Share the Wealth

Locked beneath the history-laden sands of Saudi Arabia lies the world's last known great oil pool. The right to exploit it belongs to Arabian-American Oil Co., owned by The Texas Co. and Standard Oil Co. of California. But Arabian-American, which has done comparatively little drilling, saw its future production limited by a lack of distribution facilities. On the other hand, Standard Oil Co. (N.J.) and Socony-Vacuum Oil Co. have plenty of outlets in Europe, but little oil to supply them.*

Last week the four companies decided to make the biggest deal in the history of the U.S. oil business. Jersey Standard and Socony will buy into Arabian-American--the reported asking price was $250,000,000 for a 40% interest--so that they can develop the concession fully and sell Arabian oil in Europe, biggest market in the world outside the U.S.

Help for Ibn Saud. In 1933, California Standard won its concession from Saudi Arabia's aging (67) King Ibn Saud; three years later it brought in Texas Co. with the idea of selling Arabian oil in the Far East. Now the only oil company in Saudi Arabia, Arabian-American owns rights on 278,000,000 acres, an area almost three times the size of California. Estimated oil potential of these acres: up to 20 billion bbls. Current production is now 200,000 bbls. a day (up from 18,000 two years ago), and the Far Eastern market is not able to absorb anywhere near enough oil to warrant all-out production in the Arabian fields.

In the past, Jersey Standard and Socony have supplied Europe's oil needs from South America and other foreign properties. But since the depletion of U.S. reserves in the war (the Western Hemisphere supplied 90% of the Allies' needs), the Government has looked sourly on heavy export of oil from the Americas. One other prod to the deal was given by Ibn Saud. As oil and pilgrimages to Mecca are his chief sources of income, he has long awaited increased exploitation of his lands to boost his royalties of 22-c- a bbl. Shrewd old Ibn Saud also knows that more production means more American capital in Saudi Arabia and more work and good wages for his impoverished Arab subjects.* Help for the U.S. Arabian-American can use some financial help to exploit the Arabian pool. It has already spent an estimated $200 million on its concessions. Now it plans to spend $125 million on a 26-inch pipeline running 1,200 miles northwest from the Persian Gulf to Haifa to save the long haul by tanker through the Red Sea.

To Washington the logistics of the oil deal seemed eminently satisfactory. If Europe were supplied from the Middle East, Western Hemisphere oil could stay in the Western Hemisphere. More Latin-American oil would be available to

1) take care of U.S. domestic needs,

2) lessen the drain on U.S. reserves. Another factor not lost on Washington: Arabian oil could--and would--provide ample fuel for the Navy in the Middle East. As to diplomatic ramifications of the deal, the Department of State merely said: "It's just a business deal."

* Jersey Standard and Socony-Vacuum together own 23 1/4% of Iraq Petroleum Co., controlled by the British. Its policy is to hold down production, conserve this oil for future British Navy needs. American share of current daily production is only a trickle: 22,000 bbls. In addition, the American companies' European and East Indian properties were war casualties.

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