PUBLIC RECORD OFFICE
Reference :-
༄། ། ། ། ། ། mmimmim C.O. 885
22 PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC= [ COPYRIGHT PHOTOGRAPH-NOT TQ||
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(b) To give the Imperial Government a right of pre- emption of all oil residues at a price to be agreed upon between the owners of the mining rights or refiners and the Imperial Government, or, failing
their commercial value, to agreement, at determined by arbitration;
be
(c) To impose a condition, to be implied in the sale or lease of oil rights, or any sale or lease of land for the purposes of winning oil, that the purchaser or lessee shall actively carry on the work of mining for oil, and that in default the oil rights shall lapse. (d) To empower the Governor to regulate the site of any
refinery, oil store, or place of shipment.
We are of opinion that provision should be made for this legislation to take effect from the date of publication or intro- duction into the House of Assembly, and that a draft of the Bill which it is proposed to introduce should in the first place be sent home for the observations of the Committee and the approval of the Lorda Commissioners of the Admiralty and the Secretary of State for the Colonies.
As at present advised, we do not consider it desirable that legislation should be introduced to give the Government the power of taking over and working the oil wells or refineries; but we recommend that, in any contract for the supply of oil to the Imperial Government, an emergency clause shall be inserted providing that the contracting company shall, if called upon to do 80, use their utmost endeavours to increase the supply of oil, and giving the Government the power, in the event of war, to take control of the works and plant, subject to the payment of com- pensation for losses sustained by the Company.
The question of the encouragement which the Imperial Govern- ment should give towards the extension of the oil industry in Barbados is one which must depend upon circumstances, including the extent of the local production and the requirements of the Bervice. Besides the West Indian Petroleum Company there are, we understand, at least two other proprietora in Barbados on whose lands prospecting for oil has been commenced. We consider that the grant of a monopoly of the export or supply of oil to any person or company would be detrimental to Imperial interests, and would be calculated to defeat the objects in view. We consider further that the grant of actual financial assistance to any company should be avoided as far as possible, and we are of opinion that a company possessing mining rights over a district in which satisfactory indications of petroleam have been found would, if assured of a favourable contract to supply fuel oil to the Admiralty, be enabled to obtain the necessary capital.
As at present advised, therefore, we recommend that the Lords Commissioners of the Admiralty should invite, by tender or other- wise, one or more contracts for the sale, during a term of years, of a definite minimum quantity of oil suitable for naval use. We suggest that the provisions of any such contract should follow, as far as circumstances permit, the terms of the concession which we have drafted for the acceptance of the Oil Exploration Company of Canada in Trinidad, in so far as they relate to the status of the contracting company, the right of pre-emption, the preparation of oil of the required quality, the extension of the output and the increase of supply in case of emergency, and the reference to arbitration of disputes.
In Trinidad the question of control is considerably simplified by the fact that a great part of the land of the colony, including the area in which the most promising indications of the existence of oil have been found, is Crown land, and in granting con- cessions the Governor is enabled to impose such conditions as may appear desirable.
As a basis for future concessions, as well as for the control of possible sources of supply in private lands, we are of opinion that legislation should be introduced, as in Barbados--
(a) to forbid the sale or export of crade oil except with a licence from the Governor, which should be revocable at will;
(b) to give the Imperial Government a right of pre-emption
of all oil residues at a price to be agreed upon be- tween the owners of the mining rights or refiners and the Imperial Government, or, failing agreement, at their commercial valne, to be determined by arbitration.
The draft of this Ordinance should be sent home for the obser- vations of the Committee and the approval of the Lords Com- missioners of the Admiralty and the Secretary of State for the Colonies.
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When this Ordinance has been passed, it will be possible to impose such conditions in the grant of all future concessions of Crown lands as will safeguard the interests of the Imperial Government.
We recognise that Mr. Rust and the Oil Exploration Company of Canada, who have spent considerable sums in anticipation of an extension of the concession granted in 1902, are entitled to con- sideration, and we consider that the company should be accorded as favourable treatment as is compatible with the security of Imperial interests. We think it necessary, however, that the company should be distinctly warned that this legislation will be introduced, and that the renewal of the concession will be made conditional on their accepting its terms.
We have given our careful attention to the draft concession which it is proposed to grant to the Oil Exploration Company of Canada, and we submit, in the revised draftt appended to this report, a form of concession which should, we consider, be offered for the acceptance of the company.
From the report of the Government Geologist of Trinidad, who has visited and carefully surveyed the area which forms the subject of the proposed concession, and from the remarks of Dr. Boverton Redwood, who has given this report his consideration, we are led to suppose that there is a possibility of petroleum being found in commercial quantity over a large area, but at such depths as to require a considerable initial outlay on well-sinking before the output is sufficiently large to be of value for Admiralty purposes. We consider that the rights which it is proposed to transfer to the company may prove of considerable value, and we are of opinion that the company may fairly be called upon to give more substantial guarantees to work the concession than were contemplated when the deed was originally drafted. We have been confirmed in this opinion by the information furnished by Dr. Boverton Redwood with regard to the practice in European and American oil-fields.
Holding this opinion, we have added a number of clauses to the original draft with a view to securing the interests of the Imperial Government, while at the same time according advantageous terms to the company in the matter of the sale of oil for the purposes of the Government. The land which is the subject of concession being the property of the Government of Trinidad, the contract is expressed throughout to be made with the Governor, who will, however, so far as the supply and purchase of oil is concerned, act mainly on behalf of the Imperial Government. The interests of the Island Government are, we consider, sufficiently secured by the provision for the payment of royalty, and by the advantages which may be expected to follow the establishment in the Island
of a port of supply of fuel for His Majesty's ships of war.
It will be convenient to state shortly the considerations which have guided as in drafting the additional clauses added by us to the original draft deed.
Provision has been made in sections (a) and (a 1) of clause 4 to ensure that the company to whom the concession is transferred shall at all times remain a British company and under British control. We had before us the further proposal that the majority
of the shareholders of the company should at all times be British subjects, but we are unable to support it in view of the serious effect it would be likely to have on the company's ability to raise the necessary capital for the prosecution of the undertaking.
By an addition to section (k) of clause 4, the Governor has been given the option of purchasing the buildings and plant of the company at the expiration of the term of the agreement, and the company are debarred from interfering with the normal flow of oil from the wells within six months of the date of expiration.
In clause 5 the royalty has been fixed at a rate per ton of oil produced which is, we calculate, roughly equivalent to the rate fixed on the basis of the net proceeds at which in the original draft the royalty was computed. We think that by this method the amount payable by the company will be more readily calculated, and a possible occasion of dispute will be avoided. We have further provided that royalty shall not be payable on vil residues purchased by the Governor. Without this proviso, the question of the propriety of including a proportion of the royalty in the purchase price payable by the Governor for residues taken from the company would have been one of some difficulty. In considering the effect of this proviso on the colonial revenue,
• N.B. This draft was not adopted and was considerably modified in the actual agreement with the Oil Exploration Company of Canada which is now being transferred to the Central Mining Company (Wernher, Balt & Co.).—W.J.
↑ Not printed here.