Foreign Relations of the United States, 1955–1957, Near East Region; Iran; Iraq, Volume XII

223. Background Paper Prepared in the Department of State¹

Washington, April 19, 1957.

OIL PIPELINES IN MIDDLE EAST

Our assessment of the growth of Free World requirements for Middle East oil and of the limitations on tanker movements around the Cape indicates that not only must existing transit facilities (i.e., Trans-Arabian and IPC pipelines and the Suez Canal) be expanded, but new pipeline routes with new port outlets must be constructed.

During the past several months considerable interest has been manifested in various quarters (governmental and private) in the construction of the following new pipeline routes in the Middle East: (1) Trans-Turkey, (2) Trans-Israel, and (3) Trans-Isthmus of Suez.

Trans-Turkey Pipeline: We are greatly interested in the recently proposed pipeline system extending from the Persian Gulf through Iraq and Turkey to an outlet on the Mediterranean in Turkey, due to the interest of a number of US-owned petroleum companies operating in the Middle East and due to the fact that it will provide both a needed addition and an alternative to the transit routes across Syria and Egypt. We feel that if such a pipeline is constructed, means should be found to assure it of maximum protection, such as treaty guarantees.

Trans-Israel Pipeline: We hold the following views on this proposal of the Israel Government: (1) The feasibility of the pipeline raises a number of questions, the principal of which is the availability of an assured supply of oil. (2) Whereas US Government financing is not available, we have no objections to private US interests investing in this pipeline if after investigation they feel it is a good investment.

Trans-Isthmus of Suez Pipeline: Given the Egyptian Government’s stand on matters relating to operation and management of the Suez Canal, it does not seem prudent to us to add to the West’s dependence on transit of the Isthmus of Suez by construction of oil pipelines paralleling the Canal. However, as in the case of the Trans-Israel pipeline, we have no objections to private US interests investing in this pipeline if after investigation they feel it is a good investment.

Discussion:

1. Free World Demand for Middle East Petroleum

During the next ten years or so it appears unlikely that increased supplies of other forms of energy will be sufficient to make much impact on the demand for oil. In fact, projections of the Free World’s demand for oil during the next decade show substantial increases. Unless very substantial new crude deposits are found to the west of Suez, the bulk of this additional oil will have to come from the Middle East where most of the world’s proven reserves lie. Our assessment of the growth of Free World requirements for Middle East oil and of the limitations on tanker movements around the Cape indicates that not only must existing transit facilities (i.e., Trans-Arabian and IPC pipelines and the Suez Canal) be expanded, but new pipeline routes with new port outlets must be constructed.

By 1965 Free World requirements for petroleum products are anticipated to rise to about 23 million barrels per day, an increase of over 9 million barrels per day above 1955 consumption. It is expected that the Middle East will supply over 4 million barrels per day or almost one-half of this increase. Thus, by 1965 Middle East oil production is estimated at 7.5 million barrels per day, an increase of 130 percent over the 1955 level. Around 5.6 million barrels per day, or three-quarters of this production will be required to meet the demands of markets west of Suez. Existing Middle East transit facilities when fully operative are capable of handling around 40 percent of this projected westward movement. Moreover, present estimates indicate that the westward movement of Middle East oil may well increase another 3 million barrels per day by the early 1970s.

2. New Pipeline Routes

During the past several months considerable interest has been manifested in various quarters (governmental and private) in the construction of the following new pipeline routes in the Middle East: (a) Trans-Turkey, (b) Trans-Israel and (c) Trans-Isthmus of Suez.

(a) Trans-Turkey Pipeline: Representatives of the major oil companies operating in the Middle East met in London in March and concluded that the growth and the demand for oil, particularly in Western Europe, made it essential that there be constructed a new Middle East pipeline system extending from the Persian Gulf through Iraq and Turkey to an outlet on the Mediterranean in Turkey. Their proposal envisages the construction of two trunk pipelines each of approximately 34” to 36” in diameter; the first line to be completed if possible by 1960 and the second by 1962. The combined capacity of the new lines would be approximately 1,200,000 barrels per day. The cost involved is estimated to be in excess of $800 million. The companies have not yet reached any firm decision concerning the specifics of this pipeline system, but are actively giving study to technical, financial and legal considerations involved in a project of this magnitude. It is our understanding that these companies propose that this system be built and run by a separate new company, to which they would subscribe equity capital. Further discussions will be held by these companies in London around the middle of May.

We are greatly interested in this project due to the interest of a number of US-owned petroleum producing companies and due to the fact that it will provide both a needed addition and an alternative to the transit routes across Syria and Egypt. Also this pipeline system would be in position to tap the fields of three of the four major Middle East oil producing countries—i.e., Iraq, Iran and Kuwait as well as a new off-shore field in Saudi Arabia.

In addition to the above proposal, there has been considerable interest by a number of private companies, other than the major oil producers, in the construction of a Trans-Turkey pipeline which would tap the recently discovered Qum field in Iran. Our present thinking on this project includes the following considerations: impartiality toward the various US groups interested in the project and preference for private ownership and private financing of the project.

(b) Trans-Israel Pipeline: Israel has expressed the desire to construct a 32” pipeline from the Port of Eilat to the Mediterranean capable of handling about 400,000 barrels per day. This pipeline would cost approximately $70 million. Israel has urged that the USG should take a positive and favorable interest in this pipeline. The major elements of our position are as follows: (1) The feasibility of this pipeline raised a number of questions principal of which is the availability of an assured supply of oil. (2) Whereas US Government financing is not available, we have no objections to private US interests investing in this pipeline if after investigation they feel it is a good investment.

The French Government has reportedly been favorably considering assisting the Government of Israel in constructing a 16” Trans-Israel pipeline.

(c) Trans-Isthmus of Suez Pipeline: Certain private interests (not including the major oil producing companies in the Middle East) have discussed with the Egyptian Government proposals to parallel the Suez Canal with oil pipelines. Given the Egyptian Government’s stand on matters relating to operation and management of the Suez Canal, it does not seem prudent to us to add to the West’s dependence on transit of the Isthmus of Suez by construction of this nature. However, as in the case of the Trans-Israel pipeline, we have no objections to private US interests investing in this pipeline if after investigation they feel it is a good investment.

1. Source: Department of State, Conference Files: Lot 62 D 181, CF 871. Confidential. According to a note on the cover sheet, this paper was drafted by Bennsky and cleared by Rockwell and Beckner. It was one of a series of papers prepared for the Delegation to the North Atlantic Council Ministerial meeting at Bonn, May 2–4. In the records of the Delegation, the paper was designated NMB B–18/51.