The Japanese Wildcat

From 28 miles off the Saudi Arabia-Kuwait Neutral Zone in the Persian Gulf flashed word last week that the Japanese-owned Arabian Oil Co., Ltd. had brought in its first well. It came in the nick of time. The 6,000 barrels of oil that will rise daily from the ocean floor ended months of misfortune that had brought the company near bankruptcy. An eleven-day fire in its offshore platform had cost the cash-short firm $780,000. and stockholders had refused to ante up any more capital. Now, flushed with the glow of sudden prosperity and the promise of Japanese government help, Arabian Oil President Taro Yamashita plans to sink 42 more wells in the next four years, expects to spend an additional $167 million to supply Japan with a third of its 240-million-barrel annual petroleum requirement by 1965.

Japan's first major venture into international wildcatting was stimulated by the need for cheaper oil for its mushrooming industry. Founded in 1957 with $9,800,000, Arabian Oil secured 44-year offshore concessions from both Saudi Arabia and the sheikdom of Kuwait. The price was steep, but oil-poor Japan had no choice. Instead of the fifty-fifty profit split then prevalent, the Japanese agreed to take only 43% of the profits from Kuwait, 44% from Saudi Arabia. They also promised to build a refinery in Saudi Arabia or in the Neutral Zone, agreed to sell 10% of production to the two nations at a discount, make available another 10% for sale to friendly Arab nations.

Oil producers throughout the Arab world heard of the Japanese strike with some dismay. New oil discoveries have already helped saturate the market, threaten to drive petroleum prices down. In spite of the glut, the search for new fields gallops along in the Mideast and North

Africa, because the oil companies are caught between the rising tide of Arab nationalism and the intense competition from the newest fields. The development of France's Saharan oil fields (TIME, Aug. 17) will cut into the European market for Mideast oil; in addition, Russia is shipping oil not only into Western Europe, but through the Bosporus into Egypt and North Africa. For these reasons, new oil concessions are being granted all over the Middle East. Examples: P: In Yemen the American Overseas Investment Corp. was exploring a 10,000-sq.-mi. concession in the northwestern coastal plain. It had beaten out the Japanese and the Italians for Yemen rights. P: In the Persian Gulf sheikdom of Abu Dhabi, a subsidiary of British Petroleum Co. Ltd. and Compagnie Franchise des Petroles brought in a well that tested out at 2,400 bbl. daily.

P: In the remote sultanate of Muscat and Oman, Dhofar Cities Service Petroleum Corp. was punching dry holes all over the sere, cheerless wastes, but was still hopeful of hitting a gusher.

The biggest new field has been opened in Libya. Already 16 companies have invested $175 million for 84 concessions over the country's 680,000 sq. mi. To date, 61 wells have been drilled, and 13 were producers. The two discovery wells --Zeltan One and Zeltan Two--brought in by Esso Standard (Libya) Inc. in the oil-rich Sirte district are gushing 32,500 bbl. a day between them. The company is planning construction of a 30-in. pipeline to the Mediterranean's Gulf of Sirte with an initial daily capacity of 100,000 bbl., hopes to have oil flowing through by the fall of 1961. Libyan crude is similar in quality to Mideast oil, for which European refineries are designed. Because deposits are not deep, and drilling is close to the sea, transportation to ports is easy.

The two new fields close to Europe, plus new finds such as those of the Japanese, have caused some rulers of the older oil-rich countries to wonder just how much more of a squeeze they can put on the oil producers. With the world glut, and the new fields, they are beginning to realize that it is not enough just to have oil; they must also sell it, a job that gets harder with each new discovery.

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