890F.6363/9–1548: Telegram

The Charge in Saudi Arabia (Bergus) to the Secretary of State


512. Garry Owen Aramco informed me today Aramco and SAG had agreed in principle as follows:

Offshore oil rights confirmed as being within Aramco concession.
Aramco to pay same royalties for offshore as onshore oil plus five cents per barrel.
Aramco guarantees $2,000,000 minimum royalties offshore oil per annum.
Aramco relinquishes rights Kuwait neutral zone.1
Aramco obligated start work offshore region within one month after signature agreement.
Offshore area defined as area beginning mean low tide and extending seaward.
SAG will cooperate with Aramco in confirming and crystallizing SAG’s offshore area.
SAG confirms relinquishment2 agreement of 1947.

Foregoing has been placed in hands Aramco SAG lawyers for drafting of agreement which will then be signed.

Re relinquishment by Aramco other territories, by original concession Aramco was to begin relinquishment July 1949. This later extended to July 1955.

During recent negotiations Finance Minister stated SAG desired no competitors Aramco in Saudi Arabia. Preferred Aramco not relinquish territory until exploration indicates no oil.

Aramco however, for purposes geological planning program prefers start relinquishment. Effective signature above agreement all land west longitude 46 to be released from preferential area (granted supplementary concession 1939). This comprises 76 percent preferential area.

Beginning July 1949 Aramco will relinquish 33,000 square miles exclusive concession area. Similar amounts to be relinquished in July of 1952, 1960, 1965 and 1970. Upon termination this program 46 percent total exclusive area will have been relinquished.3

Owen has seen and checked accuracy facts this telegram.

Department pass Cairo as 99 for Funkhouser.4

  1. The rights to exploit Saudi Arabia’s undivided half of the Kuwait neutral zone.
  2. Relinquishment by Aramco of its rights in various areas of Saudi Arabia under the terms of its concession.
  3. The offshore settlement agreement by the Saudi Arabian Government and Aramco, dated October 10, was signed on October 14 (telegram 194, October 18, 10 a. m., from Dhahran, 890F.6363/10–1848). Aramco provided the Department with a copy on December 30 (890F.6363/12–3048).
  4. Richard E. Funkhouser, Third Secretary of Embassy in Egypt.