The Arabian oil concession granted to Standard Oil of California in 1933 is fully documented in the history books, but the first concession granted to Major Frank Holmes 10 years earlier is less well known. Despite yielding no discoveries, the concession marked the first tentative shoots of Saudi Arabia’s interest in oil, which led to a long and prosperous future of petroleum development in the Kingdom.
In the age before oil, there was little to attract a foreign power to the Arabian Peninsula. Its tribes were many and diverse, its climate hostile and unyielding. Largely desert, it was a difficult place for outsiders to reach because of distance, terrain and dangers along the way. In the early 1900s, an uneasy balance developed as the ruler of Nejd in central Arabia, Emir Abdul Aziz ibn Abdul Rahman Al Saud – “Ibn Saud,” maintained a dialogue with Great Britain while looking for an opportunity arising from the decline of the Ottoman Empire.
The balance shifted dramatically in 1913 when Ibn Saud seized the province of Al Hasa from the Ottomans. With other preoccupations in Europe, the British (who held sway in the Persian Gulf) did not attempt to intervene militarily. However, two years later they entered into a treaty of friendship with the emir. This included a clause that he should not grant oil concessions without British approval. In return, his domain of Nejd and Al Hasa was recognized and he received an annual stipend of £60,000 (almost £5 million today).
Meanwhile, interest grew in the oil prospects of the Middle East. The Anglo-Persian Oil Company, in which the British government held a majority share, kept a watching brief over the tangled petroleum affairs of the Persian Gulf.
Holmes and the Theory of Oil
In 1920, Harold Dickson left the Political Agency on Bahrain Island for the short crossing to Al Hasa on the Arabian mainland. A British political officer, he had heard the rumor of an oil seepage based on an old report from the Ottoman days. At Qatif, having paid his respects to the local sheikh at his fort on Tarut Island and having read a copy of the report, Dickson set off on camel with his Bedouin guide and a donkey in tow. He travelled six miles inland looking for a seepage in the dunes. However, he found no sign of it and, suspecting that the report might have located the seepage in the wrong place, he abandoned his search. Dickson turned his little party around, headed for a low hill called Jebel Dhahran and reached the shore before boarding a dhow for his return to Bahrain.
Oil seepages and dome-shaped hills were the currency of oil prospecting in those early days. Two years later Dickson would meet another explorer, Major Frank Holmes. A British-New Zealand mining engineer, Holmes was a partner in the Eastern and General Syndicate of London, which was established to obtain oil and mining concessions. He claimed to have a “nose” for finding oil. Seepages were his specialty – he had heard about Arabian oil seepages in the course of his travels as a quartermaster with the army during World War I, and afterward during his many trips up and down the Persian Gulf.
Holmes had an unusual theory about finding oil in the region. He saw a correlation between freshwater springs and oil seepages. There were many freshwater springs in the sea off the northeastern coast of Arabia, on the Bahrain Archipelago, on the mainland of Al Hasa and in Kuwait. Defying conventional wisdom, Holmes believed that this water came from the Persian mountains and not from the highlands of Hejaz and Nejd. These underground streams flowed at a great depth before rising to the surface along a line of geological faults. In the same way, he argued, these faults allowed oil to float to the surface. He traced the course of water springs through three parallel lines on a map and matched these with locations where “bitumen” had been reported. In Holmes’s view, the chances of striking oil, either in Bahrain, Qatif or Kuwait, were “very bright”.
It followed that oil would be found along these lines. It was an outlandish theory in the light of modern knowledge, but a powerful motivator for someone who believed that oil might be found in Arabia. It was certainly more compelling than other theories, such as that of Hugo de Böckh, chief geologist of the Anglo-Persian Oil Company (the forerunner of British Petroleum), who dismissed Arabia as an oil prospect, and George Martin Lees, who was so skeptical of finding oil on Bahrain Island that he bravely promised to drink it all.
A Long and Winding Road
In the autumn of 1922, the 49-year-old Holmes traveled to Arabia and met Ibn Saud. The two men got on well and the emir promised to grant an oil concession for Al Hasa. It seems that Holmes had undertaken a four-week, one-man survey of the province and impressed Ibn Saud with earth samples, including one “strangely impregnated with oil.”
Holmes then travelled to Basra to get the draft contract drawn up in Arabic. Returning on the steamer Barjola, he encountered the American-Lebanese writer Ameen Rihani, who was also heading for Arabia. The affable Holmes disingenuously remarked that he was traveling for his health. Later, when staying in Bahrain with Harold Dickson and his wife, he claimed he was traveling to Al Hasa in search of a rare butterfly.
As it happened, Holmes, Rihani and Dickson were soon destined to meet again – at Uqair (Ojair) on the Hasa coast – for a meeting between Emir Ibn Saud and Sir Percy Cox, the chief British representative in the Gulf. Two prominent buildings stood on the shore at Uqair, a crumbling, ancient fort and a customs house from the Ottoman era. The emir established a camp in the dunes about half a mile away. Holmes arrived on a small dhow wearing a thin Arab robe over his European clothes, and a cork helmet draped with a red kerchief held in place by a double black cord in the Bedouin style, a strange fusion of Western and Eastern cultures. His tent was closer to the Arab camp and, although he ate his meals with the British delegation, he did not gain their trust.
The parties assembled in late November. After five days, when Holmes – at last – had his chance to agree on a final document with Ibn Saud, Cox stepped in and struck Qatar out of the concession agreement. He also reminded the emir that he was obliged to take the advice of the British government before making a deal with Holmes.
However, five months passed and Ibn Saud heard nothing of substance. The British stopped paying his stipend and Anglo-Persian declined to discuss a concession, so the emir sent for Major Holmes. On May 6, 1923, in the vaulted audience hall in Hofuf, the two men signed the final contract. Holmes received a two-year option to explore for and produce oil and other minerals in return for Ibn Saud receiving annual rental payments of £2,000 and one-fifth of the oil in return. Particularly annoying for British officials was the fact that the E&GS was prohibited from selling or transferring the concession to Anglo-Persian. But Holmes’s standing among Arabs was high; the following year, he obtained concessions for the Neutral Zone between Al Hasa and Kuwait, and Bahrain.
The Hard Reality
One rumor circulating the Gulf was that by working the Hasa concession, Holmes and his cronies would “drain” the oil from Kuwait and Bahrain. Although nonsense, it did highlight a sense of unease that the concessions had triggered. Holmes proceeded to commission a preliminary survey of oil and water prospects, appointing Arnold Heim, a university lecturer from Zurich to lead the expedition. On April 28, 1924, Heim set out from Kuwait and worked his way down the Hasa coast. His party comprised three assistants, 25 armed guards provided by Ibn Saud and 28 Bedouin camel drivers. But Heim was soon in despair, finding the heat, dust and humidity intolerable. By May 6, he wrote in his diary, “Everything becomes tiresome. The days are counted down to liberation from this ordeal.”
On reaching the port town of Jubail, they were assured that oil would be found – but were to be disappointed.
“So far,” wrote Heim, “not the slightest sign and the stratification (is) totally flat.”
On May 13, he left to stay for several days in Bahrain, leaving mining engineer John Leybourne Popham in charge of the caravan. On his return, Heim passed through Tarut where the local sheikh failed to mention the fabled oil seepage that Dickson had investigated four years earlier. Unfortunately, Heim then rode south but turned back before reaching Jebel Dhahran and so missed the anticline that would prove to be so productive in future years.
Having trekked for two nights to avoid the heat of the day, the caravan arrived in Hofuf. By now, Heim had decided that the province was not worth the effort and set his sights on Bahrain Island. Days later, Popham took the caravan to Qatif without seeing any interesting outcrops on the way. The two men returned to Bahrain on June 4 and left 10 days later. Heim reported that the only evidence of oil they had found in Al Hasa was tar and asphalt on the shore, which were probably blown in on the wind.
“The rocks did not show any traces of impregnation,” he wrote. “No signs of anticlines were encountered.” He concluded that “the countries of Eastern Arabia … do not present any decided promise for drilling on oil.”
While Heim’s report was an accurate reflection of his survey, it was not what Holmes wanted to hear – the findings had to be kept under wraps: “We must not mention one word to any single person about our business,” he told Heim. “Do not even tell your baby.” By now, E&GS was in deep financial trouble and as a consequence, Holmes stopped making the annual rental payments to Ibn Saud, which effectively nullified the concession.
Holmes’s reputation with the Saudis never entirely recovered. That much was apparent in 1934 when a new concession for Al Hasa was discussed in Jeddah. On April 9, Holmes arrived on the scene, although he was not a party to the talks. He met, among others, Harry St. John Philby, a former British official working as an adviser to the Saudi government. In his book, “Arabian Oil Ventures,” Philby describes how he dispelled any prospect that Holmes might join the talks. It was clear that the Saudis were still smarting from E&GS’s default on its rental payments and were not inclined to talk to Holmes. Three days later, he departed on a steamer to Cairo, the Hasa concession a distant dream. In the event, the new concession went to Standard Oil of California (SoCal), now Chevron.
Despite this, Holmes –forever the optimist – was undaunted.
“He does not seem to share the otherwise universally held belief that Ibn Saud regards him unfavourably,” wrote Stephen Longrigg, representing the Iraq Petroleum Company.
Shifting Sands
Dismissed by British officials as a “rover in the world of oil,” Holmes had the unnerving habit of appearing out of the blue with his interpreter and Somali assistant, slipping under the radar of imperial control. He was the “bogeyman” of the British establishment, watched and reported on while he negotiated face-to-face with Arab rulers. He was the prime mover of the oil business in Bahrain, Arabia and Kuwait, breezing around the Gulf long before Anglo-Persian took a serious view. The Arabs called him “Abu Naft,” the Father of Oil – but he remained a controversial figure. In the mid-1930s, in a classic case of poacher turned gamekeeper, Holmes acted for the British-led Iraq Petroleum Company on the Trucial Coast (today’s United Arab Emirates), where his inclination for local intrigue proved his undoing.
Heim discussed with Holmes the possibility of returning to Arabia for another survey in the cool season, but that came to nothing. However, Heim had more success with his water report on Bahrain. A few months after his visit, a series of storms made it difficult to access undersea springs and there was a severe water shortage on the island. Based on Heim’s report, Sheikh Hamad bin Isa Al Khalifa pressed the British for permission to drill two wells. A year later, news arrived that water had been struck – an additional 12 wells were drilled and all of them proved to be good producers. Thus encouraged, Sheikh Hamad granted the syndicate a two-year exploration license, which laid the foundations for the discovery of oil by SoCal in 1932, although the process was a long and tortuous one.
The Bahrain oil strike triggered an interest in the oil prospects of Al Hasa, which brought SoCal to the Arabian mainland. Some years later, Harold Dickson discovered why he had been unable to find the oil seepage he searched for in 1920.
“It was covered by a gigantic sand dune, one of the very many to be found, continuously on the move, west of Qatif palm-belt,” he wrote. When American geologists started working in Al Hasa, they discovered a large oil dome at Jebel Dhahran, and another smaller one just behind Qatif – “just where my elusive seepage existed” wrote Dickson. “Today this second field possesses six wells, I believe.”
The oilfield that Heim missed was the Dammam dome, identified locally as Jebel Dhahran. In March 1938, the discovery well, Dammam No. 7, struck oil at a depth of 1,440 meters and was soon flowing at a rate of 4,000 barrels per day. It produced 32 million barrels of oil before it was shut down in 1982. More importantly, the well heralded the start of Saudi Arabia’s oil industry, which led to numerous important oil and gas discoveries. Holmes’ concession, if developed, would have captured part of the Ghawar field, the largest oilfield in the world.
And so the first concession for Arabia went down in history – as one of the greatest missed chances of all.