Britain, British Petroleum, Shell and the Remaking of the International Oil Industry, 1957-1979
Total Page:16
File Type:pdf, Size:1020Kb
Empires of Energy: Britain, British Petroleum, Shell and the Remaking of the International Oil Industry, 1957-1979 Author: Jonathan Robert Kuiken Persistent link: http://hdl.handle.net/2345/bc-ir:104079 This work is posted on eScholarship@BC, Boston College University Libraries. Boston College Electronic Thesis or Dissertation, 2013 Copyright is held by the author, with all rights reserved, unless otherwise noted. Boston College The Graduate School of Arts and Sciences Department of History EMPIRES OF ENERGY: BRITAIN, BRITISH PETROLEUM, SHELL AND THE REMAKING OF THE INTERNATIONAL OIL INDUSTRY, 1957-1979 [A dissertation by] JONATHAN R. KUIKEN submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy August, 2013 © copyright by JONATHAN ROBERT KUIKEN 2013 Empires of Energy: Britain, British Petroleum, Shell and the remaking of the international oil industry, 1957-1979 Jonathan R. Kuiken Dissertation Advisor - James E. Cronin Dissertation Abstract This dissertation examines British oil policy from the aftermath of the Suez Crisis in 1956-1957 until the Iranian Revolution and the electoral victory of Margaret Thatcher’s Conservative Party in 1979. It was a period marked by major transitions within Britain’s oil policy as well as broader changes within the international oil market. It argues that the story of Britain, and Britain’s two domestically-based oil companies, BP and Shell, offers a valuable case study in the development of competing ideas about the reorganization of the international oil industry in the wake of the rise of the Organization of Petroleum Exporting countries and the companies’ losing control over the production of oil. The emergence of OPEC, and the political and resource nationalism which provided it with its inspiration, proved to be a challenge for the companies. In their view, this had to be countered commercially through the maintenance of the role of the major oil companies as well as the further internationalization of the oil market; a process which they believed would help de-politicize oil production and distribution. Although the Governments which ruled Britain in this era were initially in favor of this laissez-faire approach, economic and political uncertainty in Britain, coupled with the game-changing potential of Britain’s own North Sea oil resources led to a gradual process of state intervention into oil matters, both at home and abroad. Out of this emerged a different philosophy on the part of Cabinet and Whitehall officials, one which saw the future of oil being in the hands of the state and state-controlled companies. This growing divergence weakened the traditional partnership between BP, Shell and the British Government and limited cooperation until the defeat of the Labour Party in 1979 by Thatcher’s Conservatives reversed the trend of growing state involvement. Together these inter- connected accounts provide an important counter-point to the idea that the emergence of a fully international oil market was inevitable and reveals that the reformation of the oil market in the post-1973 world was the result of political and as well as market forces. Dedicated to my counselor, coach, editor, friend and wife Amy Kuiken i Acknowledgements I would like to begin by thanking the History Department and the Graduate School of Arts and Sciences at Boston College for their financial support during the writing of this dissertation. I would also like to thank the many people who assisted me with my archival research, in particular the staffs of the National Archives in Kew as well as the North Sea Oil and Gas/Capturing the Energy Archive in Aberdeen. I am particularly indebted to Peter Housego and Joanne Burman of the BP Archive without whose help this dissertation would have been much less rich. I owe a great deal to the many people who have encouraged me along the academic path. I would particularly like to thank William Harper and Jennifer Hevelone-Harper of Gordon College for their inspiration in pushing me to pursue graduate work. An equal amount of appreciation is due to the many people at Boston College such as Kristen Adrien, David Quigley and Kevin Kenny who helped me transition from a Masters to a Ph.D. program there. Those who took my hand and guided me through the process of fulfilling my coursework, comprehensive exams, and dissertation proposal also deserve special mention: Prasannan Parthasarathi, Seth Jacobs, Rebecca Nedostup, Marilynn Johnson and, most importantly, Rebecca Rea were all crucial to my reaching the point where this dissertation was even possible. As for the dissertation itself, my research and writing was immensely aided by numerous people on both sides of the Atlantic. Michael Kandiah and his colleagues at the Institute of Contemporary British History at King’s College, London were particularly helpful in assisting me in shaping the framework of my dissertation and in providing me with ample opportunities to present my early work. My friends and colleagues at Boston College who provided support and ii sympathy during the process were also much appreciated. But special recognition must be reserved for the members of my committee. Devin Pendas has proven a constant source of support, ideas and helpful criticism. Erik Goldstein took a great deal of valuable time to provide poignant critiques, especially to my early chapters. Lastly, my advisor James Cronin is due more thanks than I can provide. He proved to be a constant source of help and advice as well as an unending well of moral support. Our many conversations and his constant willingness to read drafts and other materials helped bring clarity to my confusion. I can say with certainty that any points of quality in this dissertation were a result of his help and that any of its shortcomings are my own responsibility. For his guidance I am extremely grateful. Finally, I would like to offer a word of thanks to my family and friends. My grandparents, Jennie Van Eps and Richard and Joan Kuiken have proven to be my constant cheerleaders and an unflagging source of encouragement. The love, good wishes and prayers of my siblings and my nieces and nephews was also crucial to keeping up my spirits. I am especially grateful for the patience of my parents, Wayne and Betty Kuiken. Their willingness to support me through what seemed like an endless process assisted me through my moments of doubt and the occasional desire to give up. The same is true of my beautiful and wonderful daughter, Madeleine. While proving to be a joyous distraction, and a happy reason why this dissertation was completed later than expected, she provided an unceasing inspiration to work hard, keep progressing and ultimately to finish. Lastly, my biggest thanks of all goes to my extraordinary wife Amy. She served as my coach, therapist and most onerously, as my editor. Without her, I would not and could not have completed this dissertation. iii Empires of Energy: Britain, British Petroleum, Shell and the remaking of the international oil industry, 1957-1979 Table of Contents Introduction: Britain and a Changing International Oil Industry 1 Section 1: Close but not Identical Interests: 1957-1968 Chapter 1 – An Indefinite Canute: Uphold the Status Quo in a changing Persian Gulf, 44 1957-1962 Chapter 2 – Cartels and Chaos: Declining State and Company Power, 1962-1968 92 Chapter 3 – Oil for Britain’s Benefit: Oil and Britain’s Finances, 1957-1968 135 Chapter 4 – Creeping Dirigisme: Safeguarding Against Shortage, 1957-1968 174 Section 2: Precipitous Decline: 1968-1973 Chapter 5 – A Shift in the Oil Industry’s Balance of Power, 1968-1971 218 Chapter 6 – Preparing for the Worst, 1971-1973 269 Chapter 7 – Partners and Rivals: Battles Abroad, Battles at Home, 1968-1973 308 Section 3: Coping with Crisis: 1973-1975 Chapter 8 – Grasping for a Policy, 1973-194 370 Chapter 9 – Britain’s Oil, Britain’s Company, 1973-1975 428 Conclusion: Two Revolutions 483 Bibliography 518 iv List of Abbreviations ADMA – Abu Dhabi Marine Areas AIOC – Anglo-Iranian Oil Company APOC – Anglo-Persian Oil Company ARAMCO – Arabian American Oil Company ARCO – Atlantic-Richfield Company BGC – British Gas Council BNOC – British National Oil Company BP – British Petroleum CEGB – Central Electricity Generating Board CFP – Compagnie Française des Pétroles CI – Carried Interest CPRS – Central Policy Review Staff DEA – Department of Economic Affairs DOJ – United States Department of Justice DTI – Department of Trade and Industry ECG – Energy Coordinating Group EEC – European Economic Community ENI - Ente Nazionale Idrocarburi ERT – Excess Revenue Tax FCO – Foreign and Commonwealth Office FMG – Federal Military Government FO – Foreign Office GOQ – The Interdepartmental Working Group on International Oil Questions HMG – Her Majesty’s Government IEA – International Energy Agency IEP – International Energy Program IMEG – International Management and Engineering Group IMF – International Monetary Fund INOC – Iraqi National Oil Company IPC – Iraq Petroleum Company JIC – Joint Intelligence Committee KOC – Kuwait Oil Company LPG – London Policy Group MEEC – Middle East Emergency Committee MoP – Ministry of Power NCB – National Coal Board NHC – National Hydrocarbons Corporation NIOC – National Iranian Oil Company v NUM – National Union of Mineworkers OAPEC – Organization of Arab Petroleum Exporting Countries OECD – Organization for Economic Cooperation and Development OEEC – Organization for European Economic Cooperation OPEC – Organization of Petroleum Exporting Countries PRT – Petroleum Revenue Tax RCC – Revolutionary Command Council SOG – Standing Oil Group TAP – Trans-Arabian Pipeline vi Introduction – Britain and a Changing International Oil Industry On the evening of 21 October, 1973 an emergency meeting was held at Chequers, the country retreat of Britain’s Prime Minister Edward Heath. The two most anticipated guests were the chairman of British Petroleum (BP), Sir Eric Drake, and the chairman of the British unit of Shell, Frank McFadzean. Heath had called the two men to Chequers in the midst of a chaotic scene for the world oil market.