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				“Yemen Oil Fuels Dallas Feud” Entrepreneurs' fortunes, Honor at stake Dallas Times Herald By Phil H. Shook "As with most great accomplishments, the discovery of oil in the Yemen Arab republic began with those who dared to dream it was possible - those who challenged what had been declared fact by historians and textbooks." - Hunt Oil Co. This is how Hunt Oil Co. describes the vision leading a 1981 exploration foray into North Yemen that three years later resulted in the discovery of a major oil field and attracted worldwide attention for the Dallas company and its owner, Ray Hunt. But Jack Crichton, another Dallas oilman who has sued Hunt for a share of the vast oil deposits beneath the sands of the Red Sea nation, says he had that vision first in 1955, when Crichton and several other U.S. executives were escorted by armed Yemeni horsemen to the mountainside palace of Sal to negotiate an oil deal with His Majesty, the Imam Ahmed, King of Yemen. The story of the bitter legal feud between these two pioneers in Yemen oil exploration, whose families have known each other for years, reads more like a script from "Dallas," the TV series, than an account of typical business dealings in Dallas, the city. Some aspects of the Crichton-Hunt conflict compare with issues raised in the Texaco-Pennzoil legal battle, which also involved state laws prohibiting wrongful competition and a dispute between two companies that believed they had successfully negotiated a contract. "While the facts are different, many of the issues are directly parallel," said Crichton's attorney H. Dee Johnson. At stake - in addition to more than $800 million that Hunt already has spent prospecting for oil in the desert nation and $1 billion that Crichton is asking in damages - are the solid reputations of two Dallas businessmen. On the one hand, Crichton and his partners allege that Hunt and his company "subverted" their business agent in Yemen and, through the agent, obtained copies of their "proprietary geological information and concession agreement." Those copies, the suit says, were used by Hunt and his company "in diverting the concession in question to Yemen-Hunt Oil and in successfully exploring for oil in the exact locations previously located" by Crichton and his partners "as probable oil producing locations." Crichton, on the other hand, is accused by Hunt Oil officials and attorneys of abusing the court system by filing a baseless suit "to achieve economic rewards" that he and his partners were unable to win through direct negotiations with the Yemeni government. Attorneys for Crichton say Hunt Oil's actions are in violation of Texas law prohibiting improper competitive business practices. Crichton, 71, is a former Army intelligence officer and a veteran oilman who has spent years working on finding oil in Yemen. He was the GOP standard bearer in the 1964 Texas gubernatorial race against Democrat John Connally. Hunt, 44, the son of storied wildcatter H.L. Hunt by his second wife, Ruth Ray, has built his Hunt Oil Co. into a giant independent with a refinery in Alabama and exploration projects in 16 states, the North Sea and six foreign countries. Ray Hunt has been untarnished by the legal wrangle and financial reverses that have ensnared his half-brothers Lamar, Bunker and Herbert. While it was Ray Hunt who struck the first crude in Yemen, it was Crichton and his partners who were the first Americans to gain a mineral concession in the desert nation, a saga that began more than 30 years ago. Crichton said he became interested in Yemen in 1955 when he was president of Oil and Gas Property Management, a closely held Dallas company that was in the business of acquiring oil and gas reserve. Its shareholders included Lehman Bros. Investment Fund, Singer Sewing Machine and U.S. Steel Pension Fund. Some Oil and Gas Propertyh Management holdings later evolved into Dorchester Ltd. Partnership, which later became a partner with Crichton's Arabian Shield Development in Yemen. Dorchester and Arabian Shield are plaintiffs in the suit against Hunt Oil. Crichton says his company was first approached about Yemen by Walter Gabler, a Washington, D.C., investment banker consultant. Yemen had just joined the United Nations and Gabler had developed contacts with a Yemeni minister to the U.N. Crichton, an MIT-educated petroleum engineer and former vice president of Dallas-based DeGolyer and MacNaughton and an international authority on the evaluation of world petroleum reserves, was asked to assess the prospects for oil exploration in Yemen. Crichton says his research indicated that promising geological formations in Yemen were about the same distance from the shoreline of a 180-million-year-old Jurassic era sea bed as similar formations that produced the giant oil fields in eastern Saudi Arabia. As the geologist who evaluated oil reserves for Kuwait while with DeGolyer and MacNaughton, Crichton said he knew that gigantic reserves could be in very small areas because of the thickness of these formations. Crichton and Gabler formed an expedition to Yemen that included a former State Department official, a lawyer, doctor and an interpreter. Crichton said the trip had the unofficial backing of the State Department, which was interested in having American companies establishe ties in Yemen to counter a diplomatic and economic offensive under way there by the Soviet Union. "We were briefed (by the State Department) to take a tuxedo and a bedroll and not tell anyone where we were going," Crichton said. The unusual meeting in 1955 between the Americans and the ruler of a nation isolated from the West for a thousand years was chronicled on the pages of Life magazine under the headline, "Forbidden Yemen Yields to a Yankee's Offer." Only one other company, a German oil concern, had been allowed to prospect for oil in North Yemen, an unsuccessful effort that was concentrated around the Tihama, a desert coastal plain along the Red Sea. But in November 1955 the Kingdom of Yemen issued Crichton and his partners a 30-year exclusive concession to prospect for Arabian crude over 40,000 square miles of the desert nation. In return for the concession, Crichton says the company made $300,000 in bonus payments and provided a bullet-proof Cadillac for the Imam "so he could take the ladies of the harem for rides." The company retained hatem El-Khalidi, a U.S.-educated geologist and the son of a former Jordanian prime minister, to study the geological features in the concession area. By 1957 El-Khalidi reported that the Safir Basin area northeast of the ancient city of Ma'rib - the region where Hunt would make the first oil discovery 27 years later ? was a prime prospect for exploration. "We were one of the few who thought the Safir Basin was geologically attractive because all the previous activity had been in the Tihama on the Red Sea," Crichton said. But despite the promising reports from El-Khalidi, the company's investors were becoming more and more alarmed about the deteriorating political situation in Yemen. Crichton said the Suez Canal crisis in 1956, when France and Great Britain militarily seized the canal in the face of American opposition, had raised questions about the political stability of the entire area. Yemen also was drifting toward an Egypt allied with the Soviet Union, giving the Soviets their first toehold on the Arabian Peninsula. In 1957, Crichton's investment partners decided they had to sell the company that owned the concession and get out of Yemen. Gabler and Crichton kept a portion of the company but the bulk of the stock was sold - for $25,000 in cash and a $300,000 note - to Resources Associates, an investor group that included Wallace Whitaker, the president of the Intercontinental Hotel chain; Eugene Du Pont, a member of the industrialist Du Pont family of Delaware; and Du Pont's lawyer, William Casey, who would later head the CIA. The new owners retained El-Khalidi to continue his work doing surface geological mapping and evaluation in the Safir Basin. El-Khalidi stayed in the country until 1959 and became the sole owner of the Yemen oil concession after Resource Associates also decided it was too risky to continue operations there. "My relations were very good with the Imam himself but the Crown Prince had made certain alliances with the Egyptians under Nasser," El-Khalidi recalled in a recent interview. He said the Yemen crown prince began to look with disfavor on an American company operating in Yemen while Russian tanks and other military equipment were being invited into the country as the result of its alliance with Egypt. In early 1959, the Imam became seriously ill and was taken to Rome for treatment. The Crown Prince became the acting ruler and a week later El Khalidi was ordered out of the country because he had been part of the American oil venture. He set up a consulting office in Beirut and worked with Crichton to develop a mineral concession in Saudi Arabia. By 1962 Yemen plunged into revolution. While the country became a virtual no-man's land for the next 18 years, El Khalidi says he never lost interest in the oil concession in the Safir Basin although he was unable to do anything about it. In 1980, El-Khalidi said he contacted a former employee in Yemen about road conditions and the activity among some of the tribespeople in the oil concession area. "I had lived with these people. They were independent, and they had been in open revolt," El-Khalidi says. Informed the tribes were now on good terms with the government, El-Khalidi advised Crichton that the time was right to go back into the country. Crichton and El-Khalidi joined Dorchester in making inquiries of the new government. Although the group believed the concession granted by the old king was still legal and valid - something disputed by the current Yemeni government - they decided for practical and political reasons to start from scratch in new negotiations. In February 1981, Crichton and an official of Dorchester met with the Yemeni minister of state for petroleum to begin new talks. According to Crichton, the Yemeni government indicated it would entertain a proposal for a smaller concession area, not to exceed 3,100 square miles, for oil and gas exploration only. By the end of March 1981, a formal proposal for a production sharing agreement - with the backing of Dorchester, now a substantial oil company with $700 million in revenues - was presented by Crichton's group to the Yemeni government. Crichton says his group worked out a basic agreement that only needed to be translated into Arabic and receive final approval from the petroleum minister and the Yemen Council of Ministers. "I considered we had a deal at that time. We had worked out their split and what our obligations were," said Crichton. "When I shook hands with (the Yemeni petroleum minister) as far as I was concerned it was a deal." But three months passed and Crichton's group later learned that there was competition for the concession. In a published account of its historic oil discovery, Hunt Oil says the events that led it to Yemen began in early 1980 when the Yemeni government made an aeromagnetic survey of the country. The survey, part of its minerals exploration program, suggested that a narrow and deep buried valley existed north of the ancient city of Ma'rib. According to the Hunt account, Moujib Al-Malazi, an oil exploration consultant who had traveled to Yemen that year compared geological information with the new aeromagnetic data and surmised that the potential for oil and gas in the area was greater than originally thought. The consultant shared his findings with a friend and professional colleague, Ian Maycock, then manager of Hunt Oil's London office. Maycock became intrigued with the possibilities and briefed the company's headquarters office in Dallas in late December 1980. Hunt says his company was able to convince the Yemen Arab Republic that it was capable of moving quickly "to assist the country in its quest for progress and prosperity for its people." He says preliminary discussions between Yemen and Hunt Oil begin in January 1981, a month before Crichton's group returned, when a three-person delegation from the company visitied Yemeni officials in the capital of San'a. Between July 22 and July 28, 1981, the delegations successfully negotiated a production sharing agreement between Hunt oil and the Yemeni government. It was signed on Sept. 3 that year by Ali Jabr Alawi, chairman of the state-owned Yemen Oil and Mineral Resources Corp., and Hunt Oil?s Raymond Fairchild, vice president of international exploration. The agreement covered about 7,750 square miles and provided for a six-year exploration period. Crichton said he learned some time in 1981 that his investor group had been cut out of the production sharing agreement for a larger area than his group had been permitted to bid on, and that a Hunt subsidiary had received it. Crichton, a personal friend of Hunt's late father, H.L. Hunt, and a former board member of the Hunt family foundation, says he wrote a letter to Ray Hunt congratulating him on having secured the concession, and offering to purchase a 25 percent interest in the venture. The request was made before Hunt discovered oil in Yemen, Crichton says. According to Crichton, Hunt wrote back saying he thought highly of the group seeking the interest and should Hunt Oil decide to seek a partner the Crichton group would be the first to be contacted. "Frankly that was it for awhile," says Johnson, Crichton's attorney. "My clients had been willing to accept the reality that the Yemen government had made another choice. There was no suggestion that anything was improper." But in 1983, Johnson says, El Khalidi began to get information from people with business contacts within Yemen about how Hunt Oil secured the concession and the information led Crichton's group to believe that Hunt Oil had illegally "subverted" its business agent at the time the 1981 concessions were being negotiated. At about the same time that El-Khalidi?s suspicions were aroused, Hunt Oil was drilling a well that would make history in Yemen. Although Hunt says the probability of discovering a giant oil field with the first well drilled in a totally unexplored basin is on the order of 1 in 10,000, his company beat the odds in the Safir Basin. Hunt Oil began drilling the Alif No. 1, about 37 miles from Ma?rib, on Jan. 31, 1984. The initial test on July 4, 1984, produced Yemen's first oil, flowing at 7,800 barrels a day. Later that week, Yemen President Ali Abdullah Saleh visited the well site. Surrounded by spectators, Saleh opened a valve to resume testing of the discovery well. When ignition of the crude oil flare darkened the desert sky with smoke, Hunt Oil officials say the people shouted "allah akbar" (God is great) and "Al-Izzatu lil-wattan" (Glory to the homeland) and then broke into song. Hunt had produced North Yemen's first oil well and discovered a field estimated to hold 550 million barrels of recoverable oil. The country's oil earnings are expected to reach $650 million this year. Industry sources say the discovery also will mean hundreds of millions of dollars in revenue for Hunt Oil. In addition to providing a valuable source of income for the impoverished nation, the Hunt discovery has since served as a catalyst for the construction of a 250-mile crude oil pipeline and an offshore export terminal, vaulting the country into the ranks of oil exporting nations. Foreign affairs analysts also have applauded the Hunt success for creating a stable new source of oil from an area otherwise dominated by OPEC producers. North Yemen does not belong to the oil cartel. In 1984, the same year Hunt brought in the Alif No. 1 well, El-Khalidi wrote several letters directly Co. Hunt, when contacted by the Times Herald for this story, declined to discuss details of the suit. The Yemeni government stands firmly behind Hunt Oil, saying it does not believe there is any basis for the lawsuit and denies that Dorchester and Arabian Shield had any rights to explore for oil at the time the rights were granted to Hunt's company. Associates and friends of Hunt and Crichton are caught in the middle, surprised that the Dallas oilmen are at odds with each other. "These are the least likely men I would expect to find against each other in a lawsuit," said Dallas businessman and former U.S. Congressman Jim Collins. Collins said he has known both Hunt and Crichton for years and despite differences in age, they have many things in common. "They both have the entrepreneurial spirit that you find in wildcatters and they are always on their own," Collins said. Collins said he hasn't heard a bad word about Hunt. "His mother is a saint and she raised him to be good." He said Crichton also has a reputation as an expert at finding oil and a straight shooter in business dealings. "Crichton has that Will Rogers sort of smile - and if he shakes your hand and makes a deal, it's a deal," Collins said. March 20, 1988