OIL: New Middle East Split

The price for promising Middle East oil concessions is rising so fast that the so-called fifty-fifty profit split is as dead as a dry well.

Last week a group of Japanese oilmen won a 2.890-sq.-mi. concession in the Persian Gulf off the neutral zone by contracting to pay 56% of the production profits to the zone's owners, Kuwait and Saudi Arabia. The deal came just a few days after Standard Oil Co. (Indiana) became the first major U.S. company to upset the fifty-fifty pattern. For a 6,177-sq.-mi. concession off Iran's shores in the gulf. Indiana Standard agreed to pay 75% of profits to Iran, plus a $25 million bonus, and to spend $82 million in exploration and development over the next twelve years. If no oil is found, Indiana will turn over half of the unspent portion of the $82 million to Iran.

Other companies had bid against Indiana Standard, offering only the fifty-fifty split. But this was more fiction than fact, because they also offered huge bonuses, bigger than Indiana Standard's. Iran chose the smaller bonus and bigger split, gambling that Standard will find a huge new field. If it fails to, then Iran will lose the gamble.

From Teheran to Texas, many an oilman grumbled that the new deals would inspire other oil-rich Middle Eastern countries to cancel their present fifty-fifty deals and demand sweeter contracts. But calmer leaders in the industry brushed such remarks aside. Said Howard Page, Middle East boss for Standard Oil Co. (New Jersey): "Some oilmen say that it is immoral or something to bid in a certain way. Baloney! I certainly do not want anyone to tell us how we can bid."