Concessions in Bahrein [Bahrain], Kuwait, &c: correspondence, 1932-Jul 1933 (Colonial Office Secret Print, Middle East No.49) [‎97v] (196/284)

168
will continue at annual rate of
Rs. 25,000.
If the Company fail to make a
declaration as to commercial produc
tion by a date in 1941 to be specified,
the Shaikh to have power to call upon
the Company either to make the
declaration forthwith—or to lose the
Concession.
Comment.
It will be seen that the Anglo-Persian Oil Company offer a highei amount on
signature of the Concession, and a higher annual amount when they commence
drilling (which must happen within two years of signature of the Concession). Except
for the first year after the declaration that oil has been produced in commeicial
quantities, their minimum royalty is also higher than that offered by the Kastern and
General Syndicate. It will also be observed that the Anglo-Persian Oil Company must
make a declaration by a date to be specified in 1941, that oil has been found in com
mercial quantities or surrender the Concession. In the Eastern and Cieneral Syndicate s
draft this question has to be settled by arbitration. Bearing in mind the absence of any
specific drilling obligations during the period of five years provided by the Eastern
and General Syndicate's draft for the exploration period, it seems unlikely that there
would be much prospect of taking the Syndicate to arbitration at an earlier date than
that by which the Anglo-Persian Oil Company must make their declaration.
After the declaration that commercial production has been obtained the Syndicate
offer a tonnage royalty of 3 Rs. 8 annas per ton and the Anglo-Persian Oil Company a
royalty of 2 Rs. 10 annas. To decide which of these is better in the interests of the
Shaikh depends on the production which is likely to be secured. And here the amount
of the minimum royalty is important. Generally speaking, the Company with the
higher minimum royalty will have the greater inducement to produce oil. It may also
be said that too high a tonnage royalty may retard production, and here the provision
in the Eastern and General Syndicate's draft, allowing a cessation of operations should
not be lost sight of. The rate of royalty offered by the Eastern and General Syndicate
is the same as that in India but there there is a local market to absorb all the production.
The rate offered by the Anglo-Persian Oil Company is approximately the same as that
levied by the 'Iraq Government.
In Venezuela the rate of royalty is understood not be exceed 2s. a ton in most
instances, while in Trinidad there are many leases with a royalty of from Is. 6d. to 2s.;
although in recent years a royalty of 3s. has been imposed. In the case of both these
countries, over 90 per cent, of the oil has to be exported.
Customs Duty : The Company undertake Customs Duty : No similar provision
to pay the Shaikh a Customs Duty of
I per cent, on all oil produced from
Kuwait territory, calculated on the
value of the oil at the wells.
Comment.
It is not usual to impose a Customs Duty in addition to royalty. Such a charge
might with some justification be levied in a country where the State does not own the
mineral rights and desires to secure some financial consideration for the loss of a
wasting asset such as petroleum. But where the State is the owner of the minerals it
is regarded as preferable that the State should take the whole of its financial return
in the shape of loyalty. Apart from the principle involved there is bound to be some
difficulty in assessing the value of the oil for purposes of the duty, whether at the well
head, or port of shipment.. There are some cases in which rovalty is charged on the
basis of a peicentage of the value of the oil won, and endless difficulty has arisen in
finding a satisfactory method of determining the value In Trinidad, where the
Government owns the greater part of the minerals and the question has been
thoioughly consideied, the idea of an export tax has been definitely abandoned as
unsuitable.
British Control Clause : Ownership of
Concession may be transferred or rights
sold to another Company, provided that
British Control Clause : With the approval
of the Shaikh acting on the advice of
the Political Resident A senior ranking political representative (equivalent to a Consul General) from the diplomatic corps of the Government of India or one of its subordinate provincial governments, in charge of a Political Residency. the Company may