Sweetening the Oil

France's E.R.A.P. (for Entreprise de Recherches et d'Activites Petrolieres), a state-owned complex, would love to break into the ranks of the world's top oil-exploration and production outfits --by whatever means.

In a deal arranged by E.R.A.P. Chief Pierre Guillaumat, 57, a longtime De Gaulle lieutenant, E.R.A.P. will search for new oil reserves over 85,000 sq. mi. of Iranian desert and offshore tracts in the Persian Gulf. The French twist is that E.R.A.P. will operate as a contractor to Iran rather than a concession-holding partner. Instead of splitting earnings with the host country on a 25-75 basis, as most major international oil companies do, France will turn over half the oil reserves it finds to Iran, in return for rights to pump out as much as 45% of the rest at well under the going world crude oil prices.

As a contractor, France will not have to ante up the huge cash bonuses with which the majors traditionally lubricate their concession agreements. In return, France agreed to bankroll the whole project, which may cost $50 million; the Iranians need repay the loan only if and when oil is found. Though it all adds up to a big gamble for France at no risk to Iran, E.R.A.P. spokesmen touted the deal as a long stride toward a "competitive French government oil company, flying French colors and making France completely independent of the majors."

For their part, the majors (the biggest, led by Standard Oil of New Jersey and Royal Dutch/Shell, are nicknamed "the Seven Sisters") fear that, waving the juicy E.R.A.P. deal as precedent, every sheik in the Middle East will be howling for similar agreements. Actually, France may well decide that it was a poor idea after all. Under the contract, E.R.A.P.'s exploratory territory shrinks from 85,000 to 12,000 sq. mi. after the first year, and still more after that; search rights may be stopped altogether after six years. Given past experience, the prospects for finding oil are uncertain indeed. Last year the French plumbed one Iranian concession for months, came up with only dry holes and a $27 million loss.

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