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Articles > Azad-Hye Yahoo Group (2003-2004) > Mikael Gulbenkian: Oilman seeking riches in Iraq follows steps of famed Armenian forebear

Posted in Azad-Hye Yahoo Group on 27 May 2003

By BRUCE STANLEY, AP Business Writer


Iraq was still part of the Ottoman Empire when an Armenian engineer formed a syndicate to drill for oil there and in doing so, helped shape the global oil industry. Now, his great-nephew plans an Iraqi venture of his own.

The syndicate struck gushers of crude, and Calouste Gulbenkian's 5 percent share of the company afforded him homes in some of Europe's finest hotels, a collection of 5,000 works of art and a second career as a philanthropist.

Almost a century later, his great-nephew, the chairman of Calgary, Alberta-based Heritage Oil Corp., plans to visit Iraq in June to seek his own opportunities.

"I'm hoping to set up and develop something interesting in oil and gas because Iraq, for any oil person, is paradise," Mikael Gulbenkian said at his office in London.

Heritage, which sold its first shares to the public four years ago, is a small oil exploration firm with operations in Africa and the Middle East. Its annual earnings for 2001 were a modest $900,000 on sales of $3.6 million.

The younger Gulbenkian is deliberately vague about what he plans to do in Iraq, but he dismisses comparisons with his larger-than-life relative.

"I think that would be rather presumptuous because very seldom does history repeat itself," he said.

Formed in 1911, Calouste Gulbenkian's syndicate, Iraq Petroleum Co., secured exclusive rights to produce and sell oil not just in Iraq but in most of the former Ottoman lands, including Saudi Arabia and many of the Persian Gulf emirates. Iraq proved to have the second-biggest known crude reserves after Saudi Arabia.

The company renamed as IPC became a model for other petroleum joint ventures. Its success catalyzed the global ambitions of Gulbenkian's partners, which went on to become the world's largest energy companies - BP, Royal Dutch/Shell Group, the precursor to French oil giant Total, and the two U.S. companies that eventually merged to
form Exxon Mobil.

"When you have business intuition and political and technical capabilities, you can have the foresight to actually define the path of an industry," Mikael Gulbenkian said of his forebear.

The Iraqi government nationalized IPC's oil assets in 1972, yet the company carries on in London.

While the syndicate still is owned by its original shareholders, the companies insist IPC has no legal claims to assets or property inside Iraq. BP says the five shareholders reached an agreement with the Iraqi government in 1973-74, accepting 105 million barrels of oil as compensation for their seized assets and paying a one-time sum of $315 million to the Iraqis to settle various outstanding claims.

"We don't plan to renew any business or contacts with a future government of Iraq through IPC," said Shell spokeswoman Cerris Tavinor.

Before joining Heritage Oil, Mikael Gulbenkian ran the oil and gas interests of the Lisbon-based Calouste Gulbenkian Foundation, where he developed his great-uncle's stake in IPC into a full-fledged energy business. Though a "formidable organization" in its heyday, IPC is now a relic with no role to play in Iraq, Gulbenkian said.

Iraq, in any case, is still closed to investment by foreign oil companies. Although some U.S. officials have urged that Iraq's state-owned oil monopoly be opened to outside investors, such a major restructuring will likely await the installation of a stable Iraqi government.

IPC's British and French partners tried at first to keep Iraq's oil patch for themselves. However, the United States leaned hard on its World War I allies until they made room for Americans.

Calouste Gulbenkian, renowned as "Mr. Five Percent," kept his small stake throughout the diplomatic wrangling. Perhaps his shrewdest move was to insist that none of the partners explore for oil anywhere in the former Ottoman Empire except through IPC itself.

He drew a red line on a map to define the area he meant. The result, the "Red Line Agreement" of 1928, was the boldest carve-up in the annals of big oil, said Anthony Sampson, author of "The Seven Sisters," a history of the oil business.

Today, the United States and its ally Britain are maneuvering - as IPC did in its early days - to preserve their unique influence on decisions about the production and sale of Iraqi oil.

Although the two allies control Iraq's oil fields, they lack the legal authority to sell its crude. Iraq still can only export oil under the U.N. oil-for-food program, which comes up for renewal next month. The Americans and British have asked the U.N. Security Council to lift sanctions against Iraq and let it resume exporting normally.

France, this time, is on the outside and hoping to get in. Total had negotiated with Saddam's government to develop the enormous Majnoon oil field in southern Iraq, but given France's opposition to the U.S.-led attack, Total's prospects there look bleak. Russia, too, is worried that the Americans and British will nullify Saddam's prewar
agreements with Russian firms.

Mikael Gulbenkian sees parallels today with the diplomatic squabbling over Iraq's oil in the 1920s.

Gulbenkian, 49, is the only member of his family still active in the oil business. His ancestors traded along the remnants of the old Silk Road to China, and for at least two centuries they enjoyed commercial privileges in Ottoman-ruled Iraq.

Despite the present upheaval in Iraq, Gulbenkian sounds almost nostalgic about going there to do business.

"I find it quite natural," he said.

Source: The Associated Press, May 26, 2003, Monday, BC cycle

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