Environmental Engineering Reference
In-Depth Information
This shift of power in the oil industry is part of the past century's trans-
formation from colonialism to globalization. Oil began as a home-grown
industry in the US, led by American entrepreneurs and companies such as
the Rockefellers and their Standard Oil company, which eventually sought
foreign concessions to expand overseas.
But from the start the European oil business was mostly a matter of
obtaining concessions from developing countries. This was how the
Anglo-Persian Oil Company (the precursor of BP) got started in Iran,
and the Compagnie Française des Petroles (a forerunner of Total) began
in Iraq. The start of Royal Dutch Petroleum in Indonesia was more overtly
colonial because Indonesia was a Dutch colony, part of the Dutch East
Indies at the time.
Concessions
In returning for paying an upfront fee and subsequent tax or royalties on
production, a concession generally allowed a company the exclusive right
to explore for oil and to produce oil within a given area for a set period
of time. It usually left the company free to set exploration programmes,
production levels and prices.
This system gave the IOCs considerable autonomy, and left host gov-
ernments with little control over, or even knowledge about, the day-to-
day management of their principal resource. The concession system was
eventually swept away in the mid-1970s in all the major oil-producing
countries. Long before then, however, some governments had begun to
take action.
Fifty-fifty
The first instances of resource nationalism came in Latin America,
which is not surprising given the region's long history of invasion,
colonialism and anti-colonialism, going back to the early nineteenth
century liberation from Spain. In 1938 Mexico expropriated (with com-
pensation) all foreign oil company assets and operations, and created
Pemex to run them. In 1942 Venezuela decided to renegotiate all its
concessions, and began a series of tax increases so that by 1947, the total
“tax take” of royalty and tax amounted to fifty percent of all profits. By
1950 a similar fifty-fifty profit split was agreed in Saudi Arabia, where
oil had been found in 1938, between US companies and the govern-
ment.
