Captain & Concession

(See front cover)

Nine months of the year the northeast trade winds blow across the Gulf of Venezuela into Colombia, where the Andes taper off in three great wrinkles in the earth's crust. As the warm, moist trades are deflected upward by the first mountain range the air is cooled, releasing part of its burden of rain. In the tropical night an almost continuous electrical display can be seen along the mountain peaks, resembling successive flashes of sheet lightning. This phenomenon is called the "Catatumbo Lights," after the Catatumbo River, which rises in Colombia and empties into Venezuela's saltish Lake Maracaibo (see map p. 68). Early explorers thought the Catatumbo Lights might be similar to the "Perpetual Fires" at Baku, where burning natural gas seepage illuminated the discovery of that fabulous Russian oil field. Their guess was a scientific error. But the Catatumbo Lights did illuminate the discovery of another major source of the world's oil.

In the 29 years since oil was first found oozing from the ground around masses of asphalt in the Maracaibo Basin, more than 1,000,000,000 barrels of crude petroleum have crossed the shallow bar that joins Lake Maracaibo to the Gulf of Venezuela. For a few years Venezuela ranked second to the U. S. in oil production, though since 1931 Russia has crowded it into third place. In neighboring Colombia, where the oil oozed just as freely, only Standard Oil of New Jersey has so far made the tremendous investment necessary to get South American oil to market. Colombian oil fields are deep in mountainous jungles, far from water transport. Even more important in delaying Colombian developments were the involvements of Colombian concession laws. Standard's 356-mi. Andean Pipe Line from its De Mares Concession to Cartagena on the Caribbean has carried virtually all the oil Colombia has ever produced, less than 175,000,000 bbl. Most famed of Colombia's undeveloped concessions is the Barco, covering an area larger than that of Rhode Island. Originally granted to the late General Virgilio Barco, an able Colombian who had grown rich in such varied activities as cattle, sugar, matches, liquor, the Barco Concession has had a purple history. After sinking more than $100,000 of his personal fortune in development work, General Barco put his concession on the market. Through the intervention of a seasoned promoter named Carl Kendrick MacFadden, most of the Barco went to Henry Latham Doherty's Cities Service Co. A minority interest was taken by Carib Syndicate, then headed by Mr. MacFadden. Cities Service grew tired of the responsibilities of jungle oil and in 1926 sold it to Andrew William Mellon's Gulf Oil Corp.

Almost immediately the concession was canceled by the Colombian Government. For five years the Barco was dragged through Colombian courts and Colombian politics. Finally the Colombian Congress granted the concession to Gulf a second time in a contract that is now the law of that land. Later the Barco entered U. S. politics as a highlight in an early Mellon-baiting show put on in the House of Representatives. Fortnight ago it was announced that the Barco was about to change hands once more, this time passing to Texas Corp. and Socony-Vacuum Corp. (TIME, April 27). This week at Texaco's annual meeting, Chairman T. (for Torkild) Rieber will publicly confirm the Barco purchase, announcing to his stockholders that the deal is signed & sealed.

Partners. For Texaco stockholders this week's meeting will hold two other major interests. One is that Texaco will break precedent by announcing interim earnings (60-c- per share for the March quarter). The other is that it will be the first meeting over which Chairman Rieber has presided since his election (TIME, Aug. 19). In the Barco deal the stockholders will catch their hardheaded, steel-willed chief executive in the type of action he likes best. He personally negotiated with Gulf, bought the 1,200,000-acre concession at his own figure for Texaco alone. With the Barco firmly in hand he went to a company which he knew would be a good partner for a tough job of oil pioneering. At Socony-Vacuum he sold a one-half interest to President John Albert Brown. After the uproar over last year's Ethiopian concession, during which he had to eat his denial that Socony had any connection with the Rickett contract with Haile Selassie, President Brown was more than ready for a foreign oil venture in which the only real political problem was how to make peace with Colombia's Motilone Indians, a completely savage race which likes nothing better than to pink off white oilmen with macana palm arrows. From now on Texaco and Socony will be partners on a 50-50 basis in all expenses and in any profits.

Chairman Rieber did not buy the Barco concession itself. What he bought and now shares with Socony is all of the stock in a Gulf subsidiary which in turn owns 79% of the stock in a company called Colombian Petroleum. The other 21% of Colombian Petroleum is still held by Carib Syndicate. In the highly involved concession arrangement both Colombian Petroleum and the Gulf subsidiary are the concessionaires, each being responsible for the other's obligations, which include a prescribed amount of well-drilling and, after potential production has reached about 20,000 bbl. per day, the building of a pipeline more than 200 miles to the Colombian coast. In the end, though, Texaco and Socony will have to stand the costs. Most favored parties in the Barco setup are the Colombian Government and the heirs of old General Barco and interests like American Maracaibo Co., who have bought shares in his original royalty rights. Without putting up a cent, Colombia and the Barco heirs & assigns will eventually receive total royalties amounting to some 10% of all Barco oil delivered to the pipeline terminal. What Chairman Rieber had been willing to pay for one of the richest concessions in South America remained a secret. In the oil industry the price was thought to be somewhere between $10,000,000 and $15,000,000. Two things were certain: the Mellons would never have let the Barco go at a loss, and Chairman Rieber would never have paid a dollar more for it than the figure he had set his mind upon.

Show Downs. The first thing in his life that Torkild Rieber set his mind upon was his own career. Born in a little town called Voss in the interior of Norway, he went to sea at 14, thereby upsetting the future plotted for him by his father, a progressive woolen manufacturer who expected to rear his eldest son in the family business. Son Torkild learned seamanship in sailing vessels, passed his examination for a master's ticket at 19, got his first command at 21. It was a sailing vessel and, more important, an oil tanker.

On the bridge of a steam tanker Captain Rieber sailed into Texaco in 1905, the company having bought the vessel he commanded. For four years he sailed for Texaco, was brought ashore to superintend the conversion of a peach orchard in Bayonne, N. J. into a great Texaco terminal. Today such a job would probably be given to a trained engineer. At that time it was given to Captain Rieber because he had horse sense, a command of men and the driving force of a triple-expansion engine.

His upward push within the company was interrupted just after the War, when he joined Joseph Stephen Cullinan, Texaco's first robustious president, in another oil venture. Mr. Cullinan had quit the company a few years before in one of those periodic management eruptions which have given Texaco such a peculiarly individualistic tang ever since it was founded in 1902. Mr. Cullinan had called for the usual showdown with the board of directors. A loser, he picked up his hat and walked out, with no hard feelings, to start what he hoped would be another Texaco. When he needed a good oil man he went to his old company, persuaded it to release Captain Rieber. But by 1927 Captain Rieber was back with Texaco again.

By the middle of Depression Mr. Rieber was ready to use his strong hands in another management eruption caused by Ralph Clinton Holmes, who called for his showdown in 1933. Only a few years before, Oilman Holmes had been backed by his directors in a sudden showdown with Judge Amos Beaty, then a Texaco power. Judge Beaty lost, picked up his hat, walked out to take a friendly office directly above Texaco's Manhattan headquarters. In 1933 Mr. Holmes picked up his hat, but he walked only as far as another Texaco office, there to organize a proxy battle to regain his dictatorial control. Upshot was Texaco got a new president, William Starling Sullivant Rodgers, a Yale graduate who represented a new type of oil executive. A trained engineer who went into oil after a turn at mining, he entered Texaco in 1915, was sales vice president when his directors called. Now 50, tall, athletic, he avoids the trappings of wealth in good Texaco tradition.

After the brief interregnum of the late Charles Bismark Ames, the chairmanship went logically to Torkild Rieber. To Texaco Mr. Rieber is still "The Captain." To the oil industry he is already a legendary figure. To a person who has drawn a Rieber reprimand he is about as forgettable as a typhoon. In his soft Norwegian accent he speaks of a "god dam" this or a "helluva" that with considerable frequency but no particular feeling. In his paneled office in Texaco headquarters in Manhattan's Chrysler Building, he seems to have the same intense detachment that always characterizes a good shipmaster.

For being literally "The Captain" to what he and all other Texaco men insist is The Texas Corp., Mr. Rieber draws something less than the $75,000 per year paid to the preceding chairman. Texaco salaries have not been filed since Mr. Rieber took office. He lives in an apartment hotel, has no country estate, no seagoing yachts. His son is at Yale and a daughter lives at home with his wife. Greying, powerfully-built, he has a trace of a mustache, clean, rugged features and a maze of wrinkles around his grey eyes earned by years of gazing at ten times ten thousand miles of changing sea. Forthright, generous, usually genial, sometimes convivial, he sits at a clear desk with a globe at his right, a telephone at his left, rolls of maps upon the wall and runs the biggest independent oil company in the U. S.

Company-- The Texas Corp. is as self-contained as any tanker Captain Rieber ever took out of Port Arthur, Tex., site of the company's biggest refinery. In the U. S. it owns 775,000 acres of oil lands outright, leases another 5,800,000 acres, has more than 7,000 producing wells. It has about 6,800 miles of its own crude pipelines and an interest in 1,300 miles more. Texaco pipeline communications require 11,500 miles of wire. To transport Texaco products no less than 500,000 tons of shipping are used, including its own fleet of 23 steam tankers, nine motor vessels, six ships under long-term charter and 175 other craft of assorted shapes & sizes. Texaco has 23 refineries, seven of them with a daily crude capacity of more than 15,000 bbl. The Port Arthur works can handle 80,000 bbl. of crude. On U. S. tidewater it has 20 bulk terminals, 41 in foreign lands. A Texaco factory last year turned out 45,000,000 tin cans. It sells more than 350 products ranging from gasoline and motor lubricants to refrigerating oils, floor wax and asphalt shingles. And it sells them through 40,000 retail outlets--widest marketing organization of any oil company in the U. S. At present Texaco's entire oil production is domestic, though its undeveloped foreign holdings amount to nearly 800,000 acres. Its own production last year was 46,000,000 bbl., but another 32,000,000 bbl. was bought from other producers to supply the 78,000,000 bbl. which ran through Texaco refineries. Yet Texaco sells one fifth of its oil abroad, marketing in some 100 foreign lands. The red, white and green Texaco trademark is as familiar to the motorist on Shanghai's Bubbling Well Road or in Elisabethville, Belgian Congo, as it is to U. S. motorists in all 48 states. In the Barco deal Texaco was looking ahead to the inevitable day when the U. S. will embargo the export of oil. In Collier's fortnight ago Standard of New Jersey's Walter Teagle declared: "Some day the U. S. is going to run out of oil. There are no two ways about it."

With tens of millions invested in refining and marketing equipment, Texaco has to be sure of its crude supply. Otherwise the company would be pretty much at the mercy of crude producers. Texaco has $473,000,000 in assets, 85,000 stockholders and 30,000 individuals who make one of the finest oil organizations in the industry, a unit never affected by the showdowns and walkouts at the top. Last year Texaco made a profit of $17,000,000, which was a fat increase over the $5,500,000 reported for 1934, though still far short of the 1929 record, $48,000,000. But without a sure source of crude oil Texaco might not be able to pay the dividends which have been declared every year since the company was organized upon one of the richest oil pools ever found--historic Spindletop in Texas.

Pioneering. One of the reasons Gulf was willing to part with the Barco concession was that that oil company has no heavy stake in foreign markets and plenty of production elsewhere to supply its retail distribution in the U. S. Gulf and the Mellons were not eager to continue development on a big scale. Moreover, the Barco had long since become a sore subject with Gulf and the Mellons, partly because of the prolonged wrangle with the Colombian Government, partly because old Mr. Mellon deeply resented the charges that he had used his high office to further private ends. In Congressman Wright Patman's single-handed attempt to impeach Mr. Mellon just before the Secretary of the Treasury was made U. S. Ambassador to the Court of St. James, it was hinted that a dinner conversation in Washington between Mr. Mellon and the President of Colombia and the settlement of the Barco dispute occurred suspiciously close together (TIME, Jan. 25. 1932). Last week Pittsburgh construed the Barco deal as a case of one oil company unloading a "hot" concession on two others.

Texaco's Rieber and Socony's Brown would hardly subscribe to that theory. Development of a concession like the Barco takes big money. A pipeline to the coast may cost $12,000,000 alone. It will have to be laid through thick jungle, will rise to nearly 5,000 ft. through a pass in the spur of the Andes where there are neither roads nor railroads. To get into the Barco at present, oilmen either fly to Bogota, motor to Cucuta and take the Cucuta R. R. to the property, or take a boat up the Catatumbo River to the northern terminus of the railroad. Standard Oil of New Jersey spent $52,000,000 on its De Mares Concession before it delivered a barrel of oil, has since invested an additional $42,000,000. To get real oil out of the Barco may require $50,000,000.

Exploitation of Venezuelan oil was relatively simple, except in Royal Dutch Shell's Colon Concession, because the wells were either in the water or at the water's edge. Venezuela's late Dictator Juan Vicente Gomez refused to have the bar dredged at the entrance to Lake Maracaibo for fear unfriendly gunboats might some time nose in. Gulf, Standard and Royal Dutch solved the shipping problem by designing special shallow-draft tankers which leave Lake Maracaibo in long lines each day to catch high tide at the bar. Gulf transships to regular tankers at a big terminal on the Paraguana Peninsula. Standard and Royal Dutch fleets go to their respective island refineries at Aruba and Curac,ao, in the Dutch West Indies, where politics are European, not Latin American.

Oil from the Barco by the terms of the concession must leave through a Colombian port, probably near Barranquilla. The oil is already there. Gulf brought in eleven wells which are now shut in, and drilling will continue. At the southern end of the concession commercial production has been found at less than 500 ft., though at the northern end the wells may run as deep as 6,500 ft. (In California "wells are now going down more than 10,000 ft.) General Barco merely dug pits for his oil, once struck seepage with a posthole digger.

Indians. From U. S. engineers General Barco ordered a model refinery with a daily capacity of eight barrels. First refinery in South America,* it was supplied by dipping oil from pits, and its products, packed out on burros, were marketed locally for years. In the end Motilone Indians burned clown the old Barco refinery, letting in the jungle upon the ruins. Indians are standard equipment in the Barco. Oilmen expect to be shot at with great regularity, and several oilmen and numerous native laborers have been killed or wounded. Only in one small area have missionaries succeeded in establishing any relations with the Motilones at all. There aborigines range the mountain slopes, live in communal houses where they wrap up their dead, hang them from the ceiling to rot. Expert bowmen, Motilones shoot fish in the clear streams, using special arrows with a shaft that shakes out of the head after the fish is hit. Wound around the shaft is a line attached to both parts of the arrow, enabling the fisherman to pick up the floating shaft, haul in the head with the fish on it.

Motilones can be smelled but not seen. They smear their small brown bodies with rancid alligator grease to keep off mosquitoes. Usually the only warning that Motilones are near comes from their terrible stench. Oilmen have tried to get into the Motilones' good graces by avoiding shooting them except when attacked and by leaving trinkets on the trails. Occasionally they appear from nowhere in the middle of a river, grin up at the white occupants of a passing canoe, deftly twist the canoe upside down. It is into the heart of the Motilone country that Texaco's Rieber and his Socony partner will have to march, taking the Indians along with their oil.

A claim disputed by Peru, which has a refinery built by the Spaniards to obtain tar.

This file is automatically generated by a robot program, so reader's discretion is required.