Office of the Historian

890g.6363 T 84/92

The President of the Standard Oil Company of New Jersey (W. C. Teagle) to the Secretary of State

New York, April 17, 1923.
[Received April 18.]

My Dear Mr. Secretary: For your information, I beg to advise you of recent development in connection with, the negotiations between the American Group and representatives of the present partners of the Turkish Petroleum Company, Limited, for a participation of our Group in that Company.

Mr. H. E. Nichols, one of the Directors of the Anglo-Persian Oil Company, Limited, and also Managing Director of the Turkish Petroleum Company, Limited, accompanied by an assistant, Mr. E. H. Keeling, arrived here March 25th to carry on the discussions in New York with the American Group on behalf of the Anglo-Persian and Royal Dutch interests in the Turkish Petroleum Company. These gentlemen were not directly authorized to represent the French Government interests in the Company.

The proposal which Mr. Nichols brought with him for consideration by the American Group was not acceptable to the Group. Counterproposals were made by our Group and were under consideration by Mr. Nichols up to the time of his return to London on the 14th instant. He will advise our Group of the views of the respective partners in the Turkish Petroleum Company regarding them. Inasmuch as the negotiations are still in progress, I shall not burden you with an explanation regarding them, unless you wish to be informed.

A draft of the Open Door Formula was agreed upon with Mr. Nichols which we anticipate will be accepted by the present partners in the Turkish Petroleum Company for adoption by that Company. A copy is enclosed for your files. Should you at the present time have any criticism regarding the provisions of this draft, we shall be glad to receive it at your convenience.

The American Group’s counter-proposal is open to acceptance by the other Groups until May 21st. Yours very truly,

W. C. Teagle
[Enclosure]

The Text of the “Open Door Formula” as Drafted April 12, 1923

The four groups interested in the Turkish Petroleum Company have agreed on the following principles:

I.
The Company shall negotiate a convention with the Iraq Government as soon as possible, granting and confirming to the Company [Page 244] the rights to develop and operate petroleum resources within the sovereignty of that government comprised within the Vilayets of Mosul, and Bagdad, and fixing the amount of royalty payable to the government.
II.
The Company will engage in the development and operation of these petroleum resources, and any other responsible interests of any nationality shall have the privilege of securing rights for the development and operation of petroleum in definite areas within the aforesaid territory for which the Company holds rights.
III.
In order to establish the procedure by which such interests may obtain such rights in these areas, the following articles shall govern and shall constitute the Open Door Plan.

A.
The exploitation by the Company will be limited to twenty four areas (except as to such areas as shall have once been offered at public auction as hereinafter provided and not disposed of) of eight square miles each, rectangular in shape, of which one side shall not be greater than twice that of any other side, and these twenty four areas shall be selected by the Company within two years from the date of the aforesaid convention between the Company and the Iraq Government.
B.
Excluding the aforesaid twenty four areas, the Company shall offer the remaining territory in Iraq held by it for petroleum development at public auction under the following plan:
1.
Four years after the date of the aforesaid convention, and annually thereafter until said remaining territory shall have been offered, the Company shall select not less than twenty four areas of eight square miles each, rectangular in shape, of which one side shall not be greater than twice that of any other side, and shall thereupon give notice of the proposed offer of said selected areas at a public auction to be held in the City of London, approximately one year from the date of said notice.
2.
The said notice shall be given by the Company by publication in the Official Gazette of Iraq and in the leading petroleum trade papers in Holland, France, Great Britain and the United States.
3.
Any responsible corporation, firm or individual, including any participant in the Company, shall have the privilege of designating annually from one to four areas of eight square miles each, rectangular in shape, of which one side shall not be greater than twice that of any other side, and any such designated areas shall be included by the Company in its next succeeding annual offer, provided it shall have received notice of any such designation at least one year prior to the publication of the notice of the next succeeding annual offer.
4.
Any responsible corporation, firm or individual, of any nationality including any participant in the Company, may bid for the purchase of the rights offered in one or more of said areas so selected or designated, which shall be sold to the bidder who shall offer the highest cash payment and agrees to accept a lease of the [Page 245] areas acquired on the Company’s standard form, and files the requisite bond.
5.
The Company shall not become a bidder for any part of these areas.
6.
The Company shall grant to the successful bidder under lease in its standard form for the productive life of such sub-lease, the full benefit of all the rights and privileges which the Company holds or may later acquire for the territory in which the sub-leased area is located.
7.
Each successful bidder shall deposit with the Company at the conclusion of the sale a certified check, payable on a gold value basis to the Company, for twenty five per cent of the amount payable by him, and the balance shall be paid in gold value on delivery of the lease to such bidder, which shall be made within thirty days after said sale.
8.
Each successful bidder shall file with the Company, at the time of the delivery of the lease his or its bond with surety acceptable to said Company, in the amount of two thousand (2,000) pounds Sterling, gold value, conditioned for the faithful performance by the bidder of all the covenants and provisions of such lease, to be so kept and performed by him.
9.
Each lessee shall pay to the Company the royalty due from the Company to the Iraq Government with respect to the production from said area.
10.
The Company shall afford every responsible party, of any nationality desirous of bidding upon areas to be offered for lease, every reasonable opportunity to make geological surveys in Iraq, and will, upon his application, place at his disposal such geological information as it may have in respect to such areas.
C.
As soon as the development warrants and the requisite rights are secured, the Company shall, with due diligence, construct and operate or cause to be constructed and operated, gathering and main pipelines which will provide a transportation system to seaboard and will operate or cause the same to be operated as a common carrier and common buyer of petroleum. At least thirty per cent of the Turkish Petroleum Company’s trunk line capacity shall be available for the transportation of its sub-lessees’ crude oil at a charge not exceeding one-sixth of a cent per barrel per mile. To the extent that the Company shall hold pipeline rights, the Company shall upon application, grant to any responsible party, licenses or permits for construction and operation of main and gathering pipelines, if such party shall have obtained and operates one or more areas under lease from the Company.
D.
The Company shall have the right to own and operate a refinery or refineries within the Kingdom of Iraq and for the purpose of supplying the local markets and its own requirements in Iraq with refined petroleum products, and may engage in the marketing of the same therein, but this right shall not be exclusive, and any other operator under the Open Door Plan shall have the same right.