’The Most Crooked Oil Deal of the Era’ - Africa’s premier report on the oil, gas and energy landscape.

’The Most Crooked Oil Deal of the Era’


By Paul Kenyon

The industry was ‘following the oil’ – wherever a big strike occurred, it was always assumed more would follow – and now Libya was that place and Tripoli was a boom town.

Orser and his family settled into the city’s expat community, living at first in a primitive duplex with no cupboards and only wood-burning stoves against the winter chill. The country remained desperately poor. The Esso discovery had been in a remote spot, far out in the Sahara Desert. A pipeline would be needed to link it to a port and that could take years to build. Even then, there was no refinery; the infrastructure just didn’t exist. Although King Idris promised that the Zelten Field would revolutionize the country’s fortunes, it was going to take time to work its way through the economy. But there were signs already that the money was being diverted into the pockets of the king’s men.

In a flash, Idris had gone from being an impoverished hermit, writing begging letters to Britain and the US, to a king whose country was awash with dollars, able to make rich men of whomever he chose. The opportunity for personal enrichment came at the point of auction. The oilmen were prepared to be extremely generous to whomever put them in pole position. ‘There were kickbacks galore,’ says Orser, ‘and many greedy hands.’ One new boy on the block, a small independent American company, learned how to fill those greedy hands like no other. Its name was Occidental Petroleum.

As it turned out, the king’s most trusted lieutenant was so well insulated by layers of dealmakers and officials that the Doctor needed intermediaries just to introduce him to the intermediaries.

On an autumn day in 1967, David Orser was sitting in his Mobil office when news reached him that seemed to suck the air from the room.

It had all begun when Mobil was forced to surrender one of its least-promising concessions at the end of the five-year cycle imposed by Idris. There was to be an auction. As usual, one of the big seven oil companies was expected to win. This tiny outfit from California, Occidental, or Oxy as it was known, was sniffing around, and no one could understand why. It had no expertise in oil exploration outside the US, no experience of running concessions, and anyway, Idris’s prices were too high, way out of Oxy’s league.

But, despite competitive bids from the other players, Oxy some­how walked away with Mobil’s former concession: blocks 102 and 103, 2,000 square miles of bleak, gravelly desert in the Sirte Basin, more than 100 miles from the coast. The others scoffed from the sidelines. Oxy would have no idea where or how to drill, and no chance of riding out the inevitable dry holes. They’d be bankrupt before the concession was up.

Then came the news that had so alarmed David Orser’s office in the autumn of 1966. Oxy had struck oil, first at block 102, and then at 103, not just a few drops but a spectacular field. It dwarfed the first Libyan discovery. There were 3Billion barrels down there, making it one of the most prolific deposits in the world. Sweet Libyan crude came shooting straight from the ground. To make matters worse it had happened right beneath an abandoned Mobil desert camp. The ageing seismic apparatus that Mobil used meant they had missed it.

THE DISCOVERY REQUIRED AN APPROPRIATE CELEBRATION. There was to be a party for the king. A vast marquee was erected in the desert, its floors laid with fine Persian carpets, rose petals scattered along its walkways. Oxy presented Idris with a Faberge cigarette case, and his wife with a Faberge beauty box. In the middle of the celebrations, the company’s ecstatic bosses announced they would rename the block. From now on, it was to be called ‘The Idris Field’. Of course, the Mobil team only heard about all this second-hand. They had not been invited to the party.

But the question remained: how did an unknown oil company manage to leap the rest of the field?

Occidental Petroleum was run by an American industrialist named Dr Armand Hammer, or simply ‘the Doctor’. He was a dealmaker extraordinaire, a tireless schmoozer who was already in his sixties when Occidental arrived in Libya but had lost none of his appetite for moneymaking, or his knack of knowing who to pay off. His Libyan contact book was empty. The country had been in the business deep­freeze so long, he had no connections there. When the Doctor heard about that first Esso strike, he had sent out a speculative team with a brief to bring him back a piece of the action.

It was said that the route to oil success in Libya passed through the bank accounts of a man called Omar Shelhi. Shelhi was a short, bullish man who had spent time in exile with King Idris during the war and was now treated as his adopted son. Idris had needed someone to oversee the bidding process, and Shelhi seemed the obvious choice.

It hadn’t taken the Doctor long to realize that Shelhi was his target. As it turned out, the king’s most trusted lieutenant was so well insulated by layers of dealmakers and officials that the Doctor needed intermediaries just to introduce him to the intermediaries.

As the deadline for bids approached, he finally managed to secure a meeting with a facilitator called Hans Kunz, a Swiss citizen who had begun his working life as a lowly fixer in the oil industry. Kunz passed the Doctor to his business partner, a man called Kemal Zade, a Soviet who had graduated from the London School of Economics. Zade didn’t actually know Shelhi, and so couldn’t organize the introduction personally, but he did know Shelhi’s brother. He could pass the Doctor to him. It was a maddeningly circuitous route, but with just days to go until the deadline for bids, the Doctor had no better option.

Even that plan had a hitch. The two intermediaries didn’t want to recommend the Doctor without getting to know him personally. They needed to make sure he wasn’t a time-waster. The Doctor was invited to a hastily arranged dinner in Germany, for no other reason than that was where Zade lived, and it was Zade who was calling the shots. The Doctor flew out the next day to meet the two inter­mediaries. They drank and ate while a belly-dancer gyrated around their table, and the Doctor impressed them so much, they made the call to Shelhi’s brother that same night.

A week later, the Doctor met Shelhi himself in another German hotel. The king’s representative was not impressed by what he saw. The Doctor looked like a crumpled pensioner and seemed to have no idea about oil. He had no concept of prices or how the bidding system worked, and Shelhi had the world’s seven biggest producers waiting to wine and dine him back in Tripoli. But slowly the Doctor worked his charms. He had no board of directors, he said, no auditors and no shareholders. There was no one making sure that he followed company rules because he was Occidental. He set the rules. As Shelhi visibly warmed to him that night, the Doctor announced that, should he win the concession, he would make Shelhi ‘the richest man in all Europe’.

What followed was the most crooked oil deal of the era.

The others scoffed from the sidelines. Oxy would have no idea where or how to drill, and no chance of riding out the inevitable dry holes. They’d be bankrupt before the concession was up.

Shelhi and the two facilitators would require $2.8Million in cash from the Doctor as a thank-you for being awarded the concession. The Doctor agreed, but it was just the start. If they struck oil, they would then require a cut of the money from every barrel sold. They set the figure at a modest-sounding 3 per cent, which was to be paid into their Swiss bank accounts. That was before Oxy struck oil, of course, so no one knew quite how that 3 per cent would translate into cash.

Excerpted from Dictatorland: The Men Who Stole Africa, first published in the UK in 2018 by Head of Zeus Ltd.

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