File No. 800.6363/1

The British Embassy to the Department of State 1

Memorandum

A memorandum was addressed to the State Department by Lord Reading on May 21st 1918, in respect to certain aspects of negotiations then proceeding between the two Governments and the oil interests concerned, on the subject of petroleum supplies. One of the principal objects of the scheme under discussion was to supply the Eastern markets to a larger extent from the sources of production in the East instead of from America and so enable America the better to supply the war needs of the Allies in Europe and especially to facilitate the sea transportation of oil by employing tank steamers on the shortest routes.

In the subsequent developments an agreement has been reached on all main principles between the two Governments, and according to the latest advices from London, the matters still to be discussed before a final agreement is reached are principally the prices at which supplies shall be made from the Eastern refineries to the American distributing companies. The agreement provides for a considerable extension of production from the oil fields of the Dutch East Indies, Burmah and Persia, to enable some 200,000 tons additional kerosene (lighting oil) to be produced in the East and supplied to India and China from the nearest source of supply. All existing marketing interests are safeguarded on an equitable basis. Other petroleum products from the above-mentioned fields are used for war purposes.

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It now becomes essential that the producing and refining companies operating in the East shall receive at the earliest possible date the necessary supplies of oil-well equipment such as steel casing pipes, drive and line pipes, various tools and general supplies.

Much communication has taken place between the British Embassy and War Mission, and the War Trade Board and the other departments concerned in regard to the manufacture and export of such material.

The British Government entirely appreciate the great demands that are made upon the steel industry of the United States for shipbuilding and other essential purposes, but it must be remembered that the efficiency of the Allied navies and the keeping open of the sea routes, and also the aviation and army transport services are dependent on the supply of petroleum products.

Large supplies are being shipped from the United States, but increased production from the Eastern fields and, a fortiori, the maintenance of existing production is essential for the reasons already stated. The British Government also attach importance to obtaining supplies of oil from Trinidad, which is also favourably situated.

The British Government have agreed that in supporting applications of the various oil companies in the Dutch East Indies, Sarawak, Burmah, Persia and Trinidad they will exercise the closest scrutiny and control over the demands of the companies to ensure that applications are not made for well equipment for speculative purposes, but only in fields where there is actual production for war purposes and where extensions for these purposes are necessary and practicable or of the highest promise.

The British Government are aware of the contraband regulations forbidding the export of certain classes of material to the Dutch East Indies. They regard it as essential however, under the agreed policy of the American and British Governments as to the increases of Eastern oil production, that the necessary supplies of oil-well equipment endorsed by the British Government should be made an exception to those regulations.

It is suggested that the necessary communication may now be addressed to the War Industries Board who are concerned in the granting of certificates of priority of manufacture, and to the War Trade Board who grant export licenses, and also the Shipping Board and the Oil Division of the Fuel Administration, to admit of certificates and export licenses being granted for the well equipment supplies endorsed by the British Government.

It is particularly suggested that, where manufacture is in hand or complete, and the British Government are satisfied that the supplies are necessary, export licences be granted promptly, in order [Page 621] that opportunities of sea transport, which in present circumstances may be few and far between, may not be missed.

Recent cables from the British Government show that the delays in granting licences have brought certain companies, in Burmah in particular, to a serious point at which in spite of all economy in the use of old casings, etc., operations will have to be suspended.

It is vital to avert so grave a misfortune in any of the important fields engaged in meeting the war needs of the Allied fleets and forces.

  1. Covering note of Aug. 22 not printed.↩