The concession and oil in Iran: the evolution of a concept

Abstract

The ‘Anglo-Persian’ concession agreement secured by William Knox D’Arcy in 1901 covering mineral exploration rights in Persia (now the Islamic Republic of Iran) is a remarkable story of grit and farsighted commercial and legal acumen. The concession, which was granted for a 60-year term, became the vehicle for the formation of what today is bp plc. The commercial principles and the legal tenets that underpin this historic concession are reviewed and parallels drawn with modern-day exploration agreements. The remarkable brevity and clarity of the original legal drafting, and the clever apportionment of commercial risk throughout the original bargain, have influenced the evolution of exploration agreements throughout the oil and gas sector. Despite the evolution of commercial and legal constructs, the agreement structure devised by D’Arcy over 100 years ago in the Anglo-Persian concession is still recognisable today. As Iran prepares for potential foreign investment in a post-sanctions world, the original concepts may yet prove useful in the 21st century.

Acknowledgement

I would like to thank bp plc for permission to use the contents of the original concession agreement, which is held in the bp plc public archive at Warwick University in the United Kingdom. Finally, for the record, the opinions expressed are mine alone and are not necessarily endorsed by my employers, past or present.

Notes

1 A waxy petroleum derivative sometimes known as paraffin wax.

2 TAB Corley, A History of the Burmah Oil Company: Volume 1, 1886–1924 (Heinemann 1983–1988).

3 RW Ferrier, The History of British Petroleum – Volume 1: The Developing Years, 1901–1932 (Cambridge University Press 1982).

4 Henry Longhurst, Adventure in Oil: The Story of British Petroleum (Sidgwick & Jackson 1959).

5 The government remained a major shareholder in the company until it decided to sell most of its shares on the stock exchange in 1987.

6 James Bamberg, The History of British Petroleum – Volume 2: The Anglo -Iranian Years, 1928–1954(Cambridge University Press 1994).

7 James Bamberg, British Petroleum and Global Oil, 1950–1975: The Challenge of Nationalism (Cambridge University Press 2000).

8 The definition of ‘net profits' proved to be very difficult; it was a constant source of friction between Anglo-Iranian Oil Company and the State.