shell interests, in the proportion of 60 per ceiit and 40 per cent, respectively; consequently, the amounts shown in the exhibit for the Royal Dutch Co. must be supplemented by the holdings of the Shell interests in the same subsidiaries in order to show the total capital- ization of these subsidiaries. Income accounts.— The earnings of tliis company for the years 1920 and 1921 are shown in the following table, while the income accounts for the period 1917-1921 are given in Appendix Table 3, page 130. Table 4. Inconu accounts of the Roy(d Dutch Co., 1920 atul 1921. Item. Dividends, various companies. Interest and exchange Dividends lost by limitation . . Contractual obligations 1920 Florins. 133,032,541.23 5,698,644.76 5,020.50 1921 Florins. 92, 192, 774. 73 10, 576, 307. 60 10.091.00 4, 390, 770. no Cross siruomc 138,736,206.49 DEDUCTIONS. Loss on securities French tax on priority shares Administration and other expenses. Expen.sc renewal dividend Contractual obligations Reserve for tax on dividends 48, 294. 59 53,332.56 328, 470. 19 83, 605. 10 8. 772, 140. 00 Total deductions 9,285,842.44 Net income I 129,450,364.05 107, 169, 943. :« 98, 879. &■> 439, 009. 00 11.5,a50.82 2,418,82.5.58 3,071,76.5. a5 104,098,17^.28 1 FOREIGN OWNERSHIP IN THE PETROLEUxM INDUSTRY. 7 Since this is a holding company, the financial statements show neither the value of the petroleum lands, refineries, tankers, and other assets owned bv the company nor the actual sales, expenses, and profits from the operations for any given year. The company re- ceives only the dividends accruing to the holders of these stocks, while the expenses include simplv the cost of administration, taxes, etc. The income for 1920 was 129,450,364 florins, and for 1921 it was 104,098,178 florins, a decrease of about 20 per cent. As shown in Appendix Table 3 (p. 130), the income in 1917 was about 44,374,000 florins, which increased to 72,190,000 florins in 1918 and to 100,099,883 florins in 1919. This continuous increase from 1917 to 1920 and the shght dechne in the depression year of 1921 may well be -considered a fair index of the unusual strength and stability of the company. Dividends.— The dividends paid by this company for the period 1902-1921 are shown in the following table: T\BLE 5. — Rates of cash and stock dividejids paid on common stock of the Royal Dutch Co. and Shell Transport dc Trading Co. (Ltd.), 1902-1921. Royal Dutch Co. Shell Transport & Trading Co. (Ltd.). Year. Cash dividends. 1902. 1903. 1904. 1905. 1906. 1907. 1908. 1909. 1910. 1911. 1912. 1913. 1914. 1915. 1916. 1917. 1918. 1919. 1920. 1921. Per cent. 35.9 65 50 50 73 27.8 28 28 28 19 41 48 49 49 38 48 40 45 40 31 Stock C>ish Ptwlc dividends, i dividends. \ dividends. Per cent. \ Per cent. \ Per cent. 200 50 22.5 !. 22.5 |. 20 I. 30 !. 35 35 35 35 35 35 35 35 27.5 60 Average. 41.7 31 The dividends for the Shell Co. are also shown on this table and will be discussed later. As indicated in the exhibit, the dividends paid by the Royal Dutch Co. varied from a maximum of 73 per cent paid in 1906 to a minimum of 19 per cent in 1911, with an aver- age of about 42 per cent for the 20-Year period. The dividend rates were particularlv high for the perio'd 1903-1906, averaging about 60 per cent. From 1907 to 1911 the annual rates paid were much lower, averaging about 26 per cent. From 1912 to the end of the period the rates paid were less than 40 per cent only in two years — 1916 and 1921 — while the average was almost 43 per cent for the 10-year period. Stock dividends were also paid on two occasions — in 1907, when a 200 per cent stock dividend was declared, and again in 1918, when the .stock dividend rate was 50 per cent. The dividends discussed above were those received by the holders of the common stock, m 8 FOKKKJN OWNERSHIP IX THE PETROLEUM INDUSTRY. but there are two other classes of stockholders who receive dividends at fixed rates. There are 1,500 shares of the preference class out- standing, and the dividend rate is 4 per cent per annum. The priority shares number 28,500, and the rate for this class of stock is 4i per cent per^ annum. All classes of stock— ^preference, priority,' and common -have the same par value (1,000 florins), ana it is under- stood that all classes of stock have the same voting powers in the general meetings of the shareholders. Section 2. The Shell Transport & Trading Co. (Ltd.). Organization of the Shell Co. — This company was incorpor- ated in England, October, 1897, and according to its prospectus of 1902 it was formed — for the piirpoat'; of amalgamating; the interests, eomhininfj; under one management, and continiiint,' the development of the tran8])ort of illuminating oil, mainly by meant* of tank steamers and its storage in bulk, wale, and distribution in India, China, Japan, and the Straits, created by Messrs. Arnhold, Karberg & Co., Best & Co.. Hou- ytead & Co., Dclmege, Forsyth A Co., Oraham & Co., W. & A. (iraham c^ Co., J. .1. Riechmann 0U '^^^ 13, 812, 050 The above is probably typical of the character of the securities catalogued under this heading. An analysis of the stock holdings of 10117^?-^ ^^-^ Tu''^'^^? subsidiaries for the three-year period 1919-1921 IS shown in the following table: Tablk 8. 'Stockholdings of the Shell Transport d: Trading Co. (Ltd.), 1919-1921. I tern. FOREION. Bataafsche Petroleum Maatschaijplj Anglo-Saxon Petroleum Co. Asiatic Petroleum Co. ( Ltd.) J^oci^td Anonyme Astra Romana. . !. Dec. 31- 1919 1920 1921 AMKRICAN. Roxana Petroleum Corporation Shell Co. of California.... « }«, 000, 000 « 3, 000. (KX) « 1,400,000 ' 3, 082. 600 1 84, fKK), 000 » 3. 000, 000 ■■' 1,400,000 » 3, ftS'J, 600 ' S4, 000, 000 » 3, 000, 000 « 1,400,000 » 3, 082. 600 Il.4.'>9.900 II, 459. 900 Shell Union Oil CorFJoration l ^'^'^^'^' •^''^ '•^' ^ ^■^' ^^ Asiatic Petroleum Co. (Ltd.) "(Dciawarc )'.".' V.'.'.V.V.'.... \ * ^' ^^'' ^^ , * 19, 996 » Florins. i Pounds. • Lei. Normal value of florin =40.2 cents; pound =-$4.8365; loi- 19 oonis. * Shares of no par value. The princii)al companies tabulated above correspond closelv to hose given for the Royal Dutch Co. (see p. 6), since the stock in these subsidiaries is held in the proportion of 60 per cent and 40 per cent respectively. From the information available the values of the holdings of the Shell Co. can not be accurately converted to Jinghsh currencv and thus obtain a figure comparable with that shown in the balance sheets for the respective years. J ; .« FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 11 Income accounts. — The earnings of the Shell Co. for the years 1920 and 1921 are shown in the following table, while the income accounts for the period 1917-1921 are given in Appendix Table 5, page 131. Table ^.—Income accounts, Shell Transport & Trading Co. {Ltd.), 1920 and 1921. Item. Dividends Tnterpst Totalincome Deduf'tions: Administrative expense Expenses on new issue. Total deductions Net income 1920 £7,182, 203 486,439 1921 £5,143,632 483,040 7,668,fr42 25, 535 15,687 41,222 7,627,420 5,626,672 39, 250 100,000 139, 250 5,487, 422 As already stated, this company owns only stocks and other securities directly; consequently^ its income consists of the dividends accruing to the holders of these stocks, while the expenses include such items as cost of administration and taxes. The income was £7,627,420 in 1920 and £5,487,422 in 1921, a decrease of about 28 per cent. As shown by Appendix Table 5, page 131, the income in 1917 was about £2,638,000, which increased to £2,853,000 in 1918, then in 1919 to £4,713,000. This continuous increase from 1917 to 1920 and the slight dechne in 1921 is indicative of the unusual strength and stability of the company. Dividends paid. — The rate of dividends declared by the Shell Co. for the period 1909-1921 are given in Table 5, page 7. They varied from a minimum of 20 per cent in 1911 to a maximum of 35 per cent for every year of the period 1913-1920, with an average rate of 31 per cent for the 13-year period. The dividends paid during the earlier years of this company, 1898-1901, averaged 8^ per cent. One stock dividend of 60 per cent, amounting to £3,041,172, was declared in 1918. The preference shares arc entitled to a cumu- lative preferential dividend of 5 per cent per annum. Voting power. — The preference shares have no voting power unless their dividend is affected or in arrears. Every common "fehare has one vote except that the 1,000,000 common shares, num- bering 701 to 1,000,700, carry five votes per share so long as they are held by the original allottees, their executors or administrators, the trustees of their wills, or any person deriving title from them by voluntary transfer or bequest, or by any member of the firm of M. Samuel & Co., as from time to time constituted, until less than 500,000 of such shares are so held, when they will have one vote per share. Section 3. The Royal Dutch-Shell group. Organization and development. — The genesis of this group is found in the two companies already described in detail, viz : The Royal Dutch Co. for the working of petroleum wells in Netherlands India, commonly known as the Royal Dutch Co., and the Shell Transport & 35904—23 3 I i m^- 12 forp:igx ownership in the petroleum industry. Trading Co. (Ltd.) , which is ordinarily known as the Shell Co. The cooperation between these two companies during a period of about 20 years has resulted in the development of a completely integrated business, which is worid-wide in its operations and which has been highly profitable. The dividends paid by these two cooperating concerns on the capital stock issued ranged from a minimum of 19 to a maximum of 73 per cent for the period 1902-1921, with an average of about 37 per cent. The most important change in the organization of the petroleum industry in the Orient occurred when the interests of the Shell Co. and of the Royal Dutch Co. were more closely affiliated in 1907. The plan of agreement was substantially as follows: The producing interests of both companies — oil fields, refineries, etc. — in tlie Dutch East Indies were taken over by a new company called the Bataafsche Petroleum Maatschappij — Batavian Petroleum Co. — with a capital stock of 210,000,000 florins— about $84,000,000— of which the Royal Dutch Co. was to hold 60 per cent and the Shell Co. 40 per cent. It was provided that there was to be no increase of capital nor admission of otner parties, except with the approval of four-fifths of the board of directors. The marketing interests of these two concerns, which previously were affiliated through their mutual participation in the Asiatic Petroleum Co., were consolidated in a new distributing con- cern called the Anglo-Saxon Petroleum Co. (Ltd.) , with a capitaliza- tion of £8,000,000— about $38,932,000. Asiatic Petroleum Co. -This company was organized in England in 1903, with an authorized capital of £600,000, and was controlled equally by the Royal Dutch Co., the Shell Transport & Trading Co. (seep 8), and the Society Commerciale etMiniere, a Rothschild con- cern, organized especially for the eastern petroleum trade. The Roths- childs at that time were also interested in the Russian oil trade and were associated with the Russian interests of Nobel Bros. Co. in the marketing of oil. The peculiar province of the Asiatic Petroleum Co. in this triumvirate of interests was to market the gasoline produced in the Dutch East Indies in Europe. . It was reported that provision was also made for the admission of the Rothschild Russian interests, then associated with them in the Asiatic Petroleum Co., thus virtually perpetuating that alliance. In 1907, before this amalgamation with the Shell interests was consum- mated, the Royal Dutch Co., in order to establish a proper proportion between its nominal capitalization and the real value of its assets, distributed its surplus to the shareholders by allowing them a stock dividend of 200 per cent. Policy of the group. — The general purpose and policy of this group in respect to the development of new sources of crude petroleum was outlined by Sir Marcus Samuel, chairman of the Shell Transport & Trading Co., speaking at the annual meeting of the Shell Transport & Trading Co., in 1913, as follows: The business is world-wide, and we are determined that the great distributing organ- ization whi( h we have created shall not be dependent upon any one field, or upon any one country, or upon any one government. We shall endeavor to acmiire oil terri- tories, so essential to the support of our organization, wherever they can be found. The 1920 annual report of the Royal Dutch Co. stated: As regards competition, the fight for new production deserves our special attention. This struggle became especially keen when the significance of fuel oil became generally FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 13 manifest. * * * The advantage of having production not concentrated in only one country, but scattered all over the whole world, so that it may be distributed under favorable geographical conditions, has been clearly proven. It needs hardly be mentioned that the American petroleum companies also realized, although too late, that it was not sufficient to have a large production in their own country. As regards our own group in this respect, its business has been built up primarily on the principle that each market must be supplied with products emanating from the fields which are most favorably situated geographically. It goes without saying that we are now reaping the benefits resulting from this advantageous position. In order, however, to maintain our position in the world market it is not sufficient to be satisfied with the advantages already obtained. We must not be outstripped in this struggle to obtain new territory. Our interests are therefore being considerably extended; our geologists are everywhere where any chance of success exists. With regard to the assertion that American companies recognized too late the advantage of having oil production in foreign countries also, it may be noted that they had been interested therein for many years previous to 1920, includmg such countries as Rumania, Japan, Canada, Trinidad, and Peru, and had for a long time vainly tried to obtain access to oil fields in Galicia, Burma, and the Dutch East Indies. Sir Marcus Samuel liimself had actively opposed the entry of the Standard Oil interests in Burma before a parliamentary conunittee as early as 1905. Cooperating and affiliated companies. — The patient and per- sistent pursuit of this policy of world-wide expansion by the Royal Dutch-Shell group has resulted in the acquisition or incorporation of many subsidiary companies in all quarters of the globe for the pro- ducing, transporting, refining, and marketing of petroleum and its products. The subsidiaries of tliis group operating in the United States in September, 1922, are given in Chart 1 (facing p. 14). A fist of the subsidiary and affihated companies operating outside of the United States taken from pubhshed sources, which are believed to be correct, is shown in Appendix, Exhibit 1, page 65. The com- panies listed in the tabulation are those operating in foreign coun- tries, while those in the chart were incorporated and are operating in the United States. The chart is divided into two branches, the left presenting the 30 companies which are controlled by the Shell Union Oil Corporation, wmle the 20 companies listed in the right branch are controlled by the Asiatic Petroleum Co. (Delaware). As indicated by the name, Shell-Union, this branch lists the companies included in the merger of the American subsidiaries of the Royal Dutch-Shell group with the Union Oil Co. (Delaware) in 1921, while the Asiatic Petroleum Co. (Delaware) list includes the residue of the companies formerly held by the parent group in the United States. The activities of several of the foreign-controlled companies char- tered and operating in the United States are known. The Asiatic Petroleum Co. (Delaware) is a holding company. The New Orleans Refining Co. operates a refinery in the vicinity of that city, using chiefly Mexican crude. The Simplex Refining Co. simply holds some patents. The Gold, Silver, and rearl Shell companies own tankers, a separate corporation for each ship. These ships are built and regis- tered in the United States, but they can not be operated here because of the Jones Act, nor can they be sold because of the registration. The Asiatic Petroleum Co. (New York) is the chief American pur- chasing agent for the Royal Dutch-Shell group. Most of the other companies were simply incorporated in the various States enumer- ^>*'*flHIBW*'WiBr^- Ht^'"^, 'i'^'i 14 FOPiETGN OWNERSHIP TN THE PETROLEUM INDUSTRY. a ted in order to protect the name, and thev transact no business of importance. It is believed that none of the above companies own any producing property in the United States. Foreign companies. — The appendix tabulation (see p. 65) lists the names of 105 companies regarding which only fragmentary information regarding their interrelations and the activities of their units is available, because the head offices of the two controlling companies are located in Europe. One generalization may be made, however, and that is the Royal Dutch-Shell combination does not necessarily own or control all of the companies shown in the tabula- tion. Among the most important companies that are known to be owned or controlled by tne Royal Dutch-Shell combination the following may be mentioned: Anglo-Saxon Co., Asiatic Petroleum Co., Bataafscne Petroleum Co. — all old operating and holding com- panies — Astra-Romana (Rumania), Schibaieff Petroleum Co. (Rus- sia), Caribbean Petroleum Co. (Venezuela) (incorporated in New Jersey), the Mexican Eagle Co. (Mexico), and the Nederlandsch- Indische Aardolie Maatschappij. The latter company was formed recently in conjunction A\nth the Dutch East Indian Government to develop the Djambi concession in Sumatra. The Standard Oil Co. (New Jersev) was an applicant for this grant and was strongly sup- ported by tlie American Government in several communications from the State Department. The Royal Dutch-Shell group owns only 50 per cent of the above concession. In the case of the Mexican Eagle Co. the Royal Dutch-Shell interest is reported to be about 20 per cent of the capital stock, although it has tne actual management of the operations of the company. The major portion of the stock owTier- ship remains with the Pearson interests (Lord Cowdray), from whom the minority interest was purchased. Section 4. Outline of activities. Crude petroleum proditction. — The principal producing prop- erties of the Royal Dutch-Shell group are located in the Dutch East Indies. Sarawak, Egypt, Russia, and Rumania, in the Eastern Hemisphere; while its oil lands in North and South America are locatea in California, Kansas, Oklahoma, Texas, Louisiana, and Arkansas, and in Mexico, Trinidad, and Venezuela. The properties controlled in Mexico include a 20 per cent interest in the Mexican Eagle Oil Co., acquired in 1919, the largest producer in that country having an aggregate production in 1921 of 38,665,000 barrels. The total quantity of crude petroleum controlled by the Royal Dutch-Shell group for the years 1920 and 1921, together with the location of the production by countries, is given in the following table, while a similar statement for the period 1917-1921 is shown in Appendix Table 6, page 131. Table 10.— Petroleum production of the Royal Dutch-Shell ^oup, in barrels, 1920 and 1921. Countries. United States Dutch East Indies Bntisli Borneo (Sarawak) Egypt Rumania 1920 9,792,000 16,400,000 1,004,(X)0 1,023,000 2,358,000 1921 9,032,000 16, 4s2. 000 1,389,000 1,245,000 2,399,000 Countries. Venezuela. Mexico Trinidad.. Total . 1920 516,000 36,64\000 67,741,000 1921 1,584,000 51,528,000 374,000 84,033,000 aarfY. Ch3rt5haw/ngBff///3fEd3r7d5utis/£//3f'yCDmpdn/E5offf7eRoyd/Duf^^ 5f7E//5roupownei:/dn£/operdteii/nt/ieUnifE{f5fdfE5. /Jm erica n Companies af fhe RayalDutch- Shell Group Shell Union Oil Corporjfion Shell Co. of California Wdshinqton .Refining Co. Ra Xijna Petroleum Carp. CamarO/l Ca. Ozark Pipe Line Corp. Mata dor Fetroleum Co Central Petroleum Co. Be gam ere UilAGas Co. Wiowam Oil Co. Wolverine Oil Co. fippleionClsBge OH Co. CarnegJE Oil Co . Coma Oil Co. Cap Ian Oil8< Gas Co. Fort Pitt Dii Co. Jfie Galena Ca. Hnox Oil Ca. LearferUi/A Gas Co. Leal a Oil Co. L uck now Oil Ca. ^.umbermansDIISiBas Co. \ MohawliDilCo. Manaqfam Oil Co. I Niagara Oil Co. Pickwick Oil Co. Rof h -PrguE- Mai re Oil Co. Sachem OilCa. St Lawrence Oil Co. Bfevens Paint Oil Ca. \ Wgukeeha O'l Co. fisiaticPetraleum Co. (pel), Ltd. tietvOrleans Refining Ca. Simplex Refininij Co. •• Psiatic Pet Co. (Panama)itm, Gald^hell Steamship Ca. Pearl Shell 5team5rutch-Shell production decreased from 26 per cent of the total in 1921 to 13 per cent for the fii-st half of 1922. In South America the Royal Dutch-Shell interests have developed the production in Venezuela, while a subsidiary of the Imperial Oil Co. (Ltd.), of Canada, operates in Peru. This latter company is a subsidiary of the Standard Oil Co. (New Jersey), but the crude petroleum exported from Peru is practically all shipped to Canada. The Royal Dutch-Shell group controls the production in Egypt, the Dutch East Indies, and British Borneo. In India the crude petroleum is produced by British companies. (See p. 43.) In rersia the present production is mostly produced by a British com- pany, the Anglo-Persian Oil Co. (Ltd.). American companies are endeavoring to secure concessions in Persia and Mesopotamia. (See p. 50.) The production of the Galician oil fields, which are now in Poland, was largely owned by Austrian and German capitalists prior to the World vVar. Since the war French and Swiss capitalists have invested largely in oil companies operating in Poland. (See p. 56.) The most important proven petroleum areas in Russia are the Baku, Grozu}', and Ural fields. Some production was also obtained from Maikop aftd Ferghana. In 1914 there were three important foreign prociucing groups having large crude-petroleum production in Russia, viz, (1) the Russian General Oil Corporation, a British holding company controlling about 20 subsidiary and affiliated pro- ducing companies; (2) the Royal Dutch-Shell group, with 8 producing companies; and (3) Nobel Bros., controlling 5 important producing companies. (See Appendix Table 8, p. 133.) A French writer states that in 1914 the Russian General Oil Corporation produced about 21.5 per cent of the total Russian pro- duction; the Royal Dutch-Shell group. 16.4 per cent; and the Nobel group, 13.5 per cent. There were 4 other British companies finan- cially interested in about 14 smaller producing companies, which in 1914 produced 4.2 per cent of the total Russian production.^ Thirty-eight companies produced 98 per cent oi the crude-petroleum production of Rumania in 1921 and three companies produced about 70 per cent of that total. These three companies were the Astra Romana, a subsidiary of the Royal Dutch-Shell group, which had about 29 per cent; the Romaiia-Americana, a subsidiary of the Standard Oil Co. (New Jei'sey), with nearly 22 per cent; and the Steaua Romana, which before the World War was controlled by the Deutsche Bank, but is now owned by Rumanian, French, and English interests, which produced about 20 per cent of the total Rumanian production.^ » La Liiltc Pour le Potrole ot la Russie, pp. 121 and 165-172. ^ See United States Bureau of Forcipn and Doraostic Commerce Tn»de Information Bulletin No. 45. ---~ ""^' -^'t I •ti l. Map /. CRUDE PETROLEUM PRODUCTION AND PROPORTIONS OF ROYAL. DUTCH-SHELL GROUP AND OF AMERICAN PRODUCERS BASED ON 1921 OUTPUT 6(4 160* 180* 160* i*0' 120' 100* eo' LEGEND ffoy'^m>mmm^'^ FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 19 The January 29, 1923, issue of Revista de Hacienda (official organ of the Department of Finance and Public Credit of Mexico) sum- marized the investments in the petroleum industry of Mexico as follows : American companies, 006,043,239 pesos, or 58.2 per cent of the total investments in the Mexican petroleum industry; liritish companies, 344,776,199 pesos, or 33.1 per cent; Dutch, 71,197,308 pesos, or 6.8 per cent; Mexican, 11,582,405 pesos, or 1.1 per cent; and all others as 0,933,283 pesos, or 0.8 per cent. A detailed statement of the capital invested in oil lands, oil wells, pipe lines, refineries, and storage distributing facilities is given in Appendix Table 32 (p. 152). Section 6. Oil-bunkering stations. The economic and physical advantages accruing from the use of fuel oil as compared with coal was cjuickly realized by the principal maritime nations, consequently an increasing proportion of the new ships built both for naval and *^commercial purposes w^ere oil burners, while many originally designed to burn coal were converted from coal to oil firing. The rapid expansion in the number of oil-burning ships necessitated the construction and installation of oil-bunkering facilities at the various maritime centers thi'oughout the world. These terminal facilities required docks large enough to accommodate the largest ships, and adequate storage facilities and equipment for handling fuel oil. In addition lighterage facilities, such as barges, etc., were frequently available so that vessels might be refueled at the loading or discharging berths, thus doing away with tedious delays, as the cargp could be removed and the fuel supply replenished at the same time. Several foreign companies were among the first to appreciate the advantages inherent in the use of fuel oil and the members of the Royal Dutch-Shell group were among the pioneers in this branch of petrolemn marketing. At the present time a British steamer starting from New York City making a trip around the world and calling at every important port in Europe, along the Mediterranean, in India, the East Indies, China, Japan, Australia, New Zealand, and the west coast of North America, and then returning to New York City through the Panama Canal, would find oil-bunkering stations operated by the Royal Dutch- Shell group or the Anglo-Persian Oil Co. at every important port of call. Oil-bunkering facilities operated by an American company would be available to an American steamer on a similar voyage at the principal ports of western Europe and the Mediterranean, but between the Suez Canal and Singapore in the Malay Peninsula fuel oil would have to be purchased from foreign companies, while fuel oil could be secured from American companies at only a few ports in the Orient, Australia, or New Zealand. The oil-bunkering stations of the Royal Dutch-Shell group, of the Anglo-Persian Oil Co., and of 12 large x\merican companies are shown on Map II, opposite page 20, while Appendix Table 9, page 134, gives fuller details regarding each company, including so far as avail- able the capacities of the fuel-oil stations. The American com- panies are further classified on the map by the use of one symbol for companies belonging to the Standard Oil group and a different symbol for so-called independent concerns. As ah-eady indicated, l|«iiS«*#3%*nsS.te¥*::>:j»V'^^<^'S -' iimnw i 20 FORKFCIN OWNERSHIP IN THE PETROLEUM INDUSTRY. the fuel-oil stations of the Royal Dutch-Shell group are located in all parts of the world, while American companies operate fuel-oil stations in the important ports of North and South America, and in a large number of ports of western Europe, along the Mediterranean, and at certain ports on the eastern coast of Asia. The Standard companies have an aggregate bunkering capacity of about 8,500,000 barrels in America, Europe, and alon^ the Asiatic coast. The Standard Oil Co. (New Jersey) operates fuel-oil stations with about 6,000,000 barrels capacity, the Standard Oil Co. (Cali- fornia) has about 1,500,000 barrels capacity, and the Standard Oil Co. of New York owns stations with a capacity of about 850,000 barrels. The so-called independent companies together control storage capacities of about 20,000,000 barrels, and approximately one-half of this aggregate capacity is operated by the Doheny interests (Pan American) principally in the United States, Mexico, and Brazil. The Gulf Oil Corporation controls a capacity of about 2,300,000 barrels, the Texas Co. 2,700,000 barrels, the Sinclair interests have have about 2,900,000 barrels, while the Union Oil Co. of California and the Associated Oil Co. each control over 1,000,000 barrels capacity. The Royal Dutch-Shell group has about 1,250,000 barrels capacity at 10 stations in the United States and its possessions, while it has about 110 additional stations all around the globe, for which the present capacity is not available. ML w-j- -.^Mmr: m:mK.-^ ■■^■i''^^^'IK m'^WISI^^<>'W?^..- '^''f-^ Map I. LOCATION OF OIL BUNKERING STATIONS OF ROYAL DUTCH-SHELL GROUP. STANDARD GROUP AND OTHER LARGE COMPANIES 35004—23. (Fftoep.aa) ' *fe»aiw* lr-aKap»»f*»»*5»'' ^nmyfimm-- *■; *'■*;:■ ^-«WMibM»lMt*»¥****«^-'li*«f ?-l Chapter III. CONSOLIDATION OF ROYAL DUTCHSHELL INTERESTS WITH UNION OIL CO. (DELAWARE). Section 1. Union Oil Co. (Delaware). Preliminary proceedings.— During the World War certain pro- moters having in view the development of petrolemn properties on the f'acific coast succeeded in interesting eastern capitalists in petroleum-producing companies in California. As a result of these negotiations the United Western Consolidated Oil Co. was incor- porateti in 1917. This company controlled some petroleum acreage in the Midway, Casmalia, and Montebello fields in California, together with some leases m Wyoming. Later the Western Union Oil Co., controlling production in the Santa Maria field in California, was also acquired by the same interests, together with some other minor pro- ducing companies, such as the Dunlop Oil Co. The Commonwealth Petroleum Corporation was organized in 1918 as a holding company by the eastern capitalists already mentioned and acquired the stocks of the operating companies. Later acquisitions included the pur- chase of the Columbia Oil Producing Co. and its subsidiary, the 1 uente Oil Co., and thus production in the Whittier-Fullerton field and a refinery at Chino were acQuired by this eastern syndicate, these last two companies were w^ell-established concerns, the former being orgamzed in 1900 and the latter in 1892. Union Oil Co. of California.— The most important expansion made by these eastern interests was in the acquisition of stock owner- ship in the Union of California, and as particular prominence has been attached to this transaction, the following circumstances are of interest: About 1912 an option on the stock of the Union of California was obtained by the interests controlling the General Petroleum Co. (Capt. John Barneson) and in the year preceding the World W^ar this option was transferred to Andrew Weir (now Lord Inverforth) Under this agreement 27,793 shares of the Union of California stock were issued to the British Union Oil Co., which was organized in Jingland on April 16, 1915, but the exigencies of the war prevented the completion of this contract. The eastern syndicate above men- tioned purchased these shares held by the British Union Oil Co. in 1919, and in a cu-cular issued by the Union of California on August 12, 1919, regarding subscription rights to 64,285 shares of new^ stock about to be issued, the same interests are referred to as follows: A group of responsible linanciers have entered into an underwriting agreement with your company. * * * whereby * * * said underwriters offer to pur- chase irom any and all stockholders any and all of the certificates of rights which may be tendered to said underwriters at any time on or before September 20 1919 on the basis of $60 per share right. (See Exhibit 2. p. 70.) A large block of stock was doubtless acquired at this time and immediately afterwards— as of October 1, 1919— the eastern syndi- cate, Union Oil Co. (Delaware) held 108,135 shares and the right to acquire 16,115 additional shares. On February 14, 1920, the num- 21 '^g^s:«' 22 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. ber of shares held was 113,731 and by December, 1920, the number had increased to 130,869 shares, remaining at this figure until June 30, 1922. The Union Oil Co. (Delaware) was incorporated August 14, 1919, and acquired for cash the stock held by the above syndicate in the Union of California and in the Columbia Oil Producing Co., while stock was issued for the control of the Commonwealth Petroleum Corporation. In July, 1920, the control of the Central Petroleum Co., which had properties in Oklahoma, was acquired from the Texas Co. Additional producing properties were acquired directly in West Virginia and OKlahoma, wnile several subsidiary companies, such as the Eddystonc Oil Corporation and the National Exploration Co., were incorporated to conduct operations and exploration work. The Union of Delaware was simply a holding corporation and the physical properties were managed and operations carried on by the several subsidiaries mentioned above. Financial statements. — The balance sheets for this corporation as of December 31, 1920 and 1921, and June 30, 1922, are shown in the following table: Table 12. — Balance sheets of the Union Oil Co. {Delauarc), December 31, 19 W and 1921, and June SO, 192 J. Item. ASSKTS. Investments: Cninmon wealth Petroleum Corporation. Columbia Oil Producing Co United Western Consolidated Oil Co Eddystone Oil Corporation National Evploration Co C-cntral Petroleum Co Union Oil Co. of California Shell Union Oil Corporation Total in- e-«(ments Tankers Oil laiids and leases (Ohio) Furniture and fixtures Current assets Due from afTiliatcd companies. Deferred items Total . Dec. 31, 1920. , Dec. 31, 1921. $12,203,199.61 5,371,687.60 10.304.01 2,566,535.57 11,344,408.80 20, 440, 625. 42 .51,936.761.01 J12, 2, n, 20, 226,973.21 372,080.71 13, 3.56. 48 .566, 535. 57 700, 342. 00 35.5, 8.50. 70 440. 625. 42 52,675,764.09 4,040,000.00 I 3,893,769.65 6, 854. 09 6.316.6.5.5.45 620, (M7. 79 5,6.50.00 I 12,393.93 1.675,283.00 4, 623, .586. 94 166,750.49 62. 92.5, 968. 34 ! 63, 047, ,'>18. 10 LIABTI.ITIKS, Capital stock : 46, 483, 983. 40 Stock purchase oblipations: Cvcntral Petroleum Co. preferred stock 6. 000, 000. 00 Columbia Oil Producing Co 1,, 2.54, 779. 57 Current liabilities ■ .5, 501 , 666. 81 Due to airiliated companies 2, 221 , oas. 26 Deferred credit i 294, 37.5. 00 Surplus 1.170,1.5.5.30 June 30, 1922. $115,450.70 44,049,692.89 44, 165, 143. 59 3,906,269.65 431.. 50 19, 190. 84 462. 472. 07 8.S, 629. 00 48,637,136.65 47,193,011.20 47, 236, 0.>4. 00 5, 982, 900. 00 7.54, 839. 57 4, 953, 263. 89 1,242,319.22 226, 269. 73 2,694,944 49 1 2, .501. 981. 03 23,611.98 •1,124,510. .36 Total 62,925.968.34 63, 0*7, 548. 10 i 48, 637, 136. 65 » Deficit. The above table shows the stocks held in the various subsidiaries, including the Union Oil Co. of California, in 1920 and 1921; in 1922, however, these holdings were transferred to the Shell Union Oil Corporation (recently organized) and the stock of the latter com- pany (2,240,000 shares) was substituted therefor, while some mis- cellaneous shares (171 preferred, 3,231 common) were still retained u, FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 23 in the Central Petroleum Co. The physical properties sho^vTi in June, 1922, included the tankers in process of construction and some oil lands and leases in Ohio. The current liabilities aggregated the very substantial sum of $2,500,000, and to liquidate this in- debtedness an offering of subscription rights to 139,000 shares of Shell-Union stock was made on August 17, 1922, to stockholders of the Union of Delaware at $12 per share at the rate of 1 share of common stock in the Shell-Union for each 10 shares in the Union of Delaware. (See Exhibit 3, p. 71.) This offering was promptly oversubscribed, and 155,000 shares were sold. The Shell-Union stock was quoted on the New York curb market on October 19, 1922, at $12.1 2^ per share. Section 2. Merger with Royal Dutch-Shell interests. Preliminary procedure. — Early in 1921 the directors of the Union Oil Co. (Delaware), which was practically a producing com- pany, realizing, it is said, the necessity of the development of a thoroughly integrated petroleum company wdth refineries, pipe lines, distributing and marketing facilities, entered into negotiations with the Royal Dutch-Shell interests, and a plan was evolved which enabled the Union Oil Co. (Delaware), without the raising of new capital, to share in the advantages accruing from the utilization of additional refineries and other facilities. As a preliminary step a careful examination and valuation of the physical properties and facilities of both groups in the United States, as they existed May 31, 1921, was made by disinterested parties, and it was later agreed that, if these properties were vested in one corporation, the interest of the Royal Dutch-Shell and Union of Delaware groups would be 72 and 28 per cent, respectively. An agreement w^as signed October 19, 1921, by the Union of Delaware and the Anglo-Saxon Petroleum Co. (Ltd.), a Royal Dutch-Shell subsidiary, and approved at a special meeting of the shareholders of the- Union of Delaware November 17, 1921. (See Exhibits 4 and 5, pp. 73 and 78.) Under this agreement the principal American interests of the Royal Dutch-Shell group, together with most of the properties of the Union of Delaware, were merged into a new company — the Shell Union Oil Corporation. Shell Union Oil Corporation. — The Shell Union Oil Corporation is a holding company. It was incorporated in Delaware February 8, 1922, and issued 8,000,000 shares of common stock in payment for the property and assets transferred to it by the Union of Delaware, on the one nand, and the American subsidiaries of the Royal Dutch- Shell group on the other. The Union of Delaware received 2,240,000 shares of Shell-Union stock, a cash payment of $386,220.70, and the Shell-Union assumed $777,777.77 of Union Oil Co. liabilities. ^ The Royal Dutch-Shell interests received 5,760,000 shares of the Shell- Union stock, "which was allotted as follows : Shares. Roval Dutch Co 3, 152, 770 Shell Transport & Trading Co 2, 101, 847 Dundee Corporation 505, 383 Total 5, 760, 000 The immediate representative of the Royal Dutch-Shell interests in the preliminary transactions was the Anglo-Saxon Petroleum Co. 1; ' ' •vWHtair-.a it), 'r 'I' 24 FORKIOX OWNERSHIP TX THK PKTROLEUM INDUSTKV. (Ltd.), one of the principal subsidiaries of the group The Dundee Corporation is not a member of the Royal Dutch-Shell group. (See Financial details of the merger.— The preliminary processes in this consolidation, including the ^''l"ati°'i,f ''^^^''091 «nd\he Mftv 31 1921 the signing of the contract October 19, 1921, and tfte details of the approval of the same by the stockholders of the Union Oil Co. (Delaware) have been outlined in the Pre'^P'!'"! Pa'"'\fi;*P'it- The consolidation was consummated on January 2, 1922, although the new holding companv (Shell Union Oil Corporation) was not in- corporated until February 8, 1922, and some adjustments in the original valuations wore made as late as February 10, 1922. fhe consolidated balance sheet of the Shell Union Oil Corporatio 1, dated January 2, 1922, is shown in the' following table, while a similar statement showing more detail is given in Appendix Table 10 (p. 139). Table yi.—Bahmr «heH of the Shdl Unim, Oil r,>r,,oratioii .Innunrii i, mi. ASSETS. Properties, oil lands, leases, pipe lines, re- fineries (hook value).,.., --,----• * ^- ' Sr* ?t?' 4? T.esa reserves for depreciation and depletion. . . 4 o,44(), /41.4/ ,,. , , „^, $153,119,799.02 I* ixeti assets, net /■■,■";;*• ;^"*i n f n„i; Investments, inc hiding stock of the Union Oil To. of (all- ^^ ^^^ ^^^^ ^^ fornia ' ' Current assets: $ 18, CG5, 430. 93 I asn .J ey\-\ rOX "V^ Accounts receivahle -*' -j^' \-l\- -^i . Notes receivahle .-- « 20« 867 73 Inventories at cost or market 8,JU8,»b/. /^ M. . 1 * fa - - - '-^0, 289, 101. 89 Total current assets ^^g' ^^^ 39 Prepaid expenses - " ' ^ , , , 217,585,720.17 Total assets __ ' M.ABII.ITIES. Current liahilities: . . Accounts payahle ^\^ r* ;' f^l' % Notes payable -':{{' ^'l', \' Sundry accruals J^ ' - "y ■ .^ Federal taxes 23 0, OOP. UU Total current liahilities J, 092, 348. 32 Purchase money obligations -' "' '■ ^ Reserves against option of purchase ^. :J^^' ^^- Reserve for bad and doubtful items on nnn' noo' 00 Preferred stock, per cent cumulative - , - 20, 000, OOU. uu Common stock. 8.000.000 shares of no nar value representing net assets, after deducting the preferred stock 18I,«1A »^i- -^o Total liabilities 217,585.720.17 The fixed assets, inchuling oil-land leases, pipe lines f^^J^^^^^J\f transferred to the new corporation, had a hook value of SU 8,o()b,o4U, and when the aggregate fund for depreciation and denletion was deducted the net value of these properties amounted to about $153,119,800. The respective holdings of the several companies in- cluded in the combination are shown in detail in Appendix lable 10, page 139. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 26 It will also be noted that tlie old Royal Dutch-Shell companies, including the Shell of California and the Roxana Petroleum Corpora- tion, contributed $135,198,900, or approximately 88 per cent of the total book value of the fixed assets in the new corporation, while the Union of Delaware companies contributed only 12 per cent. In the case of the investments, however, the old companies put in about $2,000,000, which was the investment of the Roxana Co. in the Comar Oil Co., while the Union of Delaware companies contributed about $32,000,000, including principally the holdings in the Union of California, with a book value of $20,441,000, and the equity in the Central Petroleum Co., aggregating $11,356,000. The cash contributed by the various amalgamating companies was comparatively small. The important item of $18,000,000 represents the sale of 200,000 shares of 6 per cent preferred stock, which was underwritten by Lee, Higginson & Co., and issued on or about August 18, 1922. (See Exhibit 6, p. 80.) This stock was issued to secure working capital for the proper development of the consolidated properties. The Shell Union Oil Corporation, being a holding com- pany, simply holds the stock of the several American subsidiaries which own and operate the various properties. The values of the capital stock acquired from each company, as shown on the exhibit, aggregates $183,913,000. The deduction of $2,000,000 was then made, representing the discount on the sale of $20,000,000 preferred stock, leaving the book value of the common stock as $181,913,000. Against this amount 8,000,000 shares of common stock of no par value was issued, giving a nominal value of $22.75 per share. Both classes of this Shell-Union stock are now quoted on the market, the common on October 19, 1922, at $12. 12^ and the preferred at $94 per share, respectively. A balance sheet of the Shell Union Oil Corporation on June 30, 1922, is shown in the following table: Table 14. — Balance sheet of the Shell Union Oil Corporation, June 30, 1922, Item. ASSETS. Investments: Stock of subsidiary and affiliated companies — Matador Petroleum Co., common Ozark Pipe Line Corporation- Preferred Common Roxana Petroleum Corporation- Preferred Common Shell Co. of California, common Rights under agreement between Union Oil Co. and the Texas Co. respecting the purchase of stock of Central Petroleum Co $11 , 250, 000. 00 Less reserve against option to purchase preferred stock. . 6, 000, 000. 00 Shares. 4,419 85,161 184,000 36,903 400,000 788, 081 Value. Stock of Union Oil Co. of California . Current assets: Cash Accoimts receivable Prepaid expenses » . Due from Roxana Petroleum Corporation Deferred items, net Total. 130, 869 $441,900.00 8,516,100.00 18,391,308.73 3,690,300.00 42,759,406.56 82, 314, 951. 40 5,250,000.00 161,363,966.69 20, 440, 625. 42 181,804,592.11 16, 014, 165. 35 36,000.00 1,853.57 7, 216, 253. 21 189,713.09 205,262,577.33 35904—23- M-S^r. ■» .->-»*«-,. -mmamhuK- w 'om m nA t Uit tuMitiiikJ^'' I, %ri;*^:*'?^--'«*iw«*»" % *1?^>T«' tT, f 26 FOREIGN OWNERSHIP TN THE PETROLEUM INDUSTRY. Table 14.— fiakncc ^htti of the Shell Union Oil Corporation, June JO, 1922— Contd. Item. LUBILITIES. Preferred stock, scries A Common stock AccouDts payable Due to Shell Co. of California ; Reserve for dividends on preferred stock, series A Profit and loss surplus, six months ended June 30, 1922. Total. Shares. Value. 200,000 8,000,000 $20,000,000.00 181, 811, 168.86 34, 062. 47 42,783.58 160, 000. 00 3,224,^2.32 205,262,577.33 At this time the company had been operating for some months and the assets as tabulated show the number of shares held in the various subsidiaries. The properties of the numerous Union of Delaware subsidiaries shown in Appendix Table 10, page 139, were distributed geographically to the Shell of California or the Roxana Petroleum Corporation, operating, respectively, in California and in the mid-continent oil field. Some of the former companies are m process of dissolution. The balance sheets of the principal prede- cessor companies at the end of 1920 and 1921 and other American Royal Dutch-Shell subsidiaries for June 30, 1922, are shown m .\ ppendix Tables 1 1-29, pages 143-1 50. A recapitulation of the fixed assets of the predecessor companies as of December 31, 1921, and of the Shell Union Oil Corporation as of January 2 and June 30, 1922, is given in the following table: Table 15.— Gross assets of predecessor companies and of the Shell Union Oil Corporation as of December Si, 1921, and of January 2 and June 30, 1922. Item. Predecessor companies, Dec. 31, 1921 Shell Union Oil Corporation, Jan. 2, 1922.. Shell Union Oil Corporation, June 30, 1922 Gross assets. Depreciation. $226,691,189.80 198, 566, 540. 49 224,498,737.95 $39,648,771.73 45,446,741.47 43,811,257.00 Net assets. $187,042,418.07 1.53,119,799.02 180,687,480.96 This table shows that the gross book value of the fixed properties of the predecessor companies aggregated $226,691,000 in 1921, while the net book value was $187,042,000 on the same date. Appendix Table 10, page 139, gives the net value of the fixed assets in the merger on January 2, 1922, as $153,120,000, so that the fixed property not in the new combination amounted to about $33,923,000, which rep- resented the book values attached to certain oil-producing properties in West Virginia and elsewhere, together with some adjustments in the depreciation and depletion accounts and also the investment in the ships now transferred to the Asiatic Petroleum Co. (Delaware). FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 27 Section 3. Properties of Shell Union Oil Corporation. Acreage of oil lands. — The acreage of oil lands held by the Shell Union Oil Corporation on June 30, 1922, and also the land holdings of the predecessor companies on December 31, 1921, are shown in the following table Table 16. — Total and proven acreage of predecessor companies, December dl, 1921, the Shell Union Oil Corporation, June 30, 1922, (kssified by States. and Company. Total acreage, 1921. Shell Co. of California Columbia Oil Producing Co United Western Consolidated Oil Co Western Union Oil Co National Exploration Co Eddystone Oil Corporation Roxana Petroleum Corporation Comar Oil Co Central Petroleum Co. (option) Total 27,420 5,580 375 11,502 35,745 26,213 87,517 41, 874 27,000 263,226 Proven acre- age, 1921. 2,028 1,632 100 1,100 3,059 7,034 18,687 720 12,775 47,135 Total acreage, Jime 30, 1922. 24,682 5,580 375 11,502 7,903 7,518 115,750 40,638 27.000 Proven acre- age, June 30, 1922. 2,362 1,642 100 1,100 35 15,283 1,043 12, 775 240.948 34,340 Company. Total acreage by States, June 30, 1922. CaU- fomia. Shell Co. of California | 24,682 Columbia Oil Producing Co i 5, 580 United Western Consolidated Oil Co I 375 Western Union Oa Co j 11,502 National Exploration Co 7,903 Eddystone Oil Corporation 7, 518 Roxana Petroleum Corporation Comar Oil Co Central Petroleum Co. (option) Total. 57,560 Okla- homa. 63,666 40,558 27,000 131,224 Texas. Louisi- ana. Arkan- sas. Kansas. 39,606 I 10,325 903 1,250 80 39,606 10,325 903 1,330 This table also ^ives the proven acreage for both dates and like- wise the distribution of the land holdings by States for June 30, 1922. The Shell of California, the Roxana, and Comar companies were all subsidiaries of the Royal Dutch-Shell group in 1921, while the other companies were all controlled by the Union of Delaware. The land holdings of the former group were located at that time in California, Kansas, Oklahoma, Texas, Arkansas, and Louisiana, while the latter concerns had lands and leases in all of the above States excepting Kansas and Arkansas, and in addition thereto held properties in West Virginia aggregating about 14,500 acres. The total holdings controlled by tlie predecessor companies in 1921 aggregated over 263,000 acres, of which 47,000 acres were proven territory. At the time of the consolidation certain lands and other properties were excluded from the new corporation, while the constituent companies had varied their holdings by certain additions and surrenders so that the total acreage held on June 30, 1922, aggregated about 240,950 acres, of which over 34,300 was proven area. Over 131,000 acres were located in Oklahoma, 57,600 I 3>* '«?.,' v... ■.*-«*-aii^-*« i*V: i*^- 28 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. in California, 39,600 in Texas, and 10,300 in Louisiana, while th^ acreage held in Kansas and Arkansas was comparatively unimportant so far as the quantity is concerned. The Shell Co. of California owns about 58,000 acres of oil lands in California. The Roxana Corpora- tion owned 115,800 acres in the mid-continent field and owns 50 per' cent of the reported holdings (40,700 acres) of the Comar Oil Co., retaining, however, the management of the company, while it has only an option on the properties of the Central Petroleum Co., which expires in 1923. The Wall Street Journal of November 2, 1922, on page 6, stated: Shell Union Oil ('orporation will retire on May 1, 192.3. at par the $6,000,000 5 per cent cumulative i)referred stock of the Oentml Petroleum (^o., which is held by the liankers Trust (-o. under a 10-year votino; trust. It appears, therefore, that the Shell Union Oil Corporation intends to exercise its option to purchase on May 1, 1923, the entire out- standing preferred stock and 66 § per cent of the outstanding common stock of the Central Petroleum Co.* The 1921 annual report of the Koyal Dutch Co., in discussing production in the mid-continent field, states: The Roxana Petroleum (Corporation has considerably strengthened its jKJsition in the mid-continent by entering into two agreements for the joint exploitation of fields which were already partly productive and partly still being explored. They succeeded in appreciably increasing the production of the former and in ])roving j)aying production in the latter. The Union Oil Co. of California, in which tlie Shell Union Corpora- tion owns over 26 per cent of the outstanding stock, controlled 266,500 acres of oil lands in California, Texas, Wyoming, and Colo- rado on June 30, 1922. of which slightly over 11,200 acres were proven territory. On June 30, 1922, the Sliell of California had 557 wells, the Roxana Petroleum Corporation 556, the Comar Oil Co. 14, and the Central Petroleum Co. 987 wells, making altogether 2,114 wells. The oil lands and leases acquired during the year ending June 30, 1922, were: Shell Co., 5,080 acres; Roxana Co., 21,600 acres; the Comar Co., 3,200 acres; while the Union of California had acquired 8,900 acres and surrendered 11,000 acres during the same period. Crude petroleum production. — As shown by the following table, the production of the predecessor companies, including the Comar and Central Petroleum Cos., was 13,640,000 barrels in 1921, while the production of the companies included in the new consolida- tion aggregated 9,043,000 barrels during the first six months of 1922. Of this latter quantity 4,617,000 barrels were produced b}^ the com- panies operating in California, and 4,426,000 barrels in the mid- continent fields. The total production for 1922 was 17,543,362 barrels, of which 11,188,489 barrels was produced in California and 6,354,873 barrels in the mid-continent oil field. ' Under date of Dec. 11, 1922, Adrian Corbott wrote the commission in reference to the above, as follows : "There is no plan so far as 1 am aware of to retire the issued and outstanding stock of Central Petroleum Co. Shell- Union Oil Corporation held an option to acquire all of the issued and outstanding preferred stock of Central Petroleum Co. and two-thirds of its issued and outstanding common stock for the sum of $6,<)0().»)00. This option Shell-Union Oil Corporation has elected to exercise. Such election having been made, Shell-Union oil Corporation is obligated to purchase and paj- for such preferred and common stock on Mav 1 . 192.-^. " FOREIGN OWNERSHIP IN THE PETROLEUM iJSiDUSTRt. 29 Table 17. — Crude petroleum production in barrels, of companies now controlled by the Shell Union Oil Corporation, 1921 and first half of 1922. Company. 1921 Shell Co. of California 4, 924, 1 .54 Columbia Oil Prodticing Co . | 1 , 348, 859 United Western Consoli- i datedCo ! 92,364 Western Union Co \ 623, 1 14 Commonwealth Oil Cor- I poration ' 1,356 National Exploration Co j 504, 165 June 30, 1922.1 3,426,720 660,392 52,778 220,006 Company. Eddystone Oil Corporation Roxana Petroleum Cor- poration Comar Oil Co Central Petroleum Co. (op- tion) Total 1921 129,943 3,898.030 209,955 1,908,000 .Tune 30, 1922.1 256,905 2, 855, 849 570,249 «],000,000 13,639,940 I 9,042,899 > First 6 months. « Estimated. In this compilation the quantity produced by the Central Petro- leum Co. was estimated at 1,000,000 barrels, or about 50 per cent of the production reported for the preceding year. The total pro- duction in the United States for the first six months of 1922 was reported as 267,521,000 barrels.^ The Royal Dutch-Shell group produced 9,043,000 barrels during the same period, or 3.4 per cent- Thus it would appear that the latter group is increasing its propor- tion of the production in the United States, as the proportion in the United ^States in 1920 was about 3 per cent. In tJiis computa- tion the operations of the Union of California are not considered, as the Royal Dutch-Shell group does not control this company. This company produced 9,796,000 barrels in 1921 and 5,889,000 barrels during the first half of 1922. In June, according to their reports, the average daily production of the Shell of California and its subsidiaries was 39,400 barrels, while the Roxana, Comar, and Central aggregated 25,800 barrels, giving a total of over 65,000 barrels daily. The Union of Cali- fornia had a daily production of about 33,000 barrels. The Wall Street Journal of October 14, 1922, states: W. H. Allen, president of the Shell Union Oil Corporation, says dailv average j^ross i)roduction of oil by its subsidiaries in September was 7(),476 barrels, inrludinji 13,000 barrels of shut-in production at (^oalinga. ( -alif. Daily avera^^e gross production in January, 1922, was 37,289 barrels. Central Petroleum (Jo.'s daily average produc- tion in September of 4,410 barrels is not included. Most of the increase in pro- duction has come from Signal Hill and Santa Fe Springs fields, (Jalif. * * * Pro- duction from new completions wathin the lam 10 davs brijigs total output above 80,000 barrels gross daily. Petroleum refineries and pipe lines.— The Shell of California owns and operates three refineries and a topping plant in that State with a daily combined capacity of 35,800 barrels. The refinery at Martinez, in the vicinity of San Francisco, is a thoroughly integrated plant with a daily capacity of 30,000 barrels. The smaller plants with their capacities are: Coalinga, 2,000; Chino, 1,300; Olinda (topping), 2,500 barrels daily. In addition the company has four gasoline absorption plants located in the oil fields of southern Cali- fornia which will handle 10,000,000 cubic feet of gas daily. The company owns a trunk pipe line extending from the Coalinga fields to Martinez, a distance of 170 miles, also a short line extending from the Puente fields to the refinery at Chino south of the Tehachapi range, together with gathering lines'^ storage tanks with a capacity of s American Petroleum Institute bulletin. The preliminary estimiite of the U. S, Ceologieal ?urvev for 1922 was i>jl,197,(XW barrols. Xet imports for 1922 were about 120,000,01)0 barrels. ■ ■ -. .*mut'^' « ttn^-T ■■^ >.. ^/^ i^J?^ ft' m- 30 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 5,000,000 barrels, 139 tank cars, and 690 tank wagons, trucks, and automobiles. The Koxana Petroleum Corporation owns and operates one refinery at Woodriver, 111., with a daily capacity of 15,000 barrels. This plant is completely integrated, manufacturing all petroleum products. In addition it has three compression plants in the Oklahoma oil fields, with a daily productive capacity of 222 barrels of casing-h^ad gasoline. This company also operates the pipe line owned by the Ozark l^ipe Line Corporation. Its trunk pipe line, 582 miles in length, connects the oil fields in Oklahoma witli the refinery at Woodiiver, 111. This trunk pipe line, commencing at Waurika, Okla., is a 6-inch line to Cushing, Okla., 156 miles distant, and then a 10-inch pipe line to Woodriver, 111., 426 miles distant. The capacity of this latter pipe line is about 25,000 barrels daily while the 6-inch pipe lines average about 10,000 barrels. In addition to this trunk pipe line, there are 24 miles of smaller pipe lines in the vicinity of Cushing, Okla., besides gathering lines, storage tanks with a capacity of 3,000,000 barrels, loading racks, and other facilities. The Central Petroleum Co. owns six compression plants and one absorption plant in Oklahoma, but there are no refining facilities controlled by this company. Marketing equipment. — In the domestic market the Shell of California distributes its products in all the Pacific Coast States, also in Nevada and Arizona, while shipments to noncontiguous territory of the United States are made to Alaska and Hawaii, and export trade is canied on with British Columbia, Chile, and other countries. In its domestic territoiy the company maintains 77 service stations distributed throughout California, Washington, and Oregon, which deliver the petroleum products directly to the consumer, and the company has an investment of about $200,000 in foreign ports, consisting chiefly of storage tanks and other terminal facilities. The marketing equipment of the Roxana Co. includes 1,003 tank cars owned, 373 tank cars rented, also 168 motor vehicles owned and 19 others in which the company owns only a 50 per cent interest. Section 4. Stock ownership of Shell Union and subsidiaries. Shell Union Oil Corporation. — ^As already stated the Royal Dutch-Shell gioup received 72 per cent and the Union Oil Co. (Dela- ware) 28 per cent of the stock of the Shell Unioin Oil Corporation. The present status of the stock ownership in this corporation, its sub- sidiaries and coordinate companies, is shown in the following table: Table 18.— ^^area of common stock outstanding of the Shell Union Oil Corporation and subsidiaries, Union Oil Co. (Delaware), and tJie Union Oil Co. of California. Company. .Shell Union Oil Corporation.... Shell Co. of California Roxana Petroleum Corporation Ozark Pipe Line Corporation... Matador Petroleum Co Union Oil Co. (Delaware^ Union Oil Co. of California Total. Ueld by- Shell Union. 8,000,000 788,086 400,000 184,000 5,916 1,389,310 500,000 5,760,000 788,066 400,000 184,000 5,916 130,869 Union Oil Co. (Dela- ware). Union Oil associates. 2,240,000 273,8.j3 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 31 As shown by the table, the Shell Union Oil Corporation issued 8 000,000 shares of common stock with no par value for the prm- cipal American subsidiaries of the Royal Dutch-Shell group and of the Union Oil Co (Delaware). The Roval Dutch-Shell group received 5,760,000 shares and the Union of Delaware 2,240,000 shares of this stock. The former block of stock was further allotted as follows: Shares. Roval Dutch Oo iVmll^ Shell Co ^'^3:1^ Dundee Corporation : ^'^' ^^"^ The Royal Dutch and Shell companies' holdings are 60 per cent and 40 per cent, respectively, while the Dundee Corporation, a British company incorporated in New York, formerly controlled some petroleum-producing property in the mid-continent fields. About 1910 this property was transferred to the Royal Dutch-Shell interests and ultimately stock of the Roxana Petroleum Co. was con- veyed to the Dundee Corporation. At the time of the recent merger the Dundee interests received the Shell-Union stock in exchange for its holdings in the Roxana Petroleum Corporation. The balance sheets of the Dundee Corporation for December, 1920, and June 30, 1922, are given in Appendix Table 30, p. 151. This company is not a member of the Royal Dutch-Shell group. The Union of Delaware received 2,240,000 shares, i. e., 28 per cent of the total common stock issued. Reference was made (p. 23) to the Union of Delaware circular offering 139,000 of these shares for sale to their stockholders at $12 per share in order to hquidate some of its indebtedness. The offering was oversubscribed; 155,000 shares were sold and are now quoted on the New York Exchange. During the past summer (1922) the Shell Union Oil Corporation sold 200,000 shares (par value $100) of 6 per cent cumulative pre- ferred stock to Lee, Higginson & Co. This stock was listed on the New York Stock Exchange and is now being sold to investors. The preferred-stock holders have no voting power except under very special circumstances affecting their dividends. The Shell-Union in turn owns all the issued preferred and comnion stock of the Roxana Petroleum Corporation and the Ozark Pipe Line Corporation and also all the common stock of the Matador Petroleum Co. The Shell Co. of California has only common stock outstanding, and all except about 20 shares is held by the Shell-Union; conse- quently there is no doubt about the complete foreign control of the Shell-Union, Shell of California, Roxana, and Matador companies. Foreign interests in Union of Delaware.— This company had 1,389,310 share of common stock issued and outstanding on June 30, 1922. The commission obtained from the records of the company a list of all shareholders with foreign addresses and also another list containing the names and addresses of all other stockholders owning 1,000 shares or over, with the number of shares so held. Inquiries were then directed to these holders to determine if they held the beneficial interest in the stock listed in their names and, if not, to furnish the names and addresses of all holders of 100 shares or over who held such beneficial interest. These inquiries included the holders of more than 923,000 shares, or about 66 per cent of the total shares outstanding. ■"'■*•:'':**•">•''*".?' 32 FOREIGN OWNERSHIP IN THE PETROLEUM INin'STRY. ■,*>* ft- .1 y • ■ • The replies from stockholders received showed 732,000 shares reported by holders with United States addresses, while 22,280 had foreign addresses. Thus the domestic holders had 732,000 shares out of 754,000, or 97 per cent, and the foreigners about 3 per cent. Union Oil Co. or California. — This compajiy has 500,000 shares of common stock issued, of which the Shell-I^iioJi holds 130,869 shares, or slightl}' over 26 per cent. Miscellaneous foreign holders have 651 shares and sundry domestic holders 94,647 shares, while the Union Oil Associates have 273,833 shares, or about 55 per cent of the entire stock outstandiiio^. Dissolution of Union Oil Co. (Delaware). — On September 26, 1922, a notice (Exhibit 7, p. 85) of a meeting of stockholders of the I'nion Oil Co. (Delaware) was sent out anju)uncing a special meeting to be held October 20, 1922, to act upon the following action of the board of directors: Rc-soUuff, That in the jud^mont of the hoard of dii<( tors (»f I'liioii Oil Co.. a Delaware eor])oration, it is advieahlo and most for the 1 enefit of naid company that it should he dissolved and that its assets, after its dehl-- ha\e heen paid or provided for. should l>e distrihuted amoni? its stockholders. Under date of October 25, 1922, James II. Brookmire, president of the Union Oil Co. (Delaware), informed the commission that the general meeting of the stockholders had approved the resolution authorizing the dissolution of the company.* According to the original agreement the directorate of the Shell- l^nion consisted of not more than 19 persons, 14 of whom were to be nominated by the Anglo-Saxon Co., a subsidiary of the Royal Dutch- Shell group, and 5 by the Union Oil Co. (Delaware). (See Exhibit 4, p. 73.) At a recent meeting of the stocldiolders the immber of direc- tors was increased to 25 and new officers were elected. In its report of this meeting the Wall Street Journal of November 10, 1922, stated: At a meetin^r of tlie Shell-Union Oil Corporation, Sir Henry W. A. Deterdin^jr, uianai^inir director of the Royal Dutch-Shell i^roup, was elected president to succeed William TI, Allen, resii;ned. Directorate was also in^'reased hv five members from 20 to 2". and live ref)resentatives of the Royal Dutch-Shell urroup were made directoi-s. 1 ive additional directors ele•» ti ■■■-^'M 84 FOHKIGX OWNERSHIP IN THE PETROLEUM INDUSTRY. concentrated sources of suj)ply. In this connection the following excerpt from a statement of Sir Mackay Edgar, head of the firm of vSperlin^ & Co., London bankers, under London date of April 24, 1920, on the international petroleum situation is of interest: While America is exhausting her supplies at a prodigal speed we are getting a firmer grip upon the world's oil reeerves. * * * • , ^ • Transport is another crucial point. In the next few years the governing factor in the oil position will be not the amount produ( ed, but the number of available tankers. Men like Doherty and Bedford understand the position and are diligently scouring the world for new oil fields, but wherever they liave turned they found British enter- prise before them aiul the control of the most promising properties in British hands. Section 2. Other foreign interests in the United States. The development of the petroleum acauisitions of the Royal Dutch-Shell group in California and the mid-continent oil fields was discussed in the preceding chapters. ,^ , , Reference was made to the holdings of the Petroleum-l^rodukte Aktien-Gesellschaft in the Union Petroleum Co. and to purchases of petroleum products from the Gulf Refining Co. made by the Shell interests about the beginning of this century. (See p. 9.) About the same time Messrs. Balfour and Guthrie (British) organized a pro- ducing company, the California Oilfields (Ltd.), in the Coahnga field in California. During the first decade of the century the Dundee interests secured holdings in Oklahoma. (See p. 31.) These last two properties were later acquired by subsidiaries of the Royal Dutch-Shell group. The connection of foreigners with the early developments in Wyoming, now attracting so much attention, was outlined by the commission in a previous report as follows: * The history of the earlv development of the Shannon pool of the Salt Creek field is unique in that it was largelv developed by foreign capital. Certain Belgian, Dutch, and French capitalists became interested in this field soon after the venture of the Pennsvlvania Oil ct (las (o. had proven unprofitable. These foreign capitalists belonged to two distinct groups. The first group included the real pioneers and accuiired the Shannon claims which had l)een secured from the Pennsylvania Oil & Oas Co In 1905 these claims were transferred to the Soci6t6 Belgo-Americame des Petroles du Wyoming, a Wyoming corporation financed ])y Belgian and French capi- talists These claims did not cover the entire Shannon pool, and Lobell secured control of the claims held by Cy Iba and transferred them, in !1K)7. to a Dutch com- panv known as the Petroleum Maatschappij Salt Oeek. a toreign cori)oration. I his company was later incor]>orated in Wyoming under the same name. 1 he selection of the clainis for the Petroleum ^raatschappij Salt Creek of Wyoming was made by Dr. (^esare Porro, an Italian geologist. * * *. . ^ ,^ , •. t . i • *^ The second group of foreign interests, consisting of l^rench cai)itali8ts, became inter- ested in the Salt Creek field about 1910 through the efforts of Verner Z. Reed, of Denver. Colo. Reed obtained about $600,000 from them, and through the Reed Investment Co., a company engaged in the promotion bu.^iness, the Midwest Oil ( o. was organized in February. 1911. A partial list of the British oil companies operating in the United States is given below. C/orpan Oilfields (Ltd.V Imperial Petroleum Co. Kansas-Oklahoma Oil &. Refining Co. (Ltd.). Kern River Oilfields of California (Ltd.). Midway Consolidated (Ltd.). Nowata Oilfields Syndicate (Ltd.). Oil Lands Development Co. of Oklahoma (Ltd.). Oktaha Oilfields (Ltd.). 1 Federal Trade (^ommLssion, I'etroleum Industry of Wyoming, p. 19. Pacific Oilfields (Ltd.). Pacific Petroleum Co. (Ltd.). Pecos Vallev Oil Co. (Ltd.). Petroleum Exploration Co. CLtd.). St. Helen's Petroleum Co. (Ltd.). Santa Maria Oilfields (Inc.). Scottish Oklahoma Oil Co. (Ltd.). Southern California Oil Syndicate (Ltd.). Tulsa Oil Co. (Ltd.). FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 35 Oklahoma State Oil Co. Tulsa Oil Co. In addition to the companies mentioned above there are doubtless many other corporations wholly or partly owned by foreign capitalists that own petroleum production in this country. For example, the Union des Petroles d^Oklahoma, which was organized in France in 1911, formerly owned all of the outstanding stock of the following American companies: Monitor Oil & ftas Co. Reese Oil Co. Terrain Oil Co. I In 1918 the properties owned bv the above companies were con- veyed to the Oklahoma Producing & Refining Corporation of America, and this latter company was controlled by the Oklahoma Producing & Refining Co. and the Union des Petroles d'Oklahoma. In 1920 the Ohio Cities Gas Co., now the Pure Oil Co., acquired about 63 per cent of the common stock of the Union des Petroles d'Oklahoma, and' in 1922 its preferred stock held by French stockholders was acquired by the Pure Oil Co. The resum6 given above clearly shows that equal opportunities for the nationals of all countries to^ participate in the development of domestic petroleum deposits has been the American policy, and the American petroleum industry therefore naturally expected that a similar freedom of action would be extended to it by other countries possessing prospective petroleum areas. Section 3. Recent activities of foreign interests. Pacific Oil Co. — The reported acquisition by foreign interests of the stock of the Pacific Oil Co. was referred to in a previous report of the commission.^ Mr. Kingsbury's statement that 'control of the Pacific Oil Co. was sought by foreign interests' ' referred to the Roval Dutch-Shell group. Inquiry was made of the Royal Dutch-Shell group by the commission whether it had acquired or was acquiring any interest in the Pacific Oil Co., to which Gen. Averv D. Andrews, representative of the Royal Dutch-Shell group replied as follows: "Replying to your telegram November 21, received 22d, I am now authorized to state that the Dutch-Shell interests, by which I mean Royal Dutch Petroleum Co. of Holland and Shell Transport & Trading Co. of London and their subsidiary companies, do not own and are not now acquiring Pacific Oil Co. stock." The commission communicated with K. R. Kingsbury, president of the Standard Oil Co. (California), regarding a statement made by him that ''Pacific Oil Co. was sought by foreign interests," and received his reply, dated August 31, 1922, as follows: Regarding the statement made in my letter to the commission about a year ago to the effect that "Pacific Oil Co. was sought by foreign interests": A statement was made to me early in December. 1920, by Capt. John Barneson, president of the General Petroleum Corporation, to the effect that he knew that Shell interests in London were endeavoring to acquire a substantial interest in the Pacific Oil Co. I would refer vou to him for specific evidence in this regard. It was about the time of his statement to me that o\ir company made ita first purchases of the stock of the Pacific Oil Co. With the knowledge that Shell interests were desirous of acquiring this property, we were verv active over a period of several months in our effort to secure on the open market the floating supply of stock which might easily be acquired in the same manner by these foreign interests. During 1921 the Standard of California acquired an interest of less than 20 per cent in the Pacific Oil Co. » Federal Trade Commission, Paciflc Coast Petroleum Industry, Part II, p. 131. 36 f()ri:i(;n ownership in the petroleum industry. The commission recently wrote to Capt. John Barneson, president of the General Petrohnim Corporation, requesting the facts regarding his statement that the Shell interests in London were endeavoring to acquire a substantial interest in the Pacific Oil Co., and received his reply, under date of September 29, 1922, as follows: Repljdng to your inquiry of September 7. 1922, requesting me to furnish you with any information that I may have "that in the fall of 1920 the Shell interests in London were endeavoring to acquire a sul^stantial interest in tlie Pacific Oil Co. " I have to advise you that, regardless of a firm conclusion in my own mind. I am unahle to furnish proof that would carry weight in a formal hearing before your com- mission. In October. 1920. a man came to me with letters from some New York business associates and advised me that he was working on a plan to acquire an int^erest in the oil lands then held under control of the Southern Pacific Railroad. He asked my cooperation in his project, which 1 was unable to give him. However, at my request the counsel of tne General Petroleum Corporation and the head of tlie land department prepared a report for him on the oil properties of the Southern Pacific. I have never seen the man since his first visit. However, in November, 1920, he wrote and cabled to me from London that he had put the proposition up to the Royal Dutch Shell Co.. and advised me that they were interested and desired my cooper- ation in an attempt to secure the property. About the same time I received the following cable from London: "We have conferred with Blank to-day. We consider business greatest interest and importance, but feel that your presence here absolutely necessary and indispen- sable to further progi'ess. We cordially invite you to visit us as soon as possible. Please reply immediately to London. (Signed) Samuels."* I immediately replied to this message as follows: •'Appreciate your invitation, but, as Blank knows, can not act in this matter. Regards. (Signed) Barneson." Since then 1 have heard nothing further from them. These cables, as you ^^•ill note, were exchanged prior to the organization of the Pacific Oil Co. The reason the Royal Dutch-Shell group was interested in the pro- ducing properties now owned by the Pacific Oil Co. will be apparent when it is noted that the production of crude petroleum from the properties owned by the latter company was 9,474,000 barrels in 1919, or 9.3 per cent of the total production of California; 11,170,000 bar- rels in 1920, or 10.6 per cent of that total; 14,047,000 barrels in 1921, or 12.5 per cent. The Pacific Oil Co. also owns slightly more than oO per cent of the Associated Oil Co. This latter company ranks third m importance in the refining and marketing business of the Pacific coast. The combined production of the Associated-Pacific Oil Co.'s interests in 1919 was 18,444,000 barrels of crude petroleum, or 18.2 per cent of that of California; in 1920, 17,536,000 barrels, or 16.6 per cent of that total: in 1921, 20,025,000 barrels, or 17.8 per cent. The commission has received no information of any subsequent attempts of foreign nationals to obtain an interest in or the control of the Pacific Oil Co. Associated Oil Co. — A report written in 1916 by M. L. Requa, then consulting engineer of the united States Bureau of Mines, stated :* It is a well-known fact that the Union and probably the Associated Oil companies of California would have passed into British ownership had not war broken'out. In order to ascertain the circumstances concerning the above the commission wrote the Associated Oil Co. requesting them to state facts in connection with the above question and whether any attempts were made at a subsequent date to secure ati interest in or control of the Associated Oil Co. * The Hon. Walter H. .Samuel is chairman of the Shell Transnort it Trading Co. * Senate Oocu nent .N'o. .{ <\, Sixty-fo.irth Congress, first .^session, p. is. V i FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 37 On September 20, 1922, a reply was received from Paul Shoup, president of the Associated Oil Co., as follows: There have been no attempts made by any foreign interest to acquire any interest in the Associated Oil C'o., large or otherwise, since my association ^^'ith this company, beginning in 1918. and I understand that no such effort was made during the war period. Am not familiar with the cause of Mr. Requa 's conclu.^ion that the Asso- ciated might have passed into foreign hands prior to the outbreak of the war, but if you wish can delve further into tliat subject. The commission requested the president of the Associated Oil Co. to inquire further into the subject and to furnish the commission with any data that he might obtain concerning this matter, but no additional information was secured. The facts regarding foreign interests in the Union Oil Co. of California are given on page 32. Alleged activities of Royal Dutch-Shell. — During the sum- mer of 1922 various rumors were circulated concerning recent alleged efforts of the Royal Dutch-Shell interests to further extend their holdings in American oil properties. In this connection several of the principal independent oil companies in the mid-continent oil fields were said to have either been approached by or had entered into negotiations with Royal Dutch-Shell interests with a view to the latter's acquisition of their properties and business. The com- mission made a careful inquiry to ascertain the truth or falsity of these rumors, with the result that in no instance was there found any evidence that the Royal Dutch-Shell interests had made any definite effort to acquire either a partial or complete control of the oil prop- erties or business of any of the American companies with respect to which the rumors had been circulated. On the contrary, the com- mission's investigation disclosed that certain persons prominentl}' identified with some of the principal indepenclent producing com- panies in the mid-continent oil fields on their own initiative had sought to dispose of a minority interest in an important American oil-producing company to the Royal Dutch-Shell interests. It appears, however, that notwithstanding this proposition was sup- ported by other substantial inducements, the effort did not meet with success. The refusal of the Royal Dutch-Shell interests to enter into this transaction is thought to be due largely to the unsat- isfactory experience following their acquisition of a minority interest in the Union Oil Co. of California. Section 4. Protective measures. General leasing law. — As already stated, in an effort to secure reciprocity and equal opportunity for American interests in foreign oil fields, the United States Congress included the following provision in the act passed February 25, 1920:® That citizens of another country, the laws, lustonis, or regulations of which deny similar or like privile^res to citizens or corporations of this country, shall not by stock ownershij), sto k holding, or stock control own any interest in any lease acquired under the provisions of this act. It is understood that the Royal Dutch-Shell interests, as repre- sented by the Shell Co. of California and the Roxana Petroleum Corporation, have made several applications for leases under this law, none of which has been granted, but which remain under considera- ' Oil leasing law or mineral land leasing law, Public. No. 146, 66th Cong. (S. 2775). An act to promote the juining of coal, phosphate, oil, oil shaie, ga.-^, and sodium on the public domain, p. 1. V 4 i . A 38 FORKIGX OWNERSHIP IX THK THTROLEUM INDUSTRY. tion by the Department of the Interior, with the burden of proof on the applicant, as shown by the following, which states that the Sec- retary of the Interior has ruled that the department — must })e satisfiod of the qiialifiratioii and riv'ht of the applicant Shell Co. before any permit or lease to it is granted. Jt is incumbent upon the ap})lif ant ( onipany To prove its qualifications. Union Oil Associates. — During the summer of 1921, when re- ports regarding the consolidation o? the Royal Dutch-Shell interests with the Union Oil Co. (Delaware) were circulated, the stockholdei-s of the Union Oil Co. of California foresaw the possibility of a foreign corporation obtaining control of that company, as the Union Oil Co. (Delaware) owned 130,869 shares, or over 26 per cent, of the issued stock of the Union of California. Steps were taken at once to con- solidate or pool the remaining shares of the Union of California stock by creating an American organization to control that stock. (See Exhibit 8, p. 86.) With this purpose in view, the Union Oil Asso- ciates was incon^orated on March 28, 1922, with capital stock of 300,000 shares of $100 par value, which were to be excnanged for an equal number of shares of the Union of California, which had 500,000 shares outstanding. On June 30, 1922, the new organization had acquired 273,833 shares of the Union of California stock, and this number on August 31, 1922, had increased to 274,738 shares, or ap- proximately 55 per cent of the total stock issued and outstanding. (See Table 18, p. 30.) The success of the new holding companv in securing possession of Union of California shares seems to preclude the possibility of management of the old company passing under foreign control. Curtis bill.— -This bill was introduced October 30, 1919, in the Senate, Sixty-sixth Congress, first session, and was designed to encourage reciprocity in trade relations. (See Exhibit 9, p. 89.) It stated that no citizen or subject of any country which prevents or prohibits American citizens, because of their nationality, from being shareliolders or operators in any undertaking for the development of mines or minerals, including petroleum, should be permitted to acquire or develop similar properties in the United States or its dependencies. A similar provision was included against any alien company which would not allow American citizens to participate in its operations, and there was also an enacting clause directing the sale of any foreign properties that come within the prohibition. This was one of the first bills introduced, but not passed, which aimed to secure reciprocity in this respect. PiiELAN BILL. — Tliis bill was introduced Mav 17, 1920, in the Senate, Sixty-sixth Congress, second session, and it was designed to authorize the establishment of an American company for the develop- ment of the oil resources in foreign countries. The directors of the company were to be appointed by the President of the United States. The company was to develop petroleum properties, and any of its products were to be subject to preemption by the United States upon payment of the market price. The majority of the stockholders were to be citizens of the United States, but foreign citizens might be minority holders of stock. (See Exhibit 10, p. 90.) Chapter V. RESTRICTIVE POLICIES AND ADMINISTRATIVE PRACTICES OF FOREIGN GOVERNMENTS. Section 1. Statement of the resolution. Tlie resolution pursuant to which this report is made directed the commission to ascertain: Whether or not Great Britain, the British Dominions, Holland, Rumania, or other countries having oil lands within their territories discriminate against American citizens with respect to the ownership of oil lands, or with respect to the owner- ship of shares in corporations which are organized to exploit and de- velop oil lands or engaged in the production of petroleum. Section 2. Sources of information. The subject of foreign discrimination against, and restriction of, American enterprise in the acquisition of petroleum lands in foreign oil fields has afready been the matter of study by several depart- ments of the United States Government, and considerable informa- tion thereon was brought to the attention of Congress during the last three or four years, which, together with Senate documents on the subject, was available to the commission. The comnaission also obtained new information, especially from domestic oil companies that have secured or have attempted to secure producing properties in foreign lands. The American Petroleum Institute furnished con- siderable information of value. (See Exhibit 11, jp. 90.) Section 3. General attitude of the principal foreign governments. Although it is not uncommon for foreign governments to place some restrictions upon the exploitation of the petrolemn resources within their domams by aliens, prominent cases of exclusion of citizens of the United States which have been brought to the attention of the commission were in British India and the Dutch East Indies. In the case of British India a single company, the Burrna Oil Co., i has had a monopoly of the crude petroleum producing business in the oil fields of Burma. The Burma Oil Co. is partly owned by the Anglo- Persian Oil Co. (Ltd.), in which the British Government is interested. American interests have repeatedly, but unsuccessfully, attempted to obtain oil concessions in British India. According to a letter from the Standard Oil Co. of New York to the Department of State dated Februar;^^ 24, 1922, early in 1902 the Colonial Oil Co. of New Jersey, a subsidiary of the Standard Oil Co. (New Jersey) , applied for a license to prospect for crude petroleum in Upper Burma, the application was denied without any reason being assigned for its refusal. In June of the same year the Anglo-American Oil Co. (Ltd.), a subsidiary of the Standard Oil Co. (New Jersey), which was registered in Great Britain, also made application for a prospecting license. The aid of General Patterson, United States consul general in India, was in- 39 in ■t ' ,- i ■ .■.M > Jf,Ul*,.«J I . ! Jft. ' m->JJlJWJ!I i . ' .Li ! llL g . »»■« » , isJSy.Srf' 40 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. voked, and lie was informed that the Government of India did not desire '' to introduce any American oil companies or their subsidiaries into Burma." According to the hitest available information the policy of the Government of India with respect to foreign participation in the development of its petroleum resources has not been modified. The opposition to American companies was not Umited to the acquisition or development of oil lands, but extended to the ownership of refining and distributing facilities. For example, the Standard Oil Co. of New York states it was not allowed to purchase a warehouse site in Burma. (See p. 44.) The foregoing sliows the attitude of the British Government during the early history of the petroleum industry. Subsequent events have indicated a continuance on the part of Great Britain and British colonies of policies of restriction upon foreigners in respect to the development and exploitation of some of their most promising oil areas. Such restrictive policies are followed not only by the British Empire, but by the Netherlands, France, and other countries. These restrictions in nearly all, if not all, cases apply ostensibly to all foreigners; and so far as the United States is concerned they amount to discriminations only in the sense that citizens of this country are not accorded the same rights in these foreign countries as are accorded the citizens of such foreign countries in the United States. The present attitude of the British Government is described as fol- lows in a memorandum prepared by the British Petroleum Deparf- ment and issued from their foreign office in London under date to April 21, 1921 (see Exhibit 13, p. 102): . ,. * * * It is uvideiit that in reo:ard to a ' 'closed door' ' policy no real parallel can fairly be drawn between the IJritish Empire, vith its small and scattered production, and a country like the United States, which at present produces two-thirds of the world's output within her home territory. With no nationality restrictions it would have been feasible for an isolated oil held, such as Trinidad, to be taken up by German companies and worked with (ierman personnel with the result tliat on the outbreak of the war tlie wells and plant mi*?ht nave been rendered useless and the supplies of oil from this source cut off for montlis. in the United States, on the other hand, the foreijj:n holdings are bound to represent only a small proportion of the whole, and can l)e no source of danjjer. As a matter of fact, the foreign companies to which America has thrown her fields open are mostly registered in America, are staffed with Americans, and dispose of their production in America. Although both Great Britain and France have failed to accord complete reciprocity to nationals of the United States in respect to their petroleum deposits, such reciprocity as between the nationals of those two Governments appears to have been established by the San Remo agreement, signed April 24, 1920. (See Exhibit 14, p. 103.) This agreement referred specifically to the acquisition of petroleum groperty in Rumania, Asia Minor, territories of the former Russian Impire, Galicia, the French colonies, and the colonies of the British Crown, and provided, among other things, that both Governments would lend their aid to their respective dependents in negotiations with the Rumanian Government in respect to petroleum rights and in their common efforts to obtain petroleum concessions in tne terri- tories of the former Russian Empire. Regarding former enemy concessions, it provided that — All shares belo:iging to former eiemy concessions of which one may gain possession and all other advantages drawn from these negotiations will be divided on the basis of 50 per cent to British intere.^ts and 50 per cent to French interests. I r i FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 41 Regarding the petroleum deposits of Mesopotamia, the San Remo agreement provided that — The British Government binds itself to concede to the French Government or the representative appointed by same, 25 per cent of the net production of crude oil at the current market price which H. B. M. Government may draw from the Meso- potamia petroleum regions, * * * or in the event the Government has recourse to a private company to exploit the Mesopotamia petroleum regions, the British Gov- ernment will place at the disposal of the French Government a participation of 25 per cent in the said company. The French Government in turn agreed to — * * * accord facilities to any British group or groups of good standing which can offer the necessary guarantee, which will operate m conformity with French legisla- tion, for the acquisition of petroleum concessions in the colonies of France, or in French protectorates or zones of influence, including Algeria, Tunis, and Morroco. It is well to point out that the French Parliament has decided that groups formed under these conditions are obliged to contain at least 67 per cent French interests. The San Remo agreement also provided that — As far as the existing regulations will permit the British Government will accord to the French dependents who may desire to explore and exploit petroleum regions in the Crown colonies, advantages corresponding to those France has accorded to British subjects in the French colonies. On August 10, 1920, the tripartite agreement between Great Britain, France, and Italy, in respect to the Turkish Empire, was signed. By this agreement the signatories undertook to — render diplomatic support to each other in maintaining their respective positions in the areas in which their special interests are recognized. Article X of this agreement provided that nothing in the agrees ment shall prejudice the rights of nonsignatory nations to free acces- to the various areas for commercial and economic purposes. Repre- sentations have been made by the United States Government to the British Government in respect to American participation in the ex- ploitation of Mesopotamia oil fields. In the memorandum issued by the British foreign office under date of April 21, 1921, it is stated that— The whole question of Mesopotamia, which has been fully dealt with in correspond- ence with the United States Government, need not be referred to here beyond saying that while there is no intention of discriminating against non-B ritish interests, account must be taken of legitimate rights acquired before the war, and this applies equally to Palestine, where American claims are understood to exist. The efforts of the United States Government with respect to participation of domestic oil companies in the acquisition of petroleum rights m Mesopotamia appear to have been successful, as indicated by a London dispatch of October 18, 1922. (See p. 16.) The Government of the Netherlands has not granted nationals of the United States the same privileges in the Dutch East Indies as those enjoyed by citizens of the Netherlands in this country. The only known American interest in the petroleum industry of the Netherlands East Indies at the present time is that of the Neder- landsche Koloniale Petroleum Maatschappij, a Dutch company, subsidiary of the Standard Oil Co. (New Jersey). Even the rights of this company were not acquired in the first instance from the Government, but from third parties, and they are said to be of little 35904—23- -5 1^^*^ » >'««'k^. --aaaeuwu* -g^^-; u w t^ a tuiiatAi »i»- 40 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. voked, and lie was informed that the Government of India did not desire '' to introduce any American oil companies or their subsidiaries into Burma." According to the hi test available information the policy of the Government of India with respect to foreign participation in the development of its petroleum resources has not been modified. The opposition to American companies was not limited to the acquisition or development of oil lands, but extended to the ownership of refining and distributing facilities. For example, the Standard Oil Co. of New York states it was not allowed to purchase a warehouse site in Burma. (See p. 44.) The foregoing snows the attitude of the British Government during the early history of the petroleum industry. Subsequent events have indicated a continuance on the part of Great Britain and British colonies of policies of restriction upon foreigners in respect to the development and exploitation of some of their most promising oil areas. Such restrictive policies are followed not only by the British Empire, but by the Netherlands, France, and other countries. These restrictions hi nearly all, if not all, cases apply ostensibly to all foreigners; and so far as the United States is concerned they amount to discriminations only in the sense that citizens of this country are not accorded the same rights in these foreign countries as are accorded the citizens of such toreign countries in the United States. The present attitude of the British Government is described as fol- lows in a memorandum prepared by the British Petroleum Deparf- ment and issued from their foreign office in London under date to April 21, 1921 (see Exhibit 13, p. 102): , ^ * * * It is evident tliat in regard to a " 'closed door' ' policy no real parallel can fairly be drawn between the British Empire, with its small and scattered production, and a country like the United States, which at present produces two-tliirds of the world *s output within her home territory. With uo nationality restrictions it would have been feasible for an isolated oil field, such as Trinidad, to be taken up by German companies and worked vvith (ierman personnel with the result tliat on the outbreak of the war the wells and plant mi»j:ht have been rendered useless and the supplies of oil from this source cut off for mouths. In the Uniied States, on the other hand, the foreign holdings are bound to represent only a small proportion of the whole, and can be no source of danjjer. As a matter of fact, the forei^i companies to which America has thrown her fields open are mostly registered in America, are staffed with Americans, and dispose of their production in America. Although both Great Britain and France have failed to accord complete reciprocity to nationals of the United States in respect to their petroleum deposits, such reciprocity as between the nationals of those two Governments appears to have been established by the San Remo agreement, signed April 24, 1920. (See Exhibit 14, p. 103.) This agreement referred specifically to the acquisition of petroleum property in Rumania, Asia Minor, territories of the former Russian Empire, Galicia, the French colonies, and the colonies of the British Crown, and provided, among other things, that both Governments would lend tlieir aid to their respective dependents in negotiations with the Rumanian Government in respect to petroleum rights and in their common efforts to obtain petroleum concessions in the terri- tories of the former Russian Empire. Regarding former enemy concessions, it provided that — - All sliares belo.iging to former eiemy concessions of which one may giiin possession and all other advantages drawn from these negotiations will be divided on the basis of 50 per cent to British intere.^t8 and 60 per cent to French interests. ^ A Jk itix.-i- r"-"^*"** ^k^.^ FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 4] Regarding the petroleum deposits of Mesopotamia, the San Remo agreement provided that — The British Government binds itself to concede to the French Government or the representative appointed by same, 25 per cent of the net production of crude oil at the current market price which H. B. M. Government may draw from the Meso- potamia petroleum regions, * * * or in the event the Government has recourse to a private company to exploit the Mesopotamia petroleum r^ons, the British Gov- ernment will place at the disposal of the French Government a participation of 25 per cent in the said company. The French Government in turn agreed to — * * * accord facilities to any British group or groups of good standing which can offer the necessary guarantee, which will operate m conformity with French legisla- tion, for the acquisition of petroleum concessions in the colonies of France, or in French protectorates or zones of influence, including Algeria, Tunis, and Morroco. It is well to point out that the French Parliament has decided that groups formed under these conditions are obliged to contain at least 67 per cent French interests. The San Remo agreement also provided that — As far as the existing regulations will permit the British Government will accord to the French dependents who may desire to explore and exploit petroleum regions in the Crown colonies, advantages corresponding to those France has accorded to British subjects in the French colonies. On August 10, 1920, the tripartite agreement between Great Britain, France, and Italy, in respect to the Turkish Empire, was signed. By this agreement the si^atories undertook to — render diplomatic support to each other in maintaining their respective positions in the areas m which their special interests are recognized. Article X of this agreement provided that nothing in the agrees ment shall prejudice the rights of nonsignatory nations to free acces- to the various areas for commercial and economic purposes. Repre- sentations have been made by the United States Government to the British Government in respect to American participation in the ex- ploitation of Mesopotamia oil fields. In the memorandum issued by the British foreign office under date of April 21, 1921, it is stated that — The whole question of Mesopotamia, which has been fully dealt with in correspond- ence with the United States Government, need not be referred to here beyond saying that while there is no intention of discriminating against non-British interests, account must be taken of legitimate rights acquired before the war, and this applies equally to Palestine, where American claims are understood to exist. The efforts of the United States Government with respect to participation of domestic oil companies in the acquisition of petroleum rights m Mesopotamia appear to have been successful, as indicated by a London dispatch of October 18, 1922. (See p. 16.) The Government of the Netherlands has not granted nationals of the United States the same privileges in the Dutch East Indies as those enjoyed by citizens of the Netherlands in this country. The only known American interest in the petroleum industry of the Netherlands East Indies at the present time is that of the Neder- landsche Koloniale Petroleum Maatschappij, a Dutch company, subsidiary of the Standard Oil Co. (New Jersey). Even the rights of this company were not acquired in the first instance from the Government, but from third parties, and they are said to be of little 35904—23 5 \>:^ '*i\ .t» --^Mi^'-r"!^ ''t*jmm «m,-mxsmm'->'r^-' •?r' mr hi'. 42 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. commercial value. The Standard Oil Co. (New Jersey), under date of August 4, 1922, states (see Exhibit 18, p. 125): Practically we have found a diBcrimination in the Dutch East Indies ^inst American capital through the refusal of the government of the Dutch East Indies to grant prospecting licenses to the Nederlandsche Koloniale Petroleum Maatechappii, or to grant mining concessions except in cases where the Nederlandsche Koloniale Petroleum Maatschappij had a right to such concessions under the provisions of the old mining law which provided that discovery of a mineral under a prospecting license gave the right to a concession. That mining law has been abrogated and a new law passed which leaves the granting of concessions to the discretion of the governor general. All the concessions granted to the Nederlandsche Koloniale Petroleum Maatschappij were granted under the old law on rights secured as a result of the dis- covery of the mineral on prospecting licenses granted to third parties and purchased by the Nederlandsche Koloniale Petroleum Maatschappij. The failure of the Netherlands to accord to nationals of the United States the same opportunities in the Dutch East Indies as are accorded Dutch nationals in the United States has been the subject of extensive correspondence between the Governments of the two nations, par- ticularly with reference to the Djambi concession.* (See p. 54.) Discrimination by foreign governments against nationals of the United States in the acquisition and development of petroleum- producing properties may oe grouped under three kinds, viz, legis- lative, contractual, and administrative. The first is illustrated by the French parliamentary requirements which, according to the San Kemo agreement, requires that at least 67 per cent be French interests. The contractual form of discrimination is illustrated by the San Remo agreement. (See p. 103.) The administrative restriction is well illustrated by the practice of the Government of British India. Section 4. British restrictions. Crude petroleum has been discovered in Great Britain and in a number of British possessions, some of which are self-governing; consequently there is considerable diversity in the laws and admin- istrative practice in different parts of the British Empire. In order to present clearly the facts in respect to the different parts of the British Empire, each important petroleum producing dependency is discussed separately. The United Kingdom. — ^According to a dispatch from the British Government to the British ambassador at Washington (see Exhibit 13, p. 101)— There is no ban whatever on the exploitation of possible oil-bearing lands by- foreigners or foreign companies. A regulation, which was introduced during the war, restricting the participation of foreigners in British oil undertakings has been with- drawn. As already explained, the total output of oil products in Great Britain is less than 170,000 tons. To secure 165,000 tons from the Scotch shale fields, it is necessary to mine 3,000,000 tons of shale and to employ 10,000 men, and the high costs have requently menaced the existence of the industry. A letter to the commission from the Standard Oil Co. (New Jersey), dated August 4, 1922, also states that — At present there is no restriction on foreign interests in the United Kingdom. British India. — The reserves of petroleum in British India have been roughly estimated by the United States Geological Survey at • Comraunications between the two Governments on the Djambi concession are set forth in Senate Docu- ments No. 11 and No. 39, Sixty-seventh Congress, first session. Ill FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 43 nearly 1,000,000,000 barrels. The most important producing region is that of Burma, which furnished nearly 98 per cent of the 1918 production. Assam also produces crude petroleum and indications look favorable for the opening of new fields in Punjab, Jammu Province, and Baluchistan. According to the petroleum department of the British Government, the country s production is about 8,400,000 barrels per annum, which is insufficient for domestic needs, and large ?uantities are imported from the United States and the Dutch East ndies, and some from Persia. .^ So far as known no American company owns oil-producing property in India. The British Government, under date of April 21, 1921 (see p. 101), stated that — Prospecting or mining leases have been, in practice, granted only to British subjects or to companies controlled by British subjects. Apparently the sale of concessions or leases to foreigners is also prohibited, and, as stated in Senate Document 11, Sixty-seventh Congress, first session: In the case of the death of the person or any of the persons to whom the license or lease has been granted it shall inure for the benefit of his legal representatives only if they are British subjects or a company or firm shown to the satisfaction of the local government to be controlled by British subjects. The American consular representative in India recently reported that the attitude of the Government of British India with respect to petroleum concessions in Burma has been *'one of entire exclusive- ness." In this connection it is interesting to note that the Shell Transport & Trading Co. (Ltd.) was not granted a concession in Burma. Under date of March 10, 1906, the London Petroleum Re- view stated : For the past two years a steady yet continuous agitation has been proceeding from two distinct quarters— the Standard Oil Co. and the Shell Transport & Trading ('O.— in order that both concerns might obtain redress, either by the abolition of the duty in India or through being granted facilities for exploration in Burma equivalent to those given to the Burma Oil Co. On behalf of the former companv, Mr. Libby energetically pushed the matter forward, while for the Shell Sir Marcus Samuel car- ried on a most spirited attack. It has been stated that the reason the Shell Co. was excluded from India was because the Government of India believed there was an alliance between that company and the Standard Oil Co. On June 17, 1914, Samuel Samuel, now a managing director of the Shell Transport &. Trading Co., made the following statement in the Brit- ish House of Commons in discussing conditions in 1903: The Burma Oil Co. went to the Indian Government and led it to believe there was a comlnnation between the Standard Oil Co. and the Shell Co. to crush them out of existence. The Indian Government of the day believed that this state of affairs existed, went to the assistance of the Burma Oil Co., and put a duty on the importa- tion of petroleum into British India, which created the first monopoly that was created in the oil trade. * * * I admire the Government of India for having protected that industry, and thereby being the means of creating a strong and powerful com- pany. That the policv of exclusion in Burma was strictly adhered to in later years is illustrated by a letter furnished the commission by C. F. Meyer, vice president of the Standard Oil Co. of New York. (See Exhibit 15, p. 105.) This letter was written by the Standard I 1 >'"l»'».. «KSE*f»»'-»-*«»*««i8»<»!aA»Wb- 44 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Oil Co. of New York to the Secretary of State at Washington, under date of February 24, 1922, and stated in part as follows: On March 20, 1902, the Colonial Oil Co. of New Jersey (a subsidiary of the Standard Oil Co., New Jersey) applied to the government of Burma for a license to prospect for oil in upper Burma. The application was made m due conformity with the local government laws and requirements in that country relative to prospecting hcenses. This application was refused on June 9, 1902, by the local government of Burma under instructions from the Viceroy of India, Lord Curzon, and no reason whatever was assigned for the refusal. . ,. i- j r i ^ On Jmie 13, 1902, similar permission for a prospecting hcense was applied for on be- half of the Anglo-American Oil Co. (Ltd.), a British corporation re-istored in 1888. In addition to n aldng application for a license to prospect for oil, and without knowl- edge of anv Government policy of discrimination, negotiations were entered into with native' owners of freehold property for the development of their land ™r to receipt of the official reply to the Anglo-American Oil Co. s application Mr. W. H. Libby, representing the Standard Oil Co., appealed to the viceroy of India for favor- able consideration of the application. Mr. libby also invoked the aid of General Patterson, then United States consul general in India, in the presentation of the case to the viceroy. In replv to a request made by General Patterson for an interview with the viceroy, the Hon. W. Lawrence, private secretary to the \iceroy, wrote under date of October 2, 1902, that he was directed to say: ,. . ^ , .u k •«„« "It is not desired bv-the Government of India to introduce any of the xVmerican oil companies, or their'subsidiary companies, into Burma, and that an interview with the viceroy would not be attended A\^th any other result." On October 2 1902, the local government of Burma issued an order prohibiting private owners of land in upper Burma from disposing of their land to any party not first approved by the government. This order was issued at the instance of the govern- ment of India. On October 17, 1902, the application of the Anglo-American Oil Co. was refused by the government of Burma without any reason being assigned . Kepre- sentations backed bv the force of the United States Ciovernment through its ainbas- sador in London— who at that time was J. H. Choate— were then made to the British Government authorities in London. The British Foreign Office replied that the gov- ernment of India was not influenced in its decision by the fact that the applicant was an American company; that the decision was given after due consideration had been paid to the special conditions of oil production in Burma, and after the government s policy had been deliberatelv adopted. They claim that the government of India, {)einc' the sole proprietor of the mineral wealth of the country throughout the greater part of India, are in a different position from that of most other governments, and have, consequently, to exercise a large discriminatory power in dealing with applications for concessions. * ♦ » ♦ ♦ ♦ * _ On February 27, 1905, we applied for permission to erect tanks for the storage of oil in Burma, and on April 17, 1905, we also made the customary local application for per- mission to construct a refinerv. It was our intention to use these facilities for the stor- ino- and refining of crude oifto be purchased from the many large and small native producers. Both of these applications were refused May 22, 1905, without any reason being assigned. We appealed against this decision to the Government of India, but our appeal was of no avail. ^ * * ♦ ♦ * ♦ ♦ The Indian Government Gazette of March 6, 1915, contains an account of an inter- rogation made by one of the Indian members of the Indian council and the reply thereto by the government secretary. In reply to the request by Sir J^azulbhoy Currimbhoy that the government lay on the table the papers in relation to the poUcy of the government regarding concessions in respect of oil fields, the Hon. Mr. tlark said* "The papers relating to the policy of the government regarding concessions in respect of oil fields are confidential, and I regret that they can not therefore be laid on the table. Oil-winning concessions are granted under the mining rules of India, but petroleum is included in what is known as the reserved list of minerals, concessions for which, as being resources of national importance, are only granted to British subjects and to ^ companies mainly British in constitution." The policy of exclusion was not confined strictly to Burma, but, it appears, was extended to other parts of India which showed promise of petroleum production. The alacrity with which the local govern- ment of India remedies any deficiency in the law of exclusion, even in \ FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 45 respect to private property, is illustrated by the following extract from the above-mentioned communication of the Standard Oil Co. of New York in respect to Assam : Early in 1917 one of our representatives visited Sylhet, in Assam, India, and obtained an option expiring November 15, 1917, to purchase or lease land and mineral rights- from private owners of freehold property. It was discovered by our representative- that in Sylhet most of the land had been settled under what is known as the "per- manent settlement" tenure, and which conveyed absolute title to both the surface and underground rights. On July 6, 1917, our representative registered with the local authorities an agreement to lease the private property secured under the option referred to above for the purpose of prospecting for oil. We were blocked in thiff^ effort to secure a foothold by a new regulation of the government of India, No. 11917,- dated October 6, and published in the official Assam Gazette on October 24, 1917. This regulation prohibits any owner from transferring his interests in a mine — which expression, it is notified, includes any mineral deposits, or land known or believed to contain a mineral deposit of commercial value. Thus before the expiration date — November 15 — of our option on the Sylhet property the government of India, by its regulation No. 11917, stepped in to prevent the transfer to us of the petroleum or mineral rights on that private property. A^ain, in respect to the State of Kashmir, the communication states : The form of prospecting license — received Ijy us in April, 1921 — issued by the native State of Kashmir, situated on the northwest frontier of India, and which is subject to administrative direction and supervision of the government of India, bears the following words: "The licensees shall at all times during the said term remain or be British or State subjects or a company or corporation of British or State subjects. The chairman or president or other persons occupying that or any other similar position (it any) and the managing director (if any) and the majority of the other directors (if any) shall be I3ritish or State subjects. " The Federated Malay States. — The United States consul gen- eral at Singapore reported, under date of November 12, 1919, that apparently, so far as the local government was concerned, there were no restrictions regarding the acquisition of petrolemn rights by aliens, but that grants to mineral rights, which included petro- leum, were subject to the approval of the British Government. Australia. — Except for certain small-scale working of shale no petroleum is produced in Australia; although the possibilities for future production are admitted, they are not as 3^et regarded as very promising. The war precautions act and amendments, 1914-1916, provided that no contract for the acquisition of any mining business, or of any interests in such, or of any security issued by a mining company should be made by any other than a natural- born British subject without the written consent of the attorney general.' In 1921 the British Foreign Office, in referring to Australia and other British colonies, stated that: In none of these Dominions is there at present any general prohibition of the exploi- tation of oil lands by foreigners, thouijh in certain of the Australian States regulations introduced during the war confined the issue of mining leases to British subjects. Northern and Western Australia. — The mineral-oil ordinance, 1913, of the northern territory of Australia (including Papua) pro- vided that® — A license under this ordinance or a mineral-oil lease shall not l)e granted to any company other than a company formed and incorporated under the law of the United Kingdom or a British possession. I S. Doc. 272, 66th Cong., 2d sess., p. 5. « S. Doc. 11, 67th Cong., 1st sess., p. 5. r A.:,i*im'tnm»fm^ ^m-- ^ *««»Cl«**4» A* Si.- 46 FOREIGN OWNERSHIP IX THE PETROLEUM INDUSTRY. A foreign company shall not directly or indirectly l)e capable of a(;qiiirinj? or hold- in": a inineral-oii lease or any interest therein, whether legal or equitable. The lessee under a mineral-oil lease shall not, withoiit the consent of the director of mines, be entitled to assign or transfer the lease to any company not l)eing a com- pany formed within the Commonwealth. The ordinance also provided that a mineral-oil lease should con- tain — A covenant bv the leasee to refine all crude oil produced by the lessee in the northern territory or in some part of Australia approved of for that purpose by the minister. A covenant by the lessee not to ship or export any crude oil tp any place outside Australia without the consent of the minister. In 1921 the British Foreign Office stated (see Exhibit 13, p. 101): In the northern territory of Australia leases are, as in Canada, restricted to British registered companies. Provisions similar to those of the northern territory occur in the mining act of Western Australia. Government activity in Papua. — The Australian and British Imperial Governments agreed, on July 7, 1919, to provide in equal shares a fund of not to exceed £500,000 for exploration work in Papua, a part of Now Guinea, to be conducted by the Anglo-Persian Oil Co. This apparently was an exclusive right to prospect in that territory. It was stated in the House of Commons on March 8, 1921, that the British Government had withdrawn from this agreement. The British Foreign Office stated, in 1921 (see Exhibit 13, p. 101) that — Exploration is bein<,' carried on in Papua on behalf of the Imperial and Australian Governments, but so far without definite result. Queensland. — The mining law of Australia pro vides that petro- leum on or below the surface of all land in Queensland, whether alienated in fee-simple or not so alienated from the Crown, and if so alienated whensoever alienated is, and always has been, the property of the Crown. (See Exhibit 11, p. 93.) Mandate of New Guinea. — Petroleum is known to exist in the mandated part of New Guinea, which was formerly a German pos- session. Tiiat the Australian Government has adopted a policy of exclusion in the development of any oil fields in the mandated terri- tory of New Guinea is indicated by statements to that effect issuing from the prime minister's office. In 1920 the United States consul general at Melbourne reported that he was given to understand posi- tively and distinctly that while the administration policy in regard to the mandate of New Guinea had not been wholly formulated, it had been specifically determined that aUens would not be allowed to prospect the oil possibilities, and that any oil discovered would be promptly confiscated by the Government. And again on November 29, 1921*, he reported tfiat the authorities had stated informally that Australian policy contemplates complete jurisdiction over all oil operations in tfie territory and includes the exclusion of other nationals. . . That a policy of exclusion seems to have been ahdered to is indi- cated by the following occurrence in the Australian House of Repre- sentatives on July 24, 1922, as taken from Hansard's:* Senator Lynch asked the minister representing the prime minister, upon notice: Whether the Government has considered the advisability of offering a reward in a » Corresponds to the United States Congressional Record. r*' Tf 1 ^ ' " I " ■ -^^¥l^^i*-^ I FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 47 similar or modified form, to that applying in the Commonwealth for the discovery of mineral oil and petroleum in the island possessions in the Pacific under Common- wealth control? . . 1 X f w Senator E. D. Millen (in reply): The Government reserves the right of searching for mineral oils and, therefore, it is not proposed to offer any reward to private pros- pectors. The Anglo-Persian Oil Co. has prospected at its own cost in the mandated territory. On May 29, 1920, this company entered into an agreement with the Commonwealth of Austialia by the terms of which a refining company should be estabUshed in Australia to be owned and controlled jointly by the Government and the Anglo- Persian Oil Co., the Austrahan Government binding itself to furnish 200,000 tons (1,400,000 barrels) of 'indigenous oil," which, by the terms of the agreement, included oil from any place over which AustraUa has a mandate. The agreement specified that the company should always remain an independent British business; also, that^° — In order to insure the full success and development of the oil-refining industry in Australia the Commonwealth will, so long as the prices charged by the refinery company for products of refining are considered by the Commonwealth fair and (a) Exercise or cause to be exercis3d such statutory and administrative powers as it deems advisable to prevent dumping and unfair competition by importers of refined oil from other countries. (6) Refund to tho refinery company any customs duty paid by the refinery com- pany upon the imoortation into Australia of crude mineral oil purchased from the oil companv and refined in Australia by the refinery company; and (c) Cause to be introduced into the Parliament of the Commonwealth and sup- ported as a Government measure a bill providing for the imposition of customs duties on crude mineral oil whenever in its opinion such action is necessary or advisable to prevent unfair competition with the products of crude oil refined m Australia by the refinery company. New Zealand.— The British Government officially stated, under date of April 21, 1921, in reference to New Zealand and other of its colonies (see Exhibit 13, p. 101) that— In none of these Dominions is there at present any general prohibition of the exploitation of oil lands by foreigners. * * * No important production has been obtained in any of th?s3 countries, though * * * a trifling quantity of oil has been obtained in New Zealand. British BoR^iEo.— In 1921 the Royal Dutch-Shell group had a groduction of about 1,400,000 barrels of crude petroleum in British lorneo. This production was all obtained in Sarawak. British North Borneo. — ^According to a memorandum of the British foreign office, under date of April 21, 1921, there is no production of petroleum in British North Borneo, and there are no nationaUty restrictions. The memorandum also states that ''prospecting is being carried on by Japanese and British companies." (See Exhibit 13, p. 102.) . The authorities of North Borneo informed the American consul at Singapore on May 25, 1920, that all rights to prospect for oil were in the hands of concessionaires; and, according to a report published in 1920, a concession to exploit the whole of British North Borneo for petroleum, running until 1925, was held by the British Borneo retroleum Syndicate (Ltd.). The report also stated that a subcon- cession, which appears to have expired in August, 1921, had been w S. Doc. 11, 67th Cong., 1st sess., p. 6. ..-►^*<»fc.««»iw*»^ii» Tfc- ■'-^i^f-.tH.*--- 3R>*R \***%.M-(>;'*»>»eai«««».i«i«!»'«i.*a»«*i i-*- ■%.>mM. wm i.%5S«!S*«»- ^- .^' 48 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 49 f ranted to the Kuhara Mining Co., a Japanese concern; and that in uly, 1918, arrangements had been made with D'Arcy Exploration Co. (Ltd.), an Anglo-Persian company, for the development of all the Borneo properties with the exception of the subconcession to the Kuhara mining Co., this area to be included on the expiration of the subconcession. Brunei. — The above-mentioned memorandum of the British foreign office stated that in Brunei prospecting had been proceeding for a number of years, but that no petroleum was produced; also, that restrictions generally, similar to those in Trinidad, were in force. Sarawak. — On April 21, 1921, the British foreign office stated that there were no nationality restrictions in force in Sarawak. All of the production is now controlled by the Royal Dutch-Shell group, and according to the 1921 annual report of the Royal Dutch Co. — On the Miri field some new rich areas were discovered, while the prospects with regard to our exploration on other anticlines in Sarawak are very favorable. Restrictions in Africa. — Exploration and prospecting work has been actively carried on in various parts of Africa, but the only section in which production was developed prior to 1922 was in Egypt. In 1921 the production in 'Egypt was about 1,270,000 barrels. Nigeria. — Paragraph 6, section 2, of the mineral oils ordinance, 1914, reads: No lease or license shall be ^nted except to a British subject or to a British com- pany registered in Great Britain or in a British colony and having its principal place of business within His Majesty's dominions, the chairman and the managing director (if any) and the majority of the other directors of which are British subjects. The British foreign office (see Exhibit 13, p. 101) stated in April, 1921, that there was no production in Nigeria; that prospecting was being done by two Britisn companies; and that the regulations were similar to those in Trinidad. (See p. 51.) Gold Coast Colony. — According to the Government Gazette, dated May 25, 1918, section 21, of the concessions ordinance, 1900, provides that"— (1) No concession with respect to mineral oil shall be granted and no assignment of any such concession shall be made, unless the grantee or assignee shall be a British subject or shall be a firm, syndicate, or company which shall at all times be and remain a British company, registered in Great Britain, or in a British colony, and having its principal place of business within His Majesty's dominions, and the chairman of the said company and all the remaining directors shall at all times be British subjects, and the company shall not at any time be or become a corporation directly or in- directly controlled by foreigners or foreign corporations. ******* (3) Every concession and assignment of a concession in respect of mineral oil shall be subject to the approval of the governor. (4) If the grantee of any such concession shall assign the same in whole or in part without the previous consent in writing of the governor, or if the grantee or assignee shall cease to be a British subject, the governor may thereupon cancel the concession. * * '* In connection with the above, the publication also stated that — All persons interested herein are informed that for several years past it has been the policy of the Gold Coast Government, a policy to which the statutorjr support above cited has been given, to insure that no concession with respect to mineral oil in the Gold Coast Colony shall be granted or assigned to or held by any person other " S. Doc. 272, 66th Cong., 2d sess., p. 6. than a IJritish subject, or by any syndicate, firm, or company other than one of a predominantly British character, and under a control predominantly British . Union of South Africa.— In referrmg to the Union of South Africa and other British colonies, the British foreign office states (see Exhibit 13, p. 101) that— In none of these Dominions is there at present any general prohibition of the ex- ploitation of oil lands by foreigners, * * * no important production has been obtained in any of these countries. British East Africa.— The ordinance, 1912, provides that ^^— A prospecting license shall not authorize a person who is not a British subject to peg out an oil claim. A person who is not a British subject shall not be entitled to own an oil claim or enjoy the right of mining for oil anything in the ordinance to the contrary notwith- standing. * ♦ ♦ ♦ * ♦ * The transfer of an oil claim and the grant or transfer of any share or interest therein shall be invalid unless the consent in writing of the governor to such transfer or grant shall first have been obtained, and the transferee or grantee is a British subject, or a firm or syndicate, all the members of which shall at all times be and remain British subjects, or a British company registered in Great Britain or in a British colony or m the protectorate and having its principal place of business within His Majesty's dominions x)r in the protectorate, and the chairman of the said company and all the remaining directors shall at all times be British subjects, and the company shall not at any time be or become a corporation directly or indirectly controlled by foreigners or foreign corporations. No lease for the purpose of mining for mineral oil or authorizing the lessee to mine for mineral oil shall be granted and no assignment of any such license or lease shall be made, unless the lessee or assignee shall be a British subject or a firm or syndicate, all the members of which shall at all times be and remain British subjects, or a British companv registered in Great Britain or in a British colony or in the protectorate and having its principal place of business within His Majesty's dominions or the protecto- rate, and the chairman of the said company and all the remaining directors shall at all times be British subjects, and the company shall not at any time be or become a corpo- ration directly or indirectlv controlled by foreigners or foreign corporations. If the lessee shall assign the same in whole or in part without the previous consent in writing of the governor, or if the lessee or assignee shall cease to be a British subject, or if, where a firm or syndicate is the lessee or assignee, any member of the firm or syndicate shall cease to be a British subject, the governor may thereupon cancel the lease. Uganda, and Sormliland.— In Uganda prospecting for petroleum may be carried on only in defined areas and under special license — ^^ issued subject to such restrictions, conditions, and regulations as the governor may impose in each particular case. No production has been developed in Somaliland, and according to the British Foreign Office (see Exhibit 13, p. 102)— Prospecting is being carried out on behalf of the Government. Xo nationality restrictions. Egypt— The British Government officially stated in 1921 that crude petroleum in Egypt was all produced by a single company (the Anglo-Egyptian OUfields (Ltd.), but that several other firms were interested m prospecting operations. (See Exhibit 13, p. 102.) The foreign relations committee of the American Petroleum Institute advised the commission that the Egyptian Government had under- taken deep-boring operations with a definite view to intensive pro- duction. (See Exhibit 11, p. 92.) ___^__ M S. Doc. 272, 66th Cong., 2d sess., pp. S-6. n S. Doc. 272, 66th Cong., 2d sess., p. 6. I r*^ iit^-ir^aiafrr"" rraf litf -'ill itMMMifiikiiu^ •mmmn 50 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Mesopotamia and Palestine. — The title to all petroleum rights in Mesopotamia were claimed by the Turkish Petroleum Co. (Ltd.), a British corporation, the stock of which is owned as follows: Anglo- Persian Oil Co. (Ltd.), 50 per cent; Royal Dutch-Shell interests, 25 Eer cent; and the French Governnient, 25 per cent. This claim was ased, first, on what was known as the Turkish Petroleum Co. con- cession; and, second, on the petroleum rights acquired under what was known as the Bagdad ana Anatolian railway grants. Under date of November 20, 1920, Hon. Bainbridge Colby, Secre- tary of State for the United States, in a note to Earl Curzon, British foreign minister, stated, with reference to the rights claimed by the Turkish Petroleum Co. in the oil fields of Mesopotamia: * * * In this connection I might observe that such information as this Govern- ment has received indicates that prior to the war the Turkish Petroleum Co., to make specihc reference, possessed in Mesopotamia no rights to petroleum concessions or to the exploitation of oil; and in \'iew of your assurance that it is not the intention of the mandatory power to establish on its own behalf any kind of monopoly, I am at some loss to understand how to construe the provision of the San Remo agreement that any private petroleum company which may develop the Mesopotamia oil fields shall be under permanent British control. * * * The British Foreign Office stated, in April, 1921, that — . The whole question of Mesopotamia, which has been fully dealt with in correspond- ence with the United States Goverrmient, need not be referred to here beyond sajdng that while there is no intention of discriminating against non-British interests, account must be taken of legitimate rights acquired before the war, and this applies equally to Palestine, where American claims are understood to exist. According to a dispatch from London, dated October 18, 1922, ne- gotiations which were in progress for participation by an American group (Standard Oil Co. of New Jersey) was progressing satisfac- torily, although the exact share which it was to receive had not been definitely determined. (See p. 16.) Under date of May 14, 1920, the United States State Department reported that ^^ — Rich petroleum fiolds are believed to exist in certain districts of Palestine. The British policy in this section, as in all other o *cupied areas, seems to be to restrict petroleum activities, so far as that may be possible, by leaving in force for the time being the re^jjulations in force prior to the time of occupation. British Honduras, British Guiana, and Jamaica. — ^The British Foreign Office in 1921 (see p. 101) stated that British Honduras had no petroleum production and no definite prospects, but that prospecting applications were being considered. (See p. 51.) It also stated that the country had '' similar regulations to Trinidad," i. e., no restrictions in the case of private lands, but lessees of Crown lands must be British subjects or British-controlled companies. In 1921 Jamaica had no production and there were no nationality restrictions. The regulations in British Guiana covering petroleum are also similar to those of Trinidad. (See p. 101.) Canada and Newfoundland. — In 1919 the United States Geolog- ical Survey roughly estimated the petroleum resources of Canada at nearly 1,000,000,000 barrels. The Canadian production of crude petroleum in 1921 was only 190,000 barrels, wnich supplied only a li S. Doc. 272, 66th CoQg., 2d sess., p. 12. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 51 small proportion of the Dominion's requirements. In 1921 the British Foreign Office stated (see p. 101) that — Exploitation in Canada is confined to British registered companies, but it is worth noting that the most active company in Canada, in regard to both imports and pros- pecting work, is Imperial Oil (Ltd.\ a subsidiary of the Standard Oil Co. of New Jersey. During the past two years petroleum production was developed in the MacKenzie River Basin m the Canadian Northwest territories. The Imperial Oil Co. was active in this development. Since this oil field was discovered the following regulation was incorporated in the mining laws of the Dominion of Canada:^* Citizens of another country, the laws, customs, or regulations of which deny similar or like privileges to citizens or corporations of the British Empire, shall not, by stock ownership, stockholding, or stock control, own any interest in any permit or lease acquired under the provisions of these regulations. Apparently this provision was adopted because the United States had included a like provision in the general leasing act of February 25 1920. in 1921 the British Foreign Office (see Exhibit 13, p. 101) stated in referring to Newfoundland and certain other British colonies that — In none of these dominions is there at present any general prohibition of the exploi- tation of oil lands by foreigners. ♦ *♦**** In Newfoundland the grant to a British company of a prospecting license for five years over all unallocated Crown lands is being considered. The British company referred to was the Anglo-Persian Oil Co. Trinidad. — The production of crude petroleum in Trinidad was estimated as 2,354,000 barrels for 1921. According to the official statement of the British Foreign Office (see p. 101) of April 21, 1921 — In the rase of private lands there is no nationality restriction, but the lessees of Crown or alienated ^^ lands must be British subjects or a British-controlled company. Exception has, however, been made in the case of an American company which, in view of good pioneer work done on private lands, has Ixjen permitted to lease certain Crown lands. All leases to Government lands arc said to provide against the control or management of the leased property ever getting into the hands of foreigners. Exhibit 16 (p. 107) shows a typical agreement with the United British West Indies Petroleum Syndicate (Ltd.) with forms of (I) exploration license, (II) license to prospect for oil on Crown lands, (III) oil mining lease, and (IV) pipe-line agreements, annexed. The restrictions in Trinidad respecting titles to petroleuni-producing properties are typical of most of the British Crown colonies. Barbados.— The British Foreign Office in 1921 stated that — There is no production, but praspectin^ work is teing done by a British company in Barbados. Also, that — There are no nationality restrictions. ('See p. 102. ) Senate Document No. 272 (66th Cong., 2d sess., p. 8) states that — The oil mines act. 1904-1 90S, III, 60, empowers the governor in ex^^cutive committee to make regulations and by provisional order grant to any person the right to survey >« S. Doc. 11, 67th Cong,, 1st sess., p. 7. w I. e., lands the surface of which lias been alienated by the Crown for agricultural purposes since Jan. 17, 1902. f*lpppppp***^**f ■.*en^.igti'^Ttv.v f.'Ji-axc-iiuwm ■ 52 foreig:?^ ownership in the petroleum industry. r.,. '^ and to prolie and bore to ascertain tho nature of the soil and to make explorations and mine for oil within an area that the governor and the executive committee may think proper. The errant to the British Union Oil Co., known as the British Union Oil Co. act of 1919, expressly provided that the privileo:es and powers therein shall not be conveyed or extended to any successors of tne said British Union Oil Co. of a nationality other than British. Section 5. Bestrictions in France and French colonies. The reserves of petroleum in France and its possessions have been roughly estimated by the United States Geological Survey at from one to one and one-half billion barrels. The production of Eetroleum in France (Alsace) in 1921 was estimated as 392,000 arrels. Although there are encouraging indications of the presence of petroleum in continental France, no mineral oil concessions appear to nave been granted, but several projects are in course of develop- ment in the North African colonies. General policy. — The French Government exercises wide dis- cretionary powers in granting concessions, the public interest appar- ently bemg the controlling factor. According to a report otthe^ United States Department of State, there is reason to believe that the French policy respecting the granting of petroleum concessions ^^ — Would find expression in a restriction on development by aliens at least to the extent that concessions would not be granted to alien groups unless they form a part of a French joint stock company, of which two-thirds of the directors should be French citizens. This polic> would probably be eftective in Algeria. French West Africa, and Mada- gascar, should petroleum be found in those dependencies. It does not appear whether the above restrictions would be applicable to Morocco and Tunis. The commission was informed by the Sinclair Consolidated Oil Corporation, under date of August 1, 1922 (see E^xhibit 17, p. 125) that — • Under the administrative practice in France it is impossible for a foreigner to obtain an oil concession, and the Government has adopted the policy of granting such concessions only on the basis that 67 per cent of the shares of the company be- French capital and remain in French hands. In practice it has been found that France and the French colonies are more completely closed to development by American companies than in any other part of the world. War-time control in France over the petroleum industry is said still to exist in a modified form under the Directeur des Essences et Petroles, who also exercises a control over selling prices. (See Exhibit 11, p. 94.) An act providing for complete nationalization of mineral resources was enacted September 9, 1919, but it is not clear whether this applies to petroleum resources. San Remo agreement. — An agreement signed at San Remo on April 24, 1920, by representatives of the French- and British Govern- ments, and subsequently confirmed by the two Governments (see Exhibit 14, p. 104), contains the following provisions: 14. Northern Africa mid other Colonies.— The French Government will accord facilities to any British group or groups of good standing which can offer the necessary guarantee, which wall operate in conformity with French legislation, for the acquisi- tion of petroleum concessions in the colonies of France, or in French protectorates or zones of influence, including Algeria. Tunis, and Morocco. It is well to point out >' S. Doc. 272, 66th Cong., 2d sess., p. 4. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 53 that the French Parliament has decided that groups formed under these conditions are obliged to contain at least 67 per cent French interests. .... 15. The French Government will facilitate the granting of all concessions in Algeria which are now liable to examination as soon as the applicants have complied with all the requirements of French legislation. . 16. Colonies of the British Crown.— Aa far as the existing regulations will permit, the British Government will accord to the French dependents who may desire to explore and exploit petroleum regions in the Crown colonies, advantages corresponding to those France has accorded to British subjects in the French colonies. Section 6. Restrictions in the Netherlands. The principal petroleum resources under the control of the Nether- lands are in the Dutch East Indies. These reserves were roughly e^stimated by the United States Geological Survey at from three to three and one-half biUion barrels. In 1921, 18,000,000 barrels were produced, as compared with 2,200,000 barrels in 1900. Valuable oil fields are located in the islands of Sumatra, Java, and Borneo. The island of Ceram shows promising indications. The Djambi field is located in south central Sumatra and, although yet undeveloped, it shows indications of great productivity. The Royal Dutch-Shell mterests control directly or indirectly all petroleum operations of any consequence in the Dutch East Indies. The Nederlandsche Koloniale Petroleum Maatschappij, a subsidiary of the Standard Oil Co. (New Jersey), has small holdings, and it is the onlv American companv operating in the Dutch East Indies. (See Exhibit 18, p. 125.) Legal restrictions. — According to the law of the Dutch East Indies, rights to petroleum mining are held only by the Government or by companies working under contract with the Government. The mining law, as amended in 1918, contains provisions as follows: Article 1. (1) In the Netherlands East Indies rights in land do not include the right of disposal over the following minerals, etc. : (h) Anthracite and all kinds of hard and soft coal, petroleum, bitumen, mineral wax, and all other kinds of bituminous substances, either solid or liquid, and inflamma- ble gases— the latter, in so far as they are not of recent date (marsh gases); iodine and its combinations. ******* (3) The right of prospecting for and extracting such minerals, etc., will be granted pursuant to the provisions of this law. * Art. 4. (1) Only the following can hold prospecting licenses or mining conces- sions: (a) Netherlands nationals: (6) inhabitants of the Netherlands or of the Netherlands East Indies: (c) companies domiciled in the Netherlands or in the Netherlands East Indies, of which, in the case of limited companies, the single manager or director, or both, or if there are several managers or directors, the majority of such managers or directors, and in the case of private companies financed by a sleeping partner, the single active partner, or if there are two such, both, or if there are several such, the majority of them, are Netherlands nationals or inhabitants of the Netherlands East Indies (in the latter case residing in the Netherlands East Indies or in the Nether- lands), with the proviso: That the persons or companies not domiciled in the Nether- lands East Indies must be properly represented there: and that persons domiciled in the Netherlands East Indies, the representatives in the Netherlands East Indies of persons not domiciled there, and tne resident managers or representatives in the Netherlands East Indies of companies domiciled there or in the Netherlands, must have authority to stay in the district or districts in which the prospecting or mining is to take place. ::irwiX3tim ■■'*». ■*B%I»r..* --r^'^-'omvl m 54 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Art. 5 A. (1) The Government shall have power to cause prospecting and mining to be carried on in places where such do not conflict with rights granted to prospectors or concessionaires. (2) For this purpose the Government shall have power either to undertake pros- pecting and mining work itself or to enter into agreements with persons and com- panies binding them to undertake the work of prospecting and/or mining: Provided, That such persons satisfy the requirements laid down under clause 1 of article 4 of this law. (3) With the exception of agreements referring exclusively to the undertaking of prospecting work, such agreements shall not be concluded until authority to do so has been granted by law in each individual case. *♦»**♦» Art. 28. (2a) The discovery of one of the minerals, etc., 8pecifi'}d sub (b) in clause 1 of article 1, shall not entitle the discoverer to a mining concession. Only the Gov- ernment, or persons or companies with whom contracts are entered into by the Gov- ernment in pursuance of the stipulations of article 5a, shall have the right to mine such minerals, etc. In the absenre of a special agreement the reward for such a discovery shall be determined in each case by the governor general. * « * * * ♦ ♦ The above provisions show that the discovery of petroleum does not entitle the discoverer to a mining concession; that to mine petro- leum is the right only of the Government or persons or companies with whom contracts are entered into by the Government, namely, Dutch subjects, inhabitants of the Netherlands or the Dutch East Indies, and companies incorporated under Dutch laws, either in the Netherlands or the Dutch East Indies, having on their board of directors a majority of Dutch subjects. The provisions of the above-quoted law and the method of adminis- tration gave the Royal Dutch-Shell combination practically a monop- oly of tne production of the Dutch East Indies. (See also p. 16.) The Djambi concession. — On November 22, 1920, a bill, spon- sored by the Government, was introduced in the Netherlands Par- liament to authorize the minister for the colonies to establish for and on behalf of the Dutch East Indies, a registered corporation with the Serson or persons tu be nominated by him, that shall be called the [ederlandsch-Indische Aardolie Maatschappij (Netherlands Indies Mineral Oil Co.) for the development of the Diambi oil fields. From an explanatory memorandum accomparryung the bill it appeared that the person to be nominated was tne Bataafsche Petroleum Co., a subsidiary of the Royal Dutch-Shell group. ^* As to the value of this concession, a communication addressed by the American Legation at The Hague to the Dutch minister of foreign affairs, stated in part that— ^« American scientists and oil experts who have a very intimate knowledge of the oil resources of the Indies agree that the Djambi fields do represent substantially the oil wealth of the country. In theso conditions I think it is not unnatural therefore for us to feel that the contemplated agreement with the Bataafsche does in fact, although perhaps not in theory, constitute a monopoly — a setting aside for the exclusive development by one company in which foreign capital other than American is largely interested of the richest mining district known in the Netherlands East Indies. I nder these circum- stances I should not be surprised if my Government did not attach any very great significance to the assurances that have been given me from time to time that nothing in the proposed legislation contemplated the prohibition of American capital from participation in the development of the oil regions other than the Djambi fields. When it became known that a bill was being considered for the granting of petroleum rights in the Djambi, the desirability for w S. Doc. 11, 67th Cong., 1st sess., p. 9. »» S. Doc. 39, 67th Cong., 1st sess., p. 4. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 55 American participation did not escape the attention of the American Government, and considerable correspondence on the subject was exchanged between representatives of the two Governments, both before and after the introduction of the bill in the Parliament of the Netherlands and before its passage.^^ In reference to this matter. Senate Document No. 11 states: ^^ In view of the fact that American citizens had not found it possible to acquire petrolpum properties in the Netherlands East Indies, except some few of relatively negli'nble importance, and in view of the further fact that Netherlands citizens had acquired and developed and were continuing t» acquire and develop extensive holdinc^ in the United States on terms of equality with American citizens, it waa hoped Ihat the Djambi concessions bill might be so modified as to admit American citizens and American capital to participation in the projected development. While the bill was still under consideration by the council of state, and prior to its introduc- tion into the Parliament, an expression of this hope was conveyed by the jVmencan minister at The Hague to the appropriate officials of the Netherlands Government. The following excerpt from a note sent by the United States Department of State to the Netherlands Legation at Washington, imder date of November 2, 1920, illustrates the importance attached to the granting of these concessions : ^^ I may add that the Government of the United States welcomes the intimation contained in your note that the Netherlands Government does not intend to give to. the Royal Dutch Petroleum Co. a virtual monopoly of the exploitation of the remaining petroleum fields in the Netherlands East Indies. As you are aware, the bill referred to in vour note, which is now under consideration by the Netherlands Government, and which provides for an agreement with the Bataafsche Petroleum Maatschappij, a Bubsidiary of the Royal Dutch Petroleum Co., according to which the subsidiary companyls to receive exclusive exploitation rights in the Djambi concessions in Suma- tra, has formed the subject of representations to your Government by the American minister at The Hague. While it is recognized that this agreement provides for the disposition of onlv one field, it is understood that this field includes the most valuable of the remaining' prospective petroleum territories in the Netherlands East Indies, and that American companies thus far have been unsuccessful in requests for a share in the concession. Frankness requires me to state that the disposition of this field at the present time in the manner stipulated by the proposed agreement impresses this Government as an indication of a policy to exclude companies controlled by American citizens from the petroleum industry of the Netherlands East Indies. Policy of the United States. — There is no doubt in the minds of citizens of the United States that the Royal Dutch-Shell combina- tion has practicallv a monopoly of the production of the Netherlands East Indies, and that American interests have been excluded from oil developments in that territory. The situation is appreciated by the Department of the Interior, which has recently refused to grant the Shell Co. of California a permit to prospect certain supposed oil- bearing lands in Utah unless the company is able to satisfy that department that the Government to which the Shell Co. owes allegi- ance does not discriminate against Americans. This position is in harmony with the general leasing law of February 25, 1920, pertain- ing to pubhc lands, and particularly to that portion of section 1 of the law which provides — That citizens of another country, the laws, customs, or regulations of which deny similar or like privileges to citizens or corporations of this country, shall not, by stock ownership, stockholding, or stock control, own any interest in any lease acquired under the provisions of this act. » See S. Docs. 11 and 39, 67th Cong., 1st sess. «» S. Doc. 11, 67th Cong., 1st sess., p. 9. « S. Doc. 11, 67th Cong., 1st sess., p. 21. I. pi I ■>.» " t t&y .*i':.. k^* 66 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. According to reports to the State Department, although Royal Dutch-Shell interests control almost the entire area of proven lands in the Netherlands East Indies, there are still large areas of unproven lands. Of these unproved lands a considerable portion is still closed to private development by Government reservation. The Govern- ment of the Netherlands states that companies other than the Royal Dutch-Shell group would be considered when other regions are opened to development.^^ Section 7. Restrictions in Russia. The petroleum reserves of southeast Russia, southwest Siberia, and the res^on of the Caucasus have been estimated by the United States Geological Survey at 5,830,000,000 barrels, while those of northern Russia and Sakhalin are estimated by the same authority at 925,- 000,000 barrels. Russia was credited with a production of 28,500,000 barrels in 1921, its proportion of world production having declined from about 38 per cent before the war to less than 10 per cent in 1921. Among the present policies of the Russian administration at Mos- cow is that of nationalization of the country's petroleum resources, and in pursuance of this policy control of oil fields was taken by the 'Russian administration without regard to ownership and without compensation. By a decree dated June 20, 1918, all movable or immovable property belonging to the petroleum mdustry was de- clared the property of the State, and trading in oil was made a State monopoly, production and distribution being placed under the general management of the chief petroleum committee of the fuel department of the supreme council of national economy. It is reported that the ] International Barnsdall Oil Corporation, an American company, has ^j obtained a concession from the Russian administration at Moscow to develop production in the Baku district. Section 8. Restrictions in other European countries. Of the European countries not already discussed, only Poland and Rumania have a large production of crude petroleum. The oil lands of Poland are located in Galicia. In 1921 Rumania had a production of about 8,350,000 barrels of crude petroleum and Poland about 4,000,000 barrels. The Governments of several other European countries have been active in attempts to develop petroleum pro- PoLAND.— As already stated, the Polish oil lands are concentrated in Galicia and extend over a wide strip of territory along the Carpa- thian range. The Polish Government owns large tracts of unde- veloped oil lands and operates a refinery with a daily capacity of 6,000 barrels at Drohobycz. It is reported that— ^4 Concessions for the development of oil fields can be secured from the Polish G9vern- ment by foreign capitalists under very advantageous conditions, o\\ing to the inade- quacy of domestic capital. The regulations governing explora-tion and development were de- sicrned to promote drilling activity. S. Eustachy, writing m L'Est Europeen, stated that the Polish Government had resolved to grant petroleum concessions along the following general lines .^^ 1 The Government will grant licenses to Polish citizens or foreigners for preparatory geological research work in tracts of from 500 to 1,000 hectares of State property «» S. Doc. 39, 67th Cong., 1st sess., p. 7. M Oil and Gas Joarnal, Oct 19, 1922, p. 90. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 57 (1 hectare=2.471 acres). After one year of preparatory work, the prospecting group must select for exploitation one of several plots of 50 hectares aggregating not more than 500 hectares. 2. The concessionaire will agree to sink during the following year at least one well per 50 hectares of land leased, the depth to be reached at the end of that period being specified in the contract unless the concessionaire agrees to produce a certain quantity of oil during the year. Following the first well's completion, the company must start work on a new well within 12 months. 3. Fifty hectare tracts adjoining the company's fields, or simply situated within the area for which the company had secured its temporary license, but which, at the end of the first year, were not selected for development work, may be placed under exploitation by the Government. 4. The ground to be finally purchased from the Government will be that upon which rigs, plants, roads, etc., have been built. 5. The State will participate in the profits to the extent of from 6 to 12 per cent. (Private owners of oil lands collect from 12 to 24 per cent of the net profits.) 6. Concessions will be granted for 30 years, extension to 50 years being accorded if the concessionaire so requests. Rumania. — In 1921 Rumania was credited with a production of about 8,350,000 barrels of petroleum. Agitation for nationalization of the petroleum industry oi Rumania has not yet resulted in definite legislation to that effect, but by a decree of November 27, 1918, large land areas were expropriated from both native and foreign owners and resold to peasants, the Government reserving the subsoil rights. Portions of Government lands, which were leased from time to time, are now operated by both foreign and native capitalists, but since 1909, with the exception of two small leases obtained by local concerns, the Government has withheld the granting of leases. A summary of a legal opinion rendered oy S. Rosenthal to the British ambassador at Paris, on February 21, 1919, stated in effect that — The provisions of the Rumanian constitution relative to agrarian reform and ex- propriation of lands and the decrees ruling the application of the same have been inter- preted as not affecting in any way existing oil concessions or rights ceded to English or other foreign companies. However, lands declared oil bearing and not yet worked or conceded which are part of a property belonging to a Rumanian domiciled abroad or to a foreigner are included in expropriation, although this will presumably only take place on pa^inent of a just indemnity. Italy. — The quantity of petroleum produced in Italy is only about 5 per cent of the country's requirements. Most of the imports are from the United States. Italians are believed to possess no important petroleum rights in foreign fields. The commission is informed that although foreigners are not specifically excluded from the acquisition and development of petroleum lands by the ItaUan mining law, vet in practice the Government has refused to grant such rights to other than Italians or companies the directorates of which are entirely Italian and the capital stocks of which are at least two-thirds owned by their own nationals. It appears that such provisions, made by tne mining law in respect to sulphur, alkali, and mineral phosphates, have been applied oy the Government to petroleum. (See Ex- hibit 18, p. 126.) Greece. — The Anglo-Persian Oil Co. recently received from the Greek Government an exclusive concession for all petroleum rights in eastern and western Macedonia for an exploration period of five years, with an option for a 50-year exploitation concession in certain districts. (See agreement with the D'Arcy Exploration Co. (Ltd.), Exhibit 11, p. 96.) 35904—23- -6 I ^ •> '^^smmm^mb^"^' ^^mmmr •f-Nfc/ VS^(^-«».-' "PP yS !«■ ■ 58 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Section 9. Restrictions in Mexico. Next to the United States, Mexico is now the largest producer of crude petroleum in the world. Of the estimated world production of 759,030,000 barrels of petroleum in 1921, Mexico s production was 195,000,000 barrels, and that of the United States 470 000,000 bar- rels The Mexican reserves were estimated by the United btates Geological Survey in 1919 at 4,500,000,000 barrels. Prior to the enactment of the Mexican constitution of 1917, con- cessions for the exploitation of mineral deposits in Mexico were freely frranted to foreign individuals and companies, and there were no Restrictions on natives selling oil lands to foreigners. The consti- tution of 1857 gave the Mexican Congress power to enact mming and commercial codes, which were to be binding throughout the Kepublic, and it also provided against the enactment of any retroactive law, and that ^^— Private property shall not be taken without the consent of the owner, except for reasons of public welfare, compensation having been made. The Mexican Congress, in the exercise of its power, enacted a law in 1884 providing that ^^ — Foreigners may acquire mining property on such terms and with such lifjtationB as the laws of the Republic grant them the capacity to acquire, own, and transfer ordinary property. It included '' petroleum and gaseous springs'' among the substances named as the ''exclusive property of the owner of the land. On June 4, 1892, another law was enacted, which provided as follows: ^^ Art. 4. The owner of the land may freely work without a special license (conces- sion) in any case whatsoever, the following mineral substances: Mineral fuels, oils, *''AR'?.''5%irmfning property legally acauired and such as hereafter may be acquired in pursuance of this law shall be irrevocable and perpetual, so long as the Federal prop- erty tax is paid in pursuance of the provisions of the law creating the said tax. Article 2 of the law of November 25, 1909, provided that^«— The following are the exclusive property of the owner of the soil: 1. Ore bodies or deposits of mineral combustibles, of whatsoever form or variety. 2. Ore bodies or deposits of bituminous substances. Mexico having been proven rich in petroleum deposits, the oppor- tunities thus afforded foreign interests for development and exploita^ tion of the country's oil lands were quickly taken advantage of, and strikingly large sums were spent for this purpose, both by American and other foreign interests. In 1919 American companies produced \ over 70 per cent of the Mexican crude petroleum production. Ihe ■provision of the Mexican mining law in respect to denouncement (filing claim by due legal process) was modified by articles 27 and 66 of the constitution of 1917 as follows: " Art 27. The ownership of lands and waters comprised witlnn the limits of th^ national territory is vestecf originally in the nation, which has had and has the right tx> transmit titie thereof to private persons, thereby constituting P^^Yate property Private property shall not be expropriated except for reasons of public welfare and by means of compensation. «» U. S. Bureau of Mines Bull. 206, p. 439. ••U.S. Bureau of Mines Bull. 206, b, 440. ^ , t j » * i ^ nr " Federal Trade Commission, Pacific Coast Petroleum Industry, pt. 1, p. 3o. •« U. S. Bureau of Mines Bull. 206, pp. 441-442. FOREIGN OWNEBSHIP IN THE PETROLEUM INDUSTRY. 59 1 ' The nation shall have at all times the right to impose on private property such limitations as the public interest mav demand as well as the right to regulate the enjoyment of natural resources, which are susceptible of appropriation, m order to conserve them and equitably to distribute the public wealth. * * *• , u In the nation is vested the legal ownership (dominie directe) of all minerals or sub- stances * * * petroleum and all hydrocarbons— solid, liquid, or gaseous. ******* Legal capacity to acquire ownership of lands and waters of the nation shall be iffoverned by the following provisions: , . . • .. I Only Mexicans by birth or naturalization and Mexican companies have the right to acciuire ownership in lands, waters, and their appurtenances, or to obtain Conces- fiions te develop mines, waters, or mineral fuels in the Republic of Me3Qco The nation may grant the same right to foreigners, provided they agree before the depart- msBX of foreign affairs to be considered Mexicans in respect te such property, and aoeajdingly not to invoke the protection of their Governments in respect to the same, und«r penalty, in case of breach, of forfeiture to the nation of property so acmiired. Wi^liiii a zone of 100 kilometers from the frontiers and of 50 kilometers from the se^ coaat, no foreigner shall under any conditions acquire direct ownership of lands and watera. ^ * » IV. Commercial stock companies shall not acquire, hold, or administer rural prop- erties. Companies of this nature which may be organized to develop any manufac- turing, mining, petroleum, or other industry, excepting only agricultural industnee, jnay acciuire, hold, or administer lands only in an area absolutely necessary for their establishments or adequate to serve the purposes indicated, which the executive of ithe union or (A the respective State in each case shall determine. *** * * * * AitT. 33. Alienfl are those who do not possess the qualifications** prescribed by article 3^. They shall be entitled to the guaranties granted by Chapter I, Title I, of the pres- eni constitution: but the executive shall have the exclusive right to expel from the Republic forthwith, and v.ithout judicial process, any foreigner whose presence he may deem inexpedient. , ,. • , /^ • r u No foreigner shall meddle in any way whatsoever in the political affairs of the country. «'**«♦«♦ Article 14 of the constitution of 1917 states also that no law shall be given retroactive effect to the prejudice of any person. Various decrees bearing upon the enforcement of article 27 of the new constitution have been issued by the executive of the nation since the constitution's adoption.^® It is necessary here to mention only those decrees which have drawTi the attention of our State Department as particularly injurious to the rights of American citizens. Excessive taxation. — On February 19, 1918, the President of Mexico, under authority of a congressional resolution of May 8, 1917, issued a decree which appears to nave been the first effort to enforce article 27 of the constitution of 1917. The issuance of this decree led to diplomatic protests by the Governments of the United States, France, and Great Britain. The position of the United States was commimicated to the Mexican Government on April 2, 1918, as follows ; ^^ While the United States Government is not disposed to request for its citizens exemption from the payment of their ordinary and just share of the burdens of taxa- tion, so long as the tax is uniform and not discriminatory in its operation and can fairly be considered a tax and not a confiscation or unfair imposition, and while the United States Government is not inclined to interpose in behalf of its citizens in case of expor- priation of private property for sound reasons of public welfare, and upon just com- I)ensation and by legal proceedings before tribunals, allowing fair and equal oppor- »• Birth or naturalization. »o See U. S. Bureau of Mines Bull. 206. »i S. Doc. 272, 66th Cong., 2d sess., p. 15. '■^^m'.r-MA'l^ ""» .>y*«^ ' ■• ';*^*«fe-4Uv-t.<'^P«:£^^'''^^'*«?- 'i»«f'r,:»/.^-^!i«M:4s?yW!*»*W3««wr<^^ omsem^m -».'«««i*wh*«»**i»- 60 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. tunity to be heard and giving due consideration to American rights, neverthelora, the Unite;! States can not accmiesce in any procedure ostensibly or nominally m the form of taxation or the exercise of eminent domain, but really resulting in confisca- tion of private rights and arbitrary deprivation of vested rights. PETROLEUf.1 RIGHTS IN FEDERAL ZONES. — Apparently there has been no overt act detrimental to American citizens taken by the Mexican authorities in pursuance of the decree signed by President Carranza on March 12, 1920, relating to the development of petroleum in the subsoil of the Federal zones.^^ ^he preamble to this decree, after reciting that in the nation was vested the legal ownership of petroleum found in lands within the Republic, and of the surface and subsoil rights in the Federal zones, stated: That through extensive development these oil-bearing districts faced early exhaustion with- out the nation receiving the fair return it would have received if the nation had permitted drilling in the intersecting and ad^'oining Federal zones; that by article 27 of the constitution the Govern- ment was authorized to grant concessions on condition that regular work of development be done; and that numerous applications for drilhng permits in the Federal zones were on filo.^ On July 10, 1920, an official circular (No. 10) was pubhshed, supple- menting the decree of March 12, 1920, and prescribing the conditions under which concessions would be granted. The following sections of the circular particularly affected American rights: 11, No concession shall ^e granted to develop any tract of land on which there exists a prior exclusive concession still in force or pending decision. Ill Each anplicatioii shall cover a definite tract of land of continuous area. In the case of rivers or streams, the concession shall entitle the holder to develop the district lo^ 62 FOREIGX OWNERSHIP IX THE PETROLEUM I15DTraTB.T. tioned companies is all handled by the Royal Dntch-SheM group, wh?ch operates a refinery at Lorenzo. In 1921 their prodm«»n was- about 1,700,000 barrels. . ,, • i -* Peru -Apparently the only restrictions against foreign exploita- tion of petroleum resources in t>eru is in terntor>' witlun oO^killometere of the frontiers. The International Petroleum Co. (Ltd.), which is controlled by the Standard Oil Co. (New Je^ey) , has large cone^sions in Peru, the estimated production for Peru m 1921 was- J,568,000 ^"BoLiyiA.-Apparently there are no restrictions against foreigner in the deyelop^ent of petroleum-bearing lands m Boh^, as the mining law of iSecembcr 12, 1916, proyides that — The State enjove the ownership of aU.dcpoeits. layers.^strata, or otli« beds of inor- m4"i oTrsLg^e'conc^rfol kno^J n Jnlr^U. a,id only 30 claims in the ca«e of recently discovered minerals. » • * No production has been developed in Bohvia. Argentina —Valuable petroleum deposits are known to exist m Artent!na one of the mosf important fields being that of Comodoro Rivadavia in the southern part of the countrj-. In this held the Ai^entTne'Go'Vernment is {l-V engaged in producing a^^^^ Arlentina is credited with a production of 1'747 000 barrels of pe troleum in 1921. The commission is informed that the countr> nas a^prrent no law goyerning the exnloitation of petroleum, but that all oil fields have been withdrawn from private ownership. Section 12. Restrictions in Asiatic countries. Outside of the Dutch East Indies and British India, the most im- portant production of crude petroleum in Asia is now produced m Pe^ia —Persia is beUeved to contain tremendous reserves of un- deveCed petroleum resources. The importance of this country may be appreciated from the fact that its production in 1921 was about 14 600 OoTbarrels. The Persian oil fields, together with the neigh- boring territory of Mesopotamia, have ri'^^'/.ff stoTooloO mated by the United States Geological Survey at 5,820,000,000 ^*Th?' Anglo-Persian Oil Co. (Ltd.), through its subsidiary the North Perlia Oil Co. (Ltd.), claimed title to three »^d^ half of the five northern Provinces, a territory covering about o00,000 square miles and said by the United States Bureau of Mines to contain the most orom'sng oil-bearing lands in Persia. The commission is in- f'ormeSTatTe Persian Government claims this grant to be invalid^ Durinc 1921 two American companies, the Standard Oil Co. (Wew JeS and the Sinclair ConsoU/ated Oil.Corporation, attempted to secTrVoU concessions in Persia. When Sir Jo^n Madman represent^- Itive of the Anglo-Persian Oil Co. (Ltd.), visited the United States Tnlg-n, an agreement was reached with the Stan dard Oi l Co. (New » Uhited States Bureau of Mines, BuU. 206, p. 521. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 63 Jersey) whereby the Standard of New Jersey and the .\jiglo-Persian Oil Co. (Ltd.) submitted a proposal to the Persian Government that these two companies be granted a joint concession to the undeveloped oil fields of northern Persia. The Sinclair Consolidated Oil Corpora- tion also entered into negotiation for a concession to oil lands m these same Provinces. The Persian Parhament did not accept either ap- pUcation for a concession, but in the latter part of 1922 announced that it would draw up a model concession to be submitted to these companies for acceptance. Up to the present time (February, 1923) no concession has been granted to the oil lands in the northern Provinces of Persia. (See Exhibit 21, p. 127.) A concession in southern Persia was granted on May 28, 1901, lor a period of 60 years to W. K. D'Arcy, through whom the Ang o- Persian claims title.^' Citizens of the United States are generaUy excluded from southern Persia. (See Exhibit 13, p. 102.) China.— There is no production of crude petroleum in Chma. Indications of important petroleum deposits are reported m a num- ber of Provinces. The United States Geological Survey has roughly estimated the petroleum reserves of Chma at 1,375,000,000 barrels. Apparently there are no restrictions discriminating between for- eigners and natives in respect to exploitation of its petroleum reserves. It is understood that at one tune the Standard Oil Co. of New York had a concession in China which it later abandoned. Japan. — The reserves of petroleum in Japan and Formosa have been roughly estunated by the United States Geological Survey at about 1,235,000,000 barrels. In 1920 about 2,000,000 barrels were produced. To meet domestic demands a q^uantity eqmvalent to about one-third of its annual production is unported, chiefly from the United States, the Netherlands East Indies, and Persia. Al- though the Japanese have been active in the working and develop- ment of fields in the islands of Hondo, Hokaido, Taiwan (Formosa), and SakhaUn, the industry is said to be showmg no progress, due to declines in production and the failure of attempts to develop new fields. . • A- 1 Apparently the production of crude petroleum in Japan is entu-eiy in the hands of Japanese subjects, and a tendency toward monopoly is mdicated, there being only 11 companies operating m 1920 as against 34 in 1916. The two big companies, the Hoden Oil Co. and the Nippon Oil Co., were consolidated on October 1, 1920, with a capital of $40,000,000. This combination is said to produce about 95 per cent of the crude-oil production of Japan and to con-r trol the refining industry of that country. i • • n In Japan the State reserves the right of original owTiership m all minerals. It is understood that prior to 1900 foreigners were not allowed to work mines or to become members of mining companies in Japan; but by amendment of the regulations in 1900 a business establishment organized by Japanese or foreigners, or bv both combined, was permitted to work mines, provided the establishment was placed under Japanese law. By article 5 of the Japanese min- ing law, promulgated by imperial order on March 7, 1905: ^"^ No person other than subjects of the Empire or juridical persons duly formed in accordance with the laws thereof are entitled to acquire mining rights. » S. Doc, 272, 66th Cong,, 2d sess., p. 12. « S. Doc. 272, 66th Cong,, 2d sess., p. 10. \m 'y'- ■>r:-ni,-'\ *■ ^ejf^,'* •;*•*:«"■ ,.^ --«iJWa««^5fe«.^^*•S7••*f^>►-."'J*^if1!•; T-km^»fjm»aitm-r<9»'..f^,y«K^'-'~'ii "■«««* :■«■»««* -^'»««M>i«i»«*j^iiiH«ii*;-- 64 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 65 ■I Apparently the meaning of ''juridical persons" in the Japanese law is such that it is practically impossible for foreign companies to retain or transfer undisputed possession of mining rights in that Empire. Wliile Japanese nationals at the present time are active in petro- leum development in eTapan, Formosa, China, and the island of Sakhalin, the Japanese Government is said to be withdrawing from private ownership or development oil fields within their domain in these territories. (See Exhibit 11, p. 92.) From 1901-1907 the International Oil Co., a subsidiary of the Standard Oil Co. of New York, controlled producing property and a refinery in Japan. In 1907 the former was absorbed by the Nippon Oil Co. Russian Sakhalin. — Russian Sakhalin, which comprises the northern half of the island, has an approximate area of 15,850 square miles. It is said to have petroleum lands covering 3,000 square miles on its eastern coast and, in addition, 1,500 to 2,000 square miles of supposedly oil-bearing lands on its western coast not yet explored. Although Russian Sakhalin can not yet be said to be producing petroleum, at least to any significant extent, the indications are of the most encouraging nature. An American company, the Sinclair Consolidated Oil Corporation, recently (1923) secured from the Russian Government at Moscow the prospecting rights to all of Russian Saklialin, but with the obliga- tion to reduce its holdings to 1,000 square versts, or 280,800 acres, within five years. (See Exhibit 20, p. 127.) 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"3 •s ■sa . . -H 3 •a-a'a^ • • • t^oo« ^ ^ ^ eS 3 .a 3 o © 3 •3© •3 a "So a w © © a © o O a bi 3 1-1 OJ 1—1 •3" a 03 w CO 8 CO »H O^ CO CO o ft bl o O a 03 .It Oa CO 03 o ®.r; a s 3 CO 3 © © O oS bl o Pnra gO 2 © O § ^ S 08 a It o a 03 •It m m © o a o O o O bO .2^ag © OQ bl S.9 o ® > Km 8 SS 3 SS '■3*'b*«ifeiijUtt.v'*«j^''*».-r*'«»*- •.a*>^>'%A/-.*!S8«>.ts*j!i»*«**as««w.«».''fl».«^^ '-■*!^mi^ ■■«aE»*-»-'»»««.«wi-i&*i 70 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Exhibit 2. CIRCULAR, UNION OIL CO. OF CALIFORNIA, AUGUST 12, 1919. Union Oil Co. of California, Los Angeles, Calif., August /f, 1919. To the Stockholders of Union Oil Co. of California: Pursuant to resolution of its board of directors (and permit having been duly issued by the honorable corporation commissioner of the State of California in that behalf) Union Oil Co. of California hereby offers to the stockholders of the company of record at Oleum, at the close of business on August 20, 1919— pro rata in proportion to their respective stock holdings — an amount of its unissued capital stock equal in par value to 14.75391 per cent of the par value of its outstanding capital stock, at par, viz, $100 per share, payable in cash, as follows: $25 per share on or before September 20, 1919; $25 per share on or before January 1, 1920; $25 per share on or before May 1, 1920; $25 per share on or before September 1, 1920. Payments for stock can only be made as above specified, and no advance remittance will be accepted for pavment in full for all subscription rights. The stock transfer books will be closed from August 20 to 27, both dates inclusive, during which time there will be transmitted to the respective stockholders transferable certificates of subscription rights — for whole shares and fractional shares separately — showing the amount of stock which their respective stock holding at the close of business on August 20, 1919, will entitle them to purchase under this offer. The company will receive no subscriptions for fractional shares of stock. However, pro\dsion has been made whereby each stockholder receiving a fractional certificate will be given the right and option either («) to sell such fractional certificate of rights; or (6) to combine his fractional rights with those of others and thus secure whole share issues; or (r) to tender such fractional certificate of rights to either the First National Bank of Los Angeles or the Farmers and Merchants National Bank of I.os Angeles for purchase by them, at the rate of $60 per whole share right, pursuant to underwriting agreement hereinafter referred to. These certificates, both as to whole shares and fractional shares, represent valuable rights which may be sold and transferred when each shall bo properly indorsed and the signature witnessed, or may be availed of also by the heirs or l^al representatives of any stockholder. On or immediately following September 20, 1919, and the first days of January, May, and September, 1920, stock will be issued in full-share certificates for the full amount of stock to be issued, which the respective $25 per share payments due upon— and which have been paid on or before — such respective dates will cover. Payment balances — for which fractional certificates will not be issued — in each case will be added to and applied on the next payment. For illustration: A stockholder owning 100 shares of stock will be entitled to subscribe for 14.75391 shares, and there will be issued to him a certificate of rights for 14 whole shares, together with the fractional share certificate of rights (w^hich may be availed of as above outlined) to cover his frac- tional interest. If he makes all payments as above provided, there will be issued to him, on or immediately following September 20, 1919, a certificato for three shares of stock and $50 will be carried forward and added to the second payment. On or immediately following January 1, 1920, a certificate will be issued for four shares, nothing being carried forward to th« third payment. On or immediately following May 1, 1920, a certificate will be issued for three' shares, and $50 will be earned forward to the final payment. On or immediately following September 1, 1920, a certificate for four shares will be issued, making 14 shares in all. All unused subscription rights will become void after September 20, 1919, and in case of default in the making of any payment at the time herein above provided for the subscription rights to the amount of stock represented by the installments not paid at that time will also become void, without liability of issuance of any stock therefor, and any payment balances will be retained by the company and become its property. The new capital secured from this offering of stock will be devoted to the following purposes: (a) To the acquisition of additional prospective oil territory and other properties. (6) To the work of drilling and otherwise developing the properties of the coni' pany. (c) To the malting of additions and improvements to, and extensions of, its refining plants and facilities, {d) To the acquisition of additional marine and other transportation facilities. {e) To providing additional marketing stations and facilities. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 71 (/) And in general to make financial provision for the conduct and growth of the company's business, . , , i • • i The stock issued will be limited to whole shares— no fractional shares being issued— and no subscriptions will be received except for one or more full shares. Stockholders desiring to avail themselves of this opportumty to increase their holdin<^ upon receiving their certificate of rights should detach the fractional share certific'ate and sign the subscription blank on the back of the certificate of whole share rights and return the same, together with remittance covering the first install- ment of $25 per share, to the secretary on or before September 20, 1919. If for any reason, any stockholder does not wish to subscribe for and purchase the shares of stock designated on his certificate of rights, he is at liberty to sell and assign his rights thereunder by indorsing the same and having his signature witnessed. A group of responsible financiers have entered into an underwTitmg agreement with your company for the benefit of itself and all and singular its stockholders whereby, nnder terms and conditions in said agreement set forth, said underwriters offer to purchase from any and all stockholders any and all of the certificates of rights which may be tendered to said underwriters at any time on or before September 20, 1919, on the basis of $60 per share right. The underwTiters have requested that you be ad\ised that they have made such arrangements that the First National Bank or the Farmers and Merchants National Bank, in the city of Los Angeles, will, at any time during business hours and before noon of the 20th day of September, 1919, pur- chase at the above price and pav for all certificates of rights, whether whole or frac- tional, upon delivery to the bank of said certificates of rights properly indorsed and witnessed. In case anv stockholder shall not desire to sell or dispose of his whole share subscTip- tion rights the fractional share subscription rights can be detached and handled as hereinbefore soecified. Permit has been issued by the honorable corporation commissioner for sale of the remaining 64,285 shares of unissued capital stock of your company. All of said stock not sold to stockholders or their heirs or assigns, pursuant to this offering, may be disposed of by the company at any time and to any parties and for such considera- tions and on such terms as your board of directors shall deem advantageous, but so as to net the company at least $100 per share. By order of the board of directors. John McPeak, Secretary. Exhibit 3. CIRCULARS, UNION OIL CO., AUGUST 17, 1922. Notice to Stockholders Respecting Right to Subscribe to Stock in Shell Union Oil Corporation. Union Oil Co., New York, August 17, 1922. To the Stockholders of Union Oil Co.: In accordance with the accompanying circular, this company hereby offers 139,000 shares of common stock (no par value) of Shell Union Oil Corporation for subscription at $12 per share to the holders of the issued and outstanding stock of this company at the close of business on August 30, 1922, at the rate of 1 share of said common stock in Shell Union Oil Corporation for each 10 shares of stock in this company held by them at said date. A dividend of 25 cents per share has been declared upon each share of said common stock of Shell Union Oil Corporation, payable September 30, 1922, to stockholders of record at the close of business on September 20, 1922. Stockholders may subscribe for more than their pro rata share of said shares of said common stock in Shell Union Oil Corporation, and the shares of such stock not sub- scribed for by reason of stockholders not taking their entire pro rata share will be allotted proportionately to stockholders subscribing for more than their pro rata share. Subscriptions to said shares of said common stock in Shell Union Oil Corporation must be made in the manner hereinafter set forth at the office of Guaranty Trust Co. of New York, No. 140 Broadway, Borough of Manhattan, New York City, at or before 3 p. m. on September 18, 1922. No subscription or assignment or any right to subscribe will be recognized unless made on the forms and in the manner prescribed by this company. Fractional war- rants will be issued, but no subscription may be made on such fractional warrants alone, and unless fractional warrants be surrendered with other fractional warrants aggr^^ting one or more full shares they will become wholly void. Neither this i • *-.- •rv'?»'-A'-t«rx-- L. m} . 'wiji— iwi 72 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. company nor Guaranty Trust Co. of New York will buy or sell whole or fractional subscription rights. The full subscription price of $12 for each share of said common stock in Shell Union Oil Corporation will be payable at or before 3 p. m. on September IS, 1922, and payment must be made at or before said date at said office of Guaranty Trust Co. of New York. The stock transfer books of this company will not be closed in connection with the offer herein contained. Subscription warrants entitled ** Series A," specifying the number of shares of said common stock in Shell Union Oil Corporation for which the stockholders of this com- pany are entitled to subscribe in accordance with this offer, and subscription blanks entitled "Series B" for use by stockholders desiring to subscribe for more than their pro rata share, will be mailed to stockholders as soon after August 30, 1922, as practi- cable. Each subscription warrant, "Series A," and each subscription blank, "Series B," should be accompanied by a certified check in New York City funds payable to the order of Guaranty Trust Co. of New York, for the amount of stock subscribed for on each warrant ana blank. Should any stockholder not receive the full amount of stock subscribed for by him on subscription blank, "Series, 15, " the amount paid by him for stock not received will be refunded to him by Guaranty Trust Co. of New York. Temporary certificates for said common stock in Shell Union Oil Corporation will be issued on the receipt of the subscriptions and the payment in full of the amounts payable thereon. My order of the board of directors. W. C. Stagg, Secretary of Union Oil Company. Union Oil Co., New York, August 17, 1922. To the stockholders of Union Oil Co.: In accordance with previous communications to you and with the expressed desire of many stockholders, your board of directors are pleased to announce that arrange- ments have been made which will permit a distribution to the stockholders of Union Oil Co. of the shares of common stock of Shell Union Oil Corporation held by this company. Because Union Oil Co. has been unable to sell ita two 10,000-ton tankers, and there appears to be no likelihood of a sale thereof on advantageous terms in the near future. Union Oil Co. in order to pay the balance of its bank loans has decided to offer to its stockholders 139,000 shares of common stock (no par value) of Shell Union Oil Cor- poration at $12 a share. This entire offering has been underwritten without commis- sion or cost to Union Oil Co. at the said price of $12 per share. A dividend of 25 cents a share has been declared on said common stock of Shell Union Oil Corporation, payr able September 30, 1922, to stockholders of record at the close of business on September 20, 1922. The portion of such dividend receivable by Union Oil Co., except so much thereof as is payable in respect to said 139,000 shares, will be retained by Union Oil Co. in its treasury. It is intended at an early date after the completion of the sale of these shares to make a distribution to each stockholder of Union Oil Co. of one and a half shares of said common stock of i^hell Union Oil Corporation for each share of stock of Union Oil Co. held by him. Union Oil Co. has been advised that application will shortly be made to list the said common stock of Shell Union Oil Corporation upon the New York Stock Exchange. After the application of the proceeds of the sale of said 139,000 shares of stock to the liabilities of Union Oil Co. there will remain certain liabilities for taxes and other obUgatious, the exact amount of which can not now be fixed, but which it is confidently expected will be substantially less than the amount which should be realized from the sale of the two 10,000-ton tankers and other assets of Union Oil Co. not yet disposed of; so that on the final dissolution of Union Oil Co. there may be a cash dividend payable to the stockholders in addition to the distribution of said common stock of Shell Union Oil Corporation hereinbefore referred to. There is annexed hereto a statement respecting Shell Union Oil Corpjoration, to the shares of stock of which you are hereby ^iven an opportunity to subscribe. There is inclosed herewith a notice giving in detail the terms of the subscription privilege and the manner of exercising the same. By order of the board of directors. James H. Brookmire, President. *>- .^ ■ <► FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Exhibit 4. 73 AGREEMENT BETWEEN UNION OIL CO. (DELAWARE) AND ANGLO-SAXON PETROLEUM CO. (LTD.), OCTOBER 19, 1921. Agreement dated October 19, 1921, between Union Oil Co., a Delaware corporation, herein called the "Delaware company," of the first part, and Anglo-Saxon Petroleum' Co. (Ltd.), a British corporation, herein called the "Anglo-Saxon," of the second part, which has been authorized to enter into this agreement by the Royal Dutch Co., the Shell Transport & Trading Co. (Ltd.), and the Dundee Petroleum Corpora- tion (Ltd.). RECITALS. The parties hereto have determined to vest certain of their American share holdings and certain of the properties of the Delaware company in a new company in the manner set forth in the following plan and agreement, provided the approval of the stockholders of the Delaware company and of tae Anglo-Saxon be first obtained as hereinafter provided: PLAN. I. A corporation, in this plan called the "Consolidated company," shall be organ- ized and shall acquire and hold all of the shares of stock of Union Oil Co. of California, a California corporation, which are now owned by the Delaware company; the con- tract executed July 12, 1920, between the Delaware company and the Texas Co , a Texas corporation, respecting the Central Petroleum Co.. herein called the Central Petroleum contract and all of the issued and outstanding shares of stock of the follow- ing corporations, with the exception noted: 1. Shell Co. of California, a California corporation, herein called the "Shell Co " (excepting 16.35 shares of stock of the said corporation). 2. Roxana Petroleum Corporation, a Virginia corporation, herein called the ^'Roxana Co," 3. Ozark Pipe Line Corporation, a Maryland corporation, herein called the "Ozark Co. 4. Matador Petroleum Co., a Wyoming corporation, herein called the "Matador Co." Prior to the acquisition by the Consolidated company of the shares of stock of the Shell Co. there shall be withdrawn from the Shell Co.'s treasury the Trumble patents (the Shell Co. shall retain for itself the right to use within the United States of America the processes covered by said patents and any improvements that may be made therein by the owner of said patents or which it may otherwise acquire by the pay- ment of a license fee of $1,000 per year during the life of the said patents, and there shall be secured to the Roxana Co. the right to use said processes during the life of said patents upon the terms and conditions of the existing contract between it and the Shell Co.) and all of the shares of stock of the following companies owned by it- Gold Shell Steamship Co., Silver Shell Steamship Co., Pearl Shell Steamship Co all California corporations; Asiatic Petroleum Co. (New York) (Ltd.), a New York corporation; New Orleans Refining Co., a Louisiana corporation. II. The properties of the Delaware company owned or controlled by it, through its ownership of stock in subsidiary corporations, and hereinafter generally described shall be vested in the Shell Co. and in the Roxana Co., respectively, as follows: ' (A) In the Shell Co.: All of the property and assets, subject to specified liabilities hereinafter mentioned, of — 1. Columbia Oil Producing Co., a California corporation, herein called the "Colum- bia Co." 2. Western Union Oil Co., a California corporation, herein called the "Wefetern Union Co." .c^r V^l^^^ Western Consolidated Oil Co., a Wyoming corporation, herein called the ''United Western Co." 4. Dunlop Oil Co., a California corporation, herein called the "Dunlop Co." 5. All of the oil and gas properties, stocks of oil and other products, consumable stores, machinery, tools, equipment, and other facilities situated in California owned by— (a) Eddystone Oil Corporation, a Delaware corporation, herein called the "Eddv- etone Co." ^ (6) Commonwealth Petroleum Co., a Delaware corporation, herein called the "Commonwealth Co." 35904—23 7 W ' ■^«mmff^-^ ■■.MXry'P -^muf" ''■^'fmmti^tt^^«>^s!:rmm^ii^im h 1. 1-,. W-i tr 74 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. (c) National Exploration Co., a Delaware corporation, herein called the "Explora- tion Co." (B) In the Roxana Co.: 1. All of the property and assets of the Exploration Co., except oil and gas properties and facilities situated in California and Kentucky. 2. All of the oil and gas properties and facilities of the Commonwealth Co. situated in Texas. 3. All of the oil and gas properties, stocks of oil and other products, consumable stores, machinery, tools, equipment, and other facilities of the Eadystone Co., situated in Oklahoma and Kansas. - III. The Anglo-Saxon shall receive as consideration for the transfer and delivery by it to the Consolidated company, as hereinbefore provided, of the shares of stock of the Shell Co., the Roxana Co., the Ozark Co., and the Matador Co., 5,760,000 shares of the nonpar value stock of the Consolidated company. The Delaware company shall receive, as consideration for the transfer and delivery by it to the Consolidated company, as hereinbefore provided, of the shares of stock of the said Union Oil Co. of California, its right, title, and interest in the said Central Petroleum Co. -j». 76 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. All net profits, if any, from such operations during this period shall become the property at the closing date of the Shell Co. or the Roxana Co., as the case may be. The Texas oil properties and facilities of the Commonwealth Co. shall be transferred and conveyed as they exist on the closing date without any adjustment as to the result of the operations thereof, if any there b^. The Anglo-Saxon so far as it is legally able to do so will procure that the Consolidated company shall acquire from the present owners the various Shell marks set out in Schedule C and the right to use the same in connection with the oil products mentioned in the schedule sold and consumed in the United States of America. The considera- tion payable by the Consolidated company shall be the sum of $2,000. Fourth. The Delaware company represents that since May 31, 1921, it has not, except as hereinbefore stated, and until the closing date it will not permit any of its subsidiary corporations whose properties are to be included in whole or in part in the proposed consolidation except in the usual course of business or permit any liens or encumbrances to be placed on such properties. Likewise, the Anglo-Saxon repre- sents that since May 31, 1921, it has not and until the closing date shall not permit any of the corporations which are to be included in the proposed consolidation to enter into any contracts or create any obligations for the payment of money or otherwise or dispose of any of their properties, except in the usual course of business, and as hereinbefore required in clause 1 of the said plan in the case of the Marland contract, or permit any hens or encumbrances to be placed on such properties. In the case of all leases, contracts, and other instruments assigned to the Shell Co. and the Roxana Co. by the Delaware company or any of its subsidiaries hereunder wherein are expressed obligations to be performed by the Delaware company or any of its subsidiaries particulars of which are set out in schedule A, the Shell Co. and/w the Roxana Co. shall execute and deliver to the Delaware company on the closing date instruments in writing agreeing to assume and perform such obligations or accepting liability for nonperformance. Fifth: At the closing date, the Delaware company shall cause to be elected to the board of directors of the Consolidated company, which board shall consist of not more than 19 members, 14 individuals to be nominated by the Anglo-Saxon and 5 individuals to be nominated by the Delaware company. At the same time the Anglo- Saxon shall cause to be elected to the respective boards of directors of the Shell Co., the Roxana Co., the Ozark Co., and the Matador Co. such individuals as the Con- solidated company shall nominate. Sixth. Should the Delaware company be unable on or before December 31, 1921 — owing to the opposition of stockholders in its subsidiary corporations or for any other reason beyond its control — to cause the properties or any of them which it is herein obligated to transfer and convey to the Shell Co. and/or the Roxana Co., to be so transferred and conveyed, the Delaware company shall be entitled to adjournments of such closing date, provided a request in writing is made for such adjournments ad- dressed to the representative of the Anglo-Saxon in the city of New York at least two weeks prior to December 31, 1921. Adjournments so granted shall not exceed in the aggregate a period of six months. Should the Delaware company be unable — owing to the opposition of stockholders in the Exploration company or for any other reason beyond its control — to transfer and convey the properties of the Exploration company to the Consolidated company on or before the closing date or any adjournment thereof, such failure shall not operate as a rescision of this contract, but the stock receivable by the Delaware company hereunder shall be reduced by 300,000 shares. Seventh. The charter, by-laws, and all corporate proceedings of the Consolidated company and all corporate proceedings by which the Delaware company vests the securities and contractual interests owned by it in the Consolidated company and the properties of its subsidiary corporations in the Shell Co. and the Roxana Co. shall be subject to the approval of counsel app(^)inted for the purpose by the Anglo-Saxon. Eighth. The cost of the organization of the Consolidated company, the issue of its capital stock, and all of its corp>orate transactions necessary in the carrying out of said plan and this agreement, including counsel fees of the Anglo-Saxon and the Dela- ware company in such connection, shall be charged to and borne by the Consolidated company. # Ninth. Instruments of conveyance and transfer and guaranty and securities to be transferred and delivered by the Delaware company to the Consolidated company and its subsidiaries and the cash payment to be made as hereinbefore provided shall be so transferred, delivered, and made in the city of New York, and the securities receivable therefor from the Consolidated company shall be delivered in said city. The securities and contract of guaranty to be delivered by the Anglo-Saxon to tlie FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 77 !f Cons^lidatei company and the securities receivable therefor from the Consolidated compaay shall be delivered in the city of London. Tenth. The Anglo-Saxon hereby designated and appoints Gen. Avery D. Andrews as Its acent and representative in the United States of America to consider and deter- mine on behalf of the Anglo-Saxon any question arising in connection with the carrying out of the Slid plan and agreement which shall not require to bo arbitrated as herein- after pro\ided. Eleventh. The parties hereto shall use their best endeavors to carry out the said plan and this agreement in accordance with the intent and purpose thereof. If, in the fourse of so doing, there shall arise situations not specifically covered by the provisions hereof or not heretofore contemplated and the parties hereto shall not be able to HQTce on a solution of any such situation, the controversy so resulting shall be referred for do ision to three arbitrators in the United States of America—one to be appointed by the Anelo Saxon, one to be appointed by the Delaware company, and the third to be appointed by the two so selected. Should the two arbitrators first appointe 1 be unable to agree on a third arbitrator, then such third arbitrator shall be appointed by the president for the time being of the chamber of commerce in the (it/ of New York. The decision of a majority of the arbitrators so appointed in rcspo t to anv such controversy shall be binding on the parties hereto. Twelfth. Should the Delaware company within the period herein provided be unable for any reason bevond its control— such expression being intended to include dolavs occasioned by minority stockholders of subsidiary corporations of the Dela- ware (ompanv who may refuse to participate in the proposed consolidation or to dispose of their shares of stock except upon exorbitant terms— to assign, transfer, and convey to the Consolidated company all of the securities, properties, and assets which It has been agreed to so assign, transfer, and convev hereunder other than the prorerties of the Exploration Co., it shall not be liable in damages to the Anglo-Saxon for failure so to do, but the Anglo-Saxon shall have the option to be exercised in writing to the Delaware company on the closing date either: (a) To require the Delaware company forthwith to deliver to the Consolidated company in liou of said properties all of the capital stock controlled by it of the sub- sidi iry company which owns the properties or assets in question free of all encum- brdnce^", liens, or other liabilities, except as set forth in schedule A, in which event the Delaware company will do everything in its power to facilitjate the transfer of the said properties or assets; or (6) should the value of the properties and assets which the Delaware company is unable to so transfer and convey be in excess of 5 per cent in value of the total value of all of the properties and assets to be so transferred and conveyed by it hereunder, exclusive of the Exploration Co., to be released from all its obligations hereundor. In the event of the Delaware company being unable to transfer and d(;liver to the Consolidated company 5 per cent in value of all the prop- erties and assets to bo transferred and conveved by it hereunder, exclusive of the Exploration Co., or any lesser percentage thereof, there shall be deducted from the shares of stock ol the Consolidated company receivable by the Delaware company hereunder such an;ount as shall be agreed on by the parties hereto, or, failing such agreement, as shall be determined by arbitration under paragraph 11 hereof. Thirtoonth. The Delaware company will use its best endeavors to procure: (a) That the lease lately held by the Western Union Co., known as the Careaga lease, shall be renewed or a new lease granted to the Shell Co., or its nominees, which shall be acce])table to the Consolidated company. The legal and other cost of nego- tiating and preparing such lease shall not be borne by the Consolidated company. (b) That no stops shall be taken to modify the agreement between the Western Union €o. ^nd the Associated Oil Co. without the consent of the Anglo-Saxon. Fourteenth. The Delaware company hereby guarantees that the Central Petroleum Co. has no liabi'ity, express or implied, direct or contingent, except as stated in schedule A, heroin referred to, subject to such changes as mav have taken place be- two'.n May 31, 1921, and the closing date as a result of transactions in the reirular course of business; but it is expressly understood and agreed that this guarantee only applies to liabilities discovered and notified to the Delaware company prior to July Fifteenth. It is hereby agreed that the Delaware companv and the Anglo-Saxon will respectively be liable for all taxes (if any) ultiniatelv found to be payable by any of the companies whose shares or assets are being transferred hereunder— other than the Union Oil Co. of California— in respect of the period prior to May 31, 1921, in excess of the tax liabilities mentioned in schedules A and B, respectively, and simi- larly any refunds of taxes (if any) obtained by any of such companies shall belong to the Delaware company or the Anglo-Saxon, as the case may be. -• -^Tfr M*ii,- ■'•".i.-. hn' %■ 78 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. In witness whereof the parties hereto have caused these presents to be executed in their corporate names by their properly authorized officers as of October 19, 1921. Henry Lockhart, Jr. Witnesses: Paul Paine. Ernest B. Tracy. H. Colijn. Witness: Adrian Corbett. Exhibit 5. CIRCULARS, union OIL CO. (DELAWARE), NOVEMBER 3, 1921. Notice of Special Meetixq op Stockholders. Union Oil Co., New York, November 3, 1921. Notice is hereby given that a special meeting of the stockholders of Union Oil Co., a Delaware corporation, has been called to be held at the office of said company, No. 17 East Forty-secoml Street, Borough of Manhattan, New York City, on Thursday, November 17, 1921, at 11 o'clock in the forenoon, for the purpose of considering and acting upon the following matters: A. The ratification of a certain agreement in writing, dated October 19, 1921, between said Union Oil Co. and Ando-Saxon Petroleum Co. (Ltd.), which agreement has been executed on behalf of said Union Oil Co. pursuant to authorization by its board of directors and subject to ratification by its stockholders, and provides in substance, among other things, that said Union Oil Co. shall organize under the laws of Delaware a corporation (herein called the new company), with an authorized capital stock of 10,000.000 shares without nominal or par value; that the new company, directly or through sul)sidiaries, shall acquire all said Union Oil Co.'s shares of stock in Union Oil Co. of California, all of the property and assets of Columbia Oil pro- ducing Co., Western Union Oil Co., Dunlop Oil Co., and United Western Consolidated Oil Co., certain properties of National Exploration Co., Eddystone Oil Corporation, and Commonwealth Petroleum Corporation, and all said Union Oil Co.'s right, title, and interest in, to, and under its agreement of July 12, 1920, with the Texas Co. respecting Central Petroleum Co., and in consideration therefor shall issue to said Union Oil Co. 2,240,000 shares of its said stock, pay certain cash, and assume certain liabilities; and that the new company shall acquire all or substantially all of the outstanding stock of Shell Co. of California (after the withdrawal of certain assets), Roxana Petroleum Corporation, Ozark Pipe Line Corporation, and Matador Petroleum Co., and in consideration therefor shall issue to said Anglo-Saxon Petroleum Co. (Ltd.) 5,760,000 shares of said capital stock. B. If said agreement be ratified, the granting to the board of directors of said Union Oil Co. of authority to cause said company and its subsidiaries to make such transfers and do such other acts and things as said, board may deem to be necessary or advisable in order fully to carry out said agreement, and to take such further steps in respect to said agreement and the subject matter thereof as said board may deem to be neces- sary or ad\'isal)le for the proper protection of the interests of said company; and C. The transaction of such further business as may properly be brought before said meeting. There will be presented and read at said meeting a copy of said agreement of October 19, 1921, containing a more detailed statement of the plan herein outlined and of the steps V. hich it is pro})osed to take for the accomplishment of the purposes thereof. Inclosed herewith is a proxy authorizing the persons therein named or any of them to vote at said meeting in favor of the adoption of resolutions ratifying said agreement and granting the authority herein mentioned. Each stockholder who is unable to attend said meeting and is in favor of the adoption of said resolutions is urged to execute that proxy and return it promptly in the inclosed stamped envelope. The execution and return of a proxy will be considered as authorizing the affixing to it of a reve- nue stamp required by law. New York City, November 3, 1921. C. E. Forsdick. Secretary. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 79 New York City, November 3, 1921. To the Stockholders of Union Oil Co.: In connection with the notice of special meeting of stockholders of your company, herewith inclosed, and in behalf of the board of directors of your company, I desire to make the following statements: An opportunity has offered of consolidating the properties owned by your company with the properties of the Shell Co, of California, Roxana Petroleum Corporation, Ozark Pipe Line Corporation, and Matador Petroleum Co., the first three of which are operating in the same fields as your company, and all of which collectively own pipe lines, refineries, and other facilities which will supplement the properties of your company. This consolidation, if carried out, will enable your company without the raising of new capital to share in the advantages of the additional refineries and other facilities which will permit the immediate realization of its plans. Negotiations were entered into for the purpose of arriving at a basis for such consolidation, and as a preliminary step a careful and thorough examination and valuation of the physical properties and facilities in question was made by representatives from both of these groups through independent accountants and engineers and an approximate valuation thereof arrived at. After also taking into consideration the value of good will and operating advantages it was agreed that if these properties were vested in one corpora- tion the interest of your company therein should be 28 per cent and that of the other interests 72 per cent. A plan was thereupon formulated providing for the organization by your company of a Delaware corporation, which will be hereinafter referred to as the Consolidated com- pany having an authorized capital stock of 10,000,000 shares of no par value, which cor- poration, was to acquire the securities and properties described in the inclosed notice, in consideration of the issue to your company of 2,240,000 shares of the capital stock of the Consolidated company and the payment thereto of certain sums in cash hereinafter stated and the issue to the other interests of 5,760,000 shares of stock and the assumption of certain liabilities also hereinafter stated. Those properties of the Shell Co. of California and the Roxana Petroleum Corpora- tion and of your company omitted from this plan of consolidation, as stated in said notice, were omitted because it did not seem advisable from the operating standpoint to include them. The said plan provides that all properties to be consolidated will be turned into the Consolidated Co. either directly or through the acquisition of the shares of the capital stock of the corporations which own the same, as they existed May 31, 1921, subject to transactions in the general course of business from that date to the date of closing, free and clear of all current liabilities in excess of those which can be cared for by current assets, excepting that the Shell Co. of California and the Roxana Petroleum Corporation will have outstanding a surplus indebtedness of $2,000,000, and there will be paid to your company the sum of $777,777, to be applied on account of its bank loans, and the sum of $386,000, representing the excess of current assets over current liabilities of the subsidiary companies of your company's group. As stated in the said notice the plan aforesaid and the terms upon which the same is to be carried out have been embodied in a contract dated October 19, 1921, which, pursuant to the authorization of your company's board of directors, has been executed with Anglo-Saxon Petroleum Co. (Ltd.), the representatives of the owners of the stock of the corporations aforesaid, subject to your approval and the approval of the stockholders of the Anglo-Saxon Petroleum Co. (Ltd.)*. When this plan has been carried out the Consolidated Co. will hold, in addition to your company's holdings in the stock of the Union Oil Co. of California and the position of your company in the Central Petroleum Co., the stock of an operating company in the California field, the stock of an operating company in the midcontinent field, the stock of a pipe- line company operating in the midcontinent field, and the stock of an exploration company which was organized for the purpose of doing general exploration work. These will constitute most satisfactory operating units for the fields in which the Consolidated Co. will be interested. Both your company and the Shell Co. of California have recently made valuable discoveries of oil properties in the California field, principal among which is the basin at Signal Hill, discovered by the Shell Co. of California, in which two wells have been brought in with a large initial production located in the center of a 700-acre lease. ^n the mid-continent field the production controlled by your company of about 8,000 barrels is in large part accessible to the Roxana Petroleum Corporation's refinery through the Ozark Pipe Line Corporation's lines, and will, in addition to the Roxana Petroleum Corporation's production of about 11,000 barrels, be adequate in itself to run the Roxana Petroleum Corporation's large and complete refinery at Wood River, •II 80 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 81 near Ft. Louie, to its full capacity of from 14,000 to 18,000 barrels per day. The 07Slt\ Fine Line Corporation's lines have a normal capacity of 24,000 barrels and are of the finest construction, extending through the Gushing, Hewitt, and Healdton fields in Oklahoma. These lines run about as follows: A 10-inch line from Wood Eivrr to Gushing, a distance of 426 miles, and a 6-inch line from Gushing to Waunka, a distance of 15G miles, with smaller gathering lines extending to Duncan and the Texas territory. The refinery at Wood River has exceptional railroad facilities and the ad-antage of a low freight rate to one of the richest fields of consumption of oil products in the United States. ^ ^^ • i The pipe lines referred to are of ample size and are equipped with sufficiently powerful pumr>ing stations to handle oil to their utmost capacity, and the Ozark Pipe Line Gorr>oration has every facility for doing a large transportation business in addi- tion to handling its own oil for use in the refinery of the Roxana Petroleum Corpora- tion . Bv the construction of additional gathering lines from the trunk line the busi- ness of the pipe line can be made much more profitable, the refinery fully served, and its own production conserved for later use. Adequate storage facilities also exist both in California and in the mid-continent fields. Marketing facilities are adequate at the Ft. Louis refinery, as is also the case in California, where the Shell Co. of Cali- fornia has, in addition to its jobbing trade in California and the Orient, over 170 retail stations for the sale of its products. Its trade in gasoline and lubricating oils in that district is particularly profitable. In a Idition to the properties mentioned, a drilling operation is in progress in the Ftate of Wyoming, where the Matador Petroleum Co. owns a large acreage, the opera- tions upon which have not proceed el far enough to demonstrate definitely its value. It will be seen from this brief statement of conditions that any equitable arrange- n-ent which will enable your company to take advantage of the facilities of these co-ppmies should enable your company to attain its full height of development and earning capacity much sooner than by endeavoring to attain such development by its own unaided and natural growth. 'The combining of these facilities, thus permitting your company to reap the benefit and profit to be derived from the exercise of the complete function of an oil com- pany, should result in an increased earning power, and in the attaining by your company, ^ith its clean and exceptionally valuable assets, of a growth satisfactory alike to its stockholders and officers. Your company after the proposed consolidation wdll have 2,240,000 shares (28 per cent of the totalissue) of capital stock of the Consolidated Co., two 10,000-ton tankers, producing properties in West \ irginia and Kentucky, and liquid assets consisting of cash, ^■overnraent bonds, inventories of oil and materials, accounts and notes receival>le, of an approximate value of $2,082,200, against which its current liabili- ties including bank loans and final payment in January, 1922, on Columbia (hi Producing Co. stock, are $5,250,000; in addition to which provision is to be made for the costs and expenses involved in the transfer of the assets to the Consolidated Co. .ind contingencies for Federal taxes. i t. • v r Your board of directors after careful consideration of all the facts and having before it the recommendation of its officers and representatives, deems the arrangement for apportionment of stock to represent the relative values of the properties and good will contributed bv the respective interests to the Consolidated Co. lo l;e eouitable and fair Your board of directors is convinced that the interests of the stockholders of vour company will be conserved and promoted by the consolidation suggested and it therefore recommends the adoption and approval of the contract negotiated by ^'our company's representatives in their behalf, which contract will be presented to the stockholders in extenso on the occasion of their meeting on November 17, 1921. C. H. ScHLACKS, President. Exhibit 6. CIRCULAR OF LEE HIGGINSON & CO., REGARDING PREFERRED STOCK OP SHELL UNION OIL CORPORATION. Proof subject to change, August 18, 1922. $20,000,000 Shell Union Oil Corporation 6 per .cent cumulative preferred stock, series A. Par value, $100. Dividends payable quarterly be-^f net income, after payment of dividends on all 5-,eiies of preferred stock, is to be applied solely to purchase or call and reUremjiit of preferred stock Rounl Dutch-Shell group.— This group, w^hich includes the Shell Union Oil Corpora- tion is of world-wide extent and importance. This constitutes one of the largest and most important industrial enterprises in the ^vovld and has proba )ly the most ex- tensive system engaged in the production, rcnlniug. tran.-^portatiou. and marketing of petroleum and its products in the world -o-diy. , , ,- j The indicated present valuation, bas^^d on current quota tioiis for listed securities and conservative valuations of the securities not listed, of \ji'i toial stock capitaliza- tion of the Royal Dutch and ^ hell Transport & Trading Co.'s alone is, at present exchange rates', in excess of $1,000,000,000. ^u r „ • The rights of the preferred stoclvholders (series A) are described on the following pages. We recommend this stock for investment. Price on appb ration. All legal matters relating to thi3 is=^ue of stock have been passed upon by Messrs Larkin, Rathbone & Petty, of New York, for us, and by Forsyth Wickes, Lsq of New York, for the company. The accounts of the several companies have been audited bv Messrs. Price, Waterhouso Sz Co. or Messrs. Arthur Y'oung & Co. The statements contained in this circular, while not guaranteed, are based upon information and advice which we believe accurate and reliable. j t* "1 t f :mm'2wm^mmu m 82 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Shell Union Oil Corporation, New York, August — , 192S. Messrs. Lee, Higginson & Co. Dear Sirs: In connection with the iasue of $20,000,000 6 per cent cumulative preferred stock, series A, of the Shell Union Oil Corporation, I submit the following information: Organization and buMness. — The Shell Union Oil Corporation constitutes a consoli- dation of substantially the entire Royal Dutch-Shell and Union Oil Co. of Delaware interests in the mid-continent and California fields, was incorporated under the laws of the State of Delaware February 8, 1922, and is now one of the largest oper- ations and the second largest company in production in the oil industry of the LFnited States. The combined properties show a net production in excess of 45,000 barrels per day in the California field and 23.000 barrels per day in the mid-continent field, paaking a total net production at this date in excess of 68,000 barrels per day, includ- ing 13,000 barrels settled production temporarily shut in. The refining capacity of 33,000 barrels per day, and at Wood River, 111. (East St. Louis), of 15,000 barrels per day, give the company a total daily refining capacity of 48,000 barrels, which is being substantially increased. There are in California 170 miles of 8-inch pipe line and in the mid-continent field 156 miles of 6-inch pipe line and 426 miles of 10-inch pipe line. ^The mid-continent pipe-line system, totaling 582 miles, extends from the refinery at Wood River, 111., to the Gushing. Hewitt, and Healdton fields in Oklahoma, with gathering lines extending to Duncan and the Texas territory. It also has complete facilities on the Pacific "coast for distribution of its products to the ultimate consumer. The Shell I'nion Oil Corporation, in addition, owns the entire outstanding capital stock of the following corporations: Shell Co. of California, Roxana Petroleum Cor- poration, Ozark Pipe Line Corporation, Matador Petroleum Co., and in addition the interest in the capital stock of the Union Oil Co. of California mentioned below and an option to purchase two- thirds of the common stock of the Central Petroleum Co., the equity and earnings applicable to which two-thirds interest have been included in the following: sta,tements of earnings and financial condition. The Shell Union Oil Corporation, in addition to the above, owns 26.17 per cent of the outstanding capital stock of the Union Oil Co. of California. That company had an average production in 1921 in excess of 27,000 barrels per day; owns five refineries, with a total daily refining capacity of more than 62,000 barrels: 425 miles of trunk pipe lines and 315 miles of gathering lines; also has its own tank steamers, tank cars, and extensive distributing and marketing systems. The Royal Dutch-Shell group, which includes the Shell Union Oil Corporation, is of world-wide extent and importance. The group constitutes one of the largest and most important industrial enterprises in the world and has probably the most extensive system engaged in the production, refining, transportation, and marketing of petroleum and its products in the world to-day. The indicated present valuation, based on current quotations for listed securities and conservative valuations of the securities not listed, of the total stock capitalization of the Royal Dutch and Shell Transport & Trading Cos. alone is, at present exchange rates, in excess of $1,000,000,000. Purpose of issue. — The proceeds of this issue of $20,000,000 of preferred stock (series A) will provide the corporation with additional working capital and funds for con- struction and development work and the acquisition of securities and proi^erties. Capitalization [upon completion of tkvi financing). Preferred stock, 6 per cent cumulative, series A (this issue) $20, 000, 000 Common stock (authorized 10,000,000 shares), outf'tanding 8,000,000 shares, of no par value, representing net assets, after deducting the preferred stoc-k of 181, 912, 822 The Shell Union Oil Corporation has no bonded indebtedness nor is there any mortgage on any of its properties or on the properties of any of its subsidiaries. Earnings. — The following is a statement of earnings for the four years ending Decem- ber 31, 1921, whi( h includes: (1) For the years 1918 and 1919, earnings of only the Royal Dutch-Shell properties. (2) For the years 1920 and 1921, earnings of the Royal Dutch-Shell properties, the combined properties of the Union Oil Co. of Delaware, equity in earnings of the Central Petroleum Co.. and dividends from the Union Oil Co. of California FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 83 Year ended Dec. 31. Profits after Federal taxes and before depreciation, depletion, and drilling charges. 1918 1 $11,603,584 1919 ! 11,763,6.53 1920 25,455,050 1921 1 17,867,452 Total for 4 years j 66, 689, 739 Average per year for 4 years \ 16, 672, 434 Depreciation, depletion, and drilling charges. $8,952,512 7,815,538 12,142,624 13,026,984 Net profits. $2,651,072 3,948,115 13,312,426 4,840,468 41,937,658 10,484,414 24, 752, 081 6, 188, 020 The foregoing statement shows net profits for the four years ended December 31, 1921, after deducting Federal taxes and $41,937,658 for depreciation, depletion, and drilling charges, averaged $6,188,020, or more than five times the $1,200,000 annual dividend requirement of this preferred stock. Net profits for the year ended December 31, 1921, were $4,840,468, or more than four times the annual preferred dividend requirement. . , -ni j i L^^Net profits for the six months ended June 30, 1922, after deductions for lederal taxes and $4,804,494 for depreciation, depletion and drilling charges, were $4,740,931, nearly equal to the net profits for the entire year 1921, and at the rate of more than fceven and three-fourths times present preferred stock dividend requirements. Financial condition, •' [Giving effect as at January 2, 1922. to the consolidation of the accounts of the companies' properties and contractual rights acquired by the Shell Union Oil Corporation on February 8, 1922, and to Uie i^sue ol 8,000,000 shares of capital stosk of no par value, and to the SheU Union Oil Corporations $20,000,000 6 per cent cumulative preferred stock, series A, this issue.] ASSETS. Fixed assets: Properties, oil lands, leases, pipe lines, refineries, etc. $198, 566, 540 Less reserves for depreciation and depletion 45, 446, 741 ^ ^ $153, 119, 799 Investments, including stock of Union Oil Co. of California. 33,838,407 Current assets : Cash - 18,665,431 Accounts and notes receivable 3, 299, 803 Inventories 8, 208, 867 30, 174, 101 Prepaid expense ^^8' ^^^ Total 217, 470, 720 LIABILITIES. Current liabilitiet. Accounts payable, including — Federal taxes 4, 774, 511 Notes payable 2, 317, 837 ^ „ ,„ ^ ^ 7,092,348 Purchase money obligations and reserves against option of purchase . 8, 465, 550 Preferred stock, 6 per cent cumulative (this issue) 20, 000, 000 Common stock, 8,000,000 shares of no par value, representing net assets, after deducting the preferred stock, of 181, 912, 822 Total.. 217,470,720 The foregoing statement shows total net assets of $201,912,822 are equal to $1,010 per share of the preferred stock. Net current assets alone of $23,081,753 are equal to $1 15 per share. The valuation of the properties is believed to be conservative. 51 V I ;ij •^'^^«#t>f^iiii^^iiiiiiiiif^*ii?^ r 1 I 84 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. MANAGEMENT. Officers and directors of the Shell Union Oil Corporation are : Officers: William H. Allen, president; Adrian rorbett, vice president; James II. Brookmire, secretary and treasurer. Directors: Richard Airey, president Asiatic Petroleum Co. (New York) (Ltd.); Frederic W. Allen, of Lee lligginson & Co.; William II. Allen, president; Avery D. Andrews, chairman New Orleans Refining Co. (Inc.); James II. Brookmire, secretary and treasurer; Lewis L. Clarke, president 3Vmerican Exchange National Bank, New York; Adrian Corbett, vice president; Bayard Dominick, of I)ominick & Dominick; Frederick Godber, president Roxana Petroleum Corporation; ( harles Kayden, of Hayden, Stone & Co.; Henry Lockhart, vice president Goodrich-Lockhart Co.; T. W. Phillips, jr., president T. W. Phillips Gas & Oil Co.; Samuel F. Pryor, chairman executive committee, Remington Arms Co. (Inc.); Charles H. Sabin, chairman guaranty Trust Co. of New York; John C. Van Eck, president Shell Co. of California; Samuel M. Vauclain, president Baldwin Locomotive Works; E. P. Whitcomb, presi- dent Union Natural (las Co., Pittsburgh; William W. Woods, vice president National City Bank, New York. PREFERRED STOCK PROVISIONS. Among the preferences and limitations which apply to the preferred stock (series A) are the following, in brief: Series A, $20,000,000 6 per cent cumulative, par $100; dividends payable quarterly February, May, August, and November 15. Restrictions on additional issues. — Additional issues of preferred stock may be made, but only provided (1) accrued dividends and sinking fund on the preferred stock, including all series, shall haA e been paid; (2) total net assets after deducting all lia- bilities and all reserves, including depletion, drilling, and depreciation reserves, shall be at least five times the total amount of preferred stock of all series then to be out- standing, including the additional preferred stock then proposed to be issued; and (3) the average annual net earnings applicable to preferred dividends covering a period of three years ending within three months immediately preceding the date of issue shall have been at least three times the dividend reauirements on all series of preferred stock, including dividends on the preferred stock tnen proposed to be issued. Preferred, in the event of involuntary dissolution or liquidation, as to assets up to par and as to its specific dividends over any other class of stock other than all series of preferred stock at the time outstanding. In event of voluntary dissolution or liquidation, preferred stock (series A) entitled to $110 per share and accumulated dividends before any dislril-ulion is made on any class of stock other than all series of preferred stock at the tinio outstanding. Series A to be callable, at company's option, at $110 per share and accumulated dividends on any dividend date on 30 days' notice, either as a whole or in part, for the sinking fund in any amounts representing whole shares. Priority. — No mortgage or loans for ])eriods in excess of ofie year or stock havin,-. prioritv ovev the preferred stock, may bo created by tlie com]>any without the consen t of the holders of 75 ])er ce^it of the ])referred stock, including all series except that the company may acquire additional property subject to existing or purchase money mortgages or liens and renew the same. Sinking fund. — An annual cash sinking fund for tlie benefit of preferred stock (series A), first payment May 1, 1924, equal to 10 per cent (but not in any year more than $800,000) of net income after payment of di^idends on all series of preferre-J stock, is to be applied solely to i)urchase or call and retiren ent of preferred ttock (series A). Series A to ha\e no voting power, unless four consecutive quarterly dividends an due and unpaid, or unless the company is in default in the oliserxancc of any of the preferred stock provisions, or unless the company has been declared bankrupt, or a receiver of its property has been appointed. If any of the above events shall occur, the preferred stockholders shall, during its continuance, be entitled to elect one-hall of the board of directors, and in addition to cast one vote for each share of preft^rred stock upon all other matters on whit h stockholders may a ote. No cash dividends shall be ])aid on stock other than preferred stock (eeries A), except out of net profits earned after May 15, 1922. Series A to have no subsc ription rights. The holders of series A preferred stock shall have no rights to 8ub8cril)e for any issue of capital stock of the company^cmmon or preferred— or for any issue of securities that may be converted into capital stock, FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 85 The provisions in the certificate of incorporation effecting such preferred stock. eeries A, may not be altered or changed except with the affirmative vote of 75 per cent in interest of such preferred stock in addition to the affirmative vote of a majority in interest of the common stock. Very truly yours, ^ . , William H. Allen, President. Exhibit 7. CIRCULARS, SEPTEMBER 26, 1922, REGARDING DISSOLUTION OF THE UNION OIL CO. (DELAWARE). Notice of Special Meeting of Stockholders. Union Oil Co., New York, September 26, 1922. Notice is hereby given that a special meeting of the stockholders of Union Oil Co., a Delaware corporation, has been called to be held at the office of said company. No. 7 West Tenth Street, in the city of Wilmington, County of New Castle, State of Delaware, Buch office being located in the offices of the Corporation Trust Co. of America, at said address, on October 20, 1922, at 2 o'clock p. m., to consider and take action upon the following resolution duly adopted by the board of directors of said company at a meet- ing thereof duly called and held on September 25, 1922: ''Resolved, That in the judgment of the board of directors of Union Oil Co., a Ddaware corporation, it is adxisable and most for the benefit of said company that it should be dissolved and that its assets, after its debts have been paid or provided for, should be distributed among its stockholders," and for the transaction of such other business as may properly come before the meeting. W. C. Stagg, Secretary. Union Oil Co., New York, September 26, 1922. To the stockholders of Union Oil Co.: In accordance with the plan heretofore announced, the board of directors of this company has called a special meeting of the stockholders of this company to be held October 20, 1922, to consider and act upon a proposal to dissolve this company and to distribute its assets after its debts have been paid or provided for. The 139,000 shares of the common stock of Shell Union Oil Corporation recently offered to the stockholder^ of this company were oversubscribed by such stockholders, and the proceeds were used to pay off this company's bank loans. The remaining liabili- ties of this company it is conservatively estimated can be liquidated with the proceeds of the sale of the two 10,000-ton tankers, and other miscellaneous assets, leaving 2,085,000 shares of common stock of Shell Union Oil Corporation for distribution to the stockholders of this company, which would be at the rate of 1^ shares of common stock of Shell Union Oil Corporation for each share of stock of this company. As a condition precedent to any such distribution, however, it is necessary that the consent of two-thirds in interest of the stockholders of this company having voting power shall be obtained to a dissolution of this company at the special meeting of such stockholders to be held as aforesaid. Inclosed herewith is a formal notice of such meeting and a proxy to be used thereat. If properly executed proxies from two-thirds in interest of the stockholders of this company are not received by the date of said meeting, an adjournment of such meeting will have to be taken, which would postpone the date of the distribution proposed. All the stockholders of this company are urgently requested upon receipt of the inclosed proxy to immediately execute it and return it in the inclosed envelope to • W. C. Stagg, secretary of this company. Union Oil Co., By James H. Brookmire, President. 4*r--^.&''"'*^?'**-' 'ill^A^ t-Wisti ^amMi::U'MMi:TRY. Exhibit 8. CIRCULAR, OCTOBER 17, 1921, TO THE STOCKHOLDERS OF UNION OIL CO. OF CALIFORNIA. Fo Union Oil Stockholders: Los Angeles, Calif., October 17, 1921. The large number of stockholders who were present at the last annual meeting will instantly recognize the inclosed proposed agreement as a crystallization of the senti- ment so freely expressed at that time and as a protective measure which subsequent developments would seem to emphasize as expedient and timely. At that meeting the settled determination to maintain (California's control of this great property and to resent and defeat any effort to take that control and management away from California was unmistakable. Your company is one of the great institutions of California. It was created and developed by Californians. Its properties are largely in California. A large majority of its shares are owned in California. A very great majority of its stockholders live in California. They work in cooperation with each other and take a just pride in the development of your company and in its vast resources. They have a common interest which they desire to protect for their common benefit. It is perfectly natural that there should be resentment at the thought that California and Californiars might lose their great enterprise; that its control and management might be taken by parties foreign to California and entirely unknown to us; that these unknown parties might have nothing in common with Californians and that the fine cooperative California spirit might be destroyed. We believe that Union Oil Co. of California should remain Californian. We have proper pride in its development. We believe it belongs here. We believe the true spirit of cooperative actio'a is embodied in the holding company plan and that it is now essential for our mutuaj protection . The purpose and intent in the establishment of this holding company is to enable a very laire:e number of stockholders to unite their interests so that they may act as a unit. This does not mean that any one man will guide the destinies of the holding company. There is no dominating influence to come into this holding company. A very large portion of the Union Oil of California stock is held as a permanent investment, but there are some who may wish to sell or trade in the new stock, or use it as collateral. Embodied in our efforts will be the listing of the holding company's shares on the same exchanges where the present stock is listed to give it the market status it will deserve and be entitled to and to make it ecjually good collateral as the present stock. A preliminary canvass of a few stockholders has been made to more definitely, determine the sentiment and learn what we may expect from this general circulariza- tion of stockholders. This canvass has shown that the movement is strongly favored. You have doubtless been informed of the fact that about 27 per cent of the stock of Union Oil Co. of California has been acquired and is now held in one single corporate ownership foreign to California. One important factor in the present situation is the fact that no one knows from day to day who may turn up as the owner of this large concentrated block of stock. We do not know where he or they may live or what their purpose may be. Such a condition is intolerable. No management can properly function under such circumstances. It is demoralizing to the loyal army of einployees as well as to the managing officers to be constantly watching the news items for informa- tion and listening to disturbing rumors. Why should we Californians. owners col- lectively of a majority interest, really remain in the minority? We believe we can count upon your sympathetic cooperation, whether you live iu California or elsewhere. We believe you will recognize the justice of our purpose. If upwon examination of the inclosed agreement you are in sympathy with the move- ment, we earnestly ask that you promptly evidence that fact by returning, properly signed, the copy of the agreement sent you and that you join in the good work by canvassing your friends and seeing that they also help the cause. It is time for Californians to become the leaders. Let us clear the atmosphere and occupy our rightful position. . . . ^ In the event you desire to join in this effort you should sign the inclosed without delay and return it to any of the undersigned or to the temporary office of the holding company, 1134 Pacific Mutual Building, Sixth and Grand Streets, I.<08 Angeles, Calif.: 1. Avery, Dr. M. N., Guaranty Trust & Savings. Los Angeles, Calif. 2. Blinn, E. B., Central Building, Pasadena, Calif. 3. Cravens, John S., Sixth and Spring Streets, Los Angeles, Calif. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 87 4. Cochran, George I., Pacific Mutual Life Insurance Co., Sixth and Grand, Los Angeles, Calif. 5. Clark. E. W., Union Oil Building, Los Angeles. Calif. 6. Condit, Fillmore, 1847 East Ocean, Long Beach, Calif. 7. Earl. Guy C, 14 Sansome Street, San Francisco, Calif. 8. Graves, J. A., Farmers & Merchants Bank, Fourth and Main, Los Angeles, Calif. 9. Johnson, A. P., 356 South Broadway, Los Angeles, Calif. 10. Milbank. Isaac. 1134 Pacific Mutual Building, Los Angeles, Calif. 11. Morshead, SUnley W.. Mills Building. San Francisco, Calif. 12. Newton, I. B., 365 Loma Drive, Los Angeles. Calif. "~ Orcutt. W. W., Union Oil Building. Seventh and Spring. Los Angeles, Calif. Robinson, Henry M., First National Bank, Seventh and Spring, Los Angeles, 13 14. Calif. 15. 16. 17. 18. 19 Stewart Lyman, 632 Lucas Street, Los Angeles. Calif. Stewart W. L.. Union Oil Building. Los Angeles, Calif. Staats, W. R., 640 South Spring Street, Los Angeles, Calif. St. Clair, L. P., Union Oil Building. Los Angeles, Calif. ^^. Warren. J. G.. 323 Lafayette Place, Los Angeles, Calif. 20. Whiting. Dwight, California Building, Second and Broadway, Los Angeles, Calif. Articles of Incorporation of Union Oil Associates. Know all men by these presents: That we, the undersigned, a majority of whom are citizens and residents of the State of California, have this day voluntarily associated ourselves together for the purpose of forming a corporation under the laws of the State of California, and we hereby certify: I. THAT the name OF SAID CORPORATION SHALL BE AND IS UNION OIL ASSOCIATES. II. That the purposes for which said corporation is formed are: To buy and other- wise acquire, and become the owner of, shares of the capital stock of Union Oil Co. of California, a corporation duly organized and existing under the laws of the State of California, and to issue in payment therefor fully paid shares of the capital stock of this corporation equal in par value to the shares of the capital stock of Union Oil Co. of California so acquired. To buy or otherwise acquire from Union Oil Co. of California shares of its capital stock, and for the purpose of financing such purchases to offer and sell shares of the unissued capital stock of this corporation to the stockholders thereof in proportion to their respective stockholdings — stock so offered but not purchased by stockholders may be sold to any purchasers — at such times, for such prices, and upon such terms as the board of directors of this corporation shall determine. To sell or issue shares of its capital stock to any purchasers — without previous offering to its stockholders — pro\ided this corporation receives therefor shares of the capital stock of Union Oil Co. of California at least equal in aggregate par value to the aggregate par value of shares of the capital stock of this corporation so sold or issued. To have, exercise, enjoy, and avail itself of all rights, powers, and privileges of ownership of shares of the capital stock of Union Oil Co. of California, including the right in all ways to represent and vote thereon upon attorneys in fact or proxies; including also full power to exercise any and all rights and privileges and to avail itself of all benefits at any time offered to or conferred upon, or made available to, stockholders of said Union Oil Co. of California. It shall have full power to divide or distribute among its stockholders — pro rata in proportion to their respective stockholdings — earnings, increment or increase, and/or surplus — whether money, funds, securities or assets — and/or unissued shares of its capital stock. To set aside from its income sufficient funds to meet and pay all of the necessary operating and other expenditures of this corporation. To do all acts and things incident to or relating to or convenient in connection with carrying out any or all of its business and purposes as aforesaid: Provided, however ^ That no sale or other disposal — saving only on final dissolution of the corporation- can at any time be made of the shares of the capital stock of Union Oil Co. of California owned by this corporation except en bloc, and no sale or disposal shall be made, except upon written assent of the holders of — or vote representing — at least two- thirds of the issued stock of this corporation. jji •'■■^ -^-dw-iA-n.; jmmmfmk d^.itxk wJf 88 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. III. That the place where the principal business of this corporation is to be trans- acted shall be and is Los Angeles, Los Angeles County, State of California. IV. That the t«rm for which said corporation is to exist shall be 50 years from and after the date of its incorporation. V. That the number of directors or trustees of said corporation shall be 20, and that the names and residences of the directors or trustees who are appointed for the first year, and to serve until the election and qualitication of their respective successors, are as follows, to wit: M, N. Avery, Los Angeles, Calif. Frank C. Bolt, Pasadena, Calif. George 1. Cochran, Los Angeles, Calif. E. W. Clark, Los Angeles, Calif. Fillmore Condit, Long Beach, Calif. Shannon Crandall, Los Angeles, Calif. J. A. Graves, Los Angeles, Calif. A. P. Johnson, Los Angeles, Calif. J. S. Mardonnell, Pasadena, Calif. Isaac Milbank, Los Angeles, Calif. Stanley W. Morshead, San Francisco, Calif. VI. That the amount of the capitil stock of said corporation is $30,000,000, which shall be evidenced by and divided into 300,000 shires, of the par value of $100 each. VII. That the amount of said capital stock which has been actually subscribed is $2 000, and the following are the names of the persons by whom the same has been subscribed, to wit: I. B. Newton, Los Angeles, Calif. W. W. Orcutt, Los Angeles, Calif. Henry M. Robinson, Pasadena, Calif. Lyman Stewart, Los Angeles, Calif. W. L. Stewart, Los Angeles County, Calif. William k. Staats, Pasadena, Calif. L. P. St. Clair, Los Angeles, Calif. Dwight Whiting, Los Angeles, Calif. J. C. Warren, Los Angeles, Calif. Name. M. N. Avery Frank C. Bolt.... George I.Cochran E.W.Clark Fillmore Condit . . Shannon Crandall J. A. Graves A. P. Johnson J. S. Macdonnell.. Isaac Milbank Number oi shares. Amount. $100 100 100 100 100 100 100 100 100 100 Name. Stanley W. Morshead I. B. Newton W. W. Orcutt Henry M. Robinson. Lyman Stewart W. L. Stewart William R. Staats... L. P. St. Clair Dwight Whiting J. G. Warren Number of shares. Amount. SlOO 100 100 100 100 100 100 100 100 100 In witness whereof each of the persons named in said articles of incorporation ae directors thereof has hereunto affixed his signature as of this 25th day of March, 1922. Isaac Milbank, M.N. Avery, Frank C. Bolt, E. W. Clark, George I. Cochran, Fillmore Condit, Shannon Crandall, J. A. Graves, A. P. Johnson, J. S. Macdonnell, Stanley W. Morshead, I. B. Newton, W. W. Orcutt, Henry M. Robinson, Lyman Stewart, W. L. Stewart, William R. Staats, L. P. St. Clair, Dwight Whiting, J. G. Warren. State of California, County of Los Angeles^ ss: On this 27th day of March, 1922, before me, Ruth Higgins, a notary public in and for said county and State, residing therein and duly commissioned and sworn, per- sonally appeared M. N. Avery, Frank C. Bolt, George I. Cochran, E. W. Clark, Fill- more Condit, Shannon Crandall, J. A. Graves, A. P. Johnson, J. S. Macdonnell, Isaac Milbank, , LB. Newton, W. W. Orcutt, Henry M. Robinson, Lyman Stewart, W. L. Stewart, William R. Staats, L. P. St. Clair, Dwight Whiting, and J. G. Warren, personally known to me to be the persons described in, and who executed, the fore- going articles of incorporation of Union Oil Associates, and they acknowledged to me that they each executed the same. «. • , In witness whereof, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. [notarial seal.] Ruth Higgins, Notary Public in and for said County of Los Angeles, State of Califomxa. \ FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 89 State of California, City and County of San Francisco, ss: On this 28th day of March, 1922, before me, Flora Hall, a notary public in and for said city and county and State, residing therein and duly commissioned and sworn, personally appeared Stanley W. Morshead, personally known to me to be the person whose name is subscribed to the within instrument, and acknowledged to me that he executed the same. In witness whereof I have hereunto set my hand and official seal in said city and county the day and year in this certificate first above written. [notarial seal.] Flora Hall, Notary Public in and for said City and County of San Francisco, State of California. No. 98387. Indorsed: Filed in the office of the secretary of state of the State of California March 28, 1922. Frank C. Jordan, Secretary of State. By Robert V. Jordan, Deputy. Exhibit 9. CURTIS BILL. • [S. 3334, Sixty-sixth Congress, first session.] A BILL To encourage reciprocity in trade relations. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That no citizen or subject of any country which requires by law, regulation, or otherwise any stipulation in any contract, lease, sale, or other agreement, relating to mines or minerals, including petroleum, in the said country or its possessions or dependencies, which prevents or prohibits American citizens, because of their nationality, from being shareholders, or which limits the number of shares which may be held by American citizens in such undertakings, or which, because of nationality, places restrictions on American citizens holding any position in the company or on the board of directors or similar control body shall be permitted to hold either directly or indirectly any ri^ht, title, or interest, in any mine or mineral deposit, including petroleum in the United States or any of its dependencies, or to act on the board or in any managerial capacity whatsoever in connection with any company having any right, title, or interest whatsoever in mines or minerals in the United States or its dependencies, so long as the restrictions before mentioned shall remain in force in any law or regulation or in any contract, lease, or other agreement to which the Government of the foreign country or any of its officials or representatives is a party. Sec 2. That no alien company which by its articles of incorporation or association, statutes, by-laws, or in any other similar manner prohibits American citizens, because of their nationality, from' being shareholders, or which limits the number of shares which may be held by American citizens, or prohibits American citizens from holding any position on the boiard of directors or in the company shall be permitted to hold, either directly or indirectly, any right, title, or interest in any mine or mineral de- posit, including petroleum, in any part of the United States or its dependencies. Sec 3. That if any of the things prohibited in the preceding sections exist at any time beginning two years after the passage of this act, then, and in that event, the posi- tions so held by aliens shall become vacant and any and all acts performed by any such alien connected with such company shall be without legal force or effect, and the shares or interests so held contrary to this law shall be sold by the Attorney General to American citizens under such conditions and regulations as the Attorney General shall fix, but always within one year from the time such shares or interests come under the provisions of this act, and the net proceeds of such sales in each case shall be paid to the alien citizen, subject, or corporation concerned. 35904—23- -8 \*'f*wC^-4 \ ^ . ■^ 1 mi,.. 90 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Exhibit 10. PHELAN BILL. (S. 4390), Sixty-sixth Congress, second session.] A BILL Authorizing the incorporation of the United States Oil Corporation. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That a corporation to be known as the United States Oil Corporation is hereby authorized to be incorporated under the laws of the^ District of Columbia, or any State or Territory, for the purpose of developing the oil resources of foreign countries. The corporation shall be controlled by a board of nine directors, to be appointed by the President of the United States. The board of directors shall be appointed with due regard for their fitness and efficiency necessary for the discharge of the duties imposed upon them and to a fair representation of the geographical divisions of the United States. Vacancies on the board of directors shall be filled by election by a majority vote of the board. A vacancy in the board of directors shall not impair the right of the remaining members of the board to exercise all powers thereof. The board shall have power to adopt by-laws and regulations governing ita pro- cedure. The board of directors shall elect a president and shall fix the compensation of its officers, experts, and other employees, as may be found necessary. The corporation may explore, develop, refine, transport, and store petroleum and its products, or whatever it produces, subject to a preferential right on the part of the United States Government to take all of ita supply, or a portion thereof, at any time, upon payment of the market price. The corporation, if in its judgment such action be necessary to carry out the pur- poses for which it was incorporated, may form subsidiary corporations under the laws of the District of Columbia or any State or Territory. The corporation may solicit subscriptions of stock, and the total capital stock shall be determined by the board of directors. The majority oi the stock of the corporation must be owned by citizens of the United States, but nothing in this act shall be construed to prevent foreign citizens from be- coming minority stockholders. The corporation shall not enter into any combination, agreement, or understanding, express or implied, with any other corporation, partnership, association, or person, which will cause an unlawful restraint of trade, nor make any unfair, unjust, or dis- criminatory contract against the United States, or any citizen thereof, in the procure- ment of petroleum, or its products, for the use of the United States. No liability shall be incurred by the corporation which will in any manner bind or involve the United States. The Government of the United States reserves the privilege of demanding reports from time to time of the activities of the corjwration. Exhibit U. REPORT OF AMERICAN PETROLEUM INSTITUTE AND AGREEMENT BETWEEN GREEK GOVERNMENT AND D'ARCY EXPLORATION CO. (LTD.). Report from the Foreign Relations Committee Of the American Petroleum Institute in Response to Request of the Federal Trade Commission op August 1, 1922. The following is the information requested : ' 'The Federal Trade Commission is making an inquiry into certain aspects of the petroleum trade, in compliance with United States Senate Resolution 311, copy of which is attached. "You are requested to furnish promptly the following information: "Do foreign governments controlling petroleum-oil-producing territories to your knowledge discriminate against American citizens or companies, seeking to develop such resources, in the following particulars: FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 91 ( (i I (a) With respect to the acquisition or exploitation of petroleum oil lands? "(6) With respect to the ownership of shares in corporations which are organized to acquire or exploit petroleum-oil lands or otherwise to engage in the petroleum industry?" ^ The report of the committee is discussed in detail under the following headings: 1. Foreign governments which are actively taking a direct interest in acquiring petroleum resources in various parts of the world. 2. Parts of the world where foreign governments hold concessions or are making explorations and developing petroleum resources. 3. Parts of the world where foreign nationals hold concessions or are making explora- tions for petroleum and the extent to which Government aid is given for these nationals by their respective Governments. 4. Extent to which foreign governments are trying to control the petroleum situation. 5. Exclusion of aliens by foreign governments from owning and operating oil fields in their doniains, colonies, or mandated territories. 6. Subsidies granted by foreign governments. 7. Commercial or legal restrictions which are made to protect foreign corporations in their operations which are detrimental to American oil companies. 8. Abstracts from reports of May 17, 1920, May 16, 1921, and June 13, 1921, from the Secretary of State in response to Senate resolution of March 10, 1920. in regard to restrictions imposed by foreign countries upon citizens of the United States in pros- pecting for or acquiring lands containing petroleum within the territory under the jurisdiction and influence of such countries. (1) foreign governments which are actively taking a direct interest in ACQUIRING petroleum RESOURCES IN VARIOUS PARTS OF THE WORLD. Great Britain, France, Russia, Argentine Republic, Rumania, Egypt, Poland. (2) PARTS OF THE WORLD WHERE FOREIGN GOVERNMENTS HOLD CONCESSIONS OR ARE MAKING EXPLOTATIONS AND DEVELOPING PETROLEUM RESOURCES. Great Britain.— In England and Scotland during 1919 where exploratory drilling was progressing. Persia.— The Anglo-Persian Oil Co. (Ltd.) claims through its subsidiary, the North Persia Oil Co. (Ltd.), title to three and one-half of the five northern Prov- inces through purchase of the concession granted to a party by the name of Kosh- taria, which concession the Persian Government have claimed is invalid. The Per- sian Government is offering a concession on the entire five northern Provinces exclu- sively to American interests in connection with a substantial loan to be made to Persia by American bankers. Australia (Papua).— Through an advance of 50,000 pounds to the Commonwealth of Australia to assist in the testing of the Papuan oil fields. Mesopotntni/i. —The Turkish Petroleum Co. (Ltd.), a British corporation, the stock of which 18 owned 50 per cent by the Anglo-Persian Oil Co. (Ltd.), 25 per cent by the Prench Government, and 25 per cent by the Royal Dutch-Shell combination, claims title to all of the oil rights in Mesopotamia, first, through what is known as the Turkish Petroleum Co. (Ltd.) concession, and, second, through the petroleum rights acquired under what is known as the Bagdad and Anatolian Rail wav grants. The Secretary of State of the United States has taken the position that the Turkish Petroleum Co. (Ltd.) concession is invalid and has made representations to the British Government to tins effect. The latest information is that negotiations are in progress for a partici- pation by an American group and a settlement to the satisfaction of the State Depart- ment of the question of the open-door policy in Mesopotamia. Macedonia.— The Bureau of Foreign and Domestic Commerce has received a con- firmation of a report that the Greek Government has granted to the Anglo-Pereian Oil (^. an exclusive concession for all petroleum rights in eastern and western Macedonia for an exploration period of 5 years, with an option for a 50-year exploitation concession in certain districts. For the exact terms of this concession see Exhibit A attached hereto. ' SAN REMO AGREEMENT. This agreement has been confirmed by the British and French Governments and gives to the nationals of these two countries facilities for the acquisition of oil con- cessions in British andJrench colonies, protectorates, and zones of influence, including Algeria, Tunis, and Morocco. Groups so formed must contain a majority of British interests. ii -w ^^^^^mmmm «T«TO^"-^^fe»#i / 1 f^i- 4 92 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. TRIPARTITE AGREEMENT. Si*?ned at Sevres, August 10, 1920, and defines the sphere of influence of France in Silicia and the western part of Kurdistan bordering on Syria, and of Italy in south- - ern Anatolia. The British spheres of influence are not only undefined but are not referred to. This raises the q^uestion as to whether the agreement is susceptible of the interpretation that the British interests may be held to extend to any or all the remaining parts of the British Empire. The agreement, in effect, renders diplomatic support to each of the signatories in maintaining their respective positions in the areas in which their special interests are recognized. ROYAL DUTCH-SHELL. It is understood that the Anglo-Persian Oil Co. (Ltd.) has renewed its marketing agreement with the Royal Dutch-Shell up to the end of 1925. France.— The San Remo agreement, referred to on page 91, herewith. French groups so formed under this agreement must contain at least 67 per cent French in- terests. . . The tripartite agreement. (See tripartite agreement between Great Britain, France, and Italv on p. 92, herewith.) Russia.--The present policy of the Russian Government is one of nationalization of its petroleum resources. Oil production has been reduced from 38 per cent of the world 's pre-war production to about 9 per cent post-war production. The Government has taken control of the oil fields without rej^ard to ownership and without compensa- tion to owners, with the result that no American interests would be safe in their nego- tiations with the Russian Government. Japan.— In Japan, Formosa, China, and the island of Sakhalin by withdrawing oil fields within their domain from private ownership or development. (See p. 95, Japan.) Argentine Republic— DirecHy engaged in producing and refining in the Comodoro Rivadavia oil fields. Argentina at present has no law governing petroleum exploita- tion but is operating under an antiquated mining lav/. Rumania.— The nationalization of the petroleum industry in all its branches has fre- quently been agitated in Rumania, but no definite legislation has ever been enacted to make this effective. In a decree of November 27, 1918, large areas of land were ex- propriated from native and foreign landowners alike and resold by the Government to peasants, the Government reserving the subsoil rights. The Government owns a large area, some of which is petroliferous. Portions of these lands have been leased from time to time and these concessions are now operated partly by foreign and partly by national capital. However, since 1909 only two small leases have been granted by the Government, both to local companies, without competitive bidding. The Government has fixed the prices of petroleum products for internal consumption since the beginning of the war. It has exercised this control also over the principal necessaries of life in Rumania. Egypt.— In August, 1919, the Eg>^ptian Government decided to undertake deep boring operations, with a definite view to intensive production if petroleum were discovered in any ap]^reciable quantities. This was a radical departure from the former policy of the (lovernment in segregating selected areas for intensive drilling by the Government. Icelnnd.—The government of Iceland recently established a petroleum monopoly and has concluded an agreement with the British Petroleum Co. (Ltd.), a subsidiary of the Anglo-Persian Oil, for its entire supplies for a period of three years, Previous to the creation of this government monopoly the United States was supplying at least 75 per cent of the Iceland requirements. Poland. This Government is interested in the oil business and it owns the State refinery located at Drohobycz, which has a daily crude capacity equivalent to 6,000 barrels of 42 gallons. It is understood that the Government is also operating some producing properties for its own account In the Boryslaw field. In addition, it ob- tains a supply of crude for its refinery through the 20 per cent which it collects from private operators on State lands. . During the war the Government exercised a rigid control over the industry, con- trolling both the prices for home consumption and export. It has recently relin- quished control of export prices in the home trade. The Government still controls a considerabl j area of State lands in some of the oil fields that have not been yet opened for exploitation. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 93 (3) PARTS OF THE WORLD WHERE FOREIGN NATIONALS HOLD CONCESSIONS OR ARE MAKING EXPLORATIONS FOR PETROLEUM AND THE EXTENT TO WHICH GOVERNMENT AID IS GIVEN FOR THESE NATIONALS BY THEIR RESPECTIVE GOVERNMENTS. Great Britain. — There are companies in 27 countries, including the United States, which have close relations with the Anglo-Persian Oil Co. (Ltd.) and the Royal Dutch-Shell combine through interlocking directorates, marketing arrangements, and financial interests. Australia. — Australian mining law provides that petroleum on or belo\y the surface of all land in Queensland, whether alienated in fee simple or not so alienated from the Crown, and if so alienated whensoever alienated is and always has been the prop- erty of the Crown; further, that in every lease for mining for petroleum a royalty at the rate of 12 pounds 10 shillings per cent of the gross value of all petroleum obtained during the term of the lease is charged. The labor covenant is also interesting in that it stipulates: (a) The lessee must employ continuously during the whole term of his lease not less than one man for every 8 actes leased by him. (6) He must erect a boring plant within six months of the beginning of the lease. (c) He must not approve any buildings, machinery, or plant (except after obtain- ing permission from the minister of mines). Oil-boring operations in Papua (New Guinea) are jointly financed by the Anglo- Persian Oil Co. (Ltd.)— British Government owned— and the Goverment of Australia, and provision was made in 1920 for the establishment of a refinery to be owned and controlled jointly by the Australian Government and the Anglo-Persian Oil Co. (Ltd.), with measures to insure full success and development of this refinery through imposition of customs duties. On July 14, 1922, in the Australian House of Representatives, a question was asked and answered which clearly indicates that the Australian Government intends to adhere to its exclusive policy of developing any oil fields in the mandated terri- tory of New Guinea. The question and answer are as follows, as taken from Hansard : "Senator Lynch asked the minister representing the prime minister upon notice — " • Whether the Government has considered the advisability of off ering a reward in a similar or modified form to that applying in the Commonwealth for the discovery of mineral oil and petroleum in the island possessions in the Pacific under Common- wealth control.' "Senator E. M. Millen (in reply): " * The Government reserves the right of searching for mineral oils, and therefore it is not proposed to offer any reward to private prospectors.' " Trinw/a^f.— Trinidad is a British Crown colony, and there are restrictions on the licensing and leasing of oil rights in Trinidad which belong to the Crown and which are not covered by valid existing licenses or leases. Clauses in existing licenses and leases prohibit, under penalty of forfeiture, foreign control or management of the companies which hold sucn licenses or leases. Netherlands and colonies. — Through its nationals in the United States, Central and South America, Dutch East Indies, and Curacoa. Prospecting license concessions are granted only to Dutch subjects, inhabitants of the Netherlands or Netherlands East Indies, and to companies incorporated under Dutch laws either in the Netherlands or Netherlands East Indies having in their board of directors a majority of Dutch subjects. The minister for the colonies, on behalf of the Netherlands East Indies, is authorized for and on behalf of the Nether- ands Indies and with the person or persons to be nominated by him in a registered corporation to be known as Netherlands Indies Mineral Oil Co., for the development of the Djambi concessions in central Sumatra, and the persons to be nominated by the minister for the colonies are the Bataafsche Petroleum Co. and the Shell Transport & Trading Co. Dutch companies in which there was a preponderant American stock ownership have been unable to acquire concessions except a few of relatively minor importance. Further, it is a matter of record that a number of years ago when effort was made by an American corporation to purchase the controlling stock in- terest in an important Dutch producing and operating company that the Dutch Government intervened and prevented the transfer, and that this local coinpany later on was taken over by the Royal Dutch, thus assisting in completing their mo- nopoly of the producing business in the Dutch Indies. Japan. — Through its nationals in Japan, Formosa, China, and the island of Sakhalin. (See p. 95, Japan.) France. — Through its nationals in the United States, Morocco, Greece, and Galicia. Argentine Republic. — Through its nationals in Argentina. Rumania. — Through its nationals in Rumania.. I ( j t fpmmmmmmw^^m'W'. ■■^"im^'-mm iPWI 94 FOR?:iGN OWNERSHIP IN THE PETROLEUM INDUSTRY. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 95 (4) EXTENT TO WHICH FOREIGN GOVERNMENTS ARE TRYING TO CONTROL THE PETRO- LEUM SITUATION. Great Britain. — 1, By creating a permanent governmental petroleum department, with powers and duties as follows: (a) Act as adviser in petroleum matters to all branches of His Majesty's Gov- ernment. (6) Grant concessions for all oil developed within the British Empire. (c) To advise and assist British oil companies in procuring concessions and carry- ing on work and conducting trade in other countries. 2. By debarring foreign nationals from owning or operating oil-producing proper- ties in the British Isles. Prospecting for petroleum or working petroleum properties is lawful in the United Kingdom only for the Board of Trade, minister of munitions, or person or persons authorized by them. 3. By direct participation, ownership, and control of petroleum companies. France. — Dunng 1921 a bill was prepared by the general commissioner on motor spirits and petroleum for presentation to the French Parliament for governmental control over the petroleum industry and instituting customs regulations with a view to development of refining in P>ance. The war-time control in France over the petroleum industry is still in existence in a modified form, and the French Government are still maintaining a petroleum office in charge of the director of essences at Petrol es. This official also exercises a control over the local selling prices in the French market, which prices are subject to his approval. Representations were made through the State Department to the French Govern- ment bv the American Petroleum Institute in 1921 regarding the tariff preferentials discriminating against American companies. The ownership of coal, and presumably of oil resources, is vested in the Govern- ment and concessions for exploitation are granted on a royalty basis. The terms of individual concessions may be made such as exclude foreign control. Rvjisia. — See page 92, herewith. Japan. — See page 95, herewith. Netherlands and colonies. — See page 93, herewith. Argentine Republic. — Have withdrawn oil fields within their domain from private ownership. Rumania. — See page 93, herewith. Italy. — See tri])artite agreement between Great Britain, France, and Italy on page 92, herewith. Mexico. — The conditions imposed by articles 27 and 33 of the Mexican constitution promulgated February 5, 1917, are well known to Government officials and oil men interested in Mexico. It is impossible at this time to define the position of the holders of oil lands by natives or foreigners in Mexico. (5) EXCLUSION OP ALIENS BY FOREIGN GOVERNMENTS FROM OWNING AND OPERATING OIL FIELDS IN T^EIR DOMAINS, COLONIES, OR MANDATED TERRITORIES. See sections 1, 2, 3, and 4 for details. (6) SUBSIDIES GRANTED BY FOREIGN GOVERNMENTS. Great Britain. — British oil companies are assisted by protection and restrictions and policies discussed in the preceding sections. Australia. — See page 91, herewith. (7) COMMERCIAL OR LEGAL RESTRICTIONS WHICH ARE MADE TO PROTECT FOREIGN CORPORATIONS IN THEIR OPERATIONS WHICH ARE DETRIMENTAL TO AMERICAN OIL COMPANIES. Royal Dutch-Shell.— This group is constantly extending its operations in unified control by purchasing competing companies outright or by taking them into the combine. Such purchai^es and interlocking control are prohibited by the antitrust laws of the United States. It is reliably stated that the purchasing of the Mexican Eagle Oil Co. (Ltd.) (Lord Cowdray's Mexican properties) was refused by the British Government to an American company and afterwards sold to the Dutch-Shjjll, thus adding to its large holdings and giving possession to potential production in Mexico as well as to pipe lines, storage wharves, sea loading facilities, and refineries. Through this purchase the Dutch-Shell procured control of the following subsidiaries of the Mexican Eagle: Eagle Oil & Transport Co. (Ltd.), which owns and operates a large fleet of tank steamers. Anglo Mexican Petroleum Co. (Ltd.), a marketing or^nization that has extensive markets in Mexico, Central and South America, the British Isles, and markets some oil in the United States. Anglo-Persian Oil Co. (Ltd.). — In addition to its connections with the Burma Oil Co. (Ltd.) — being practically owned by the latter company and British Government — the Anglo-Persian Oil Co. (Ltd.) has acquired and now entirely controls the British Tanker Co. (Ltd.), Petroleum Steamship Co. (Ltd.), Home Light Oil Co. (Ltd.), and the British Petroleum Co. (Ltd.). The three last-named companies were formerly German controlled and taken over by the British Government shortly after the war. The Burma Oil Co. (Ltd.) enjoys a monopoly granted by the Crown of Burma. The Anglo-Persian Oil Co. (Ltd.) has a concession of unprecedented magnitude granted by the Persian Government. The development of a strong nationalistic sentiment among British oil companies is illustrated by a resolution adopted by the Lobitos Oil Fields (Ltd.) to prevent the transfer of more than 20 per cent capital to foreigners. British preferential tariffs in some of the British West Indies and colonies in the Caribbean littoral are prescribed . These high tariffs on American petroleum products are a serious handicap to our nationals in their competition for trade in these markets. France. — See page 94 under France. (8) RESTRICTIONS ON AMERICAN OIL PROSPECTORS IN FOREIGN COUNTRIES. Abstracts from reports of May 17, 1920, May 16, 1921, and June 13, 1921, from the Secretary of State in response to Senate resolution of March 10, 1920, in regard to restrictions imposed by foreign countries upon citizens of the LTnited States in pros- pecting for or acquiring lancls containing petroleum within the territory under the jurisdiction and influence of such countries. Finland. — Does not allow foreigners to own rights. France. — Not abstracted; described on pages preceding. British Empire. — Not abstracted; described on pages preceding. Australia. — "A foreign company shall not directly or indirectly be capable of acquiring and holding a mineral oil lease or any interest therein whether legal or equitable." (Australian mineral ordinance, 1913.) British West African Colonies. — In Nigeria mineral oil is prospected for and mined by British subjects or companies. In the Gold Coast and Nigeria the government has a right of preemption over mineral oil mined, based upon valuation f. o. b. Port Arthur, Tex. Canada. — Identical reciprocity provision regarding aliens to United States Federal Statutes, that portion section 1, Public No. 146, Sixty-sixth Congress, February 28, 1920. . . India. — Only British subjects or companies controlled by British subjects can pro- cure a prospecting license or a mining lease. Newfoundland. — ^Anglo- Persian Oil Co. has exclusive right to prospect oil in im- granted Crown lands during the next five years. (Infotmation, Jan. 4, 1921). Trinidad. — Regulations applying Crown lands provide that not more than 25 per cent of the capital of the company shall be owned by aliens and the chairman and managing director and a majority of the other directors shall at all times be British subjects. Dutch East Indies or Netherlands East Indies. — ^The Royal Dutch-Shell has a com- plete economic monopoly of production. (See exchange of notes between the United States Government and the Government of the Netherlands, S. Doc. 11, 67th Cong.) For additional data see page 93, herewith. Albania. — In July, 1921, it was reported that oil concessions were to be granted by the Albanian Government to a British company, su bsidiary di the Anglo-Persian Oil Co. (Ltd.), 51 per cent of the stock to be held by the said company and 49 per cent by the Government and people of Albania. It is not known whether this concession was granted. France. — Not abstracted; described on pages preceding. Japan. — ^The Japanese mining law provides that no person other than subjects of the Empire or juridical persons duly formed in accordance with the laws thereof are entitled to acquire mining rights. Juridical persons established in Japan under itJMitJi'.L^jM-^ ^ V* i-Y^Vi ■■■^v« 96 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Japanese law, even though some or all of its constituents are aliens, are in the eyes of the Jajlanese law Japanese nationals. Guatemala. — ^The nation holds absolute title to all sources of petroleum in the Republic. Leases are not to exceed 10 years in duration and are made only with native or naturalized citizens. Contracts are nontransferrable unless approved by the Government, and then only provided the interested parties are citizens. Mexico. — Not abstracted; descried on page 94 herewith. Palestine. — -The British policy in this section has until recently restricted petro- leum activities. It is reported that an American oil company has of recent date been granted permission to explore for oil under a concession secured prior to the war. Persia. — Not abstracted; described on page 91 herewith. New York City, September 26, 1922. [Exhibit A.] Agreement Between the D'Arcy Exploration Co. (Ltd.) and the Greek Government. The D'Arcy Exploration Co. (Ltd.), which company is a branch of the Anglo- Persian Oil Co. and which is henceforth referred to herein as "the company," tiiis term being also applied to its successors and to any exercising its rights, is granted the exclusive right to explore the land in eastern and western Macedonia and to search within the limits of these territories only for petroleum, asphalt, natural gases, bitumi- nous shale and schist yielding petroleum on distillation, under the following con- ditions: 1. The duration of the exploration of the territory referred to above shall be five years — hereinafter referred to as "the period of exploration" — commencing from the publication of the ratification of the present law. 2. It is strictly forbidden for any exploration to be carried out on municipal or communal spaces or roads, on any space occupied by railways, cemeteries, archaeo- logical sites, or any other places of public use or within a distance of 60 meters of any habitable buildings or yards or gardens adjoining these buildings. If in the course of tnese operations the land is damaged to such an extent as to render cultivation impossible, or if it is held for a period in excess of a year, the owner of the land has the right to demand the expropriation of the territory which has been ceded for this purpose and to claim compensation therefor, which compensation shall be determined in conformity with the law concerning the expropriation of private property for public purposes. 3. The company has the right to remove samples, but it is obliged as far as possible , to restore the land to its original condition and to fill up any openings which have been made in the ground. 4. During the period of exploration the company has the right, subject to the reservations made in paragraph 2 and excluding private gardens, estates, and similar property, to search in any territory and in any portion thereof and to carry out, with- out let or hindrance, geological and topographical investigations, as also to carry out excavations and borings, care being taken tnat any land under crops, or where oUve trees, tobacco, vines are ^own, or any territory of a similar nature, are not injured. The company, however, is obliged to expropriate, in accordance with the proceed- ings laid down in the present agreement for such cases, and to compensate every third party for any damage arising from these explorations, the amount of the com- pensation in the event of the parties concerned failing to agree being fixed by five arbitrators consisting of one representative of the ministry of national economy, one representative of tlie company, two experts, one of whom shall be nominated by the company, and one by the private individual concerned, and as president, the presi- dent of the court of first appeal of the district in which the property is situated. 5. Within six montlis of publication of the ratification of the present law the com- pany is obliged to commence its investigations, and from the commencement of such investigations, and at the end of each year, the company must submit to the ministry of national economy detailed reports of all its investigations, copies of all necessary plans and charts, and details of its general analyses. Independently, however, of these general yearly reports the ministry of national economy has the right to call for special reports from the company in regard to any questions whatever arising. The company is obliged, three months before the expiration of the period of explora- tioai to inform the ministry of national economy exactly which are the districts to be FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 97 included in the final contract. Failing this, it will be considered that it has resigned all its rights in connection therewith. An exception is made in the case of "force majeure, " as determined in article 11 of the present. 6. The company is obliged within the third year of the period of exploration to make use of one, at least, prospecting boring machine of the type used generally in such operatioixs either in eastern or in western Macedonia, adding, by the end of the exploration period, at least one additional boring machine in each of the two coun- tries for the fourth year and similarly for the fifth year, so that the total number of these machines installed during the whole period of exploration shall be five. The company, however, has the right to use these machines at its own discretion in the one country or the other as the necessity presents itself to the company. "Force majeure" permitting, these machines shall work continuously and in the event of their being entirely unsatisfactory they shall be replaced. The company is obliged to deposit, by means of a letter of guaranty from a bank duly recognized by the Greek Government or by a bill of the Athens Bank of Dei)osits and Loans a guaranty of 100,000 drachmas, which shall be increased during the first six months of the second year of the period of exploration to a total of 300,000 drach- mas, to insure the completion of the work contemplated and of the terms of the present agreement as regards tne period of exploration. This deposit will be returned to the company at the completion of these operations, the expense of any geological researches and operations being included, or in the event of the abandonment of the operations arising out of the nonexistence of profitably workable petroleum, provided a certificate to this effect is furnished by two experts. The one shall be nominated by the ministry and the other by the company, and in the event of their disagreeing, an arbitrator shall be agreed upon in common by the ministry and by the company. Should they fail to agree as to the arbitrator, one shall be nominated definitely by the president of the court of appeal in Athens. The sum corresponding to the geological and excavatory expenses is returnable. In any contrary event the deposit reverts ipso facto to the State. 7, At any time between the signature of the present agreement and three months before the expiration of the period of exploration the company may inform the min- istry of national economy, in writing, exactly which areas it selects for definite work- ing for the purposes referred to above and within the prescribed limits of eastern and western Macedonia. At the same time the ministry of national economj'^ is obliged to grant to the aforesaid company or the company referred to in article 8 of the pr^ent agreement the concession or concessions for the purpose of obtaining petroleum and the other substances referred to above. Each such concession shall in every case be for a period of 50 years, commencing from the date of the letter notifying the acceptance of such concession in which the area to be worked shall be defined. In addition to the conditions laid down in the present agreement the following also shall be observed : (a) That whenever the company or its successor wishes to acquire the right to lay down railways or construct roads or sites for storehouses or sidings, and the installation of the same, or to add to the sites which it has acquired, always provided that they are within the prescribed geographical limits, for the purpose of commercial exploita- tion of petroleum and the products connected therewith, such additional lands shall be freely included in the concessions as far as public or unoccupied lands are concerned, but in the case of privately owned lands, on payment of the requisite compensation, which, in the event of nonagreement, shall be settled by the arbitration of the minis- try of national economy, which shall be obliged to concede such lands at the request of the company in accordance with article 32 of law G F K D "concerning mines" (1910). and in reference also to law G P N A of 1911 and 103 of 1913. (6) Thrft the company or its successors shall have the right to construct, maintain, and use — on every occasion with the permission of the ministry of national economy, which shall issue such permission in response to a detailed application from the company or its successor, accompanied by the necessary diagrams and after examina- tion on the spot according to the nature of the work proposed — one or more pipe lines, telephone wires, telegraph wires, railways of the same gauge as the international railways, light railways, aerial railways, roads, and bridges in any part of the territory included in the concession. As far as the telephone lines are concerned, they may reach to the extreme limits of the conceded territory, but as far as the railways both above ground and underground are concerned, to any point on the Greek coast. The construction of railways in the direction of the border lines of neighboring States is, however, strictly forbidden without special permission on each occasion from the minister of national economy. Also, the company or its successor shall have the right to erect, use, and maintain workmen's dwellings, oflSces, workshops, and to construct and to use works for the refining of petroleum. I V I IkK. '^^9'*^^;:^^^m^^mi' 98 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. For all the above purposes the ministry of national economy shall grant to the company or to its successor any necessary areas of unoccupied Government land, on payment of a fair rental or of a fixed price per hectare, in the same manner as governs the right of the company and ite successor to hold any private property; in case of dis- pute the price will be settled by arbitration in accordance with the foregoing. (c) That the company or its successor, for the whole duration of any concession, is not under obligation to pay, indirectly or directly, any tax, duty, or "rights" or com- pensation for any territory greater than that paid in similar circumstances by any other company in Greece, such, however, to be always in agreement with the terms of the present contract. (d) That the company shall have the right to import into the Kingdom all the machinery and tools necessary both for the original installation and for any extensions thereof, free of any import duty, during the whole of the period of the present agree- ment, both for the exploration and the exploitation of the territory. That during the first 25 years no export duty phall be levied by the Greek Govern- ment on any consignments of crude petroleum or on any of its refined products. Dur- ing the second 25 years it will be left to the discretion of the ministry of national econ- omy to decide whether or not any consignments of crude p>etroleum or any of its refined products shall be subject to an export duty, but in the event of such a duty being impoeed, it shall not exceed in amount one-tenth of the marketable value of the product; and further, in the event of competition, this export duty shall be reduced to such an extent as to allow a reasonable clear prof t to the company on the capital outlay, such profit to be de( ided upon by two experts appointed in accordance with clause 6 of the present agreement. 8. If, as a result of the exploration work, petroleum is found in quantities which both the minister of national economy and the company regard as commercial, then a company shall be formed in Greece, conformable to (^reek laws, and with its head- quarters in Athens, for the working of this petroleum. Not less than 35 per cent of the capital phall be offered for subscription in Gree<^ e at the pri( e of issue. This Greek company shall work the concessions which have been granted, and the exploration company shall transfer the present agreement and all the rights and pri\aleges con- tained therein to the Greek company for the continuation of the work of exploration, or for development and working of tne territory referred to in the present agreement. There shall be two Greek members of the board of directors of the above company if the board consists of a total of five members, four if there is a total of nine members, and so on. The minister of national economy has the right to nominate one of these Greek members, according to the terms of the statutes of the company and the duration of this member's official eervice. In the event of the company considering that it can not exploit the substances whose exploration forms the subject of this present agreement, due to their nonexistence in marketable quantities, it \n\\ then withdraw, declaring that it has no longer any rights under the agreement. Nevertheless, so long as the company considers that it can produce in marketable quantities it retains its rights under the present agreement, even if the Greek Government holds a contrary opinion on the subject. 9. The producing company is liable to the payment of a yearly acreage tax of 3 drachmas per hectare for each or all the acres ceded to it, as well as the revenue tax referred to in article 7 (c). The producing company is also liable to the payment of a royalty of 12 per cent on the crude production of the wells, either in money or in kind, at the option of the ministry. Any quantities expended by the company for working use are deducted. The company must divide the territory into rectangular sections each 500 hectares in extent, and must maintain for each such section of proved petroleum-bearing territory, at least one exploiting machine (sonde d 'exploitation pyour le petrole) and for the area which is being explored, one drilling exploration machine for every 2,000 hectares. The company has the right to abandon any portion of the ceded territory, with a cor- responding reduction in the acreage tax. The terms of this agreement will no longer be applicable to any such abandoned territory. 10. Apart from tne above royalty the company will be obliged to sell to the State, for its own requirements, quantities of the commercial products of all descriptions up to a total of 20 per cent of the balance remaining after deduction of the royalty. Tne price at which this shall be ceded shall be the market price less 10 per cent. Should the need arise, the Greek Government has also the right to buy, for its inter- nal consumption, at the current market price, the whole or any portion of the balance remaining after deduction of the royalty quantity and of the 20 per cent; in this event, however, the Greek Government is obliged to advise the company three months in :Z>^ flIbMke TS "•iWi*^"''' FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 99 advance of the amount it proposes to take and the period over which it proposes to take it. 11. The company is not subject to any of the penal clauses of this present agree- ment in the event of "force majeure." The permanent advisory council of the de- partment of mines of the ministry of national economy shall be the competent body which will decide as to the existence of "force majeure." In the event of the advisory council giving a decision unfavorable to the company, the company nevertheless has the right to challenge such decision by appeal to the minister, who decides finally. Increase in wages and in the cost of material, tools, and machinery in general is not considered "force majeure." 12. Letters and telegrams addressed by the company to the ministry will be subject to the legal stamp duties. The ministry will accept no responsibility for any loss of letters or telegrams which have not been signed for on delivery. 13. At the end of each three months the company is obliged to submit to the ministry a statement of its production and of the disposal thereof. The royalty ^v'ill be col- lected on the basis of these production figures. 14. After the expiration of the present contract, or any extension thereof in con- formity with article 18, say "fixtures" installed by the company, storehouses and building of all kinds of wells, wharves, roads, and bridges, revert to the Greek Govern- ment, the company having no claim to compensation in respect thereof. For the remaining "movable" material, namely, railway lines and railway rolling stock, working and pipe-line plant, as well as every portable tool and machine, the company is entitled to compensation at the current price for such of the material as the Greek Government wishes to retain, article 6 applying as regards arbitration to such cases, and in such an event the Government is obliged to advise the company six months in advance, giving details of what it proposes to retain. 15. The company is obliged to give preference of employment to skilled Greek engineers, provided the need arises for, and application is received from such. Also apart from its own specialist workmen whom it is entitled to employ in the absence of similar skilled workmen who are Greek subjects, it is obliged to employ workmen who are Greek subjects. 16. All regulations in regard to damage to private indi\dduals arising out of the work of exploitation, as also those relating to compensation of workmen for injuries received, are applicable to the present company. 17. No recourse may be made to the regular courts, but if any difference or disputes arise between the Greek Government and the company regarding the interpretation of the rights and obligations of both parties to the present agreement, such differences or disputes shall be referred to two arbitrators in Athens, one of whom shall be nomi- nated by the ministry of national economy and the other by the company. Before the arbitrators examine the matter, the two parties shall appoint a referee, and in the event of a disagreement as to the person of the referee, he shall be nominated by the president of the Athens Court of Appeal. The decision of the arbitrators, or, in the event of their failing to agree, of the referee, shall be final and binding on the con- tracting parties. 18. The company shall have the preferential right to an extension of the exploita- tion period by a further 25 years under the same terms as any other company of stand- ing and of the same character may propose for further exploitation. 19. The Government has the right, by royal decree, to extend the present agree- ment to any other areas contiguous with those referred to in the present agreement. 20. The present agreement has been drawn up in Greek and in English, the Greek copy being regarded in all circumstances as the official copy of the a^eement 21. The present agreement is valid subject to ratification by the national ass aembly. Exhibit 12. EDITORIALS ON MONOPOLY OF BURMA OIL CO., THE PETROLEUM REVIEW (LONDON), JULY 22, 1905. Monopoly of the Indian Oil Concessions. — One of the committee rooms of the House of Commons was the scene of rather an unusual meeting on Wednesday last when Sir Marcus Samuel, Bart., addressed a number of Members of Parliament upon the subject of the monopoly of the Indian oil concessions. Our readers will probably remember a -^^'r-*ii#^>^;|»|^^iaW(S^^ ^ I 100 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. that at the last meeting of the Shell Transport and Trading Co., Sir Marcus Samuel, Bart. — the chairman — pointed out the unfair monopoly that had, with the sanction of the Indian Government, been gained by the Burma Oil Co., in regard to oil con- cessions. Elsewhere we record a brief report of Wednesday's meeting and therefore it is only necessary here to say that after tne explanation of Sir Marcus, backed up by speeches by Sir Edward Sassoon, Sir Fortesque Flannery, and other gentlemen. It was resolved to send a deputation to the Secretary of State for India to represent the views expressed by Sir Marcus Samuel, and to urge the claims to the Shell Co. in the matter. It certainly appears to us a very serious matter to the Shell Co., that the producers of Burma oil should apart from the great advantage which they have in regard to the carriage from Rangoon to India, be enabled to sell their oil by reason of the allowance in duty which they have at one penny per gallon less than the Shell Co. can recover. When one recollects the hundreds of thousands of pounds spent by the "ShelP' and others upon organisations in India, it stands to reason that they should make a bold bid for ''fairness all round." The "• Shell*' Company and India. — A number of Members of Parliament received the following circular one day this week: — " Dear Sir. — We beg leave to request the favour of your attendance in Committee Room No. 5 at four o'clock next Wednesday, to hear a short address upon the Mineral Resources of Burmah,^ by Sir Marcus Samuel, Bart., late Lord Mayor of London. Your attendance is earnestly and especially requested. ' ' The meeting on Wednesday was largely attended, and the gentlemen present listened with great interest to Sir Marcus Samuel, who spoke with reference to the oil concessions granted; with the sanction of the Indian Government, to the Burmah Oil Co., and their probable effect upon the Shell Transport Co. He explained that the concessions granted to the Burma Oil Co. practically gave to that concern a monoi)oly of the oil trade in that country, the Standard Oil Co. , being excluded from competition. He urged the claims of the Shell Transport Co. to a participation in the Burmah oil business, and contradicted a statement which had been made, that the Shell Transport Co. was a foreign corporation. Its shareholders included some of the most prominent men in England, including several Members of Parliament. After speeches by Sir Edward Sassoon, Sir Fortescue Flannery, and others, it was resolved to send a deputation to the Secretary of State for India, to represent the views expressed by Sir Marcus Samuel. Exhibit 13. MEMORANDUM OF BRITISH GOVERNMENT ON THE PETROLEUM SITUATION. APRIL 21, 1921. Dispatch to His Majesty's Ambassador at Washington Inclosing a Memo- randum ON THE Petroleum Situation. Earl Curzon to Sir A. Gcddes (Washington). Foreign Office, April 21, 1921. Sir: I transmit to your excellency herewith copy of a memorandum which has been prepared by the petroleum department dealing with the general petroleum situation. 2. In view of the public interest in the question of petroleum supplies and in the policy of His Majesty's Government, an attempt has been made to give in this memo- randum a summary of the conditions now existing in this country, in other parts of the British Empire, and in various foreign countries. The memorandum will be laid before Parliament, and you are at liberty to make use of the facts contained in it in replying to any inquiries which you may receive on the subjects dealt with. I am, etc. Curzon of Kedleston. [Inc'losurc] MEMORANDUM ON PETROLEUM SITUATION. Statements have frequently appeared in the foreign press during the past year to the effect that His Majesty's Government are cooperating with British commercial interests to secure an undue share of the petroleum resources of the world, and, while they are entirely without foundation, they may through constant repetition have obt-ained some credence. L.m9' f'l een withdrawn. As already explained, the total output of oil products in Great Britain is less than 170.000 tons.* To secure 165,000 tons from the Scotch shale fields it is necessary to mine 3,000,000 tons of shale and to employ 10,000 men, and the high costs have frequently menaced the existence of the industry. Canada.— knnnA production, about 34,000 tons, which meets only a small propor- tion of the Dominion's requirements. Favoral^le indications have been found in the Northwest Territories, but the remoteness of the locations must render development slow. Exploitation in Canada is confined to British registered companies, but it is worth noting that the most active company in Canada, in regard to both imports and prospecting Vork, is Imperial Oil (Ltd.), a subsidiary of the Standard Oil Co. of New Jersey. There are extensive shale deposits of varying richness in New Brunswick and other Provinces. Union of South Africa, Australia, New Zealand, and Newfoundland.— -In none of these dominions is there at present any general prohibition of the exploitation of oil lands by foreigners, though in certain of the Australian States regulations introduced during the war confined t;he issue of mining leases to British subjects. In the northern territory of Australia leases are, as in Canada, restricted to British registered companies. No important production has been obtained in any of these countries, though shale is worked on a small scale in Australia and a trifling quantity of oil has been obtained in New Zealand. Exploration is being carried on in Papua on behalf of the Imperial and Australian Governments, but so far without definite result. In Newfoundland the grant to a British company of a prospecting license for five years over all unalloted Crown lands is being considered. InMa. — Prospecting or mining leases have been, in practice, granted only to British subjects or to companies controlled bv British subjects. The production of petroleum in India is about 1,200,000 tons per annum, which is insufficient to meet the country's needs. Large quantities are imported from the United States, the Dutch East Indies, and, to an increasing extent, Persia. Trinidad. — In the case of private lands there is no nationality restriction, but the lessees of Crown or alienated* lands must be British subjects or a British-controlled companv. Exception has, however, been made in the case of an American company which, in view of good pioneer work done on private lands, has been permitted to lease certain Crown lands. Trinidad's annual production is about 295,000 tons, and development is actively proceeding which it is hoped will lead to a material increase. British Guiana, British Honduras, Nigeria, and Kenya Colony. — Similar regulations as to Trinidad. No production and no definite prospects, but prospecting work is being done by two British companies in Nigeria and applications from prospectors are under consideration in British Honduras and Kenya. i ** ■ > ^' • Lands, the surface of which has been alienated by the Crown for agricultural purposes since January 17, 1902. : ^mi^P^ : ■na '\ v^ X -^ 102 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Jamaica and Barbado8.~No nationality restrictions. No production, but pros- pecting work 18 being done by a British company in Barbados. Eaypt.~No nationality restrictions. Annual output 155,000 tons, produced by a single company, which discovered a valuable deposit in 1914. Several other firms [ nave recently started prospecting operations. Somaliland.~^o production. Prospecting is being carried out on behalf of Govern- ment. No nationality restrictions. Sarawak.~Annua.\ production, 150,000 tons. No nationality restrictions. /^ruMei.— No production. Prospecting has been proceeding for a number of years without tangible result. Nationality restrictions generally similar to those in irinidaa. Bntish North Borneo.~}^o production. No nationality restrictions. Prospectine IS being earned on by Japanese and British companies. The foregoing shows the extremely small oil production of the British Empire and the absence of any general policy of exclusion of foreigners. It will be seen that in the vast areas of territory where there are no restrictions, no foreign countrv has taken the opportunity of exploring for oil except in the case of British North Borneo, whereas m Canada and Trinidad, where restrictions are in force, foreign capital has for many years past been actively at work both on its own account and by way of participation m British companies. It can therefore hardly be contended that the restrictions have imposed any serious disability on foreign enterprise. It has to be remembered that when such regulations were first introduced in India and else. vhere the oil situation was very different from that prevailing to-day The problem was then not so much to find new sources of oil as to secure profitable markets for that already produced, and there was a real danger that oil lands might be taken up by large oil companies and kept unworked so as to maintain prices. Apart from this consideration, however, it is evident that in regard to a "closed- door policy no real parallel can fairly be drawn between the British Empire, ^^dth it3 small and scattered production, and a country like the United States, which at present produces two thirds of the world's output within her home territorv With no nationality re3triction8 it would have been feasible for an isolated oil field, such as Irinidad to be taken up by German companies and worked with German per- sonnel, with the result that on the outbreak of war the wells and plant might have been, rendered useless and the supplies of oil from this source cut off for months In the United States, on the other hand, the foreign holdings are bound to represent only a small proportion of the whole, and can be no source of danger. As a matter of fact, the foreign companies to which America has thrown her fields open are mostly registered in America, are staffed with Americans, and dispose of their production in America. Regulations were introduce I last year in the Philippines restricting the exploita- tion of certain lands to citizens of the United States and of the Philippines In this action, in almost her only detached territory, the United States appears to be adopting the very policy, and probably for the same reason, for which Great Britain has been so loudly condemned. In Mexico, United States companies control at least 80 per cent of the production, while British commercial interests have a share in the remaining 20 per cent which IS largely Dutch controlled. As the growing production of Mexico, which increased from 3,750,000 tons in 1913 to 23,000,000 tons in 1920, is perhaps the predominating factor in the oil situation to-day, the strength of the United States position will be apparent. Most of the Mexican production of crude oil is at present shipped to United States refineries. In ('entral and South America oil production is, except in Peru and the Argen- tine, still in the initial stages, the only other countries where commercial supplies have been found being Venezuela and Colombia. No evidence can be adduced from any of these countries of any attempt at British domination. If British-Dutch interests have considerable holdings in Venezuela, American companies are at least equally prominent in Colombia, while in Peru, where the oil industry was established l)y British enterprise and was at one time almost entirely in British hands, the control of all producing companies but one has passed to the Stand- ard Oil Co. Among the criticisms leveled against this country is that of having secured a mo- nopoly in Per4a. It should hardly be necessarv to say that the rights of the Anglo- Persian Oil Co. in Persia have no connection whatever with the British Government holding in the company but are mainly derived from a concession which was ob- tained through the personal enterprise of Mr. W. K. D'Arcy in 1901, and for which it was equally open to any other individual, British or foreign, to apply. It was only FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 103 after heavy expenditure and much discouragement that success was achieved, to the great advantage of Persia; and the suggestion that British governmental influence was used to force a monopoly on an unwilling country can only be made through com- plete ignorance of the facts. The British Government did not acquire its present holding in the Anglo-Persian Co. for 13 years after the concession was obtained by Mr. D'Arcy, and it does not interfere with the company's commercial policy in any way. Little need be said of the other fields in which British interests are represented. In Galicia, where thej^ were never very important, they have been reduced since the armistice, while British firms have been temporarily driven from south Russia. In Rumania, a one-eighth share in an ex-enemy company has been acquired by a British group, but the British share in the oil industry of that country is not more important that the American, French, or Dutch. The whole question of Mesopotamia, which has been fully dealt with in corre- spondence with the United States Government, need not be referred to here beyond saying that while there is no intention of discriminating against non-British interests, account must be taken of legitimate rights acquired before the war, and this applies equally to Palestine, where American claims are understood to exist. In conclusion it can only })e repeated that, although it is hoped that British interests will take an increasing share in the development of the world's oil resources, any suggestion that British domination is intended or possible is entirely unfounded. It has been frequently alleged that Great Britain has secured control of half the petro- leum deposits of the world, *but statements of this kind are based on entirely inade- quate data and are mere conjectures. The United States has, through her unique natural resources, been able to develop a vast industry with great organizations, whose experience, wealth, and energy make it certain that her present overwhelming lead in oil production will be retained for many generations to come. Apart from her home deposits (of which fresh discoveries coQtinue to throw doubt on pessimistic forecasts of early exhaustion), the United States is already taking the chief share in the development of the Mexican oil fields and is certain to play a leading part in opening up those of Central and South America as well as of other countries. It is becoming increasingly obvious, however, that there is ample scope for the activity and enterprise of all nations in searching for and bringing into use the world's stores of petroleum as yet undiscovered. Petroleum Department, £ Queen Annes Gate Buildings, S. W. L. Exhibit 14. SAN REMO AGREEMENT. Anglo-French Petroleum Agreement, Signed at San Remo, April 24, 1920. 1. By order of the two Governments, France and Great Britain, the undersigned representatives have resumed, by mutual consent, the examination of an agreement in reference to petroleum. 2. This agreement is based on the principle of a cordial collaboration and the reciprocity in the countries where the petroleum interests of the two nations can be amalgamated to advantage. The present memorandum refers to States or countries as follows: Rumania, Asia Minor, territories of the former Russian Empire, Galicia, the French colonies, and the colonies of the British Crown. 3. This agreement may be extended to other countries by mutual consent. 4. Ruvmnia.— -The Governments of Great Britain and France will lend their aid to their respective dependents in all negotiations which are to be started with the Rumanian Government for — (a) The purchase of oil and petroleum concessions, shares, or other interests owned by former subjects or companies (of enemy origin) in Rumania, which have been sequestered — for instance, the Steaua Romana, Concordia, Vega, etc. — who consti- tuted in said country the petroleum group of the Deutscher bank and the Discont Gezell Schaft, at the same time as all other interests which it may be possible to take over. (6) The concessions of petroleum fields owned by the Rumanian State. 5. All shares belonging to former enemy concessions of which one may gain posses- sion and all other advantages drawn from these negotiations will be divided on the i 104 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 105 basis of 50 p>er cent to British interests and 50 per cent to French interests. It is understood in the company or companies to be created in order to carr>' out the administration and exploitation of said shares, concessions, and other advantages, the two countries are to have the same proportion of 50 per cent of the capital sub- scribed as well as equal representation on the board and equal voting power. 6. Territories of the former Russian Empire. — In the territories belonging to the former Russian Empire the two Governments will give their joint support to their respective dependents in their common efforts with the view to obtain petroleum concessions and facilities for expyort, and to assure the delivery of petroleum sup- plies. 7. Mesopotamia. — The British Government binds itself to concede to the French Government, or the representative appointed by same. 25 per cent of the net pro- ^ duction of crude oil at the current market price which His British Majesty's Govern- ' ment may draw from the Mesopotamia petroleum regions in the event of these regions being made productive by virtue of Government exploitation; gj in the event the Government has recourse to a private company to exploit the Mesopotamia petroleum regibns, the British Government will place at the disposal of the French Government fi participation of 25 per cent in the said company. The amount to be paid for a par- ticipation of this kind should not exceed the amount paid by any other participant , in tne said petroleum company. It is also agreed that the said petroleum company ^is to be under the permanent control of Great Britain. 8. It is mutually a^eed in the event of the private petroleum cgmpauy being constituted as aforesaid the Government of the country or other local interests are authorized, if they so desire, to participate up to 20 per cent in the shares capital of said company. The French are to contribute one-half of the first 10 per cent of such a local participation and the balance will be furnished by each participant in propor- tion to nis holdings. 9. The British Government agrees to lend their support to any arrangements bv which the French Government may obtain from the Anglo-Persian oil supplies which may be transported by canalization from Persia to the Mediterranean oy means of any pipe line which may have been constructed in the interior of those territories placed under F'rench mandate, and regarding which France has accorded special facilities, up to 25 per cent, of the oil so transported on such tenns and conditions which may be fixed by common accord between the French Government and the Anglo-Persian company. 10. In consideration of the foregoing agreement, the French Government will acquiesce, if such desire is expressed, and as soon as the request is made, to the con- struction of two pii>e lines and separate railways, these latter necessitated for the construction and upkeep of the pipe line and for the transportation of the oil emanating from Mesopotamia and Persia, and traversing French spheres of influence up to a port or ports on the eastern Mediterranean. The said port or the said ports are to be chosen by mutual agreement by the two Governments. 11. In the event of pipe lines or railways of this nature traversing a territory in the interior of a zone under French influence, France agrees to accord all facilities for the right of way (way leaves) without taxes or transportation claims being imposed for the passage of such oil. An indemnity, however, will be due the landowners for the area so occupied. 12. France will also accord facilities in the terminal ports for the acquisition of f)roperty necessary for the erection of depots, railwav tracks (switches), refineries, oading quays, etc. Oil exported through these installations is to be exempt from export and transit taxes. The necessary material for the construction of the pipe lines, railways, refineries, and other installations is also to be free from all import and transportation taxes and claims (titres de transport). 13. Should the said petroleum company \\'i8h to establish a pipe line and a railway in the direction of the Persian (Julf, the British Government uill use its good offices in order to facilitate similar facilities. 14. Northern Africa and other colonies. — The French Government will accord facilities to any British group or groups of good standing which can offer the neces- sary guaranty, which will operate in conformity with French legislation, for the acquisition of petroleum concessions in the colonies of France or in French protec- torates or zones of influence, including Algeria, Tunis, and Morocco. It is well to point out that the French Parliament has decided that groups formed under these •ji conditions are obliged to contain at least 67 per cent French interests. 15. The French Government will facilitate the granting of all concessions in Algeria which are now liable to examination as soon as the applicants have com- plied with all the requirements of French legislation. 16. Colonies ofdhe British Crown. — As far as the existing regulations will permit, the British Government will accord to the French dependents who may desire to explore and exploit petroleum regions in the Crown colonies advantages corresponding to those France has accorded to British subjects in the French colonies. 17. In the foregoing agreement the terms are not applicable to the concessions which may be the object of negotiations already instituted between private French or British interests. 18. The present agreement has been initialed this day by M. Philippe Berthelot and Prof. Sir John Cadman, subject to ratification by the prime ministers of France and Great Britain, respectively. San Remo, April 24, 1920. Exhibit 15. LETTER OF STANDARD OIL CO. OF NEW YORK, FEBRUARY 24, 1922. February 24, 1922. The Secretary of State, Washington, D. C. Sir: From statements that have been published in the press, it would appear that a recent visitor to this country, who holds a high place in British oil circles, is endeavor- ing to create the impression that the British Gover;iment does not discriminate against other than British nationals in granting concessions for the production of crude petro- leum. We have laid before you from time to time as it came to us evidence that the British Government follows a well-defined policy of discrimination and that, in so far as India and Burma are concerned, this discriminatory policy has been in force for 38 years. In view of the statements that are now being made denying the existence of a policy of discrimination, we trust that you will not consider it out of place if we, in refutation of these statements, review our records of the discriminatory acts we have experienced at the instance of British officials, together with other direct evidence that has been reported to us by our representatives abroad. On March 20, 1902, the Colonial Oil Co. of New Jersey (a subsidiary of the Sftandard Oil Co. of New Jersey) applied to the Government of Burma for a license to prospect for oil in upper Burma. The application was mkde in due conformity with the local government laws and requirements in that country relative to prospecting licenses. This application was refused on June 9, 1902, by the local government of Burma under instructions from the Viceroy of India, Lord Curzon, and no reason whatever was as- signed for the refusal. On June 13, 1902, similar permission for a prospecting license was applied for on be- half of the Anglo-American Oil Co. (Ltd.), a British corporation registered in 1888. In addition to making application for a license to prospect for oil, and without know- ledge of any government policy of discrimination, negotiations were entered into with native owners of freehold property for the development of their land. Prior to receipt of the official reply to the A i^lo- American Oil Co.'s application, Mr. W. H. Libby, representing the Standard Oil Co., appealed to the Viceroy of India for favorable consideration of the application. Mr. Lioby also invoked the aid of General Patterson, then United States consul general in India, in the presentation of the case to the viceroy. In reply to a request made by General Patterson for an interview with the viceroy, the Hon. W. Lawrence, private secretary to the viceroy, wrote under date of October 2, 1902, that he was directed to say: "It is not desired by the government of India to introduce any of the American oil companies, or their subsidiary companies, into Burma, and that an interview with the viceroy would not be attended with any other result." On October 2, 1902, the local government of Burma issued an order prohibiting private owners of land in upper Burma from disposing of their land to any party not first approved by the government. This order was issued at the instance of the government of India. On October 17, 1902, the application of the Anglo-American Oil Co. was refused by the government of Burma without any reason being assigned. Representations backed by the force of the United States Government through its ambassador in London (who at that time was J. H. Choate) were then made to the British Government authorities in London. The British foreign office replied that 35904—23 9 \ n^ iq^ 'fMmsm: w-^,ti¥ff»»^B«wp*PWT.< -imP' ^wPt-Tvr?* :& 106 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. the o:overnment of India was not influenced in its decision by the fact that the appli- cant was an American company; that the decision was ^iven after due consideration had been paid to the special conditions of oil production in Burma and after the government's policy had been deliberately adopted. They claim that the ?:overn- ment of India, being the sole proprietor of the mineral wealth of the country through- out the greater part of India, are in a different position from that of most other govern- ments, and have, consequently, to exercise a large discriminatory power in dealing with applications for concessions. We pass without comment the apparent contradiction between the British foreign- office expressions, as per the foregoing, and the Viceroy of India's written statement to the Unite^ and make good the breach or breaches within two calendar months from the service of the notice, and may, by the notice, declare that in default of their so doing the license hereby granted shall thenceforth determine, and in such case this license and all rights and liberties conferred hereby or enjoyed hereunder ehall, on the expiration of the said period of two calendar months (unless the licensees shall in the meantime have remedied and made good the breach or breaches referred to in the notice), determine without prejudice to the rights and remedies of the governor in respect of any prior breach or nonperformance of any or all of the terms and conditions hereof on the part of the licensees and except in respect of the covenants on the part of the licensees herein mentioned to be performed after the expiration, or sooner determination, of this license or after the abandonment of the undertaking hereby licensed. COVENANTS BY THE GOVERNOR. The governor hereby covenants that if upon the expiration by effluxion of time of the term hereby granted he is satisfied that the licensees have been prevented from completing their search of the said lands by any cause other than their own default, then the governor shall, at the request and cost of the licensees in writing, renew the license for such further term, not exceeding two years, as the licensees may desire, from the expiration of the term hereby granted, subject to the like conditions in all respects as are herein contained, except this covenant for renewal and except also that the fees mentioned in the said schedule marked " B " shall not be payable on such renewal. And also that on or before the determination of this license as regards any lands (whether originally included in the license or subsequently added) the licensees shall in respect of crude oil have a right to a mining lease or leases, in the form set out in the schedule marked "D" hereunder written, of so much of those lands as the licensees may from time to time during the continuance of this license as regards such lands elect to lease. Provided that the total area included and to be included in all such mining leases collectively shall not exceed 100,000 acres. PROVISIONS AS TO INCLUDING OTHER LANDS AND GIVING UP LANDS. It is hereby J^eed that the provisions of this license and the covenants and agree- ments on the part of the licensees herein contained shall mutatis mutandis extend and apply to any further area or areas over which the licensees may from time to time hold a license or licenses to prospect for oil in like manner in all respects as if such further area or areas had formed part of the lands described in the said schedule ^^f'^^\^^y^-mi^:mmm)mg^^i»m^^^3:B^i' Wia*j|«S^?,',\,*^^- 112 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. marked "A." And further that the licensees may from time to time by notice in writing to the governor declare that they desire to abandon their license with regard to any lands defined in such notice (whether forming a part of the lands described in the said schedule marked "A" or of any such further area or areas as aforesaid) and thereupon the rights and obligations of the licensees with regard to the lands specified in such notice shall (save as to any things which, under the provisions hereof, they would be liable to do on or in relation to such lands on the determination or expiration of this license) cease as from the date of such notice, but without prejudice to the rights and remedies of the governor in respect of any prior breach or nonperformance by the licensees of any of such obligations. ARBITRATION CLAUSE. If at any time during the continuance of this license or after the determination thereof any question or dispute shall arise regarding this license or any matter or thing connected herewith or the powers, duties, or liabilities of the licensees hereunder or the amount or pa>Tnent of any rent or royalty, then and in all such cases the matter in difference shall be referred to the decision of two referees or their umpire pursuant to the provisions of the arbitration ordinance No. 41 or any ordinance or law amending or replacing the same for the time being in force. In witness, etc. {Schedule A.] All those lands colored red on plans signed by the subintendant of Crown lands on behalf of the governor and by on behalf of the licensees and annexed hereto. of [Schedule B.] Fees. — A payment of Is. per acre to be paid upon the area specified in Schedule A acres forthwith and upon any further area or areas forthwith on the grant of a license in respect thereof or the same becoming subject to the provisions of this license. Royalty. — For all crude oil — which expression shall have the same meaning as is attributed thereto in Part X of the form of lease set out in Schedule D hereto — or other mineral hereby licensed a royalty of 2s. per ton shall be paid to the receiver general on the net output collected into the field tanks of the licensees (except such quantity as is herein granted free of royalty). [Schedule C] During the period of this license the licensees undertake to continue survey work and/or to do such testing of the properties by means of the drill or trial borings as mav be reasonable, with the objectof arriving at the oil-producing prospects of the area; and in this respect to give due regard to the reasonable wishes of the governor. The licenseee shall be free to do such work on such parts of the area or areas covered by this license as in their uncontrolled discretion — subject to the right of the governor mentioned below — they may deem best suited to ascertain the prospective value of the prop)ertie8 as a whole ; and they undertake to provide as a minimum one drilling rig, with a suitable number of bore masters and appliances, for each 10,000 acres — with a minimum of four rigs— for the time being held under or covered by tiiis license, and so soon as the best location for an experimental hole has been ascertained by them, to work the drill with every reasonable dispatch; and so soon as the effect of any hole has been ascertained, to move that rig, with its appliances and workmen, without un- due delay to another spot where the experimental hole will, in their opinion, afford information. The governor shall have the right, when necessary to enable him to decide upon any applications received by him, to purchase the surface of any portion of the Crown lands to require the licensees to do prospecting work over any such area selected by him, provided that no such area or areas exceed 2,500 acres in any one year in the aggregate; and provided also that such work shall not be required on more than two plots in any one year. [Schedule D.J (III) MINING LEASE (OIL). This deed made the day of -, in the year of our Lord between governor and commander in chief in and over the colonly of Trinidad and Tobago and its dependencies, vice admiral thereof, intendant of Crown lands, etc. (herein- after called the "governor," which expression includes the governor or officer for the FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 113 time being administering the government of the said colony) of the one part and the United British West Indies Petroleum Syndicate (Ltd.), whose registered office is situate at — — (hereinafter called "the lessees, " which expression shall where the -, governor, granted context so admits include their assigns) of the other part: Whereas by deed bearing date the , His Excellency unto the lessees subject to the terms and conditions therein expressed the sole right and license to enter upon, mine, bore, quarry, dig, work, search for, and win, and work crude oil in and under certain parcels of land situate in the , in the island of Trinidad, and specified in the schedule marked "A" to the said deed, and such further lands as might from time to time be included therein, for the term or terms therein specified, with powers to make and use anyroad drain or watercourse on the said lands and to erect and bring upon the said lands all such temporary huts, sheds, and structures, steam and other engines and machinery necessary for carrying on the prospecting operations thereby authorized ; and Whereas by the said deed now in recital the governor covenanted that on or before the determination of the said license the lessees should in respect of crude oil be en- titled to a raining lease in the form of these presents of so much of the said lands as the lessees might desire to lease up to 100,000 acres; and Whereas the lessees in exercise of the right aforesaid have called upon the gov- ernor to grant them a mining lease of the lands specified and delineated in Part I of the schedule hereunder written and the governor has agreed to grant their request upon the terms and conditions hereinafter appearing; Now this deed witnesseth as follows: In consideration of the covenants, provisions, and royalties hereinafter reserved and contained the governor doth hereby demise unto the lessees the lands mentioned and described in Part I of the schedule here- under written together with the liberties, powers, and privileges to be exercised in connection with the said lands mentioned in Part II of the said schedule, subject to the restrictions and conditions which are specified in Part III of the said schedule, excepting and reserving out of this demise unto the governor the liberties and powers mentioned and specified in Part IV of the said schedule. To hold and enjoy all and singular the liberties, powers, and privileges hereby demised unto the lessees from the first day of , for the term of 50 years then next ensuing, yielding and paying to the governor the several rents and sums of money mentioned and specified in Part V of the said schedule, subject to the provisions relating to rents expressed in Part VI of the said schedule. And the lessees do hereby covenant with the governor as in Part VII of the said schedule is expressed and the governor doth hereby covenant with the lessees as in Part VIII of the said schedule is expressed and it is hereby mutually agreed and declared by and between the parties hereto as in Parts IX and X of the said schedule is expressed and it is declared that the schedule hereunder written shall be deemed part of these presents and be read and construed accordingly. |n witness, etc. [The schedule above referred to.] PART I. — THE LANDS DEMISED BY THIS LEASE. Description of property. — All that piece or parcel of land lying and being delineated in the plan hereunto annexed and therein colored pink and containing an area of or thereal)outs. PART II. — LIBERTIES, POWERS, AND PRIVILEGES TO BE EXERCISED OR ENJOYED BY THE LESSEES, BUT SUBJECT TO THE RESTRICTIONS AND CONDITIONS IN PART III. 1. To bore.— To bore, dig, sink, drive, make, repair and use all such boreholes, pits, shafts, drifts, levels, excavations, waterways, and other works as may be neces- sary or proper for the purpose of searching for and winning crude oil. 2. To appropriate VMter. — Subject to the approval of the governor to appropriate and use for any purpose connected with the borings or works connected therewith the water upon or within any of the said lands, and to collect and impound the same for the purpose of working the said borings or works, but so that in the exercise of this privilege the lessees shall not deprive any lands, villages, houses, or watering places for cattle of a reasonable supply of water as heretofore accustomed and enjoyed. 3. To appropriate land for stocking. — To enter upon, use, and occupy a sufficient part of the said lands adjoining any borings for depositing thereon the product of the said borings and all the earth, soil, and other substances brought to the surface and for otherwise, carrying on the works of the said borings. !• < i : i i ■ ^;>^.*L- '-*«.&'-^:?-" ~-- *jem'm.^.:'^mt..it*m0^^i»smt>u:imms*-»*^^ ••'«*ik. •'#it^;.. ^v^rf^swiai?* a-vI^V' 114 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 4. To refine. — To refine oil in and upon the said lands, whether for purposes of sale or otherwise, save as hereinafter proviaed, 5. To lead and carry away oil. — To take, lead, pipe, and carry away over the said lands the crude oil and refined products, and to dispose of the same at their own will and pleasure, save as hereinafter provided. 6. To erect houses. — To erect, set up, and make in, upon, and over the said lands, workmen's houses, sheds, engines, machinery, furnaces, buildings, erections, pipe lines, railroads, tramroads, and other roads and works necessary or convenient for the effectual working of the said borings, diggings, 'or works connected therewith, and the exercise of the several liberties and powers hereinafter granted. 7. To dig gravel, etc.— To search for. dig. aud get gravel, sand, and stone within the «aid lands for the purposes mentioned in this part of the schedule, but not for sale. 8. To cut timber. — Except as regards lands which may have been proclaimed as a forest reserve to cut down and fell the timber now standing or growing, or which at anytime hereafter may grow on the said lands, for the purpose of facilitating ingress and egress to and from the said lands, and also for the purpose of clearing lands for the erection of machinery and plant in connection with the said borings, and also for the purpose of clearing lands for erecting and making habitable the said workmen's houses ^ PART III. — BESTRICTIONS AND CONDITIONS AS TO THE EXERCISE OF THE ABOVE LIBERTIES, POWERS, AND PRIVILEGES. 1. Notice to he given before entering on lands — Liberty to object. — Before taking any land for surface operations, the lessees shall give to the subintendent of Crown lands 14 days' previous notice in writing specifying by name or other sufficient designation and by quantity the land proposed to be taken and the purpose for which the same is required. The subintendent shall at any time within 14 days from the receipt of such notice state his objections, if any, to the proposed site, and the validity of such objections in case of dispute shall be determined oy reference to arbitration, as here- inafter provided in Part IX of this schedule. 2. Timber. — Save as provided in clause 8 of Part II hereof, the lessees shall not, without the express sanction of the governor, cut down or injure any trees or timber in the said lands, but they may clear away brushwood or undergrowth which inter- fere with the due exercise of the liberties and privileges above granted. PART IV. — LIBERTIES AND POWERS OF THE GOVERNOR. 1. Governor may work other minerals, etc. — Liberty and power for the governor o any lessee or other person authorized by him in that behalf to enter into and upon the said lands and to search for. dig, work, and get any minerals or substances other than crude oil. in, upon, or under the said lands and for the purposes aforesaid to sink, make, erect, and use such pits, shafts, levels, drains, watercourses, tunnels, buildings, engines or machinery, railways, wagon ways, and other ways, works, and conveniences, upon, through, or under the said lands as shall be necessary or expedient; provided always that tha said reserved liberties and powers to work for minerals or substances other than crude oil shall be exarcised and enjoyed in such a manner as not to hinder or interfere with the rights and privileges of the lessees under these presents, and provided also that fair and proper compensation shall be paid by the governor for all loss, damage, or injury which the lessees may sustain or be put to by reason or in consequence of the exercise of the said reserved liberties and powers to work for minerals or substances other than crude oil, the amount of such compensation to be settled in case of difference by reference to arbitration, as hereinafter provided in Part IX of this schedule. 2. Governor may enter land. — Liberty and power for the governor or any lessee or other person authorized by him in that behalf to enter into and upon the said lands, and to make and maintain upon, over, or through the said lands such roads, tram- ways, railways, and pipe lines as shall be necessary or expedient for any purpose, and to obtain from and out of the said lands such stone, earth, and other materials as may be necessary or requisite for making, repairing, or maintaining such roads, tramways, railways, and pipe lines, and to pass and repass at all times over and along such roads, tramways, railways, and pipe lines for all such purposes as occasion shall require; provided always that the said reserved liberties and powers to make and maintain roads, tramways, railways, and pipe lines shall be exercised and enjoyed in such a manner as not to hinder or to interfere with the rights and privileges of the lessees under these presents: And provided also that fair and proper compensation shall be paid by the governor for all loss, damage, or injury— not, however, including the value of any stone, earth, or other materials taken — which the lessees may sus- 'iWSPW'^ FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 115 tain or be put to by reason or in consequence of the exercise of the said resen-ed liberties and powers, the amount of such compensation to be settled in case of differ- ence by reference to arbitration as hereinafter provided in Part IX of this schedule. PART v. — RENTS RESERVED BY THIS LEASE. 1. Certain half-yearly rent. — Subject to the provisions of clause 2 of this part the ■certain half-yearly rent of £5,000 shall be paid by the lessees to the receiver general of the Colony from the date — ^hereinafter referred to as the date of the commencement of the certain rent — of the expiration of five years from the date of these presents on the day of and the day of in each year for the half year imme- diately preceding the first of such half-yearly payments — to be apportioned if neces- sary—to be made on whichever of these half-yearly days shall happen next after the date of the commencement of the certain rent. 2. Royalties. — From the commencement of the term granted by this indenture there shall be payable to the receiver general on the half-yearly days aforesaid in each year (a) the royalty of 28. per ton of net crude oil which shall have been received into the lessees' field storage tanks after deducting water and foreign matter and oil used for field purposes and (b) the royalty of Id. per 1,000 cubic feet of natural gas sold by the lessees: Provided, That from and after the date of the commencement of the certain rent: (1) If the total royalties payable hereunder in respect of crude oil in any half year shall amount to or exceed the sum of £5,000 the certain half-yearly rent of £5,000 shall not be payable in respect of that half year; and (2) if the total royalties payable hereunder in respect of crude oil in any half year shall be less than the sum of £5,000 the amount paid in respect of such royalties shall be deducted from the certain half-yearly rent of £5,000 payable in respect of that half year: Provided, That if the quantity of net crude oil received into the lessee's field storage tanks •during any complete year commencing on the day of exceeds 100,000 tons, a deduction of sixpence per ton shall be made from the royalty for every ton so received during that year, but so nevertheless that at least the amount of the said •certain rent shall as from the date of the commencement of the certain rent always be paid in respect of each and every half year. Any sum which on the footing of such deduction being made the lessees may have overpaid shall be allowed from the half-yearly payment next ensuing after it has been ascertained to be due except in the case of the last year of the term when the same shall be allowed out of the last half-yearly payment for that year: Provided also. That the governor shall have the right from time to time to call for the delivery by the lessess at the place or places of production of 10 per cent of the crude oil there produced. In such an event, the lessees shall be relieved from royalty on the quantity of crude oil so taken by the governor, and on a further quantity of crude oil equal to nine times the quantity so taken by the governor, and the certain half-yearly rent — if and when paj able — shall for the half year in which the crude oil is taken by the governor be reduced by a sum equal to 208. for every ton of crude oil so taken by the governor or 15s. if the quantity of net crude oil received into the lessees' field storage tanks in the complete year exceeds 133,333 tons. 3. Surface rent. — The further yearly rental of Is. per acre or part of an acre of land the surface whereof shall be occupied by the lessees for any of the purposes of this demise, the said surface rent to be paid by equal half-yearly payments on the -^>: \imi^,'^m».t^mmii immmim Maas!^f^ < --^mr^ '^mmf^^ ^'^^ mi t^ usMf.issm^ 'I 116 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. such a quantity of crude oil as shall be required to make up the deficiency without paying any royalty for the same other than the said certain rent. But the surplus of any preceding half year or half years shall not come in aid of or be applied to make good the deficiency of any subse^iuent half year or half years. 3. Oil free of royalty. — All mineral oil which shall be certified by the inspector of mines of the colony for the time being to have been used by the lessees for the usual and customary purposes of carrying on the works and for domestic consumption in the houses and offices of agents and workmen for the time ])eing employed in and about the said borings and premises shall be free from royalty. PART VII. — THE lessees' COVENANTS. " ' \. Lessees to he British company. — ^The lessees shall at all times be and remain a British company registered in Great Britain or a British colony, and having its principal place of business within His Majesty's dominions, and the chairman of the said com- pany and a majority of the other directors shall at all times be British subjects, and tlie lessees shall not at any time be or become directly or indirectly controlled by for- eigners or a foreign corporation. Inthisclause the expression "foreigner" means any person who is not a British sub- ject, and the expression "foreign corporation" means any corporation other than a corporation established under and subject to the laws of some part of His Majesty's do- minions and having its principal place of business in thoee dominions. Any alteration in the memorandum or articles of association or in the constitution of the lessees shall be reported to the governor, j)rovided that two months' previous notice of the intention to make any alterations which might conceivably affect the British character of the company shall be given in writing to the governor, who, if in his opinion the said alteration shall be contrary to the cardinal principle of this deed, that the lessees shall be and remain a British company under British control, may refuse his consent to such alteration. If, and whenever, any such alteration as last aforesaid shall be made without the written consent of the governor, or if the lessees shall at any time cease to be a British company or shall become a corporation under foreign control, or shall assign any of the liberties, powers, and privileges hereby granted, without the previous consent in writing, of the governor, the governor may thereupon cancel and determine all the liberties, powers, and privileges hereby granted. The lessees undertake that the local general manager and as large a proportion of the staff employed by them as circumstances may permit shall be I3ritish subjects. 2. To pay rent, taxes, etc. — The lessees shall pay the rents and royalties hereby reserved at the times and in the manner above appointed in that behalf, and shall also pay and discharge all taxc.'^, rates, assessments, and impositions whatsoever which shall from time to time be c harged, assessed, or imposed upon the said borings or premises or any part thereof by authority of the (iovernment or otherwise. 3. To ei'ect boundary marks. — The lessees shall, at their own expense, forthwith erect and at all tifnes maintain and keep in. repair boundary marks and pillars according to the demarcation shown in the plan hereto annexed, so that the boundaries of the said lands may at all times be clearly defined. 4. To open boring operations — To uork continuously. — The lessees shall within 18 calendar months from the commencement of the term hereby granted start and open up boring operations and shall work continuously ^vith a minimum of o^e rig, appli- ances and workmen for each 10,000 acres under lease — with at no time less than four rigs — and shall thereafter drill wells in an efficient and workmanlike manner until the aggregate output of crude oil from the wells so drilled amounts to 2^ tons per acre under lease and shall thereafter drill from time to time such additional wells as may be necessary to maintain the said output of 2^ tons per acre. To maintain jyroductive borings — To use lands solely for purpose of demise. — The lessees shall maintain in good repair, working order and condition, all productive borings when opened, without doing or permitting to be done any unnecessary or avoidable damage to the surface of the safa lands in or upon which the said borings or premises are situated, and shall not cultivate or use the said lands in any manner save for the purpose of this demise and the rights hereby granted. 5. Refinery. — As soon as an output of crude oil of a suitable quality for refining at the rate of 50,000 tons per annum is assured from the areas for the time being comprised n this lease, the lessees shall prepare plans and proceed with all reasonable dispatch with the erection of a refinery capable of dealing with at least 50 per cent of such crude oil so as to produce as great a percentage of oil fuel complying with the Govern- ment specification as such 50 per cent of crude oil will reasonably give: Provided, That if the quality of the oil shall in the opinion of the lessees permit the production ^ 'wra»PW«-*- i FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 117 of oil fuel complying with the Government's specification by a simpler process than refining, the lessees shall prepare plans and proceed with all reasonable despatch with the erection of suitable works as soon as an output at the rate of not less tnan 25,000 tons per annum is assured; provided, always, that the volume of the output shall in either case be assessed on the production of not less than six producing wells by calculating the average daily output over a period of not less tnan three calendar months The lessees shall complete such refinery and/or works with suitable storage accommo- dation upon such site as the lessees may with the previous written approval of the governor select — such approval not to be unreasonably withheld, due regard being had to the commercial interests of the undertaking — and shall maintain it or them in efficient working order with all diligence and dispatch and shall from time to time make such additions to the same as may be requisite for dealing with 50 per cent of the crude oil which the wells are reasonably expected to yield over a prolonged period, 6. Access of water. — The lessees shall take all practical measures to prevent the injurious access of water to the oil-bearing formation. Upon a well proving to be un- productive or ceasing to yield oil in paying quantity or being abandoned for any cause, , the lessee shall be at liberty to withdraw the casing from the said well, but in order to prevent water gaining access to the oil-bearing formation the lessees shall immediately upon the casing being withdrawn, "plug" the well by filling it with sand, clay, or otner material, as shall effect the object. 7. Governor may inspect. — The governor, or any officer appointed by him so to do, shall be at liberty at all reasonable times during the said term to inspect and examine all works carried on by the lessees under the lil^erties and powers hereinbefore granted, and the lessees with proper persons employed by them and acquainted with the working of the jborings and works shall effectually assist the governor or any such officer in con- ducting such inspection and shall afford them all information connected with the work- ing of the borings and works which they may reasonably require. 8. To keep hooks and accounts — To furnish abstracts. — The lessees shall at all times during the said term keep or cause to be kept at the office or countinghouse of the worl s to be situate in or contiguous to some part of the said lands, correct and intelligible books of accounts upon such plan or principle and in such form as may be approved by the governor, wnich books shall contain accurate entries of (1) the quantity of crude oil won or got from the borings which have been or may be made or sunk by the lessees under the license and liberty in that behalf hereinbefore contained; (2) the (quantity of crude oil subjected to any refined process whatsoever; (3) the quantity of refined products produced from the 'said crude oil; (4) the quantity of oil otherwise disposed of, and shall also at their own expense furnish at such times as the governor may appoint true and correct abstracts of all or any of such accounts and returns and shall at all reasonable times allow such officers as the governor shall in that behalf appoint to enter into and have free access to the said office or countinghouse for the purpose of examining the said several books of account and to take copies thereof and make extracts therefrom. 9. Lessees to keep plan of estate.— The lessees shall at all times during the said term cause to be made and kept at the said office or countinghouse true and correct ard intelligible plans of the position of all borings, workings, and operations which have been made and carried on, and all such plans shall be made, amended, and filled up by and from actual surveys to be made for that purpose at the end of every period of 12 months, and the governor or his representative shall at all reasonable times have access to all such plans. 10. To provide measuring receptacles. — The lessees shall provide and at all times keep to the satisfaction of the governor the usual means for measuring, and shall measure or cause to be measured therein all crude oil obtained from time to time from the said borings and shall at the end of each day cause the total quantity won and got during the previous 24 hours and measured as aforesaid to be entered into the aforesaid l^ook or books of account, and it shall be lawful for the governor at all times during the said term to employ any person or persons to be present at the measuring of the said crude oil and to keep accounts thereof and to check the accounts of the lessees. 11. The governor may test. — The governor or any officer appointed by him so to do may at any time or times during the said term examine and test the measuring recep- tacle as aforesaid and the appliances used therewith in order to ascertain whether the same respectively are correct and in good repair and order, and if upon such examination or testing any such measuring receptacle or appliance shall be found incorrect or out of repair or order it shall be lawful for the governor or his agent to require that the same be adjusted, repaired, and put in order by, and at the expense of, the lessees, and to prohibit the use thereof in the meantime, and if such requisi- .£^^^->!m^r,m^mmm m i ^m m m !'- *' ^mi^rm^^ -i?::" - 'S 118 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. tion be not complied with within 14 days after the same shall have been made, the governor or such officer may cause the said measuring receptacle or appliance, respec- tively, to be adjusted, repaired, and put in order, and may recover the expense of so doing from the lessees, and if upon such examination or testing as aforesaid any error shall be discovered in any measuring receptacle or appliance, such error shall, if the governor so decide, be considered to have existed for three calendar month* previous to the discovery thereof, or from the last occasion of so examining and test- ing the same in case such occasion shall be within such period of three months, and the said royalty shall be paid and accounted for accordingly. 12. Governor to have right of preemption. — The governor shall have the right of pre- emption of all oil or of any of the products thereof and shall have the right to require the lessees to produce oil fuel of such consistency, description, and flash point as are set out in the specification in Part X of this schedule (subject to any alteration which may be made therein by mutual agreement), and at such monthly rate of production witiiin the capacity of the lessees' refinery as the governor mav determine, but in such latter case the governor shall be bound to purchase the oil fuel so produced. The lessees shall with every possible expedition and so as to avoid demurrage on the vessel or vessels engaged to carry the same do their utmost to deliver all oil or prod- ucts of oil purchased by the governor under this clause at the time and in the manner required by the governor at a mutuallv, convenient place of shipment or at a place of storage in Trinidad to be determined by the governor, whether belonpring to the gov- ernment or otherwise; provided that the governor shall not exercise such rights except in time of war or national emergency of the existence of which the governor shall be the sole jud^e. 13. Demurrage. — Snould the governor exercise the right of preemption the subject of the immediately preceding clause and a vessel employed to carry any such oil or I)roducts thereof on behalf of His Majesty be detained on demurrage at the port of oading the lessees shall not be called upon for demurrage unless the delay is due to the fault of the lessees. In the event of any dispute as to such fault the same shall be settled by arbitration under the arbitration ordinance No. 41, or any ordinance or law amending or re- placing the same for the time being in force. 14. Lessees to convey oil by existing means of transport. — The lessees shall, if required, convey the oil or produc'ts thereof purchased by the governor bv their existing means of transport from their refining works or i)lace of storage to the lessees' ordinary place of shipment, but shall be entitled to make their ordinarv charge for such conveyance. 15. Prices in preemption. — The price to be paid for all oil or products of the refining or treatment of such oil taken by the governor shall be either — (1) As specified in a separate agreement, or, (2) if no such agreement shall have been entered into prior to the e ercise of the right of preemption, the fair market price at the time being as the same shall be settled by arrangement ])etween the fovernor and the lessees, and in default of such agreement the price to be paid shall hibit to the governor original or authenticated copies of contracts and charter parties entered into for the sale or freightage of such oil or products, and in fixing the sum to be paid, due regard is to be had to any un- avoidable waste or loss of products caused by the e::ercise by the governor of his right of preemption. 16. /« a state of emergency lessees to increase supply of oil. — On the occasion of a state of emergency, of which the governor shall be the sole judge, the lessees shall use their utmost endeavors to increase the supply of the oil or products thereof for the government to the extent required by the governor. Powers of the governor in case of war. — In the event of war or on the occasion of a state of emergency, of which the governor shall be the sole judge, the governor may take control of the works, plant, and premises of the lessees, and the lessees shall conform to and obey all directions issued by the governor or on his behalf. Com- pensation shall be paid to the lessees for any loss and/or damage sustained by the lessees by reason of the exercise by the governor of the powers conferred by this clause. Any such compensation shall be settled by agreement between the governor .^ FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 119 and the lessees or, in default of agreement, by arbitration in manner provided by the last preceding clause. 17. Agent and notices. — The lessees shall at all times have on the said lands an office, with a dfuly accredited a^ent, at which and on whom all notices may be served and to whom all communications from the governor may be made. If there shall not at any time be such an office or agent on the premises, the governor shall be at liberty to treat any other person there as such agent and to serve all documents upon any such other person, as aforesaid. In the case of there being no such other person, as aforesaid, then the affixing of such notice upon some conspicuous portion of the said premises shall be deemed to be good and effectual service thereof. All notices and communications from the lessees to the governor may be served or made by writing addre&sed to the colonial secretary at Port of Spain. 18. To pay compensation for injury to property and rights of other parties. — The lessees shall make and pay reasonable satisfaction and compensation for all injury which may be done by them, their agents, and servants in exercise of the liberties and powers hereby granted to the proi)erty and rights of other parties, and shall at all times save harmless and keep indemnified the governor from and against all actions, suits, claims, and demands by such parties in respect of ajiy such injury. 'In default of agreement, the amount of any such compensation shall be settled by arbitration under the arbi- tration ordinance No. 41, or any ordinance or law amending or replacing the same, for the time being in force. 19. To deliver up boring, etc., in good order. — The lessees shall at the end or sooner determination of the said term deliver up to the governor in good order, repair, and condition and fit for further working all then existing productive wells or borings which shall have been made by the lessees under the liberty and power in that behalf hereinbefore contained, together with all engines, lining, casings, and fixtures below ground level and which can not be moved without causing injury to the said borings, except borings or other works which shall have been abandoned or disused in me ordinary and fair course of working of the said borings and premises. 20. Lessees not to assign lease. — ^The lessees shall not assign, underlet, or part with possession of the demised premises or any part thereof or their interest therein here- under without the previous consent in writing of the governor, but such consent shall not be unreasonably withheld in the case of a responsible British assignee or under- lessee being proposed who being an individual shall be and remain a British subject, or, being a company shall be a British company as defined by clause 1, Part Yll of these presents, provided, that in the event of the proposed assignee or underlessee being a British company as last aforesaid such consent shall be only granted on the condition of such company executing such assurance as the governor shall approve by which such company agree to be bound to observe the provisions of clause 1, Part VII, of these presents as if they had been named therein as lessees. PART Vni. — THE governor's COVENANT. 1. For quiet enjoyment. — The lessees paying the rents and royalties hereby reserved and observing and performing the covenants and provisions herein contained, and on their part to be observed and performed, shall and may peaceably and quietly hold and enjoy the rights and privileges hereby demised for and during the term hereby granted without any lawful interruption from or by the governor or any person right- fully claiming from or imder him. 2. Renewal. — If the lessees shall be desirous of taking a renewed lease of the said lands for a further term of 30 years from the expiration of the said term, and of such desire shall, prior to the expiration of such last-mentioned term, give to the governor six calendar months' previous notice in writing and shall pay the said rents and royal- ties hereby reserved and observe and perform the several covenants herein contained and on the part of the lessees to be observed and performed up to the expiration of the said term hereby granted, the governor shall offer to the lessees a renewed lease of the said premises for the further term of 30 years at the same surface rent and under and subject to the same covenants, provisions, and agreements as are herein contained, but subject to the payment by the lessees of such increased certain half-yearly rent and royalties as may be then fixed by the governor, provided that in neither case shall the increase exceed 50 per cent, and the lessees shall be entitled to a renewal on the said terms and subject to the payment of the said increase of certain half-yearly rent and royalties in priority to any other applicant. 3. Power to remove works, etc. — The lessees may (subject to the provisions of clause 19 of Part VII of this schedule) at any time or times within six calendar months after the determination of this lease, whether by etPuxion of time or otherwise, enter into and upon the said lands or any part thereof for the purpose of taking down, remo\ing ^ i •^M'^, ^ \m^m^.m»^^^''^'^^i'^^\^s^sm^:"- ^^'^^<^ '.» »rH*v ••— "•!»'• i R- 122 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. (iV) PIPE-LINE AGREEMENT.* This indenture made the day of 1913. between Sir Reginald Laurence Antrobus, K. C. M. G.; Maurice Alexander Cameron, C. M. G., late a major in His Majesty's Corps of Royal Engineers; and William Hepworth Mercer, Esq., C. M. G.; all of Whitehall Gardens, in the city of Westminister, the Crown agents for the Colo- nies — hereinafter called the "Crown agents" — acting for and on behalf of the Govern- ment of the Colony of Trinidad and Tobago and its dependencies— hereinafter called "the government"— of the one part and the United British West Indies Petroleum Syndicate (Ltd.), whose registered office is at hereinafter called "the syndi- cate " — of the other part. Whereas it is provided by section 4 of the petroleum Cpipe lines) ordinance, 1911, hereinafter called "the ordinance," that it shall not be lawful for any person to use or to lay and connect on any land in the Colony — whether such land is or is not the property of any such person — any pipes for conveying oil without the permissioa of the governor in executive council ana that this permission may be granted upon Buch terms and conditions as the governor in executive council may think fit; and Whereas it is further provided by section 18 of the ordinance that it shall be lawful for the governor in executive council to declare that any pipe line or system of pipe lines shall be common carriers and that after the publication of such declaration in the Royal Gazette the owners or operators of such pipe lines shall make full and ade- quate provision in regard to the carriage of crude oil as such common carriers in accord- ance with the provisions of the section and with such rules and regulations as mav from time to time be made under such section by the Governor in executive council; and Whereas, it \s further provided by section 19 of the ordnance that the rules and regu- lations in question may, among other things, fix a limit to the rates which the owners or operators of pipe lines may charge for llie carriage of oil and the terms and condi- tions upon which such owners and operators shall be bound to carry oil; and Whereas the syndicate have intimated their intention to apply to the Government for a license to prospect for oil on Crown lands in the colony and if satisfied with the results of their investigations to acquire an oil mining lease over an area or areas not exceeding 100,000 acres; and Whereas the terms and conditions upon which such prospecting license and lease are respectively to be granted have been agreed between the Government and the syn- dicate; and Whereas the syndicate have represented to the Government that it will be necessary for them to lay and/or connect and /or use pipe lines in the furtherance of their own business and that they desire to know the terms and conditions upon which the gov- ernor in executive council will grant them permission to lay and/or connect and/or use pipe lines as they may from time to time require; and Whereas the syndicate have further represented that they will be willing from time to time to provide main trunk lines on a scale adequate to the oil industry of the colony and from time to time such other pipe lines to facilitate the collection and transport of the oil of other producers as well as their own oil as may be desirable, with due regard to the circumstances of each particular case; and Whereas the syndicate have represented to the Government that they are prepared to carry on their business in the colony on a scale commensurate with the area to be included in the license or oil mining lease proposed to be applied for by the syndicate as aforesaid and to provide from time to time suitable and adequate facilities for the collection and conveyance of crude oil sufficient to meet the reasonable requirements of the oil industry in the colony as a whole; and Whereas the parties hereto have agreed that these presents should be entered into for the purpose of evidencing the terms and conditions upon which the syndicate will be granted permission to use or to lay and connect pipe lines in the colony. Now this indenture witnesseth that it is hereby agreed between the parties hereto as follows: 1. Applications for pipe lines within lands of the syndicate to be granted as of course.— Any applications which the syndicate may from time to time make under section 4 of the ordinance for permission to lay and/or connect and/or uee ])ipe lines for the con- veyance of oil on any lands included in the said proposed prospecting license or lease to the syndicate or on any freehold property of the synclicate or any leasehold property held by the syndicate in the colony for a term having at the date of such application being made not less than five years unexpired shall if made in the manner prescribed by or under the ordinance and provided the grant thereof does not involve » This agreement was executed on the 28th April, 1913. ^■^-^ FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 123 any avoidable interference with the ordinary means of communication, or any unnec- essary interference with agriculture, be granted as a matter of course and without delay. 2. Applications for pipe lines within lands over which the syndicate has easements to be dealt with promptly and not to be unreasonably refused. — Any applications which the syndicate may, from time to time, make under the ordinance for permission to lay and/or connect and/or use pipe lines under or over lands in the colony, of which the syndicate are neither owners nor lessees but under or over which the syndicate may have obtained by agreement with the owners thereof and without the exercise of any compulsory powers under section 8 of the ordinance, way leaves or easements for laying and/or connecting and/or using the same, shall be dealt with and determined by the Government with all reasonable dispatch, and permission shall not be unrea- sonably withheld if the laying and/or connecting and/or using of the pipe lines will be conducive to the more economical working of the syndicate's business or if such permission is necessary as part of a scheme for a main trunk line. 3. Aj)plications for main trunk lines to be favorably considered. — On receipt of a writ- ten notification that the syndicate is prepared to undertake the obligations imposed by section 18 of the ordinance in respect to a proposed pipe line or lines, any specific application which the syndicate may from time to time make under such section for permission to lay and /or connect and/or use pipe lines to be used as main trunk lines shall be favorably considered by the governor, and if the syndicate has laid and is working satisfactorily any such main trunk line as a common carrier within the mean- ing of such section the governor will not sanction the construction of U competing main trunk line unless the need for it is established to the satisfaction of the governor and the syndicate is unable or unwilling to supply the need. Provided that nothing in this clause contained shall be deemed to impose on the governor any obligation to prevent an owner or owners of oil-mining rights — not being a combination of owners for this purpose only — from laying and/or connecting and/or using pipe lines on his or their own property or on any property of which he or they may be lessees or tenants and thence to a refinery or a shipping place for the conveyance of oil won from any area oVer which he or they own oil-mining rights so long as such pipe lines are used only for the conveyance- of such oil. 4. Licenses to include means of communication. — Any permission to lay and/or con- nect and/or use any pipe line shall include permission to construct and use any telephone or telegraph lines or other means of communication (other than and except radiotelegraphy) which may be necessary or desirable for the satisfactory working of such pipe line. 5. Provisions as to transmission of oil by trunk main lines. — In any rules and regu- lations which may from time to time be made by the governor in executive council under section 18 of the ordinance regard shall be had to the following provisions: (a) Syndicate to be entitled to charge maximum rates to be fixed by the governor. — The maxim tfhi rates to be charged by the syndicate for the transport of oil by means of their main trunk lines shall be sufficient to cover all costs of working upkeep and maintenance to allow amortization at the rate of 7^ per cent per annum on the capital cost of the pipe lines and to allow the owners 5 per cent per annum to cover interest and 5 per cent per annum for profit. The rates so fixed snail be based upon the total number of tons of their own oil and of the oil of other parties actually transported by the syndicate by means of their main trunk lines. (b) Provisional rates to be fxed yearly in advance. — Provisional rates to lie charged by the syndicate shall be agreed upon between the governor and the syndicate year by year in advance: Provided, That if the rate finally fixed for any year shall he less than the rate provisionally fixed the syndicate shall forthwith repay to all persons the excess which they may haxe paid during the year beyond what they would have been liable to pay if the provisional rate had been equal to the rate finally fixed, and that if in any year the rate finally fixed shall be greater than the provisional rate the syndicate shall be entitled to recover from all persons who shall have transported oil or products of oil through the main trunk lines during the year the difference between the sums paid by them and the sums which they would have been liable to pay if the pro- Adsional rate had been equal to the rate finally fixed, and shall — without prejudice to other means of recovery — until payment thereof have a lien therefor on all oil or prod- ucts of oil thereafter delivered by such persons for transport by such main trunk lines. (c) Syndicate to be only under obligation to transport oil for uhich the pipe line was constructed. — The syndicate shall only l)e under obligation to transport crude oil or that product of crude oil for which the pipe line was constructed. (d) Syndicate may make regulations with approval of governor to avoid mixing of oils. — • The sATidicate shall be at liberty, subject to the approval by the governor, from time to time to make and vary such regulations as may be reasonably requisite to avoid 'f:. ^^"W ■■F •^1 124 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. or minimize undue mixing of oils or danger of such mixing and for regulating the minimum quantities of each particular grade of oil or products of oil acceptable for transport. {e) Syndicate may make a S per cent deduction for leakage. — For evaporation and leakage during transport the syndicate shall be authorized to make a deduction of 3 per cent of the oil transported, but as at the end of each calendar year actual stocks shall be taken and any difference between the actual leakage and the 3 per cent shall })e adjusted with the senders pro rata, pro\'ided that in making the adjustment^ if any, no regard shall be paid to differences in quality of oil.. The syndicate shall be empowered to collect from the senders any surplus which the rate finally fixed may show over the provisional one, and if necessary to recover the same by the exercise of a lien on any oil which such defaulting sender may subsequently deliver for transport. (/) Sjpidicatc not to he required to promde storage.- — The syndicate shall not be bound to provide storage for the oil before dispatch or for the reception of the oil at the point of delivery. (g) Syndicate to provide appliances and afford facilities for measuring oil transmitted. — The syndicate shall provide all necessary appliances for measuring all oil and products of oil — as well their own as those of other persons — transmitted through such main trunk lines, and shall keep true and proper accounts thereof, and shall permit the governor or his representative at all reasonable times to inspect and test such appli- ances and to examine and check such accounts, and shall afford all necessary facilities ill that behalf. 6. Governor in framing regulations to consider representations of syndicate and others. — In framing regulations under the ordinance the governor in executive council will take into consideration any representations made to him bv the syndicate as well as by other persons, and such regulations shall be framed with due regard to the needs of the syndicate for the purposes of their business and in general accordance with the true intent and meaning of these presents. 7. puration of agreement. — Subject as hereinafter provided, this agreement shall remain in force until the 17th dav of January, 1916, and thereafter so long as the syndicate or its permitted assigns shall hold an oil-mining lease from the government and provide all such main trunk lines and facilities for the transport of oil or ])roduct8 of oil — whether their own or those of other producers — as may from time to time be reasonably' necessary and adequate to meet the requirements of the oil industry in the colony as a whole. 8. Power to governor to cancel agreement. — If an order shall be made by a court of competent jurisdiction or an effective resolution shall be passed for the winding-up of the syndicate otherwise than for the purpose of reconstruction or amalgamation, or if the syndicate shall fail to perform or observe any of the obligations or conditions imposed upon it by these presents, it shall be lawful for the governor by notice in wTiting to the syndicate to cancel and make void this agreement without prejudice* to any antecedent claim of the government against the syndicate in respect of any breach by the syndicate of any of their obligations hereunder. 9. Synidicate may assign this agreement with permission. — The syndicate may, subject to the previous consent in writing of the governor, assign or otKerwise dispose of this a,greement to any company formed for the purpose of constructing and working pipe- lines in the colony. 10. Notices. — Any notice to the syndicate under or in connection with this agree- ment may be given by leaving the same addressed to the syndicate at their principal office in the colony , or at their registered office in England, and every such notice shall be deemed to be given at the time when the same shall be so left. Any notice, authority, or other act of or on the part of the governor, under or in connection with this agreement, shall be sufficient and binding on the parties hereto if the same be in writing and signed by the governor for the time being of the colony or by one of the Crown agents. 11. Governor and Crown agents not to be personally liable. — Nothing herein contained shall impose any personal liability on the governor or the Crown agents, or any of them, or on any member or officer of the government. 12. The italic side headings are for the purpose of convenience only and do not form part of and shall not affect the construction or the interpretation of these presenta. In witness, etc. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Exhibit 17. 125 LETTER SINCLAIR CONSOLIDATED OIL CORPORATION, AUGUST 1. 1922. Sinclair Consolidated Oil Corporation, New York, August 1, 1922. Mr. Otis B. Johnson, Acting Secretary Federal Trade Commission, Washington, D. C. Dear Sir: Replying to your favor of July 26 in reference to the inquiry the com- mission is making into certain aspects of the petroleum trade, in compliance \^ith Senate Resolution No. 311, beg to advise you as follows: 1. In Trinidad — which is a British Crown Colony, controlled directly bv the Crown agents and colonial secretary in London — ^all leases to government lands contain a provision to the effect that the lease will become void if the lessee, which must "be and remain a British company, " or any of the lands comprised in the lease become "controlled or managed, directly or indirectly, by a foreigner or foreigners, or a foreign corporation or corporations. " 2. France: Under the administrative practice in France it is impossible for a. foreigner to obtain an oil concession, and the government has adopted the policy of granting such concessions only on the basis that 67 per cent of the shares of the com- pany be French capitq,l and remain in French hands. In practice it has been found that France and the French Colonies are more completely closed to development by American companies than in any other part of the world, 3. There are, or have been, restrictions in Burma and India which have, so far, prevented American capital from participating in the development of this region. 4. The Dutch Government and the Dutch East Indian Government have shown a great reluctance to permit American capital to participate in the oil development of the Dutch East Indies. Very truly yours, Sinclair Consolidated Oil Corporation, By G. T. Stanford, General Counsel. Exhibit 18. LETTER STANDARD OIL CO. (NEW JERSEY), AUGUST 4, 1922. Standard Oil Co., New York, August 4, 1922. Federal Trade Commission, Office of the Secretary, Washington, D . C. Dear Sirs: On the 26th ultimo your office requested that we give you information as to the action of foreign governments tending to prevent the free operation of Ameri- can corporations or citizens in their countries or dependencies. For your information we give you the following memorandum on the situation as we understand it in some of the countries which have come to our knowledge. I might add that in some cases also discretion is given to officials of the government with the effect that the discretion is exercised in a direction to impede, if not pre- vent, American operations. Netherlands.— The mining law of the Dutch East Indies, which is distinct from that of Holland, provides that only Dutch subjects or persons or companies legally domi- ciled in the Netherlands or its East Indian colonies may hold prospecting licenses and mining concessions. Practically we have found a discrimination in the Dutch East Indies against American capital through the refusal of the Government of the Dutch East Indies to grant prospecting licenses to the N. K. P. M, or to grant mining concessions except in cases where the N. K. P. M. had a right to such concessions under the provisions of the old mining law which pro\ided that discovery of a mineral under a prospecting license gave the right to a concession. That mining law has been abrogated and a new law passed which leaves the granting of concessions to the dis- cretion of the governor general. All the concessions granted to the N. K. P. M. were granted under the old law on rights secured as a result of the discovery of the mineral on prospecting licenses granted to third parties and purchased by the N. K. British Empire. — At present there is no restriction on foreign interests in the United Kingdom. i-K r f.: ■ 'mi^St:^*,^.!^^^*' ''i&f'tf^I ■ifi^&fcjvv ■ u Av.?. 1 *«ti ---■ 4'iiM''V ^ :t> 126 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Canada. — ^The exploitation of petroleum is permitted only to British registered companies. India and Burma. — Prospecting or mining leases are in practice granted only to British subjects or to companies controlled by British subjects. Trinidad.— Leases on Crown lands or lands alienated by the Crown for agricultural purposes since January 17, 1902, are granted only to British subjects or British con- trolled corapaniea. No restriction on private lands. British Honduras, British Guiana, Nigeria, Kenya. — Same restrictions as in Trinidad. So far as our information goes, there are no restrictions on American participation in the exploitation of petroleum in other parts of the British Empire. Italy. — The Italian mining law does not specifically exclude foreigners and foreign companies from the acquisition and development of petroleum lands but in practice the Italian Government has refused to grant rights in this direction except to Italians or companies whose directorate is entirely Italian and at least two-thirds of whose capital stock is owned by Italians. The mining law makes this provision in regard to sulphur, alkali and mineral phosphates and the Government has applied the same regulations to petroleum. Jrtprtn.— Mining rights can not be held by persons other than Japanese subjects or juridical persons established according to Japanese law. (Art. 5 of the Japanese mining law.) Very truly yours, E. J. Sadler. Exhibit 19. LETTER MEXICAN PETROLEUM CO. (LTD.). JULY 28, 1922. Pan American Petroleum & Transport Co., Mexican Petroleum Co. (Ltd.), of Delaware, New York, July 28, 1922. Otis B. Johnson, Esq., Acting Secretary Federal Trade Commission, Washington, D. C. Dear Sir: I beg to acknowledge receipt of your two letters of July 26 to the Mexican Petroleum Co. and Pan American Petroleum & Transport Co., respectively. Our experience in regard to oil production in foreign lands has been limited to the Republic of Mexico and our answer only has to do with our personal knowledge of that country. Mexico does not discriminate against American citizens or companies seeking to develop petroleum resources as compared with any other foreigners. An attempt has been made, however, by the recent constitution ancj decrees under it to discrimi- nate in favor of Mexican citizens by making it impossible for foreigners to acquire oil properties and making necessary the incorporation of Mexican companies. No foreigners, however, are especially favored in this matter and all are treated alike. There is no discrimination against American citizens with respect to ownership of shares in corporations organized to acquire or exploit oil lands or otherwise engage in the petroleum industry. The Department of State of the United States can inform you on the recent attempt in Mexico to abridge and impair and end petroleum rights already held by Americans and all other foreigners and Mexicans in Mexican lands. The le.pl difficulties in Mexico are rather basic and related to the international concept of property than a discrimination against Americans or any other foreigners. Yours very truly, H. Walker, For Mexican Petroleum Co. Pan American Petroleum & Transport Co. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Exhibit 20. 127 LETTER SINCLAIR CONSOLIDATED OIL CORPORATION, FEBRUARY 2, 1923. Sinclair Exploration Co., New York, February 2, 192S. Pederal Trade Commission, Washington, B.C. (Attention Mr. Francis Walker, Chief Economist.) Dear Sir: This refers to your cable of the Ist of February requesting the area in flquare miles of the oil concession in Sakhalin. The area of the northern half of the island of Sakhalin belonging to Russia is given as approximately 15,850 square miles. The prospecting rights of the company cover this whole area, but the company has the obligation to reduce its holdings to 1,000 square versts by the end of five years. The Russian verst is equal to 280.8 acres, so that the total holdings of the company at the end of the five years will be 280,800 acres. I hope this will furnish you with the desired information. If not, I shall be pleased to give you anything further you may need in this connection. Yours very truly, R. Crandall. Exhibit 21. LETTER SINCLAIR CONSOLIDATED OIL CORPORATION, NOVEMBER 3, 1922. Federal Trade Commission, Washington, D. C. Gentlemen: Sinclair Exploration Co., New York, November 3, 1922. In July of 1921, following up a suggestion of the Secretary of Commerce, the Sinclair Co. began its negotiations with the Persian authorities for an oil concession over the five northern Provinces of Persia, which are stated by the Persian Government to be free from any prior concessions. These negotiations have been continued to the present date, during which period the Sinclair Co, has had active opposition from a combination of interests of the Standard Oil Co. of New Jersev and the Anglo- Persian Oil Co. of I ondon. In August of this year the Persian Government, having considered the two con- -cession contracts submitted to it by the respective groups to be unsatisfactory in terms, undertook to draw up a model form of concession, which, when prepared, will be duly submitted to the respective interests above mentioned for their consideration and signature. In the event that both companies should accept and sign the same •contract, the Persian Parliament will then undertake to decide to which interest the •concession shall be awarded. The Persian Parliament is still in the process of drafting this model form of contract at the date of writing. To refer again to the competition the Sinclair Co. has encountered in endeavoring to obtain this concession, we wish to state that early in 1921 an oil concession over the area referred to was signed between the Persian Government and the Standard Oil Oo. of New Jersey, but in order to become legal this required the ratification of the Persian Parliament. While this ratification was pending, Sir John Cadman, a director of the Anglo- Persian Oil Co. of London, cam« to the United States and while here entered into an agreement on behalf of his company with the Standard Oil Co. of New Jersey to share, on a 50-50 basis with the latter company, the Persian concession when obtained. The fact of this agreement was given to the press by the parties concerned. Public knowledge of this agreement in Persia, where the desire of the Government and the people is to obtain purely American capital, was sufficient to make the Parlia- mentary ratification of the contract signed by the Persian Cabinet impossible. Yours very truly, A. G. Veatch, Vice President. i -i4^' _.iC ■*.«p. "P**" *^ B* APPENDK TABLES. Table 1. — Balance sheets of the Royal Dutch Co., December 31, 1917-1921. [Florin=40.2 cents.] Item. 1917 ASSETS. Unissued shares Shares in foreign companies Shares in American companies. Other securities Cash Debtors ^ Dividends on priority stock Total. LIABILITIES. Ordinary shares Preference shares Priority shares Creditors Unclaimed dividends ity stock Unclaimed dividends Undistributed dividends Bonus shares, 1918 Interest account Reserve Profit and loss Florins. 34,472,800 105,231,081 36, 279, 806 4, 674, 212 36,187,665 73,645,763 641,250 1918 291,132,577 Florins. 28,945,600 127,446,055 55,776,213 4, 757, 251 65,013,439 77,025,021 641,250 359,604,829 on pnor- 120, 000, 000 1,500,000 28,500,000 6,979,247 14, 591, 210 106,685 58,150 75,023,716 44,373,569 Total [ 291,132,577 200,000,000 1,500,000 28,500,000 5, 154, 283 424, 382 20, 083, 031 737, 716 1919 Florins. 156,182,000 149,810,154 58, 469, 213 1920 1921 28,253,610 185,023,407 641,250 578,379,634 50,665 30, 964, 441 72,190,311 359,604,829 370, 000, 000 1,500,000 28,500,000 44,095,694 198, 437 541,700 1, 146, 230 571, 116 31,726,574 100, 099, 883 578,379,634 Florins. 49,273,000 159,934,571 185,922,834 Florins. 248, 543, 000 172,370,209 185,924,597 93,396,040 154, 556, 418 641,250 38,690,557 94,261,621 641, 250 643,724,113 \ 740,431,234 370,000,000 1,500,000 28,500,003 77,718,309 281,309 901, 102 927,664 3,472,312 2,616,833 28, 356, 220 129,450,364 570, 000, 000 1,500,000 28,500,000 2,545,152 69,300 737,545 771, 113 32,209,946 104,098,178 643,724,113 i 740,431,234 Table 2.— Stockholdings of the Royal Dutch Co., 1917-1921. [Florin=40.2 cents.] Item. 1917 1918 1919 1920 1921 FOREIGN. Bataafsche Petroleum Maat- schappij Florins. 84,000,000 57,600,000 7,255,980 7,200,000 1,972,944 1,969,357 Florins. 126,000,000 57,600,000 11,609,568 7,200,000 2,219,472 1,969,357 Florins. 126,000,000 57,600,000 17,414,352 25,200,000 2,219,472 2,495,740 i i Florins. Florins. 180,000,000 180,000,000 115,200,000 115,200,000 26,121,528 26,121,528 25,200,000 25,200,000 4,438,944 7,398,144 11,738,740 36,767,138 Anglo-Saxon Petroleum Co Shell Transport & Trading Co . . . Asiatic Petroleum Co Soci6t6 Anonyme Astra Romana. Various petroleum companies... Total 159,998,281 54,767,200 206,598,397 79,152,342 230,929,564 81,119,410 362,699,212 | 390,686,810 202,764,641 218,316,601 Less difference between par and book value Total (net) 105,231,081 127,446,055 149,810,154 159,934,571 i 172,370,209 AMERICAN. Shell Co. of California } 36,279,806 55,776,213 f 50,302,313 \ 7,717,500 449,400 118.210,434 47,040,000 20,672,400 118,212,197 47,040,000 20,672,400 Roxana Petroleum Corporation.. Ozark Pipe Line Corporation Total as per balance sheets . 141,510,887 183,222,268 208,279,367 345,857,405 358,294,806 129 ,' f^ 130 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Table S.—Incmne accounts of the Royal Dutch Co., 1917-1921. [Florin =-40.2 cents,] Item. 1917 1918 1919 1920 1921 Income: Dividends various onmnanies ......... Florins. 45,563,153.00 4,050,675.00 *" "126,246.' 66" Florins. 91,361,600.00 5,021,291.00 ■■"294," 254.' 66" Florins. 112,682,080.00 5,586,834.00 477.'66' Florins. 133,032,541.23 5,698,&44.76 5,020.50 Florins. 92,192,774.73 10,576,307.60 10,091.00 » 4,390,770.00 Interest and exchange . Dividends lost by limitation Sundry revenues Total income 49,740,074.00 96,677,145.00 118,269,391.00 138,736,206.49 107,169,943.33 Deductions: 214,249.00 71,940.00 136,616.00 392,599.00 70,061.00 203,549.00 18,169,508.00 48,294,59 53,332.56 328,470.19 83,605,10 8,772,140,00 Loss on securities .. French tax on priority shares 98,879.65 Administration and other expenses Expenses renewal div- 439,009.00 115,050.82 Contractual obliga- 4,675.625.00 268,075.00 23,820,625.00 tions Rpsprvp for taxes . . • . . 2,418,825.58 Total deductions . . . 5,366,505.00 24,486,834.00 18,169,508.00 9,285,842.44 3,071,765.05 Net income 44,373,569.00 72,190,311,00 100,099,883.00 129,450,364.05 104,098,178.28 1 1 Contractual obligations. Table 4 -Balance sheets of the Shell Transport & Trading Co. (Ltd.), December 31, 1917-1921. Item. ASSETS. Property (shares, etc.). Debtors and loans Dividends due Investments Cash Total . LIABILITIES. Capital Rpsprvcs etc ,.-..--.----• Subsidiary company's account. Creditors Unclaimed dividends Preferred dividends accrued... Profit balance 1917 £9,510,859 87,395 2,349,478 3,037,526 105,492 15,090,750 1918 £11,019,820 226,153 1,387,525 2,764,924 137,441 15,535,863 6,997,561 4, 060, 000 565,226 174,854 279,666 25,000 2,988,443 1919 1920 £12,036,905 412,484 4,635,614 8,112,506 760,923 25,958,432 £16,588,461 353,146 4,435,331 13,812,051 122,713 35,311,702 1921 £20,256,603 99,671 4,7-22,739 6,820,359 2,438,771 34,338,143 10,039,791 1,060,000 86,770 373, 498 2.5,000 3,950,804 Total. 15,090,750 15,535,863 14,857,641 5,000,000 290,867 34,677 25,000 5,750,247 21,321,296 5,000,000 175,602 19,762 25.000 8,770,042 25,958,432 35,311,702 21,365,144 5,000,000 526,163 26,826 25,000 7,395,010 34,338,143 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 131 Table 5. — Income accounts of the Shell Transport 6c Trading Co. {Ltd.), 1917-1921. Item. Dividends Interest and other income. Total income . Deductions: Administrative expenses. Interest Depreciation Stamp duties Expenses on new issue. . Total deductions. Ket income 1917 £2,655,536 119,094 1918 £2,771,903 121, 700 1919 £4,573,341 189,383 2,774,630 2,893,603 4,762,724 21,474 95, 870 19,228 24,734 "i,'42.V 14,500 136, 572 40,659 2,6.38,0.58 I 2,852,944 29,354 20,000 1920 £7,182,203 486,439 1921 £5,143,632 483,040 7,668,642 I 5,626,672 25,535 39,250 15,687 100,000 49,354 4,713,370 41,222 139,250 7,627,420 5,487,422 Table 6, — Petroleum production of the Royal Dutch-Shell group, in barrels, 1917-1921. Country. United States Dutch East Indies British Borneo (Sarawak) . Egypt Rumania Venezuela Mexico Trinidad Russia Total. 1917 9,767,000 12,115,000 533,000 924,000 1,000,000 210,000 737,000 11,459,000 36,745,000 1918 10,050,000 12,254,000 49(5,000 1,905,000 2,158,000 376,000 336,000 3,020,000 30,595,000 1919 9,511,000 15,027,000 586,000 1,588,000 1,716,000 279,000 19,651,000 1920 9,792,000 16,400,000 1,004,000 1,023,000 2,358,000 516,000 36,648,000 48,358,000 67,741,000 1921 9,032,000 16,482,000 1,389,000 1,245,000 2, .399, 000 1,584,000 51,528,000 374,000 84,03.3,000 I f^-^ri^ '««^*' m ;, t:^ ' 132 t: ft. O I o <"^ o o u o a, o o o ;3 o H PQ ■< H FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. S 2? 5 3^ P5pco 1-t «o o » d caS ocoom ^8; >ooco< OJ«o^ •-•« s I Eh I a> O «0 ^ t^ < . - . ^- I— 1 M »C ■ s^s 2 9 »4 '«'<« o CO ^ »c tn to ■^ o -t O "O CJO to o > »COT Q »0 t«. M I C^ ■«< *.-H CO CO oc>» r-lW -a )00' >C»5 OOC^ 00 100 S^& (I4 OA CO OAOec 08 'ga tp'H< >or^ 03 Eh cooes 00-hOC0C^IC4 '-'OO1; MCS^aOt^ ec 1—1 «c 05 1>- i-i c< to o >eo eo jg^eo CO S tO^^OiOwCO A oeo 'CtoS>^'*-eofl^ 82 (Oooiae^>-i (O olO'C^».ooS5Mto»Cl■«» 3§ CO r^ocotoro — ■^Tt<--ifriccsoo -^ CO CO « t>. •«»• CO c^ '* CO es CO -^ K o -H CO CO c^ es CO S52 OOOcDCSJ -< M CO* UO -< CO 30CSOS CO »0 M 00 CO •^ ■»*! 01 CD -< CO -^ e>j 00 ^ 00 If t^ M 00 •* b--HOC^0C-* s r a 3 o o • 03 09 M O H m a 3 c ^ • 3 OS be S 8-0.2 09 o 3 03 09! Co 09 — fl g d (3 o B' ICO 8i.§ 55 n" 2S 8 to eo CO 00 00 uo oT i CO CO 10 ^ •o rt d 03 •3 O t, 5 09 CQ e o o •s g •«^ 4^ o 3 "g 09 •d i •8 03 A? FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 133 Table S.— Petroleum 'production in Russia {millions of poods '), 1910-1914. » 1 barrel=8J poods. Companies. 1910 1911 1912 1913 1914 GENERAL OIL. Mantachef 29.5 4.9 21.7 15.5 5.3 12.2 23.0 .4 18.3 9.3 2.2 3.9 1.4 2.3 6.8 .3 28.3 4.7 14.2 13.6 4.6 10.4 19.7 .6 18.8 5.1 1.8 .4 .4 1.9 7.2 .4 24.8 5.7 15.5 12.5 4.8 11.6 17.1 .9 15.6 5.7 1.8 3.6 .8 2.4 5.2 .5 24.4 5.0 13.6 11.7 5.6 13.0 14.2 .9 14.2 5.6 1.7 2.8 .6 2.3 5.2 .6 17.9 Society Naphtalan 4.4 Moscou Caucase 10.7 Lianosof 9.2 Ter Akopof 5.7 Soci^t^ russe "le Naphte" 17.2 Caspienne 12.1 Soy ousnik .9 Mirsoeff Freres 11.7 Aramazd 5.5 Soci^t^ Apch^ron 1.2 Chihovo 2.8 A van Yousbachof .3 Soci6t^ russe de naphte 2.7 Maximof 5.6 Santo .8 Belreersky .1 Soci6t6 Moscow-Volga 4.6 1.1 3.5 4.5 1.2 3.1 4.3 1.5 4.8 3.8 1.7 6.4 2.6 Soci^td Nijni-Novgorod 1.8 Rvlsky Succnsseurs 7.4 Total 166.2 140.9 139.1 133.3 120.6 ROYAL DUTCH-SHELL. CasDienne et de la Mer Noire 30.4 7.6 4.4 8.7 4.6 32.6 7.8 4.8 8.5 3.9 34.4 6.4 3.9 9.6 4.8 1.0 2.6 14.3 32.5 5.4 4.5 8.5 4.7 4.5 8.6 10.4 — - 28.3 Chibaef 5.3 Sooutchastniki 3.5 Caucase 7.1 Socit^te russe de naphte 2.7 Oural-Casnienne 9.5 Caucase du Nord 1.0 20.2 1.2 22.0 22.3 Standard russe de Grozny 13.6 T otal 76.9 80.8 77.0 79.1 92.3 NOBEL. Soci^t^ Nobel 67.3 1.2 66.8 1.3 70.5 2.2 .4 1.7 4.8 68.4 2.3 2.6 .8 4.7 62.9 Soci(5t6 Tcheleken-Daeuestan 2.5 Soci(^t6 Emba 6.5 Socidt6 Tchimion 1.4 4.6 1.8 3.9 1.0 Soci^t^ russe de naphte 2.7 Total 74.5 272.7 73.8 263.3 79.6 275.5 ! 78.8 273.0 75.6 Miscellaneous 272.0 Grand total (J^d^-;; 590.3 69.4 558.8 65.7 571.2 67.2 564.2 66.4 560.5 65.9 1 134 a o •i i O I u e I o I •2 00 •I • O s I o S H m < FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Ago «Q 1^ o O 3^5 O So-SSo 020 OS S «n5 a r* r-t O fcirt 4^ o O4 > CO CO ^ "SAd^ S O c 0) I T3 O O c>r_) PC'S .2 X o ©Q a eg ^ c c! U two 5 « S ^ o e8 -3 02 S a C^ O « « cc a "3 So o o «2 «c ■<»< !>0 iS5 © «§« O O OS a5 3 i3 CO 00 8 IT «5 1— I c* cc 0> CO ^ c - Om Cs t, e9 - •- C8 L, ~ °-C eair ;^ompq •c © o'> "55 > c *■ 8 r- S5 eo s ^ S^^SJSgJ 8 88 88 t- CO iS8 'C ec CO o> be £ o 8 ^S , CMi «p OS 00 >- t-- »-< uj * CO ■*• C>» CM •* CO a 03 "? OJ 18 e3a:o©o8oO©!!; PQ P4 » t^ C5 03 OQ CO CO W -«; pH iJ CC PQ H "< ^ c © FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 135 00 S 8 5?: OiO 11 to w is tOOcD OOCt^QQCOeCiCO ' f^ *i- ^B*' I ^ o •— ' CO "-l I-H PQrtS=;o ►! tJ r- J- © *J ^ S *- c s CO 8 o eo U5 "5 O O »C »C O t^ u5 »— I <— I "i eO •— • e>< 1-1 T-i .-I o< 00 z US ,10 CM CO lO iC "5 C? »C iC "O «C to "5 ^ iC »Ci «D 00 OC4 OSO> ;0 I-" OJCOCO (N C Q 'C © O CO -< ^ t>0 -^ J. •^^ C8 Co 9 o _Ln3«- •^ CO O -a 2 -goo S ^t./ 18 CI '8g^-^^^2SgSI8 58 3 R r> toaor>«o i-< »-«c< « s s s^s S^ S FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 137 ICt N oS;c< si , OS o 3 c o a ss o d' cj 8 CO o a d vr^ l4iiic.V^ 138 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. fV,'* •s' .^-\ */■>... 53° o 3,a o S as M »H as "O-^ 2 030^02 dfepnlga C3 ^ _ « h. 4^ "2 A s ^ ^• S i-< q o d s w S Sv— < ^35 **< So Po-s^ 3 . X o ©o o d C5y id "S3 iS«ao <5P5 d^ o « ® CO a ->^ i p. 1^1 S O>eo !8!8:8 e* • : : : : g : : « 2 : § <3b."3T3*Cl "H .a)*iB ,*j oo k^iafc%^i*iMtoii&^ ^» o o FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. SS ^ ^ "i ft M »S* O Ml C5 ♦*© ^ o> o CO Ng ^ 3§ *©* gfi ** •-» a J «i W '-So WW 1—1 r-t CO .-I 05 to CO O5eo eo-'c' ■"t 't' coic to 00 Si OS s CO c^ 8 il 03 00 oc'co" ooo CO lO »c CO tp«DpOJ - - i^ icco f-c to O ofc 00 OS 00 to" 1—1 OS «o OS ;o lO o 8_^ oo" eo 00 Os»0 Q O •"!» t^O i-< t-^COO 00 CO coo OS 00 OS O c5 -^ooco Oseo-HC* ?? 8 S • CO o r^ »o s §^ S s§ s 8 t^ £? «o 1-1 rt r- ■* Os «\ c^ ^ 1-1 1-1 OOOSi-t CO ?5 SS OS eo 00 CO OS eo •^' OS CO T}<" I— I 50 if5 eo s CO 00 CO c< SCO CO 8 ?J O If 8"^ S"^ rH OS t~ o ooo )CO < 00 SCSO COIN Tt> CO CO CI "3 o o •c «g g o ft« CO«-l en rt OS'S c/: ft ^ o og •""^ ■•JS 9 d •-. en At *^ 1 iS O 01 OS OS "3 o g d CO bC d 3 5 a § > a o (I CO S.2 ** CO 01; CO a> CO * rt O ® S CO OS § n o CO o CO d ft ft eo CO 3 O 2 • eo • * cS tf^ OS ® S^ g ® ^ «S coi b d O O g © CO J3 03 g M 3 u ■<>> o CD eo CO CO bC d ■•-> u 3 ■!-> "3 ft o 3 e3 ft to g —4 ■*J CS bC i B O CO eS 3 00 1-H CD •O 1-1 CO CD o 00 CO CD O 1— 1 o O o 00 co 00" CD O ": 3 •go ^ =0 ^s OS e3oO'«-> •C3 -'" .282 "^ d P ® c fe >a^ to d.c eo O a OS O W^:-~< 140 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. a •♦J o O Oi ^ i a I •0 0? n o p. CO % a o c §- o Is •S a 3-5 0-. s S 3^2 eco OJcK QC5 t^ to 8 o o 1— t CO ju^ So 8 « d s o CO w d GO •a § CO •c (O o V- 08 ^ •"• en O* CO d 8 0.OT O t« a in *^ a> en 98 a OS -r 53 r- to tox S8 s g? S 8 1-4 S^ 1-1 00 2" t- n 1-4 lO 1-^ e»5 CO ao d d V 00 g 00 00 00* CO to" CO C*5 ?3 CO «c o< 53 8 1-H CO CI — 1-4 O g PI ^ c^ ss >cc 00 c^ s: s en (/I 08 08 a o 5 :*. 03 O O O^ o8 S « w £.^ c/-r '-' S: a> s 8 '/) en a •c J v. a «3 o oj S en 4^ a ii (^ 3 e^ s J8 CO 5 O CO CO o S e<5 S3 CO o t-- 05 IN f CO c^ c* 52 00 s? •« t^ e< to co" 1-4 00 gf 1-N d 8 r-i CO a g 4-» d 2 £ 3 > 08 O d en a> .d V &-2 en « en a :: a ^ 03 o 3 £ o •^4 c8 C j-4 ►-o I g§' •a| 08 XJ e8 o d a> k4 Ui 3 o o en tnt5 > u o « en a Xi 08 O"^ 00 -3 bO d 4-> 0) r- a 3 O o en •/) FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 141 ss eo .Q a o Q en 08 en en 03 >> d OJ o 4-> « en O •O OS a d 03 /-* o Ui 03 CS _d o 6 d o a o c o 03 en -M en en 03 O .d 3 o 03 08 O "" •2 a <^ d V, O en ,c "^ en •di en O en a> 3 I— t oil ,^ —4 M4 g M! C3 d en C 33 « o5 fl.2 2 .2dg O V ^»-' Q en oQ d SS '-" O .d =2^ 3:3 en^ >,— 60.2 S o d 2 -4 § £ S^ o *i S en <- c ♦» * > d^ CO en rj O"" en W ■«1< 1— ( CO en en 08 O 8 8 C4 to rf, :d8 <9 ^ > : o t-- tn ■< > 08 d+j © en 3 '^ •^-3 3 M-d 0) ^ o 03 a> 2 « § !" fe ■2 OS'S g £ d o 3 d •^^ a> 3 d d o e» xi -3 d 03 d _c +j o ft l-l o O d o •a -3 CI a en • °e £33 o . 03 O d--< £^ |§ f ° ^^ ■© 8 en v-i oa -H d •3 o ■^ o •2 o 03 U <-4 V> ^ 1=1 g Ol 03-3 en ^^ d"-4 •a° S3 u as. « en I en 2^ iS I T^ :')*< 142 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. V ; 'ifs- , FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 143 Table II.— Balance sheets of the Shell Co. of California, December 31, 1920 and 1921, and June 30, 1922. Item. «r Fixed assets: ASSETS. Oil lands and improvements, leaseholds, etc Gosnell, Edison & Taylor tracts Signal Hill tracts Pipe-line real estate, rights of way, etc. . Refineries Distributing plants and equipment Office furniture and fixtures Patent rights (Simplex Refining Co.) . . . Reserve for depletion and depreciation.. Net fixed assets. Investments: Washington Refining Go Silver Shell Steamship Co Gold Shell Steamship Co Pearl Shell Steamship Co Asiatic Petroleum Co. (New York) (Ltd.). Roxana Petroleum Corporation New Orleans Refining Co Ozark Pipe Line Corporation Matador Petroleum Co Total investments Shell Union Oil Corporation consolidation account Due from affiliated companies v>iii roui/ l1SS6ls • . «.....«•..>•«••>••-•«•>•->•-•■•• Dividends accrued on preferred stocks Deferred charges Total. LIABILITIES. Capital stock, common Due to affiliated companies Current liabilities Reserve for Federal income tax Deferred credit Appreciation of Gosnell & Edison tracts Appreciated surplus Appreciated surplus (Union of Delaware)... DliriJiLlS ••••••••••■•■•••■•••••••••■••■••••«• 1920 tT' $49,147,421.82 8,396,000.00 ■ ■«■««*»■*•«***< 7,277,039.80 1,507,719.91 9,765,264.53 3,643,137.26 73,915.49 1,000,000.00 80,810,498.81 12, 646, 797. 41 68,163,701.40 1,080, 1,680, 1,6S0, 1,680, 250, 1,999, 3,999, 6,599, 246.00 000.00 000.00 000.00 000.00 9S2. 50 700.00 977. 50 9, 400. 00 18,979,306.00 '"3,' 092," 893." 34" 7, 632, 236. 47 189,111.75 182,269.66 98,239,518.62 78,808,601.2,5 3,631,863.78 1,963,028.19 '""i6s*756.'66" 8,302,061.04 5,425,214.36 1921 $52,652, 10,890, 5,956, 6,856, 1,511, 10,615, 4,226, 84, 500, 380. 61 592. 98 938. 94 820. 19 957.53 720.55 195. 74 186-97 000.00 93,294,793.51 15, 727, 141. 62 June 30, 1922. $74,471,268.62 10, 890, 592. 98 5,956,938.94 6,833,676.91 1,511,957.53 10,800,355.32 5,751,205.75 100,443.52 116,316,439.57 22, 410, 065. 01 77,567,651.89 I 93,906,374.56 1,080, 1,680, 1,680, 1,680, 2.50, 1,999, 3,999, 6,599, 441. 246 00 000.00 00(J.00 000.00 000. 00 9.S2. 50 700.00 977.50 400.00 275.00 I 1,080,246.00 40,940 •19,419,581.00 "*i,'i.55,'629.'i6' 6,905,701.71 """iosjiio.'sg" 105,153,074.59 98,239,518.62 78,808,601.25 4,379,976.83 1,391,13.5.50 220, 000. 00 16,847,531.92 '*3'565,*829.'69" 105,153,074.59 1,121,186 2,526,858 65.5,010. 8, 403, 892 75 75 38 54 97 106,613,323.20 78,808,601.25 2,519,839.89 1,483,815.07 110,000.00 57,584.55 "i6,'847,'53i.'92 2,525,6.50.71 4, 260, 299. 81 106,613,323.20 1 IrtL U-i ■ I '•fe m:. u^^4 144 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Table 12. — Balance sheets of the Roxana Petroleum Corporation, December 31, 1920 and 1921, and June SO, 1922. Item. ASSETS. Oa lands and leases, oil wells, tanks, refineries, machin- ery, tank cars, automobiles, funiituro and fixtures, etc. Less reserve for depreciation and depletion 1920 Net fixed assets , Investments Affiliated companies accounts , Current assets , Prepaid insurance, discount on stock, etc . $.54,361,833.12 13,252,623.28 1921 $66,477,704.91 15,978,997.19 June 30, 1922. $73,180,957.29 17,638,769.33 Total. LIABILITIES. Preferred stock Common stock Purchase money obligations Affiliated companies accounts Notes and accounts payable Deferred credits Capital surplus Surplus and inidivided profits Shell Union Oil Corporation, capital suri)lus. 41,109,209.84 264, 805. 50 3, 347, 067. 01 2,a30,196. 16 79, 259. 44 47,630,537.95 3,690,300.00 40, 000, 000. 00 175,0()().00 S9, 539. 70 2.014,347.66 1,661,350.59 Total ' 47,630,537.95 50,-498, 707. 72 2, 149, 815. 00 1,019,641.29 2,893,075.14 69, 414. 26 55, 542, 187. 96 2,047,615.00 59, 205. 50 4,129,745.14 297, 438. 34 56,630,653.41 ! 62,076,191.94 3, 690, 300. 00 40, 000, 000. 00 2,128,400.47 411,285.39 2,960,297.12 4, 68(), 963. 87 2, 759, 406. 56 3,690,300.00 40,000,000.00 ' *2,"62.5,'256."9i 1,670, 62:^.66 932, a59. 07 4,046,917.99 3,863,433.76 5,847,600.55 56, 630, 6'>3. 41 62,076,191.94 Table \Z.— -Balance sheets of the Ozark Pipe Line Corporation, December SI, 1920 and 1921. Item. ASSETS. Fixed assets Less depreciation reserve. Net fixed assets Current assets Prepaid insurance and discount on stock . Total. LIABILITIES. Preferred stock Common stock ■ Notes and accounts payable — Affiliated companies' accounts. Surplus , Total. 1920 $30,252,080.50 2,309,274.58 27,942,805.92 214,200.39 4,907.05 28,161,913.36 8,516,100.00 18,400,000.00 473,534.44 1,280,851.12 > 50S572.20 28,161,913.36 1921 $30,291,463.14 2,804,685.14 27,486,778.00 75,429.23 8,560.11 27,570,767.34 8,616,100.00 18,400,000.00 66,983.19 596,375.42 18,691.27 27,570,767.34 1 Deficit. Table lA.—Balan/x sheet of the Matador Petroleum Co., January 2, 1922. Fixed assets , $623,719.42 Less reserve for depreciation and depletion 15, 973. 63 Net fixed assets 607, 745. 79 Current assets 7, 507. 94 Prepaid expenses 364. 09 Total 615, 617. 82 Liabilities: Capital stock, common 614, 394. 56 Accounts payable 1> 223. 26 Total 615,617.82 ''1 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 145 Table lb.— Balance sheets of the Union Oil Co. of California, December 31, 1920 and 1921 . Item. ASSETS. Fixed assets: Oil lands, rights, and leases Oil wells and development Pipe lines and storage systems Steamship and marine equipment.. Refineries and compressor plants. . . Marketing stations 1920 1921 $31,467,379.14 11, 948, 812. .54 11,098,822.01 8,005,926.02 9, 738, 130. 08 10, 015, 247. 21 Total 82,274,317.00 Reserve for depreciation and depletion 23, 038, 059. 04 $93,048,525.00 20,655,968.00 Net fixed assets ! 59, 236, 257. 96 Investments and advances, controlled companies : 2, 313, 322. 85 Other investments I 1, 461, 710. 99 United States securities 8, 361, 880. 00 Current assets 29, 918, 244. 40 Deferred charges . . Total. LIABILITIES. Capital stock First mortgage 5 per cent bonds Purchase money obligations Bills and accounts payable Interest accrued Reserve for tax and other contingencies . Operat ing reserves , Appropriated surplus Unappropriated surplus Total. 813, 786. 26 66,392,557.00 2,291,182.00 985, 155. 00 750, 2.50. 00 33, .548, 883. 00 647,610.00 101,905,202.40 ] 104,615,637.00 50, 9, 5, 3, 25, 7, 000,000.00 24.-), 003. 00 284,670.55 566,692.51 40, 3.53. 34 96;i,023..52 765,60.5.94 000,000.00 039, 253. 60 101,905,202.46 50,000, 8,670, 565, 4,199, 44. 4,042, 777, 25, 0f)0, 11,;>17, 000.00 000.00 298.00 258. 00 370. (X) 2^5. 00 2S1.00 'J)0. 00 141.00 104,615,637.00 Table 16. — Balance sheets of the Commonwealth Petroleum Corporation, December 31, 1920 and 1921. Item. Fixed assets: Oil lands and leases Oil wells and development . Furniture and fixtures ASSETS. 1920 1921 Total Reserve for depreciation and depletion. Net fixed assets Investments Current assets Due from affiliated companies. Deferred items Total. LIABILITIES. Capital stock Current liabilities Due to affiliated companies. Capital surplus Surplus Total. $1,543,524.41 315,561.06 j 6,796.91 ! $1,-524,268.37 138,194.06 6,796.91 1,86.5,882.38 1,865,882.38 10,744,431.50 94,880.22 3,512,091.85 276,227.25 16,493,513.20 10,890,501.45 1,877.78 260,390.44 5,340,743.53 16,493,513.20 1,669,259.34 14,454.54 1, 6.54, 804. 80 10,744,431.50 81,128.93 3,307,719.17 276,059.26 16,064,143.66 10,890,501.45 1, 165. 38 4,773.49 5,514,688.75 1346,985.41 16,064,143.66 I Deficit. < 'i A I rs- W* ^ i,^ / 1 ■■'!. 146 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Table 17 ^Balance sheets of (he Columbia Oil Producing Co., December SI, 1920 and 1921. Item. ASSETS. Fixed assets: Oil lands and leases Oil wells, development, and equipment . Materials and supplies G eneral office equipment T otal ; .•.:••,-••.••• Reserve for depreciation and depletion . 1920 $2,718,062.28 1,973,793.19 603,902.28 1,196.60 Net fixed assets Investments Current assets Due from affiliated compames. Total. UABILITIES. 5, 2%, 954. 35 1,268,676.61 1921 »2, 715, 962. 28 2,319,856.07 1,379.10 4,028,277.74 275,000.00 892,093.32 170,917.01 5,366,288.07 5,a37,197.45 1,464,039.63 3,573,157.82 275,000.00 541,702.78 845,332.66 5,235,193.26 Capital stock Current liabilities Due to affiliated companies . Surplus Total. 3,418,891.50 271,061.12 1,676,335.45 3, 418, 891. 50 88,167.31 71,305.06 1,656,829.39 5,366,288.07 5,235,193.26 Table IS.— Balance sheets of the Western Union Oil Co., December 31, 1920 and 1921. Item. 1920 1921 ASSETS. Fixed assets: , , . ^ n Oil and gas leaseholds and real estate *y ■ Oil wells, development, and equipment ; A Construction work in progress | Well materials and supplies 1 General office equipment | 797, 593. 00 808,401.15 657, 357. 78 222, 582. 03 18,296.15 $3,797,593.00 3,252,604.35 24,057.62 12, 515. 27 Total Less depreciation and depletion. 7, 1, 504,230.11 826, 895. 71 Net fixed assets Investments Current asset s Due from afliliated companies — Deferred items 5,677,334.40 1,000.00 232, 224. 59 336,064.96 5, 075. 00 7,086,770.24 2,243,115.28 4,843,654.96 1,000.00 227, 507. 51 908, 185. 55 3.40 Total : 6,251,698.95 5,980,351.42 LIABILITIES. I Capital stock 25l'oi3'55 Current liabilities , .,'r^' cr^ q^ Due to affiliated companies ; o'l^'ore^'no Special surplus, appreciation ^'^3^!*M^ Surplus. 101,834.33 Total 6,251,698.95 999,900.00 104,676.12 1,713,014.49 3,189,303.00 126,542.19 5,980,351.42 J Denclt. FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 147 Table \^.— Balance sheets of the United Western Consolidated Oil Co., December SI, 1920 and 1921. Item. - ASSETS. Fixed assets: Oil lands and leases Cost of reorganization and acquisition of oil-lease contracts Oil wells development and equipment Construction work in progress General office equipment Reserve for depreciation and depletion Net fixed assets - - - ■ Current assets - Due from affiliated companies LIABILITIES. Capital stock • Current liabilities Due to affiliated companies Surplus Total 1920 1921 $2,578,686.34 1,058,225.00 487,193.37 7,991.25 2,860.00 $2,573,686.34 1,058,225.00 390,760.89 393.'66 4,134,955.96 180,735.92 4,023,065.23 195,900.63 3,954,220.04 63, 232. 05 750.00 3,827,164.60 44, 183. 19 15,032.22 4,018,202.09 3,886,380.01 3,489,600.00 5,492.61 426,783.77 96,325.71 3,489,600.00 2, 427. 39 425, 788. 40 ' 31,435.78 4,018,202.09 i 3,886,380.01 1 Deficit. Table 2().— Balance sheets of the Dunlop Oil Co., December SI, 1920 and 1921. Item. 1920 ASSETS. Fixed assets: Oil and gas leaseholds and real estate Oil weUs, development and equipment — Total Less depreciation and depletion . Net fixed assets Current assets Due from affiliated companies. $40,000.00 113,327.04 1921 153,327.04 104, 783. 42 $50,000.00 114,553.40 164,553.40 112,276.46 48,.'>43.62 49,58.5.28 41, 794. 41 52,276.94 18,600.07 79, 701. 03 Total. 139,923.31 LIABILITIES. Capital stock Current liabilities. Surplus Total . 200,000.00 1,612.56 161,689.25 150,578.04 200,000.00 1,315.06 150,737.02 139,923.31 150, 578. 04 » Deficit. I .:< ' \i P-. 4r* .r^< i) 148 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Table 2\.— Balance sheets of the Eddystone Oil Corporation, December 31 , 1920 and 1921 Item. ASSETS. Fixed assets: Oil lands and leases Oil wells and development . Total ..-•• Reserve for depreciation and depletion . Net fixed assets Investments Current assets Due from affiliated companies. Advances to Tidal Osage Co... Total. LIABILITIES. Capital stock Current liabilities Kay Count v Oas Co Due to affiliated companies. Surplus 1920 $1,368,949.84 1,442,927.14 2,811,876.98 154,467.40 2,657,409.58 5.00 548,529.59 7,672.76 3,213,616.93 500,000.00 92,673.57 Total. 419, 147. 84 2,201,795.52 1921 $1,598,007.26 2,102,049.28 3,700,056.54 452,296.77 3,247,759.77 5.00 542,772.44 4,773.49 60,000.00 3,855,310.70 500,000.00 13, 132. 58 75,000.00 1,799,7S2.56 1,467,395.56 3,213,616.93 I 3,855,310.70 Table 22.— Balance sheets of the National Exploration Co., December 31, 1920 and 1921, Item. ASSETS. Fixed assets: Oil lands and leases Oil wells and development . Miscellaneous properties. . . Reser\'e for depreciation and depletion. Total Investments Current assets Due from afTiliated companies. Deferred items Total. LIABII-ITIES. Capil al stock Current liabilities Due to affiliated companies. Surplus 1920 $3,131,441.38 1,442,373.98 191, 723. 36 4,765,538.72 50,663.24 4,714,875.48 *"92i,'759.'48 172,831.26 5,809,466.22 1921 $3,594,474.42 2, 888, 307. 83 42,979.96 6,525,762.21 135,634.85 6,390,127.36 25, 000. 00 910, 075. 80 48,135.39 117,277.22 7, 490, 615. 77 Total. 3,000,000.00 2, (M2, 144. 13 i 710,000.00 I 57,322.09 I 3, 000, 000. 00 377, .'542. 71 4, 167, 904. 86 1 •>1,631.80 5,809,466.22' 7,490,615.77 » Deficit. Table 2?>.— Balance sheet of the Asiatic Petroleum Co. {Del'avare) {Ltd.), June 30, 1922. Assets: Current assets, associated companies $227, 378. 79 Investments 6, 776, 700. 00 Deferred charjjes 67, 073. 19 Cash on hand in bank 9, 075. 65 Total "tT oSO^ . 63 Liabilities: Capital stock 5,000,000.00 Current liabilities — Associated companies 2, 146, 787. 31 Other parties HO. 50 Deferred credit 13, 613. 56 Surplus ' 80, 283. 74 Total 7.080,227.63 » Deficit. v> FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 149 Table 2i.— Balance sheet of the Asiatic Petroleum Co, {New York) {Ltd.), June SO, 1922, Assets: Capital assets $26, 122. 13 Current assets — Associated companies 457, 003. 92 Other parties ---- 416,018.70 Investments 22, 300. 00 Deferred charges 244, 221. 65 Cash on hand and in bank 5, 691. 56 Inventories 66, 756. 72 Total 1, 238, 114. 68 Liabilities: Capital stock • 250,000.00 Current liabilities — Associated companies 719, 157. 85 Other parties 333, 414. 62 Loans from affiliated companies 235, 883. 48 Reserve for depreciation 6, 778. 89 Surplus ' 30-, 120. 16 Total 1,238,114.68 Table 25. — Balance sheet of the Asiatic Petroleum Storage Co. {Panama) {Ltd.), Jane 30, 1922. Capital assets $75, 475. 42 Current assets — Associated companies 28, 915. 02 Other parties 62,829.89 Deferred charges 823. 43 Cash on hand and in bank 7, 681. 48 Inventories, fuel oil in storage 67, 304. 79 Total 243,030.03 Liabilities: Capital stock outstanding 77, 000. 00 Current liabilities — Associated companies 131, 203. 03 Other parties 6, 341. 54 Reserve for depreciation 41, 531. 65 Surplus ' 13,046.19 Total 243,030.03 Table 26. — Balance sheet of the Gold Shell Steamship Co., June SO, 1922. Assets* Capital assets $585, 648. 40 Current assets, associated companies 619, 059. 76 Inventories, provisions : 2, 749. 52 Total 1,207,457.68 Liabilities: Capital stock 650,000.00 Current liabilities, other parties 12, 738. 18 Reserve for depreciation 466, 221. 96 Surplus 78,497.54 Total ■- 1.207,457.68 » Deficit. *■ 7^ 'hi 1%. \ 150 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Table 27.— Balance sheet of the Silver Shell Steamship Co., June SO, 1922. Capital assets .- ^t5?'?m'AQ Current assets, associated companies o'4, 701. by Inventories, provisions 1, 551. 93 Total 1,436,149.29 LiabiUties: p:if\ nn(\ m Capital stock ^5?'™ 2? Current Uabilities, other parties .11'^^' no Reserve for depreciation 458, S6Z. U9 Surplus 310, 707. 19 Total 1,436,149.29 Table 2S.— Balance sheet of the Pearl Shell SUamship Co,, June SO, 1922, ^Capital assets ^??Hoq oq Current assets, associated companies 5by, 4^d. ^y Inventories, provisions 2, 322. 16 Total 1,192,021.90 Liabilities: cca aaa m Capital stock ^^2'?SS?2 Current liabilities, other parties aqq qro a7 Reserve for depreciation 439, 362. 47 Surplus 98, 976. 28 Total 1,192,02L90 Table 29.— Balance sheet of the New Orleans Refining Co. (Inc.), June SO, 1922. Capital assets -• $3,847,29L00 Current assets— , Associated companies "^O;^* ^j- J^ Other parties ^^Htr' It Deferred charges J^-p ^'^' 'J^ Cash on hand, at banks, in transit ll'» 757. b9 Inventories — , Oil stocks on hand and in transit ''^^ ^l d» Materials and supplies ^2, 817. 38 Total 5, 539, 299. 56 Liabilities: Capital stock authorized ^ /JK' nnn' nn Capital stock unissued !> 000, 000. 00 Capital stock outstanding 4, 000, 000. 00 Current liabilities— Associated companies ^y^. ^J^- \^ Other parties ^93, 817. 54 Reserve for depreciation ^ 783, 835. 16 Surplus ' 330, 715. 57 Total 5,539,299.56 » Deficit .V FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. 161 Table 30. — Balance sheets of the Dundee Corporation, December Si , 1920, and June SO, 1922. Item. Assets: Cash Loans and advances Investments— Roxana Petroleum Corporation . Ozark Pipe Line Corporation... Shell Union Oil Corporation Total. Liabilities: Preferred stock Common stock , Notes payable, American Exchan^ National Bank. Loan, American Exchange Securities Co Sundry creditors Surplus Total. Dec. 31, 1920. June 30, 1922. fl01,014.70 1 206,580.18 1,350,030.00 13,500.00 $380.56 168,317.58 4,433,209.54 1,671,124.88 57,670.00 675,015.00 176.90 938,262.98 1,671,124.88 4,601,907.68 253,130.04 100, 759. 45 3,158,562.88 35.65 1,089,419.70 4,601,907.68 Table 31. — Balance sheet of the Union Oil Co. {Delaware), October 20, 1922. Assets: Properties and equipment — '2 10,000-dead-weight-ton tankers (at cost) $3,906,269.65 Furniture and fixtures (at cost) 19, 180. 84 Investments — Shell Union Oil Corporation, common stock. . 41, 012, 656. 08 Central Petroleum Co., common stock 103, 797.05 Central Petroleum Co., preferred stock 11, 653. 65 $3, 925, 450. 49 Current assets — Cash in bank and on hand Prepaid expenses 41, 128, 106. 78 22, 823. 51 1, 776. 83 Deferred items . 24, 600. 34 462. 38 Total 45,078,619.99 Liabilities: Current liabilitie;?, accounts payable. Outside interests in subsidiaries 13,262.09 17, 162. 18 30, 424. 27 Total Capital stock and surplus: Capital stock, 1,389,411 shares $47, 239, 486. 80 Deficit 2, 191, 291. 08 45, 048, 195. 72 Total 45,078,619.99 NoTB. — ^There are contingent liabilities estimated at $725,000. •Ti«rfss?qw«y ■iju »!^ 152 FOREIGN OWNERSHIP IN THE PETROLEUM INDUSTRY. Table ^2.— Capital investment in the Mexican petroleum industry, in pesos,^ by na- tional interests, December 31, 1922."^ Capital invested. Interest. Land. Oil wells. Pipe lines. steel tanks. Amount. Pro- portion. 56.8 36.9 Amount. Pro- portiOTi. Amount. Pro- portion. Amount. Pro- portion. American British 201,780,000 130,980,000 10,620,000 7,080,000 4,540,000 114,000,000 74.000.000 57.0 37.0 3.0 2.0 1.0 137,662,898 30,118,045 31,393,019 58,595 276,877 69.0 15.1 15.7 «2 37,221,360 16,984,180 8,884,289 87,761 916,406 58.1 26.5 Dutch 3.0 6,000,000 2.0 4,000,000 1.3 ! 2,000,000 13.9 Mexican Other .1 1.4 Total 355,000,000 100.0 i 200,000,000 100.00 199,509,434 100.0 64,093,996 100.0 Capital invested. , Interest. Concrete and other storage. Refineries. Ships and other fa- cilities. Total. Amount. Pro- portion. Amount. Pro- portion. Amount. Pro- portion. Amount. Pro- portion. American British 877,140 560,000 58.7 37.5 31,301,841 21,133,974 9,000,000 51.0 34.4 14.6 83,200,000 71,000,000 5, 300, 000 300,000 200,000 52.0 44.4 606,043,239 344,776,199 58.2 33.1 Dutch 3.3 71,197,^08 6.8 Mexican Other 56,049 3.8 .2 .1 11,582,405 7,933,283 1.1 .8 Total 1,493,189 100.0 61,435,815 100.0 160,000,000 100.0 1,041,532,434 100.0 I Normal value of Mexican gold peso is $0.4985. « From " Revista de Hacienda," Jan. 29, 1923. » Less than one-tenth of 1 per cent. o ■4. ■'*