On the last day of July 1928, American, British and French oil companies carried out the greatest carve-out in oil industry history.

In countries inside a line (drawn, it is said, by the Armenian-Turkish oil entrepreneur Calouste Gulbenkian, using a red pencil), the firms accepted that they would work together or not at all.

The Red Line agreement, as it is called, encompassed the whole of Mesopotamia and all of Arabia, with the exception of Kuwait. We know now that these areas contain at least 60 per cent of world oil reserves and 40 per cent of world gas.

Breathtaking arrogance

The signatories are still among the world's largest corporations: what are now BP (which then exclusively controlled Iran's oil industry), Shell, Total, ExxonMobil, ChevronTexaco and Gulf Oil.

It was an act of breathtaking arrogance that can be compared with the hubris that drove the victors in the First World War to divide up the Arab lands of the Ottoman Empire; now Iraq, Jordan, Lebanon, Palestine and Syria.

It is obvious in hindsight that the Red Line deal, which was drafted to underpin a new shareholding structure for the Iraq Petroleum Company (IPC), was the high water mark of Western influence in the Middle East.

Second-class status

But at the time, it was nothing less than the companies believed to be right and proper. They would find the oil and benefit principally from it. The countries where the oil was located would be helped, but kept firmly in place - if necessary, by force.

Elements of the ruling classes of the country's concerned reluctantly accepted their second-class status in their own countries. The mass of the people fumed and waited for times to change, which they quickly did.

The long withdrawing roar of international oil company (IOC) involvement in the Middle East began almost immediately.

States within states

Governments within the Red Line challenged their right to be states with states. Saudi Arabia invited Standard Oil of California (Socal), a non-Red Line firm, to look for oil, which they found 70 years ago this year. The first outright nationalisation of a Middle East oil company came in 1951 in Iran. Foreign ownership of upstream assets was eliminated in Iraq, Kuwait and Saudi Arabia by 1980.

Within the Red Line today, the only national oil company with a foreign stake is Petroleum Development Oman (PDO), where 40 per cent is owned by Shell, Total and Partex, the firm set up by Gulbenkian to represent his five per cent interest in the 1928 deal.

Some 80 years later, what was described by a US geologist in 1944 as "the greatest prize in human history" glitters even more brightly.

Balance of power

With prices expected to stay high despite the world economic slowdown, the oil of the countries inside the Red Line has never been so valuable. Their proven reserves of oil and gas are the equivalent of more than 1.2 trillion barrels of oil. It is worth, at present prices, more than $100 trillion, nearly twice the value of the world's economy in 2008. And it is owned by countries with little more than two per cent of the world's population.

The difference between then and now is that the balance of power has shifted irreversibly. In 1928, the oil companies - backed by London, Paris and Washington - acted as if they were joint rulers of a new Arab dominion. The states of the Gulf are the masters now. And the national oil companies they created to replace foreign firms are growing in strength, competence and confidence.

Partly as the result of the events of 2003, when the present oil price surge began, a new world energy order is emerging that will have profound implications for the Middle East and the world.

The challenge for the oil companies which signed it is to learn the right lessons from the 1928 agreement and to redefine themselves credibly as partners in a joint project that must deliver benefits fairly. It could be their last chance. But at least they have one.