The State and The Emergence of The British Oil Industry

THESTATEANDTHEEMERGENCEOF
THE BRITISH OIL INDUSTRY

STUDIES IN BUSINESS HISTORY
General Editors: Leslie Hannah, Director, Business History

Unit, University of London, and Leslie Pressnell, Professor of
Economic History, University of Kent at Canterbury
This series aims to publish outstanding works in the field of

modem business history. Emphasis will be placed on general
issues in the history of business rather than on the biographies of
individual companies or businessmen. The main focus of the
series will be on the experience of the nineteenth and twentieth
centuries. Authors are encouraged to interpret business widely in
its political, social, technological and economic dimensions.
Geoffrey Jones
THE STATE AND THE EMERGENCE OF THE BRITISH OIL INDUSTRY
Further titles in preparation

THE STATE AND THE
EMERGENCE OF THE
BRITISH OIL INDUST RY
Geoffrey Jones
in association with Palgrave Macmillan

To my parents
© Geoffrey Jones 1981

Softcover reprint of the hardcover 1st edition 1981
All rights reserved. No part of this publication may be

reproduced or transmitted, in any form or by any means,
without permission
First published 1981 by

THE MACMILLAN PRESS LTD
London and Basingstoke
Companies and representatives
throughout the world
British Library Cataloguing in Publication Data
Jones, Geoffrey
The state and the emergence of the British oil
industry
1. Petroleum industry and trade- Great Britain
-History
2. Industry and state- Great Britain- History
I. Title
338.2'7'2820941 HD9571.6
ISBN 978-1-349-05033-8 ISBN 978-1-349-05031-4 (eBook)

DOI 10.1007/978-1-349-05031-4
Contents
List of Tables, Figures and Maps vu
Preface IX
Introduction I
I ADMIRALS AND OILMEN 9
I
The Royal Navy and Oil 1865-1905 9
IIThe Problem of Supply II
II I
The Fisher Years 14
IV The Admiralty, the Oil Companies and the Emergence
of Shell 17
V Churchill and the Switch to Oil 27
2 THE MARKETING OF OIL IN BRITAIN 32
I The Structure of the British Oil Market 32
II The Emergence of New Products 37
III The Market for Fuel Oil 38
IV The State as a Market 43
3 THE BRITISH IN FOREIGN OILFIELDS 47
I The British Oil Industry 47
II The Oilfields of Russia 50
III Weetman Pearson and Mexican Oil 63
IV The Growth of the Shell Group 1907- 14 77
4 OIL AND EMPIRE 85
I The Imperial Perspective 85
II The Indian Empire 88
III The West Indies I 05
IV Egypt 113
5 PERSIAN OIL 1900-14 128
I The D' Arcy Concession 128
II The Intervention of Burmah Oil 1904-5 132
III The Search for Oil 1905-8 135
IV The Birth of A.P.O.C. 141
v
VI CONTENTS
V A.P.O.C. and the British Government 1912-14 144

6 THE MAKING OF AN 'EXCEPTIONAL
RELATIONSHIP' 160
I The India Office, the Foreign Office and A.P.O.C.
II The Admiralty and the Making of the
A.P.O.C. agreement 165
III The 'Exceptional Relationship' 170
7 THE POLITICS OF OIL 1914-18 177
I Oil and the First World War 177
II The Frankenstein Syndrome 178
III The Return of the Shell Menace 182
IV The Search for a National Oil Company 189
V The Petroleum Executive and the Rapprochement with
Shell 195
8· THE ROAD TO ACHNACARRY 208
I The 'Initialled Agreement' 1919-20 208
II The Oil Company Merger Schemes 1920-24 222
III Cartels and Combines 229
Conclusion 245
Appendix 253
Select Bibliography 254
Index 259
List of Tables,
Figures and Maps
Tables
Table 1.1 Average cost of oil and coal on all naval stations
1906-11 13
Table 2.1 British imports of petroleum products 1885-
1913 32
Table 4.1 Crude petroleum production in the British
Empire 1890-1914 85
Figures
Fig. 1.1 Geographical origin of fuel oil purchased by the
Admiralty 1902-12 12
Fig. 2.1 Sources of United Kingdom oil imports 1885-
1913 34
Fig. 2.2 The marketing of eastern European oil in the
United Kingdom 1883-1914 35
Fig. 8.1 Sources of United Kingdom oil imports 1914-29 232
Maps
Map 3.1 The oilfields of the Caucasus before 1914 51
Map 3.2 Mexico in 1914 64
Map 4.1 The oilfields of Burma before 1914 90
Map 4. 2 The oilfields of Trinidad before 1914 107
Map 4.3 The oilfields of Egypt before 1914 114
Map 5.1 Persia in 1914 129
vii
Preface
A writer seeking to burden the public with yet another book
about the petroleum industry might reasonably be expected to
begin with both an apology and an explanation. The importance
and power of the oil industry, its mystique and scandals, have
always attracted writers, and the literature on the many facets of
the industry is now enormous. It is also rather patchy. There are
journalistic studies, many of them partisan, of all but the most
technical aspects of the petroleum industry. Economists have also
written much about the contemporary oil industry. However, the
history of the industry, at least outside the United States, has
attracted far less attention from academic writers. The result is
that many aspects of the early history of the oil industry lie
obscured by ignorance and myth. The extent of accurate infor-
mation about the early European oil magnates, men such as
Henri Deterding, Calouste Gulbenkian and Frederick Lane, is
hardly greater than about the knights of the Round Table.
This book is offered as an attempt to dispel some of the myths
and remove a little of the ignorance surrounding the early history
of oil. In particular, it provides an account of some aspects of the
birth and development of the British oil industry in the first
quarter of the twentieth century, with the growing involvement of
the State in that industry as the central theme. It makes no claim
to be an exhaustive study of the subject, and a number of
important topics on which there is already an extensive literature,
such as Britain's involvement in Iraqi oil, are not discussed in great
detail.
This study is published as part of a series entitled 'Studies in
Business History'. Business history has now established itself as a
respectable academic subject in Britain, although its boundaries
with other related sub-fields, such as economic history or
industrial economics, remain ill-defined. This author believes
business history to encompass far wider issues than the mere
history of companies, and that it involves topics traditionally
IX
X PREFACE
regarded as the preserve of the economic, social and even political

historian. It was essential in this study of the emergence of the
British oil industry to discuss politics and international dip-
lomacy as well as company growth and marketing strategies, and
to use government as well as company archives. There is little
place in the 'real world' for the fine frontiers between disciplines
which academics love to create and resolutely defend. .
In the course of my research I have used the facilities of many
institutions, and I would like to thank the following: the Public
Record Office; the India Office Library; the Ministry of Defence
Library; the Naval Library; the Science Museum Library,
London; Cambridge University Library; and the Archives Centre
of Churchill College, Cambridge. I was treated with particular
kindness by the staff of the Institute of Petroleum, London, and
the Archives Economiques et Financieres, Paris.
Within the text I have used the accepted English spelling for
place names and certain technical terms. Otherwise, I have
transliterated Russian words according to the Library of Congress
system, with slight modifications.
This study would have been difficult, if not impossible, without
the assistance which I have received from various oil companies.
My research greatly benefited from access to hitherto unavailable
papers in the archives of the Shell Group in London and The
Hague. The archives of S. Pearson and Son, which have been
deposited in the Science Museum, London, also proved most
useful. ESSO (U.K.) allowed me to see an unpublished company
history. Mr Tony Corley, who is currently completing a his-
tory of Burmah Oil, corrected some of my misapprehensions
concerning that company and Indian oil in general. Dr Ronald
Ferrier, the Group Historian of British Petroleum, assisted my
understanding of the early history of the Anglo-Persian Oil
Company.
I would like to thank the editors of the following journals for
permission to use material which first appeared in their publi-
cations: the Historical Journal, Business History and Modern
Asian Studies.
A number of individuals have selflessly given their time in an
attempt to make this a better book. I owe a particular debt to
Clive Trebilcock, who first aroused my interest in economic
history, and subsequently initiated me into the art of research.
Stephen Roskill has proved an unfailing source of wisdom over
PREFACE XI
the last few years. Leslie Hannah undertook the awesome task of
reading the penultimate draft of my manuscript in its entirety. I
also wish to thank the following: Mr Malcolm Falkus; Dr Peter
Gatrell; Mr Grigori Gerenstain; Mr Paul Hendrix; Mr Malcolm
Hoodless; Mr J. N.D. Hooper; Dr Bill Kennedy; Dr Maurice
Pearton; Mr Alan Peters; Dr George Philips; Dr John Shorter; Dr
Derek Scales; Dr David Stevenson; Canon Charles Smyth; and
Ms Shirley Watson. Miss R. Malone and Miss P. Blundell, my
typists, performed a splendid service in deciphering an illegible
manuscript. These patient people bear no responsibility for
the inadequacies which remain in this book, nor the ideas put
forward in it.
The research for this book was undertaken while I was
successively a research student and a Research Fellow of Corpus
Christi College, Cambridge, which for eight years housed me,
helped to finance me, and enriched me by its humanity. I
completed the manuscript after joining the Business History Unit
at the London School of Economics. I owe a great debt of
gratitude to both these very different academic institutions.
London GEOFFREY JONES

November 1979
Introduction
The oil industry is usually said to date from 1859, when a Colonel
Drake drilled an oil well in Pennsylvania. There was, however, a
long pre-history. Asphaltic bitumen was used extensively in
ancient Mesopotamia, and in subsequent centuries petroleum
was collected from seepages, or shallow pits, and used for both
medicinal and industrial purposes. Marco Polo visited Baku in
1272 and reported that the inhabitants collected oil. Natural oils,
such as olive, whale and fish oils, were used as lubricants and lamp
oils. A shortage of these oils in the nineteenth century prompted
experiments with the production of oil from shale. James Young
in Scotland was a pioneer in this field. The demand for oils
increased rapidly with the development of new and cheap lamps,
which became readily available in Britain in the 1850s. Colonel
Drake, by demonstrating that it was possible to drill through
impervious rock to obtain natural petroleum, revolutionised the
industry.
The forty years after 1859 saw the rapid expansion of crude oil
production in the world. Some 274 metric tons of crude oil had
been produced in the United States in 1859. By 1900 production
had reached nearly 9 million metric tons. Moreover, new
producing areas in other parts of the world began to challenge the
early American monopoly of the industry. Petroleum production
in Russia expanded rapidly. For a brief period at the turn of the
century Russia produced more oil than the United States.
Incredibly, almost all of this huge Russian production came from
an area of the Aspheron Peninsula, around Baku, of less than six
square miles. By the turn of the century Rumania, Austria~
Hungary, Canada, Burma and the Dutch East Indies had also
entered the list of oil producers. Before 1900 the industry had also
acquired some other recognisably modern features. Pipelines had
replaced barrels, trains and carts. During the 1880s ocean-going
steam oil tankers began to challenge the dominance of sailing
vessels in the sea transportation of petroleum.
of
2 THE EMERGENCE OF THE BRITISH OIL INDUSTRY
It was, however, in the first three decades of the twentieth century

that the world oil industry assumed most of its present character-
istics. This can be demonstrated by looking very briefly at four
different aspects of the industry. First, production. World crude
oil production continued to expand, increasing ten-fold between
1900 and 1930. A more significant development, however, was the
emergence of the new producing areas in South America and the
Middle East, which were to become so vitally important after the
Second World War. Oil production began in Mexico in 190 I and
Venezuela in 1917. Oil was discovered in commercial quantities in
Iran in 1908 and Iraq in 1927. These new discoveries were to alter
radically the face of the world oil industry. In 1900 the United
Kingdom had imported some 60 percent of its oil from the United
States, and a further 30 per cent from Russia. By the middle of the
1930s Venezuela was Britain's largest supplier, followed by Iran,
with the United States providing only I 0 per cent of Britain's oil
and Russia almost nothing. Only during the crisis years of the
Second World War did the United States re-establish itself as the
major supplier of oil to Britain.
Secondly, during the opening decades of the twentieth century
the oil industry acquired a technology that a modern oilman
could recognise. The geologist, for instance, acquired a far more
important place in the search for oil. Before 1900 most of the
world's oil had been discovered by the wildcatter, or by surface
indications of oil and gas. Although many geologists had been
engaged in petroleum exploration during the drilling boom of
1865-66 in the United States, they had not been conspicuously
successful, and their employment in the American industry ceased
almost completely after 1867. until the twentieth century. It was
in Europe that the role of the geologist was revived. By the late
nineteenth century some European oil companies, particularly
those operating in Russia and Burma, had begun to employ
geologists, but their work was essentially confined to surface
investigation. One of the most important items a leading British
geologist advised his fellow oil geologists to take with them on
field work was 'a stout walking-stick with a crooked handle'. 1
Those words were written in 1912. By the early 1920s crude
geophysical exploration methods were being extensively used all
over the world. In 1925 the Shell Group carried out its first
experimental air survey.
There were even greater changes in refining technology. The
INTRODUCTION 3
refining process is basically one of distillation. By means of

distillation the raw material of the industry, crude oil, is separated
into its various by-products, the main ones being fuel oil, gasoline
or petrol, and kerosene or paraffin. The proportions of the
different by-products obtained from the straight distillation of a
given crude oil are relatively fixed. The proportions vary accord-
ing to the different chemical compositions of different crudes.
One of the first things on which an oilman informs an 'outsider' is
that no two crudes are alike. The first American oil to be
exploited, from Pennsylvania, was a 'light' crude, which yielded a
high proportion of kerosene on refining. 'Lighter' crudes give
more petrol, 'heavier' crudes more heavy distillates such as fuel
oil. The crude oil from Baku, for example, was of the heavy
variety, and gave kerosene yields of only about 30 per cent. Until
the turn of the century refining technology was essentially a
matter of separating the various components of the crude oil into
these different products. There was no way of adjusting the
proportions of products recovered to meet any changes in the
relative demand for them. The expansion of the production of one
distillate, therefore, could only be achieved by expanding the
production of all the other distillates obtained from the given
crude. In the early years of the industry unwanted by-products
were simply destroyed. In Russia refiners burnt the 'heavy' re-
sidual which remained after the kerosene had been extracted. The
vital breakthrough out of this situation came with the develop-
ment of 'cracking', a process whereby large oil molecules are
broken into smaller molecules, with the practical effect that petrol
could be obtained from fuel oil. The first commercial process for
'cracking' heavy petroleum fractions to give petrol was intro-
duced in 1913 by Dr William Burton in the United States. A
series of more efficient cracking processes was developed in the
early 1920s. 'Cracking' meant that the industry could not only
recover petrol; it could manufacture it. By 1935 a third of the
world's petrol was produced by cracking.
The development of this new flexibility in the petroleum
industry's capacity to respond to the market was directly related
to the fundamental changes which were occurring in the use made
of petroleum by the beginning of the twentieth century. This was
the third area of great change in the petroleum industry in the
opening decades of the new century. Until 1900 kerosene, which
was mainly used for heating and lighting purposes, had been the
most valued petroleum product. In 1899 kerosene amounted to 64

per cent of total petroleum products refined in the United States.
In Britain at the turn of the century the word 'petroleum' was
virtually synonomous with kerosene. In 1902 Britain's leading oil
'expert', Boverton Redwood, estimated that there were some II
million lamps in use every night in England and Wales. However,
from the turn of the century onwards in one Western country
after another the primacy of kerosene as a source of heating and
lighting was challenged by gas and electricity. Kerosene's demise
was not immediate. Kerosene sales increased two and a halftimes
in the United States between 1899 and 1919. In 1917 there were
still some 20 million kerosene lamps in use in America. New uses
were always being found for the fuel-eventually in jet and other
high-speed engines. But relatively after 1900 kerosene became less
important than two other petroleum distillates, fuel oil and
petrol.
The Russians pioneered the use of oil as fuel under boilers. 2 In
regions around Baku it was far cheaper than alternative fuel
sources, such as coal or wood. By the late nineteenth century it
was already being widely employed on Russian trains and in
Russian factories. After 1900 the use of fuel oil spread rapidly in
the United States, at least in regions where it was cheaper than its
main rival, coal. By 1909 fuel oil accounted for one third of the
total United States petroleum product output, and overall there
was an increase of2500 per cent (by value) of distilled fuel oil sold
in the United States in the first twenty years of the twentieth
century. The adoption of fuel oil in countries where coal was
plentiful and cheap was much slower. In the United Kingdom
some railway companies experimented with fuel oil. In 1900 the
Great Eastern Railway had about 75 engines equipped to burn
oil, although these were all later re-converted to coal. Fuel oil did,
however, find a niche in certain specialised industrial processes,
and in the Royal Navy. In the world as a whole, many ships
switched from coal to oil. In 1914 only 3 per cent of the world's
merchant shipping had burnt oil in their boilers. By 1929 over 30
per cent of the world's ships did so, and another 10 per cent used
oil in internal combustion engines.
There was an even faster growth in another petroleum product,
petrol. In 1900 petrol had been mainly used in cleaning establish-
ments or as a chemical solvent. The situation was dramatically
altered by the advent of the motor car. In this the United States
INTRODUCTION 5
led the way. The number of motor vehicles registered in the

United States increased from 8000 in 1899 to 7.6 million in 1919,
and sales of petrol increased by 1400 per cent over the same
period. By the end of the 1920s there were 26.5 million registered
motor vehicles in the United States, and petrol sales had
experienced a further fourfold increase. As a result of these
developments there had occurred by 1930 a radical change in the
relative importance of petroleum products sold in the United
States. The primacy of kerosene had been challenged. In 1919, in
terms of relative value, though not of volume, petrol was the
largest petroleum product sold in America. By 1929 petrol was
largest in terms of both volume and relative value. Western
Europe lagged behind these developments. By 1907 the United
Kingdom was the largest market for petrol in Europe, but it was
not until 1915 that imports of petrol into Britain surpassed those
of kerosene. The car remained a luxury in Britain and western
Europe before 1914. The great expansion came after the First
World War. The number of motor vehicles registered in Britain
increased from under 400,000 in 1914 to over I! million in 1925.
New methods of distribution were developed to meet the resulting
expansion in demand for petrol. Petrol ceased to be sold in two
gallon cans, and the 1920s saw the introduction into the United
Kingdom of kerbside pumps. The first day and night service
station was opened in Britain in the Harrow Road, London, in
1921.
A cautionary note is needed here to put the triumphant march
of petroleum into perspective. In 1899 oil supplied 4.5 per cent of
United States energy requirements. By 1930 this proportion had
reached perhaps a quarter. The growth in the relative importance
of petroleum was much slower in Europe. In 1929 oil supplied
only 4 per cent of Europe's primary energy requirements, and it
did not exceed 25 per cent until the late 1950s. This was a very
different position indeed from that prevailing in 1973, on the eve
of the great oil crisis, when petroleum provided over 64 per cent of
Europe's total consumption of energy. At the end of our period
western Europe and the United States could still be called 'coal-
based' industrial economies, though many new industries, as well
as the new weapons of war such as aeroplanes and tanks, were
dependent on petroleum products.
Fourthly, the first quarter of the twentieth century saw the
emergence of the oligopolistic corporate structure which, at least
until the mid-1970s, was to dominate the oil industry outside the
United States and the Communist world. By 1900 the trend
towards oligopoly in the petroleum industry, which many
petroleum economists consider to be an inevitable feature of that
industry, was already marked. 3 In the United States the oil
industry was dominated by the giant Standard Oil Company. In
1870 the Standard Oil Company (Ohio) had been organised as a
refinery business under the management of, among others, J. D.
Rockefeller. The company grew rapidly through a series of
mergers in the 1870s, and in the late 1880s it began to acquire
direct interests in production in order to increase the security of its
crude oil supplies. By 1900 it was the largest industrial enterprise
in the United States, and it remained the second largest after the
formation of United States Steel in 1902. In 1910 the company
controlled about 60 per cent of total United States production of
petroleum. The Russian oil industry also witnessed extensive
concentration. By 1899 the five largest oil companies in Russia
controlled over 40 per cent of total Russian production. Fourteen
years later the three largest companies controlled over 60 per cent
of Russian oil production. 4
It was in the period after 1900 that the present 'seven sisters', the
seven large integrated multinational oil companies which grew
to dominate the world oil industry, emerged. 5 In 1911 the United
States Supreme Court ordered the dissolution of the Standard Oil
Company on the grounds that it had infringed that nation's anti-
trust laws. Three of the successor companies were to become
'sisters'-Standard Oil of New Jersey (now Exxon), Standard Oil
of New York (now Mobil) and Standard Oil of California (now
Socal). The two other American majors, Gulf Oil and Texaco,
had their origins in companies formed after the discovery of oil in
Texas in 1901. Of the western European 'sisters', British
Petroleum had its origins in a British company formed to exploit a
Persian oil concession secured in 190 I. The other European
'sister', the Shell Group, was formed in 1907 by the amalgamation
of the British Shell Transport and Trading Company with the
Royal Dutch Petroleum Company, under 60 per cent Dutch
control. The French oil company, the Compagnie Francaise des
Petroles, which was to become the unofficial eighth sister, was
formed by the French Government after the First World War.
Despite the outbreak of occasional internecine price wars, a
pattern of co-operation between these major companies had been
INTRODUCTION 7
established by the late 1920s. They were allied in joint ventures in

the Middle East, and during 1928 the leaders of the major British,
Dutch and American companies began to plan the establishment
of an international cartel to control the oil supplies of the
world.
These developments in the world petroleum industry in the first
quarter of the twentieth century provide the background for the
central theme of this book, the emergence of a British oil industry.
In 1900 Britain's oil industry was extremely small. Almost all of
the world's oil was produced in foreign countries by foreign
companies. Within the United Kingdom itself there existed only
the tiny Scottish shale oil industry. In addition, small British oil
companies had established footholds in the oilfields of Baku,
Burma and Dutch Borneo. A quarter of a century later there had
been a remarkable change in the position of British oil enterprise.
Although the amount of oil produced in the British Empire was
still small, British oil companies had spread over much of the
world. They had secured a prominent place in the Russian oil
industry before the Bolshevik Revolution had resulted in the
nationalisation of all foreign assets. A part-British multinational,
the Royal Dutch Shell Group, had acquired worldwide pro-
duction and marketing interests. The British company which
controlled the vast reserves of oil in Persia was on the road to
becoming a second European oil multinational. British oil
interests had established a strong position in Mexico, and secured
a large share of the promised riches of Iraq.
The expansion of British oil enterprise was the product of free
enterprise capitalism, the consequence of individual entrepre-
neurial decisions. British foreign investment of this period, unlike
French, was not influenced by the State. Nevertheless, three
separate reasons led the British Government to become involved
in the petroleum industry. First, after 1900 the Royal Navy began
to use oil in its vessels instead of coal. This made oil a vital
strategic commodity, on which the security of the Empire
depended. Secondly, several British colonies began to attract the
attention of oil companies. The government in London was
forced to become more directly involved in the formulation of
petroleum exploration legislation than it was to be again until the
discovery of the oil and gas deposits in the North Sea. Thirdly, the
areas of the Middle East and Latin America which attracted
British companies were diplomatically sensitive regions. Rivalries
between oil companies of different nationalities were translated

into international political rivalries.
These points of interaction led the British State and the oil
companies into increasing contact before the First World War.
For a variety of reasons several British oil companies sought
diplomatic support, fuel oil contracts and even finance from their
government, while the Admiralty's search for a safe supply of oil
led the State in 1914 to acquire control over a company working
the oil fields of Persia. During and after the First World War the
contacts between the British Government and the oil companies
became even closer.
Notes
I. E. H. Cunningham Craig, Oil Finding (London, 1912) p. 154.
2. G. G. Jones, 'The Oil Fuel Market in Britain 1900-14: A Lost Cause
Revisited', Business History, XX (1978) 133-5.
3. P. H. Frankel, Essentials of Petroleum (London, 1969). For a contrary view,
seeM. Adelman, The World Petroleum Market (Baltimore, 1972).
4. P. V. Vo1obuev, 'Iz istorii monopolizatsii neftianoi promyshlennosti dorevo-
luzionnoi Rossii (1903-1914)', /storicheskie Zapiski (1955) 98.
5. The phrase 'Seven Sisters' was first popularised by the Italian Enrico Mattei,
and has now achieved wide public currency through Anthony Sampson's
study of the oil industry, The Seren Sisters: The Great Oil Companies and the
World they Made (London: Coronet, 1976).
1 Admirals and Oilmen
I THE ROYAL NAVY AND OIL I865-I905
The conversion of the Royal Navy from coal to oil burning was a
landmark in the emergence of the British oil industry. It was the
main reason for the growth of the State's interest in the affairs of
the oil companies, who became not merely purveyors of a
commercial product, but suppliers of a strategic commodity on a
par with armaments. From the point of view of the industry, the
government became a very large consumer for an important
petroleum by-product, fuel oil. The events which led admirals to
become interested in oilmen must therefore occupy an important
place in a study of the British oil industry.
There was a long history of interest in oil burning in the Royal
Navy. In 1865 a young naval captain, J. S. Selwyn, drew attention
to American experiments with burning oil in the boilers of ships,
and called for an immediate inquiry into whether Britain should
follow suit. A series of experiments on burning petroleum was
undertaken at Woolwich Dockyard in 1866, and two years later
the Admiralty placed a ship at Selwyn's disposal for further
experimental work. 1
The momentum behind Selwyn's work was not sustained. The
early oil burners required steam to atomise the fuel. This steam
could only be generated from large quantities of fresh water, with
the result that the application of these burners to ocean-going
vessels was extremely difficult. In 1894 an oil-fired steamer, the
Baku Standard, did make a pioneer crossing of the Atlantic, but
the major technological breakthrough did not come until the
invention of the pressure jet burner in 1902. Selwyn followed the
path of many frustrated pioneers and sank into eccentricity. By
the turn of the century, aware that the difficulty of securing fuel oil
in Britain constituted a great deterrent to any further experiments
with oil burning in the Navy, Selwyn had become preoccupied
with grandiose schemes for developing Britain's supposed large
deposits of shale oil as a source of supply. 2
9
Nevertheless, by the middle of the 1890s the staid officials at the

Admiralty were being prompted from another source to examine
the question of burning oil in their ships. Various manufacturers
of fuel oil burning systems tried to interest the Admiralty in their
wares, and in 1898 the Admiralty decided to undertake further
experiments. The results, unfortunately, were not satisfactory. 3
Naval engineers could not obtain combustion without clouds of
black smoke and a very low water evaporation rate per pound,
and most Admiralty officials were unenthusiastic. In June 1901
the Engineer-in-Chief observed that 'on account of the in-
flammable nature of petroleum it is considered undesirable to
employ it on board ships'. 4
Yet the subject would not go away. During 1901 the growing
use of oil by foreign navies finally prompted the Admiralty to
undertake a more energetic investigation of the fuel oil question.
In August 1901 the ChieflnspectorofMachinery was sent to Italy
to investigate the burning of oil in Italian naval vessels. 5 By the
end of 190 l the Admiralty had begun its own trials with the fuel.
In January 1902 the First Lord, Lord Selborne, described the
Admiralty's experiments with oil as 'the most important in-
vestigation now in progress. ' 6
In retrospect, the Admiralty's early experiments with oil seem
unadventurous. Officials displayed an excessive concern with the
different requirements of the Navy and the merchant marine, with
the result that there was a reluctance to learn from the advances
made in oil burning by merchant vessels. Nevertheless, experience
with the burning of oil was steadily accumulated, even if progress
was spasmodic. In 1904 it was decided to fit all new battleships
and cruisers to burn fuel oil as an auxiliary to coal, and all the
destroyers for the following year with an installation for burning
oil alone. By 1905 the Royal Navy had established itself as the
leader in the field of oil burning among the navies of the world.
The advantages of oil over coal became apparent very early on.
Oil is a mobile fuel that could be pumped rather than man-
handled. Bunkering, refuelling and daily operation were all
essentially revolutionized by oil's convenient fluidity. The use of
fuel oil increased a warship's speed considerably. It allowed a
rapid control over the rate of fuel supply which meant that speed
could also be quickly varied. It required less storage than coal and
this considerably increased a ship's radius of action. When oil was
burnt properly it enabled an almost complete absence of smoke,
ADMIRALS AND OILMEN 11
one of the Admiralty's main requirements for a fuel. Oil firing

made possible a reduction in ships' complements. Men did not
have to be taken from the guns to stoke coal as occurred when
supplies from the coal bunkers deep in the ship were drawn upon.
A warship could be re-bunkered with oil at a much faster rate
than with coal, and there was the theoretical possibility of re-
fuelling at sea. This would greatly increase the effectiveness of a
fleet as it would no longer have to send a proportion of its vessels
back to port for re-fuelling.
II THE PROBLEM OF SUPPLY
There was one overriding problem, however, and that was the
difficulty of securing ample supplies of the new fuel. There was
little purpose in perfecting an oil-burning system for warships if
the Royal Navy could not get any fuel to burn; and whether it
could do so was in doubt right up to the First World War. The
Admiralty faced three related problems in securing a supply of oil
for the Navy: availability, price and security.
Officials certainly had reason to be concerned about the avail-
ability of fuel oil. There was, as yet, little domestic demand for the
fuel, so there existed no commercial supply organisation for the
United Kingdom. Fuel oil was produced in countries, such as the
United States and Russia, which had a large and growing internal
demand for the product. The Admiralty was, therefore, not only
dependent on distant foreign countries for fuel oil, but on those
countries having a regular surplus over their own consumption.
As a response to this problem the Admiralty steadily diversified
from its original dependence on Texan oil, a process illustrated in
Figure 1.1. The new sources of supply were acquired partly as a
result of deliberate policy. The Admiralty, for political reasons,
preferred oil from British-controlled sources such as Burmah Oil
and Scottish shale, at least if it could be obtained at a reasonable
price. The Admiralty was also forced to diversify because its
original major supplier, the United States, experienced a pheno-
menal growth in fuel oil consumption after 1900. The new sources
of supply, however, proved no more reliable than the old one. 7
Rumania briefly supplied large quantities of oil, but Admiralty
officials recognised that this was the result of a temporary surplus
which could easily disappear. 8 Oil from Dutch Borneo was very
expensive because of the cost of freight, while the newly-discovered
u;
c
9
"'c
£
0
-g mmrnm;;Jsorneo
:lt
::J {;.~.:{~:j Sha le
0
-5 ~R umania
·c;
Q; [ ¥\iWZJBurma
::J
u.. 180 . U.S.A .
150
120
90
60
FIG. 1.1 Geographical origin of fuel oil purchased by the Admiralty 1902-12
Source: Director of Naval Contracts Report, 24 January 1912, enclosure No. 4,
Admiralty Deparmental Committee on Fuel Oil 1911-1912, Naval Historical Library.
Persian supplies were at the mercy of unruly tribesmen.

These uncomfortable facts dampened the Admiralty's en-
thusiasm for oil. Many observers outside the Admiralty, who did
not realise the great tactical advantages of oil-burning warships,
thought it almost insane to convert the Navy to this foreign-
produced fuel. 'It is rather as though,' the Secretary of State for
India wrote to the Viceroy in April 1913, 'the owners of the
premier cru vineyards in the Gironde went about preaching the
virtues of Scotch Whisky as a beverage. ' 9 These fears can be more
readily appreciated when it is remembered that worries about
supply were not confined to Britain. The very slow progress of the
United States Navy in the burning of oil was largely due to the
concern of officials about the availability of future petroleum
supplies, and this at a time when the United States was the largest
producer of oil in the world. 10
The price of the new fuel presented further problems to the

Admiralty. There was a rapid expansion in the naval fuel bill from
the middle of the 1890s onwards, as. the Spencer building
programme began to result in a growing demand for coal. 11 This
underlying trend continued into the new century. Fuel costs,
which had represented on average just under 3 per cent of total
Admiralty expenditure between 1892/3 and 1900/l, rose to 5.5 per
cent between 1901/2 and 1912/13. The first large purchases of oil
came after 1909, so it is clear that this higher plateau of fuel costs
was established while coal was still the primary fuel.
Oil was, however, more expensive than South Wales coal, even
after the Admiralty had estimated the efficiency of20 cwts of oil as
equal to that of 28 cwts of coal. In addition, there was the cost of
the various supporting facilities which the Admiralty needed to
acquire in order to maintain oil-burning ships, such as storage
depots and oil tankers. 12 Table 1.1 gives a contemporary
Admiralty estimate of the two fuels.
TABLE 1.1 Average cost of oil and coal on all naval stations 1906-11
1906-7 1907-8 1908-9 1909-10 1910-11

s d s d s d s d s d
Coal (per 28 cwts) 27.11 30.11 33.6 28.1 29.2

Oil (per ton) 49.03 35.02 47.1 34.10 35.0
Source: Adm. Oil Committee 1912, enclosure No. 5 to Director of Naval Contracts
Report, January 1912.
The fuel oil prices paid by the Admiralty remained relatively

stable in the first few years, but after 1910 prices rose sharply as a
substantial expansion occurred in the world demand for fuel oil.
The Admiralty itself was partly responsible for this. Other navies,
such as that of the United States, followed the lead of the Royal
Navy, while the Admiralty's work in improving oil-burning
devices made oil more attractive to commercial consumers. There
were also a number of exogenous factors-most notably the rapid
growth of fuel oil consumption in the United States, which
reduced that country's surplus of oil for export and made the
Royal Navy an even less important buyer in the world market.
Fuel oil supplies failed to expand sufficiently to meet this
increased demand and, after 1911, there was a short-term

bottleneck in the oil tanker market. The Admiralty, dependent
for its oil on sources of supply several thousand miles away, and
with freight costs therefore forming a significant proportion of
total expenditure, found itself confronted with apparently in-
exorably increasing prices.
The third supply problem for the Admiralty was that of
security. It was this aspect which made Britain's situation so very
different from that of the United States. Almost all of the
Admiralty's sources of supply were foreign, as were many of the
companies involved in the industry. The non-American sources of
supply developed after 1906 were far greater political risks than
was the United States. Not only did Rumania's geographical
position make her a very doubtful source of supply in the event of
a European war, but also most of the capital invested in the
Rumanian oil industry was German. The oilfields at Miri were in
Dutch Borneo. The search for a secure source of oil, safe above all
in the event of a major war, soon became an essential feature of
British oil policy.
III THE FISHER YEARS
The different aspects of the oil supply problem-availability, cost

and security-<:aused Admiralty officials to have many doubts
about extending the use of oil in the Royal Navy. What is
surprising, indeed, is that such substantial progress was made
before 1912, and that the full-scale switch to oil was eventually
undertaken before these problems had been solved. The credit for
this is often attributed to Admiral Fisher. John Arbuthnot Fisher,
regarded by Maurice Hankey as 'probably the most remarkable
man of his day', 13 occupies an important position in the story of
the Royal Navy's conversion from coal to oil, as he does in the
whole process of the reform and re-invigoration of the Navy in
the early twentieth century. He had joined the Royal Navy in
1854. Possessing great energy and self-confidence, a kind of
demonic charisma, a capacity for generalisation, and 'right in
nine-tenths of what he fought for', 14 Fisher progressed rapidly in
his career. He became a Captain at the age of 33, and in 1886 took
up his first appointment at the Admiralty, as Director of Naval
Ordnance. It was in this capacity that he first became interested in
oil. This interest earned him the title of the 'Oil Maniac', an
indication both of the strength of his enthusiasm for the use of oil
in warships and of the opinion of his contemporaries on the
soundness of that idea. At the end of 1901 Fisher, now a full
Admiral and about to become Second Sea Lord, was still strongly
supporting the cause of oil. In December 1901 he wrote to the
First Lord of the Admiralty, Lord Selborne, expressing his hope
that all possible progress was being made with the question of
burning oil in the Royal Navy, as it would have 'an immense
bearing on naval warfare.' 1 5 Fisher's enthusiasm for oil was
increased by his contact with several British oilmen. In July 1903
he met William D'Arcy, who had recently secured a large oil
concession in Persia, and D'Arcy gave Fisher all the 'Maps and
papers' concerning the concession. 16 A more significant contact
was Marcus Samuel, the chairman of the Shell Transport and
Trading Company, whom Fisher seems to have first met in 1899.
Fisher was as eager for the Navy to burn oil as Samuel was to sell
his oil to the Admiralty, and on that basis the relationship
developed. 17
Fisher's enthusiasm for oil was demonstrated during his early
plans for the revolutionary new type of battleship which was to
become the Dreadnought. In the first volume of Naral
Necessities, written during his period as Commander-in-Chief at
Portsmouth in 1903/4, Fisher developed his ideas of a dread-
nought battleship and a new battlecruiser, and he clearly looked
forward to the day when his new-style ships would use oil. Fisher
considered speed was the 'first desideratum in every type of
battleship', and the main attraction of oil was that a ship burning
that fuel was potentially capable of greater speed than a coal-
burning one. Yet Fisher's enthusiasm for oil should be put into
context. In Naval Necessities he recognised that 'until a certain
prospect of a constant oil supply for our fleet is provided', his new
battleship could not burn oil exclusively, and he recommended
instead the use of oil only when the vessel was in proximity to the
enemy. 18 For this reason H.M.S. Dreadnought, completed in
December 1906, was coal burning. Fisher was enthusiastic about
oil, but it was only one of his many enthusiasms and, given the
difficulties of supply, a minor one at that. The early experimental
work with oil burning was supported widely within the Admiralty
and it would be a misjudgement to regard Fisher as the central
figure.
It is, therefore, not too surprising to discover that Fisher's
appointment as First Sea Lord in October 1904 was followed by a

slow-down in the oil programme. One of the main motives behind
the reforms undertaken by Fisher in these years was the need for
economy, and the Dreadnought had given Britain such an
advantage over other nations that the Admiralty could reason-
ably afford to slow down its building programme. Fisher's first
years as First Sea Lord therefore saw a reduction in the Naval
Estimates: the level for 1904/5 was not surpassed until 1910/ll.
The financial constraints of the period resulted in a deceleration
of the oil fuel programme. In March 1905 the Admiralty Board
instructed all naval vessels to exercise strict economy when
burning oil. 'Generally', wrote the Director of Naval Intelligence,
Charles Ottley, 'the fact that oil fuel is not a native product of the
United Kingdom, and that by consequence its supply is but
limited, is to be borne in mind.' 19 Only 7000 tons of fuel oil were
purchased in 1905, compared to 22,420 tons in the previous year.
Further economy measures followed the election of Campbell-
Bannermann's Liberal Government in December 1905. By July
1906 the two committees which had attempted to formulate an
embryonic oil supply and storage policy, the Admiralty Oil
Committee and the Joint Committee with the Colonial Office,
had been abolished. 20 Even the plans for building purely oil-
burning destroyers were set back. At the end of 1908 the Beagle
group of destroyers, sixteen in all, were ordered to be fitted for
burning coal alone. However, the contract trials of these vessels
proved rather disappointing, and all destroyers after the Beagle
class were built to burn oil exclusively.
Fisher's five year tenure as First Sea Lord, therefore, was not a
period of great advance in the use of oil in the Royal Navy,
although some progress was made. Oil storage facilities were
constructed, although as usual financial constraints constantly
hampered Admiralty plans. By 1912 the Admiralty had sufficient
storage for 186,000 tons of fuel oil. 21 These years also witnessed
the modest beginnings of the Admiralty oil tanker fleet. The
several small vessels acquired served alternately as fleet re-
plenishers and as conveyors to the United Kingdom of fuel oil
purchased abroad. They also provided a means by which the
Admiralty could gain experience of new naval technologies in sea-
going vessels before they were applied to the war fleet. 22
IV THE ADMIRALTY, THE OIL COMPANIES AND THE

EMERGENCE OF SHELL
The growing use of fuel oil by the Royal Navy led the Admiralty
into contact with oil companies. The relationship between the
Government and private industry in Britain before 1914 was far
from clear-cut. In the half century before the First World War
there was a steady increase in State intervention in what had been
the most laissez-faire economy in Europe, if not the entire
Western world. In 1900 a State-supported central scientific
research organisation, the National Physical Laboratory, was
established, and a few years later a loan was made to the Cunard
Line for the construction of ships. Local governments established
gas and electricity undertakings. Some authors have seen in these
developments decisive proof of the 'end of laissez-faire'. 2 3 In fact,
laissez-faire was very far from being a corpse by 1914. Even the
great theorists of laissez-fa ire, Adam Smith and Jeremy Bentham,
had never equated their ideal with a total absence of State
intervention in the economy. It had always been recognised that
intervention was sometimes necessary, most notably in the
interests of national security. Laissez-faire was a pragmatic
doctrine, and as such it continued to command wide support in
Britain before 1914. The list of interventionist measures repre-
sented exceptions to a still prevalent general rule.
This pattern of general commitment to liberal economic ideas,
together with a willingness to make exceptions on empirical
grounds, was demonstrated in the British Government's relations
with private companies. Despite a genuine commitment to the
virtues of free competiti'on, civil servants were prepared to
countenance or even encourage combinations or cartel agree-
ments among firms in certain cases, in contrast to the increasingly
strong 'trust-busting' views of Federal and State officials in the
United States after the turn of the century. Civil servants at the
Board of Trade encouraged moves towards co-operation and
combination by the railway companies in the decade beforel914,
on the grounds that the degree of competition in the industry was
economically inefficient. 24 The Service Ministries, who were the
major Government customers of private industry, also declined
to follow a rigidly doctrinaire policy in their dealings with the
firms from whom they purchased goods. The kind of relationship
that developed between the Admiralty and the War Office and
their contractors depended on the type of commodity in question.

'Competitive tender can only apply in its fullest sense when your
requirements are for an article of general consumption', the
Parliamentary Secretary to the Admiralty explained in 1905,
'because in regard to other articles which are special to the
Admiralty, or ... to the War Office namely, special articles of
warlike material, you tend to become the sole consumer and you
do not then in the fullest sense get free competition in the matter
of tender ... you then tend to go into partnership with the firm
that supplies you, rather than to have full competition in the open
market.' 25 In armaments, therefore, where reliability of supply,
rapid delivery and high standards were essential, the Service
Ministries moved away from the orthodoxy of laissez-faire. They
developed a partnership or 'special relationship' with a small
favoured group of manufacturers. Competitive tendering for
contracts virtually ceased to exist; 'rings' of producers were
recognised or even encouraged. 26 The situation was altogether
different when the Government purchased coal, an 'article of
general consumption'. Although the Admiralty was very re-
strictive about the type of coal it purchased, it followed con-
ventional contracting rules when giving supply contracts.
Tenders were asked from all twenty-four (in 1903) South Wales
collieries on the Admiralty List, and only the lowest quotations
taken.
The question in the decade before 1914, therefore, was where
the incipient oil company- Admiralty relationship would appear
on the spectrum of possible Government-company relation-
ships. As a commodity, fuel oil shared certain features of both
armaments and coal. It was, like coal, a fuel but, like armaments,
it was also a manufactured good from which a very high standard
was expected. Fuel oil had a commercial as well as a military use,
thus qualifying as 'an article of general consumption'. It also,
however, had the peculiarity of being a joint product, its
production being dependent in varying degrees on the market
conditions experienced by its fellow joint products, kerosene and
petrol. The Admiralty's position in the fuel oil market was much
weaker than in either the armaments or the South Wales coal
markets, because fuel oil was a commodity produced for the most
part beyond the borders of the British Empire. The major oil
companies with which the Admiralty had to deal were also
foreign, and thus immune from the control which the War Office
and Admiralty could exercise in the last resort over British coal
owners or armaments manufacturers. Moreover, the Admiralty
in 1902 was a new, and initially a small, customer for fuel oil, and
it would clearly need time to develop the kind of 'special
relationship' with the oil companies which it had been developing
since the 1890s with the armaments firms.
The type of relationship which emerged between the British
Government and one particular oil company has become a matter
of controversy. Civil servants and politicians have been accused
of taking a great dislike to the Shell Group. It was alleged by the
British leaders of Shell at the time, and has been subsequently
alleged by their biographer and by at least one recent historian,
that the British Goverv.ment, led by the officials at the Admiralty,
displayed a persistent and malignant bias against Shell from at
least 1902. The Admiralty is said to have obstructed Shell's
attempts to secure oil concessions in British India and other
British colonies; to have tried to prevent the company from
securing a foothold in the promising oil-bearing regions of the
Middle East; and to have refused to place any naval fuel oil
contracts with it. 2 7
The whole subject clearly merits closer scrutiny. Perhaps the
place to start is with the Shell Group itself. The Group, as it
became known after the great merger of 1907, had its origins in
two companies, one British and one Dutch. The British company,
the Shell Transport and Trading Company, traced its origins back
to the activities of a London Jewish merchant, Marcus Samuel.
Samuel had begun his career in the 1830s selling boxes made from
shells brought from the East. The business gradually expanded
the number of commodities in which it traded. When Marcus
Samuel senior died in 1870, one of his sons, also called Marcus,
continued to be involved in the Far Eastern trade, and in 1878 he
established a partnership with his brother Sam, forming the firms
of Marcus Samuel and Co. in London and Samuel Samuel and
Co. in Japan. The Samuel brothers became experts in Eastern
shipping and in trade with Japan.
In the middle of the 1880s Marcus Samuel was persuaded to
undertake a new venture, the sale of kerosene in the East. The
man who was responsible for Samuel's new interest was Fred
Lane. Lane, known as 'Shady' to contemporaries in the pet-
roleum business not because of any dishonesty but simply
because of his tendency to be involved with several different oil
interests at the same time, was one of the most important

influences on the first half-century of the European oil industry.
He was a man who excelled in arranging deals and bringing
partners together. His importance was well attested to by his
fellow oilmen. Henri Deterding called him the 'cleverest man' he
had known and Calouste Gulbenkian considered him the 'foun-
der of the British oil industry'. 28 Unfortunately he has become
one of the characters forgotten by posterity. While such colourful
figures as Deterding, Gulbenkian, Ludwig Nobel and Marcus
Samuel have attracted much attention, the quiet Fred Lane has
faded into obscurity. His achievements were nevertheless very
substantial. He undoubtedly laid the foundations of the early
successes of the Shell company. By the early 1880s the firm of
Lane and MacAndrew was already established as an important
london shipping broker, and at about this time Lane became
interested in shipping oil. In 1884, the year after the first kerosene
had been shipped to Britain from the Caucasus, Lane and
MacAndrew chartered the Nobel tanker Petroleum to bring a
cargo of Russian oil to London- the first delivery to Britain by
bulk tanker. The Nobels, who were major oil producers in Russia,
were at that time reluctant to start any export trade in kerosene,
and Lane shifted his allegiance to another group, the Paris
Rothschilds, arranging for the distribution of their oil to
England. In 1886 Lane visited Batum (which thanks to the
Rothschilds was becoming the major export port for Russian oil)
and arranged for the first shipment of Russian oil to India.
In 1885 Lane approached Samuel, with whom he had already
done much business in other commodities, and raised the
possibility of selling the Rothschilds' Russian oil in the East.
Sales of kerosene in Eastern markets were at that time monopo-
lised by Standard Oil. Standard's usual response to competition
was to cut prices in the threatened market until their competitors
had been eliminated. If Russian oil was to establish itself in Asia,
therefore, it needed to be so cheap and supplied over such a wide
area that Standard would be unable to undercut it in all the Asian
markets. In 1890 Lane showed Samuel around Batum, and soon
after this visit an audacious scheme was formulated by Lane and
Samuel. 29 The coup against Standard was to be in two stages.
First, Lane arranged in 1891 a nine year supply contract between
Samuel and the Rothschild's oil company Bnito. Secondly, in the
following year Samuel persuaded the Suez Canal Company to
allow him to carry his large new supplies of Russian oil through
the canal in specially designed oil tankers, something which had
not been previously allowed because of safety considerations. The
coup was totally successful. Russian oil carried through the Suez
Canal was cheaper in Eastern markets than American oil, and
Samuel established a large, though only marginally profitable,
trade in the East. Later in the 1890s fears that the Russian
contract might not be renewed led Samuel's company to search
for a secure source of oil nearer their Eastern markets, and in 1898
a major oilfield was struck at Kutei in Dutch Borneo. In October
1897 the Shell Transport and Trading Company Limited came
officially into existence, taking its name from the brand name of
kerosene the Samuels had been selling.
Shell Transport grew rapidly. By the beginning of the twentieth
century the company possessed oilfields and a refinery in Borneo,
some thirty ocean-going tankers, and storage depots at many
ports in the East. In addition, Shell had supply contracts with
producers in both Russia and Texas. This apparently impressive
business, however, rested on weak foundations. The main
problem was Marcus Samuel himself. Although Samuel was
capable of formulating a grand design, he was far less able when it
came to details and organisation. Although the coup of 1892 had
laid the foundations for a profitable business, Samuel's
inability to perceive the need to develop an organisation com-
mensurate with this success left Shell vulnerable to attacks
from its rivals. The old ramshackle management structure was
retained long after the scale of the business had vastly increased, a
problem which was to plague almost all the British oil companies
of the period. Shell headquarters in London was manned by a
staff of a dozen or so, most of whom were members of the family.
To a professional like Fred Lane, who had become one of the
original directors of Shell in 1897, this was intolerable. 'Business
like this cannot be conducted by an occasional glance in one's
spare time, or by some brilliant coup from time to time', Lane
wrote to Samuel in December 1902, explaining his reasons for
resigning from the Board. 'It is steady, treadmill work; and unless
one is prepared for this, better let it alone altogether. ' 30 Samuel,
however, felt less and less attracted to the 'steady treadmill'. He
purchased a country house in Kent, and in 1902 became Lord
Mayor of London. Oil was relegated to a secondary place in
Samuel's list of priorities. Nearly fifty years old when he became
Lord Mayor, he was well on the way to becoming the inflated

windbag of his later years.
It was Marcus Samuel's weakness which enabled the Royal
Dutch Petroleum Company eventually to out-manouvre the Shell
Transport and Trading. The Royal Dutch Petroleum Company
was founded in the Netherlands in 1890, with a concession in the
Dutch East Indies. 31 In the early years the firm was under the
energetic direction of J. B. August Kessler under whom, in 1892,
it exported its first few cases of oil. Four years later a thirty year-
old book-keeper, Henri Deterding, joined the company. as
technical and commercial manager in the Dutch East Indies, and
by 1901 had become its chief executive. Deterding, clever,
ambitious, a 'Higher Simpleton', 32 was to have an impact on the
European oil industry fully comparable to that of
J. D. Rockefeller on the American one. There were, however,
great differences between the two men, both in their characters
and in their ideals. Deterding had little sympathy for his fellow
human beings, and he was devoid of intellectual interests,
although at times he did display considerable generosity and a
paternalistic regard for the welfare of his company's employees.
His business strategy was also very different. While Standard Oil
sought the elimination of opponents through trade wars, Deterd-
ing believed in co-operation and market control. He frequently
quoted the Dutch proverb Eendracht maak t macht-co-
operation gives power. It was the classic distinction between the
aggressive American world of absorption and merger, and the
Continental preference for the cartel. 33 .
Deterding's chief ambition in these early years was to build an
oil company to rival Standard Oil. As part of this policy he strove
to secure a union with the other, and larger, oil company with
production interests in the Dutch East Indies, Shell Transport
and Trading. By 1902 he had secured an agreement between Shell,
Royal Dutch and the Rothschilds, establishing a marketing
company which would act as sole sales agent for the three
interests in the East. In July 1903 the Asiatic Petroleum Company
formally came into existence, with Deterding, as managing
director, moving his offices to London, the commercial and
trading centre of the world. Holland was already too small for
him. With Deterding in control of Shell's sales in the East, and
Samuel's neglect of the business, the relative positions of Shell
and the Royal Dutch were reversed. By 1906 the financial
situation of Shell was so bad that Deterding was able to impose

his own terms for a merger of the two concerns. The Royal Dutch
and the Shell Transport and Trading company were to become
holding companies, with the Dutch having 60 per cent of what
came to be known as the Group. There were to be three major
operating companies. The Bataafsche Petroleum Maatschappij
(B.P.M.), based in The Hague, was responsible for production
and refining. The Anglo-Saxon Petroleum Company, based in
London, was in charge of transportation. The Asiatic Petroleum
Company, in which the Rothschilds retained their interest until
the 1920s, remained the marketing company, and also continued
to be based in London. 34
Shell, therefore, was allied to a Dutch company from 1902, and
was under Dutch 'control' from 1907. This fact greatly perturbed
Admiralty officials. The prospect of the Royal Navy being
dependent on a Dutch-controlled company supplying oil from a
Dutch colony was unattractive, especially as the Netherlands
were widely regarded as being very susceptible to German
influence. Yet the specific charge that the Admiralty consistently
showed bias against Shell in the award of naval contracts is
misleading. The first priority for the Admiralty was always to
secure oil for its vessels. In general, like the War Office, it
preferred British rather than foreign products. Purchases of
foreign armaments were made only in times of crisis or in the
virtually complete absence of a reliable domestic product-as
with aero-engines before 1913. But it was precisely into this
second category that fuel oil fell. The Admiralty had little
alternative but to purchase most of its supplies from foreign
companies producing in foreign countries. Anglo-American, the
British subsidiary of Standard Oil, supplied the Admiralty with
some oil from 1906 and was granted a major fuel oil contract in
1911. The Admiralty also purchased oil from the Romano-
Americana, Standard Oil's Rumanian producing company. The
United States was a strategically more reliable source than the
Netherlands, but the Admiralty did not exclude from its contracts
even those firms with direct German connections. The Admiralty
was fully aware that British Petroleum, from which it purchased
most of its Rumanian oil, was not only owned by foreigners, the
Deutsche Bank, the Rothschilds and the Nobels, but marketed
the oil of the Steaua Romana Company, which was completely
controlled by the Deutsche Bank. 3 5
There was, in reality, no bias against Shell in the granting of

contracts merely on the grounds that it was 'foreign'. Whatever
officials thought of Shell's management, they recognised their
dependence on the company. 'We lead a very stormy life in our
interviews with the Shell', the Additional Civil Lord at the
Admiralty observed in 1913. 'I always try to keep on good terms
with them myself, because I feel we want their stuff. ' 36 The annual
naval contracts went on the whole to the lowest tenders. The
reason why Shell did not receive any contracts for several years
after 1907 was that the Borneo fuel oil it tendered did not fit the
Admiralty specification and was also very expensive. 37 The
freight charges to the United Kingdom made the cost prohibitive
for all but the very small Admiralty requirements in the East. The
only bias in the Admiralty was against expensive oil when it could
get cheap oil. Moreover, the unstable production of the Borneo
oilfields gave Shell constant trouble and for a period the company
was glad not to receive naval contracts. 38
The Admiralty clearly regarded fuel oil as being more 'an
article of general consumption' than one of the 'special articles of
warlike material'. Its contracting policy was reasonably or-
thodox, with only marginal exceptions aimed at encouraging
some British sources of supply. Thus in 1905 the Admiralty made
an oil fuel contract with Burmah Oil, the British company which
possessed oilfields in Burma, and in return promised that
company assistance against its larger foreign rivals in India.
Again, although under the terms of the 1905 contract the
Admiralty did not have to purchase any Burmese oil, the
Admiralty did purchase it, and at 'a considerable sacrifice per
ton'. 39 Similarly, the purchase of 20,000 tons of Scottish shale oil
in 1910 at 42/- per ton was made to encourage a domestic source
of supply; an equivalent amount of Rumanian or Texan oil could
have been purchased at lower prices.
The Admiralty did not develop a 'special relationship' in its
buying policy with a favoured group of oil firms before 1913.
Tenders were requested from all the firms capable of supplying.
Admiralty officials displayed none of the enthusiasm for 'rings'
which they had shown when dealing with the armament manufac-
turers. The different market position of the Admiralty was mainly
responsible for this difference in approach. A monopsonist could
exert considerable market power even over a 'ring', but the
Admiralty was very far from being in such a position in the world
fuel oil market. Moreover, the 'foreign' nature of the oil
companies, and the low standard of business ethics generally
ascribed to them, made the Admiralty even more suspicious of the
oil companies than it was of the armament manufacturers.
The widespread contemporary suspicion of the oil companies
seems to have originated in the black reputation of Standard Oil
in the United States. By the turn of the century Standard Oil had
accumulated such a reputation for dishonesty and corruption in
its relentless pursuit of monopolistic control over the American
oil industry that it had become the favourite target for radicals
and journalists. Ida Tarbell's History of Standard Oil, an
important landmark in the development of American anti-
Standard sentiment, appeared in serial form in 1902, and
as a book in 1904. 40 This book, appropriately prefaced by a
photograph of a bald and sinister J. D. Rockefeller, related
the story of Standard's rise to power through aggression against
its smaller independent competitors. From the early 1900s several
state governments in America began taking legal action against
Standard Oil. The company was the subject of a series of critical
reports by the Bureau of Corporations, and in 1907 the Federal
Government took it to court on charges of having violated the
Sherman Anti-Trusts Acts by attempting to monopolise the
petroleum industry. In 1911 Standard Oil was forced to dissolve
itself into a number of separate companies. These events were well
reported in Britain, as in the whole of Europe. Terms such as
'trust' and 'octopus' crossed the Atlantic together with
Standard's kerosene and they became part of the British public's
vocabulary when discussing the large oil companies. The fact that
the oil companies sold petrol, the price of which affected car-
owners, a still small but articulate part of society, served to make
the subject of oil companies one of public interest. When the price
of petrol rose, as in 1912 and 1913, popular daily newspapers such
as the Daily Mail and the Daily Express contained many
references to the petrol trusts and the 'oil octopus'. Marcus
Samuel's inability to refrain from his public declarations that 'the
price of an article is exactly what it will fetch' only reinforced the
belief that British oilmen, especially Jewish ones, acted just like
their American cousins. 41 Moreover, as we shall see in sub-
sequent chapters, small British oil companies made sure that
politicians and civil servants were well aware of the dubious

business ethics of their larger competitors. A comparison can be
made with the armaments industry. Just as the critics of oil
companies in Britain adopted the language of the American
'trust-busters', so the British critics of the armaments industry in
the early twentieth century borrowed the arguments and methods
used by the German socialist Karl Liebknecht to attack the
German armament firms. The assault on the armament firms,
however, was led by a small group of radicals who clearly
attracted no support from the officials of the State procurement
agencies who dealt with the firms involved. 42 There were more
critics of the oil companies, and government officials largely
shared their views.
The Admiralty, therefore, though lacking a sustained bias in
contracting matters against the large oil companies, shared the
widespread public suspicion of their 'monopolistic' and 'cosmo-
politan' nature, and certainly did not seek a 'special relationship'
with them. Instead, Admiralty officials considered it in their best
interests to encourage competition in the petroleum industry. 'It is
expedient', observed the Director of Contracts in January 1912,
'that not only the competition of Texas oil with Roumanian
should be maintained but that competition should be stimu-
lated between the various producing companies in Roumania,
and combination with a view to a settlement of prices frus-
trated.'43
The contrasting attitudes displayed by Government officials
towards the oil and armament companies are well illustrated by
the case of Ernest Pretyman, one of the most important early
influences in the formulation of Admiralty oil policy. 44 Pretyman
was Civil Lord of the Admiralty between 1900 and 1903, and
Parliamentary and Financial Secretary from then until the
Liberal election victory in December 1905. He was an apologist
for the Government's 'special relationship' with the large arma-
ment firms, 45 but his views about the oil industry were very
different. As President of the Admiralty Committee on the Supply
of Oil Fuel for Naval Use, established in August 1903, Pretyman
exercised an important influence on Admiralty oil policy. He
firmly opposed the entry of 'foreign Trusts', including both
Standard Oil and Shell, into the oilfields of the British Empire,
and he favoured a protective policy towards the smaller British oil
companies.
V CHURCHILL AND THE SWITCH TO OIL
Fisher resigned as First Sea Lord in January 1910. From then

until December 1911 the First Sea Lord was Sir Arthur Wilson,
and no new progress was made with the use of oil in the Royal
Navy. In October 1911, however, Winston Churchill moved from
the Home Office to the position of First Lord of the Admiralty. By
this time a considerable number of Royal Navy vessels were oil-
burning. Fisher was soon pressing Churchill to expand the use of
oil. He had fallen, as he wrote in his habitually supercharged
prose, 'desperately in love' with Churchill in 1907. 46 Within three
days of Churchill's appointment to the Admiralty Fisher was in
contact with him. One of the strongest pieces of advice Fisher
gave to the new First Lord concerned the importance of fuel oil
for the Navy. Fisher's enthusiasm for the subject had been revived
by his 'discovery' of the diesel engine. The Admiral's dreams of
diesel battleships were in fact technologically utopian, but they
served to inspire his vision for oil as the fuel of the future. 'Your
old women will have a nice time of it, 'Fisher warned Churchill in
December 1911, 'when the new American Battleships are at sea
burning oil alone and a German Motor battleship is cocking a
snoot at our "Tortoises".' 47 The old doubts about supply were
abandoned in the face of this new enthusiasm, paradoxically just
at the time when supply difficulties were beginning to become
acute. Although Churchill was rather more selective about taking
Fisher's advice than he has often been given credit for, he seems to
have needed little convincing about the importance of oil.
In December 1911 Churchill requested from his officials at the
Admiralty full details about the Navy's use of oil to date, and a
comprehensive assessment of the pros and cons of a further
extension in the use of oil. The answers were all decidedly in
favour of oil, the supply of the fuel remaining as the only major
problem. In April 1912 the decision was taken to include a Fast
Division of five oil-fired battleships in the Naval Estimates. With
this 'fateful plunge', Churchill observed, 'for the first time, the
supreme ships of the Navy, on which our life depended, were fed
by oil'. 48 The decision was the outcome of the Admiralty's
growing experience with oil over the previous decade. It had been
made as a result of the collective opinion of nearly every
Admiralty official who knew anything about the subject, and it
was consequently not the 'bold Churchillian master stroke' or
coup that has sometimes been depicted. Churchill's contribution

was to take political responsibility for converting the bulk of the
fleet to oil before the supply problem had been solved. Unlike
previous First Lords, Churchill first committed the Royal Navy
to oil and then began to search for the large quantities of oil that
would be needed. He turned, inevitably, to Fisher to help him
undertake this task. 'The liquid fuel problem has got to be solved,'
he wrote to Fisher in June 1912, inviting him to head a
commission to investigate the whole supply question. 'You have
got to find the oil; to show how it can be stored cheaply: how it can
be purchased regularly and cheaply in peace, and with absolute
certainty in war. ' 49
* * * * *
Churchill's 'fateful plunge' in 1912 made the Royal Navy
dependent for its fuel, not on South Wales miners, but on the oil
producers of North America, Rumania and Dutch Borneo. It was
a startling change, and Admiralty officials were duly startled by it.
Even before 1912 great reservations had been expressed about
being dependent for the critical fuel on foreign countries and on
the foreign companies which seemed to dominate the industry.
The Admiralty shared the widespread public distrust of the two
main 'multinational' oil companies before 1914, Standard Oil and
Royal Dutch Shell. Both their 'monopolistic' tendencies and their
foreign ownership were regarded with suspicion. As a result, some
minor attempts were made to encourage small British oil
companies and to stimulate oil production in the British Empire.
Admiralty policy, however, was both realistic and pragmatic.
There was a recognition of the Navy's dependence on oil
produced by the market as it then was, rather than what it ideally
could be at some future date. No company was denied a naval oil
contract on the grounds that it was 'foreign' or a 'trust', and the
Admiralty purchased fuel oil from both Shell and Standard Oil
when it was offered at competitive prices.
Notes
I. Captain, later Admiral, Selwyn. J. H. Selwyn, 'On Armoured, or Iron-Clad
Ships' and 'Liquid Fuel for Marine Purposes', Journal of the United Serrice
Institution (1865 and 1885).
2. See Selwyn's comments during a discussion at the Society of Arts in March
1899, Petroleum Reriew (18 March 1899).
3. Admiralty Departmental Committee on Fuel Oill911-12 (hereafter Adm.
Oil Committee 1912). History of the Development of Oil Fuel Burning in
H.M. Service, CN 04061/1911. There is a copy of the proceedings of this
committee in the Naval Historical Library, London.
4. Minute by A. J. Durston, 20 June 1901, ADM(iralty papers), P(ublic)
R(ecord) O(ffice), ADM 1/7526, No. N.S. Coal 1118/01. Durston was a
conservative, who had opposed the introduction of submarines.
5. Admiralty to Foreign Office, August 1901, ADM lf1594C, no. s20554.
6. Ibid. Minute by Lord Selborne, no. s29029jl901.
7. Adm. Oil Committee 1912, Report by Director of Contracts 24 January
1912, enclosure no. 4; and Director of Contracts memorandum, 31 March
1913, enclosure no. 3, in Memorandum in Regard to Outline Scheme of
Supply of Oil Fuel, ADM 116/1219, no. 0040/13.
8. Adm. Oil Committee 1912, Report by Director of Contracts, 24 January
1912, enclosure no. I.
9. Lord Crewe to Viceroy, II April 1913, Hardinge MSS., vol. 119, nos 2,
17.
10. J. A. DeNovo, 'Petroleum and the United States Navy before World War
I', Mississippi Valley Historical Review, XLI (1954-5). The United States
Navy was not a major navy at this time, and it was conservative about a
good many things.
II. Evidence of Director of Naval Contracts to Royal Commission on Coal
Resources, Second Report, cd. 1991 (1904), p. 155.
12. Virtually all the Admiralty's oil was used on the Home Station. In 1910-11
about I ,318 tons of oil were issued on the Gibraltar Station, this being the
first issue from a foreign stock.
13. R. F. Mackay, Fisher of Ki/verstone (Oxford, 1973) p. 515.
14. This was Churchill's view in 1923. W. S. Churchill, The World Crisis 1911-
1914 (London, 1923) p. 74.
15. J. Fisher to Lord Selborne, 24 December 1901, in A. J. Marder (ed.), Fear
God and Dread Nought. Correspondence of Lord Fisher, vol. I (London,
1956) pp. 220, 275.
16. Ibid. J. Fisher to Mrs Reginald R. Neeld, 18 July 1903.
17. For a somewhat exaggerated account of the friendship between Fisher and
Samuel, see R. Henriques, Marcus Samuel, First Viscount Bearsted and
Founder of the 'Shell' Transport and Trading Company, /853-1927
(London, 1960) pp. 280-8. No documentary evidence exists of an intimate
social relationship between Fisher and Samuel, and many of the events
described by Henriques appear to have originated in his own vivid
imagination.
18. Naval Necessities, vol. I (1904) pp. 107-8.
19. Memorandum by C. Ottley to First Sea Lord, 14 March 1905, ADM.
1/7825, no. N.S. Coal 772/1905.
20. It is ironical that J. E. King chose 1906 as the year the British Government
finally embarked on a rational oil policy. J. E. King, 'The New Broad
Arrow: Origins of British Oil Policy', Mariner's Mirror, XXXIX (1953)
196-8.
21. Report by DirectorofStores, 3January 1913, ADM. 116/1219. Virtually all
this storage was located within the United Kingdom.
22. See G. G. Jones, The Oil Companies and the British Government 1900-25
(Cambridge Ph.D. 1977), pp. 28-9.
23. J. W. Grove, Government and Industry in Britain(London, 1962) pp. 27-35.
24. P. J. Cain, 'Railway Combination and Government 1900-1914', Economic
History Review, XXV (1972).
25. Minutes of Departmental Committee on Government Factories and
Workshops, evidence of E. G. Pretyman, 6 July 1905, Ql153.
26. R. C. Trebilcock, 'A "Special Relationship"-Government, Rearmament,
and the Cordite Firms', Econ. Hist. Rev. 2nd series, 19 (1966).
27. R. Henriques, op. cit., pp. 390, 481-3, 513-4. M. Kent, Oil and Empire:
British Policy and Mesopotamian Oil 1900-1920 (London, 1976) pp. 46, 94,
127.
28. R. Henriques, op. cit., p. 75.
29. The most extensive account of the coup is in ibid. ch. 3. Henriques
characteristically inflates the importance of Samuel.
30. Ibid., pp. 437-40.
31. For the early years of the company see F. C. Gerretson, History ofthe Royal
Dutch, vol. I (Leiden, 1958).
32. This was Deterding's own description of himself. Sir H. Deterding, An
International Oilman (London, 1934) p. 13.
33. Mergers and cartels are not, however, pure alternatives. See L. Hannah,
'Mergers, Cartels and Concentration: Legal Factors in the U.S. and
European experience', in J. Kocka and N. Horn (eds) Law and the
Formation of the Big Enterprises in the 19th and Early 20th Centuries
(Gottingen, 1979) pp. 311-12. For Deterding as a pioneer of'duopoly', see
F. C. Gerretson, op. cit., vol. II, pp. 180-2.
34. R. Henriques, op. cit., ch. 8. F. C. Gerretson, op. cit., vol. II, pp. 343-8.
Deterding always emphasised Fred Lane's crucial intermediary role in the
1906 merger negotiations. 'I could not have done it', he once observed,
'without Lane'. SHELL.
35. Adm. Oil Committee 1912, Report by Director of Contracts, 24 January
1912, enclosure no. I. There is a discussion of the formation of the British
Petroleum Company in ch. 2, pp. 36 IT.
36. M. Kent, op. cit., p. 78.
37. The Admiralty's fuel-oil specification of 1903 laid down very strict
requirements for such matters as flash point, sulphur content, and viscosity
at low temperatures. The requirement that fuel oil should not have a flash
point less than 200° F close test was particularly exacting. Shell's Borneo oil
had a flash point of 150-200°F.
38. Waley Cohen to H. Loudon, 17 May 1907, SHELL.
39. That was the view of the Director of Naval Contracts, Adm. Oil Committee
1912, evidence of Charles Greenway, Q240.
40. Ida M. Tarbell, The History of the Standard Oil Company (New York,
1904). There is a useful modern study of the response within the United
States to Standard Oil and its fellow 'trusts' by L. Galambos, The Public
Image of Big Business in America, 1880-/940 (Baltimore, 1975).
41. R. Henriques, op. cit., pp. 564, 633.
42. C. Trebilcock, 'Radicalism and the Armament Trust', in A. J. A. Morris
(ed.) Edwardian Radicalism 1900-1914 (London, 1974).
43. Adm. Oil Committee 1912, Report by Director of Naval Contracts,

24 January 1912, enclosure no. I.
44. Ernest Pretyman ( 1860- 1931 ), Etonian, Conservative M.P. Civil Lord of
the Admiralty 1900-3 and 1916-19, Parliamentary and Financial Secretary
1903-6, Parliamentary Secretary to the Board of Trade 1915-16.
45. C. Trebilcock, The Vickers Brothers: Armaments and Enterprise 1854-1914
(London, 1977) p. 15.
46. R. F. Mackay, op. cit., p. 431.
47. Admiral Fisher to Winston Churchill, 10 December 1911, in
R. S. Churchill, W. S. Churchill, vol. II, Companion Part 3: 19JJ-1914
(London, 1969) p. 1927.
48. W. S. Churchill, op. cit., p. 131.
49. Winston Churchill to Admiral Fisher, II June 1912, in R. S. Churchill,
op. cit., p. 1929.
2 The Marketing of Oil in
Britain
I THE STRUCTURE OF THE BRITISH OIL MARKET
The position of the Admiralty in the rapidly expanding market

for petroleum products in the United Kingdom before 1914 was a
minor one. The structure of the market in these years is shown in
Table 2.1. There was no domestic refining in this period, so
imports closely reflected the relative importance of the different
petroleum products in final consumption. Until the turn of the
century kerosene was the dominant petroleum product (by
volume) consumed in Britain. There was a steady growth in the
relative importance of petrol and fuel oil after 1900, but kerosene
remained the major production in terms of quantity right up to
the First World War.
Until the 1880s the United States supplied almost all of
Britain's oil, with the small Scottish shale oil industry providing
TABLE 2.1 British imports of petroleum products 1885 ~ 1913
Total Kerosene Fuel oil Petrol Lubricat- Gas

ing oil oil
(million gallons)
1885 73.9
1890 105.1
1895 177.1
1900 255.0 215.3 39.7
1905 300.1 157.3 12.3 18.7 47.5 63.8
1910 345.5 138.8 34.4 55.0 58.6 57.5
1913 488.1 157.1 95.0 100.9 68.0 66.0
Source: 'Fifty Years of British Oil Development', Petroleum Times, LIII (I 949). There are
only statistics for total petroleum imports before I 900. After 1900 the discrepancy between
total imports and the total given for the various by-products arises from the small
quantities of crude and 'other spirits' which were imported.
32
THE MARKETING OF OIL IN BRITAIN 33
only marginal competition. Figure 2.1 shows the subsequent

diversification of Britain's sources of supply.
The first kerosene from the Caucasus arrived in Britain in 1883.
By the end of the decade Russian oil was mounting a serious
challenge to the Americans. In 1891 Russia supplied over a third
of Britain's oil consumption. The Russian challenge subsequently
receded before rising to a new peak in 1903 when that country
very briefly became the largest single supplier of oil to Britain.
However, the exhaustion of the existing Russian oil fields and the
labour and racial conflicts in Baku caused Russian oil exports to
fall ofT rapidly after 1904. By then new sources of supply were
already on the horizon. Rumania and the Dutch East Indies
emerged as suppliers of the British market. Mexican oil also
quickly established itself in Britain after 1910, and in 1914 the first
cargoes of Persian oil arrived.
Behind the varying fortunes of different countries' oil on the
British market lay fierce marketing battles between rival com-
panies. In the late 1870s American kerosene, mostly supplied by
Standard Oil, dominated the British market. Standard Oil
distributed its kerosene exports through agents in local markets.
In 1879 its refined products began to be consigned to Henry
Funck and Company in the United Kingdom. 1 The arrival of
Russian oil in Britain in 1883 threatened the comfortable
American monopoly. In 1888 Fred Lane, after his brief associ-
ation with the Nobels, organised two distribution companies for
the sale of Rothschild Russian oil in Britain, the Kerosene
Company and the Tank Storage and Carriage Company. Shortly
afterwards, the Nobels followed suit by nominating the firm of
Bessler, Wachter and Co. as their sole distribution agents in the
United Kingdom. Figure 2.2 shows the complicated history of the
marketing of eastern European oil in Britain over the next two
decades.
The American response to the challenge of Russian oil in the
British market in the late 1880s was not immediate, partly because
of the conservatism of Standard Oil's agents in Britain. However
in April 1888, a month after the formation of the two Rothschild
companies, Standard established in Britain its first foreign
marketing affiliate, the Anglo-American Oil Company. The
company's £500,000 capital was entirely subscribed by its
American parent. All major policy decisions were taken in New
York, and all the company's chairmen were Americans untill907
rn300
z
g
..J ----U.S.A
<(
Cl -----RUSSIA
..J
::! -··-··-DUTCH EAST INDIES
a:
w
Q. ----RUMANIA
::;;
-----------MEXICO
z 200
Q ----BRITISH INDIA
..J
..J
~
.,
100 , \
/ ..._...J \
~ ~
_,....-.....____ _
____ ../' / \ ~. /
--
------ ........____ ----.,.....,..~/ _;,..:::> .,
/" ~--::.... _..- ---~
1~;-~;;;--;-;;r; 18B8 1sB9 189o 18,91 1892 1893 1894 18,95 189s 1fl97 1898 1a99·;~~8f~~-~~ Hio1 1900 19,09 19ib_M1 19;;'19b
FIG. 2.1 Sources of United Kingdom oil imports 1885-1913
DEUTSCHE SHELL
BANK/ TRANSPORT
RUMANIAN AND
INTERESTS TRADING
1888-1893
KEROSENE COMPANY
"""'T "'·
TANK STORAGE AND
1888
BESSLER
WACHTER
1897 ANGLO AND CO.
CAUCASIAN
PETROLEUM
COMPANY
I
1900 1902 1903
CON SO Ll DATED HOME LIGHT GENERAL
PETROLEUM CO OIL COMPANY
e>'"OrMCO
I 1906
I
BRITISH PETROLEUM COMPANY
1906 1909
PETROLEUM STEAMSHIP COMPANY BRITISH CREOSOTE COMPANY
FIG. 2.2 The marketing of eastern European Oil in the United Kingdom
1883-1914
when John Usmar, an Englishman, was chosen for that position.

Anglo-American soon began to introduce American bulk
distribution methods into Britain. The company assumed a
leading role in the transporting of oil across the Atlantic. By 1907
Anglo-American's fleet of 19 ocean-going tank steamers,
4case-oil steamers and 16 sailing ships was the largest oil-carrying
fleet in the world, and it included the biggest tanker afloat, the
6117 ton Tuscarora. The company also developed the bulk
distribution of kerosene once it had arrived in Britain. From 1890
Anglo-American began to acquire a fleet of tank wagons. In the
1890s one of Standard Oil's most dynamic experts in marketing,
James MacDonald, was sent to Britain as the managing director
of Anglo-American. MacDonald and his colleagues established
an extensive sales network, the company at first delivering
kerosene to local agents and, after 1900, selling direct to retailers.
These measures were for a time very effective, and the Russian
challenge was curbed. In 1893 Anglo-American acquired the
Rothschild distribution companies, and as part of this deal sold
some Russian oil in Britain. The United Kingdom became the

largest foreign consumer of American kerosene, and Anglo-
American's Royal Daylight brand briefly held a position of
primacy. 2
Anglo-American's success did not go for long unchallenged. In
1897 the Rothschilds re-entered the British kerosene market.
They established, again with the assistance of Fred Lane, the
Anglo-Caucasian Petroleum Company, which undertook an
extensive marketing programme involving bulk deliveries by tank
wagons. A price war between this organisation and the Nobels
followed, before these two interests merged their companies into
the Consolidated Petroleum Company, established in 1900. This
new company in turn reached an import quota agreement with
Anglo-American. This arrangement, however, was soon disrup-
ted by the emergence of new competitors. In 1902 a group of
independent Russian refiners, who had previously distributed
their products through theN obels and the Rothschilds, organised
the Caucasian Petroleum Export Company, which was renamed
the Homelight Oil Company in 1904. This company briefly
offered vigorous competition in the British market before having
its supplies curtailed by the Russian Revolution of 1905.
Moreover, Shell Transport and Trading also entered the British
market at this period. Shell Transport had broken into the
Continental kerosene markets in 1901, when it established the
Petroleum Produkte Aktien Gesellschaft (P.P.A.G.) to market
Texan oil. Shell was barred by the terms of its Rothschild contract
from marketing Russian oil in Europe. In 1903 Shell Transport
reached an agreement with the Deutsche Bank's Rumanian oil
subsidiary Steaua Romana, whereby the P.P.A.G. would market
Rumanian oil on the Continent. Marcus Samuel established the
General Petroleum Company to sell this oil in Britain. 3 The
price wars waged by these rival companies in the British kerosene
market in the opening years of the twentieth century were at times
so severe that the United Kingdom became the least profitable of
Standard Oil's foreign marketing operations.
Stability in the British market was eventually restored as the
Continental oil groups established cartel agreements amongst
themselves. In 1906 the European Petroleum Union (E.P.U.), a
cartel essentially covering the western European kerosene trade,
was formed by the Nobels, the Rothschilds and the Deutsche
Bank. Fred Lane again acted as the intermediary between the
three parties. 4 Lane was by now in the complete confidence of
both the Rothschilds and Henri Deterding, a position which

enabled him to play a crucial role in all the major negotiations in
the European oil business in this period. In Britain the E.P.U.
created the British Petroleum Company (B.P.), which united the
General, the Consolidated, and the Homelight Oil companies.
The E.P.U. also established a British registered tanker company,
the Petroleum Steamship Company, and, three years later, it
became the majority shareholder in the British Creosote
Company. B.P. and its allied companies reached a market-
sharing agreement with Anglo-American, which lasted until the
outbreak of a price war between Standard Oil and the Shell
Group in 1910.
A pattern is discernable behind these battles for the British
kerosene market and the bewildering changes in names and
alliances. There were alternate periods of market control and
sharp price competition, with each period of market stability
being disrupted by the appearance of new competitors. These
were themselves eventually drawn into new structures of market
control, which were then disrupted by the appearance of yet
further new competitors. The long-term trend which lurked
behind this rather frustrating cyclical pattern was towards the
control of the British kerosene market by a series of ever-stronger
cartel agreements reached between vertically-integrated com-
panies.
II THE EMERGENCE OF NEW PRODUCTS
During the 1890s new petroleum products began to appear in

Britain. While artificial gas made inroads on kerosene sales, its
manufacture offered a market for gas oil, a petroleum distillate
with a viscosity and distillation range between those of kerosene
and light lubricating oil. Gas oil, or solar oil as it was then called,
was used to raise coal gas to the statutory illuminating standard.
It was also soon to find a use as fuel in oil engines, especially of
fishing boats and deep-sea trawlers. Anglo-American established
a strong position in this market, and by 1911 it accounted for
about half of the total British gas oil imports.
A new product of much greater significance was petrol. Petrol
had been consumed in small quantities for many years. It was
used in dry-cleaning processes, in the manufacture of rubber,
textiles and paint, and employed in Davy safety lamps. It was the
growth of the motor car industry, however, which transformed
the significance of petrol. Even though the car did not make the
spectacular advances in the United Kingdom that it made in the
United States, Britain was the largest market for petrol in Europe
in the 1900s. Table 2.1 shows the large rise in petrol imports into
Britain in the decade before the First World War.
The distribution network developed by the oil companies for
selling kerosene proved of great value when it came to marketing
petrol. Anglo-American marketed Pratt's motor spirit from 1896,
and after 1900 the company threw itself with some vigour into the
struggle for the new market. Anglo's petrol was generally
distributed in two-gallon green cans, through a network of
retailers ranging from garage owners to cycle repairers. By 1905
Anglo-American had 3500 such sales agents. A constant problem
for the American company was that its supplier, Standard Oil,
was very short of petrol for export. This was a consequence of
rising demand in the United States and inflexible refining methods
which were incapable of shifting production from other pet-
roleum products into petrol. 5 Despite this the company pursued
an imaginative marketing programme. During 1905 it gave
leather pocket books with maps of the United Kingdom as gifts to
motorists buying Pratt's motor spirit. 6 By 1910 such marketing
methods had secured for Anglo-American about 30 per cent of
the British petrol market, and after a price-cutting war in that
year its share rose to 40 per cent.
Shell was the main rival to Anglo-American. The Borneo
crude, which created immense problems for Shell refiners seeking
to obtain good quality kerosene, produced excellent petrol. The
oil was rich in aromatic hydrocarbons, which meant that engines
were less inclined to 'knock' when fuelled with it than with petrol
from the United States. In the early years of the century Marcus
Samuel's General Petroleum Company distributed Shell motor
spirit. After the merger of the General and Consolidated compan-
ies, British Petroleum took over the marketing of Shell petrol on a
commission basis, Shell owning all the distribution facilities
which were used by the company.
III THE MARKET FOR FUEL OIL
The second important new petroleum product was fuel oil. In the
later nineteenth century the peculiar joint nature of petroleum-
product refining had led, at a time when kerosene was the main
petroleum product in demand, to the fortuitous production of
large surplus quantities of heavy residuals for which uses had to

be found. The first country where this occurred was Russia. The
large amount of residual, which remained after the desired
kerosene had been extracted from the 'heavy' Baku crude, was
known as ostatki or waste, and simply burned. Later enterprising
producers began to encourage the use of this commodity as fuel.
By 1900 fuel oil was powering many Russian trains, ships and
factories. The new century saw a considerable expansion in the
use of fuel oil in the United States, but even before then Standard
Oil, faced with large quantities of fuel oil produced from its 'heavy
Lima crude', had begun marketing the product. 7
After 1900 a number of British oil companies operating
overseas also found themselves with 'heavy' crudes, and not even
a potential local market. One of the places to which they looked
for a market for their fuel oil was their home country, Britain.
While kerosene found a ready market among the myriad of small
and poor consumers of Asia and Russia (as well as the West), fuel
oil found its best markets in the industrialised world. Britain was
the industralised country par excellence, with a dense railway
network which consumed in the early 1900s some twelve million
tons of coal annually. It also possessed the largest merchant fleet
in the world. The market, if only it could be captured from coal,
was an tmmense one.
A campaign was consequently initiated to interest Britain's
consumers in fuel oil. The Shell Transport and Trading Company
was the pioneer. The oilfields which the company located in
Borneo in 1898 produced considerable quantities of heavy
residuals, and Samuel initiated a campaign to sell his fuel oil to
British shipowners, railway companies and, as has been seen, the
Royal Navy. In the early 1900s Samuel, convinced that the age of
fuel oil was dawning, also secured a major supply of the fuel in the
western hemisphere. In January 1901 a huge gusher was struck at
Spindletop in Texas. By June Samuel had signed a contract with
the Texan producers which gave him at least 100,000 tons a year
of the heavy Texas crude, largely in the form of fuel oil.
The techniques chosen by Shell, and later by the other
companies, to market fuel oil were modelled on those already
developed by the Russian and American producers. Technical
information was disseminated in pamphlets, and books were
sponsored by the companies in an attempt to inform potential
users about the economics and technology of fuel oil burning. By
1914 the fleets of most of Britain's major oil companies had

themselves been converted to fuel oil. Although there were
obvious economic reasons for the companies to convert their
tankers to oil burning, since their very business took them to the
major oil-producing regions where they could re-fuel with cheap
oil, the maximum publicity advantage was also gained from
successfully burning oil in the tanker furnaces. When the Shell
tanker Murex returned to Britain in February 1902 after a 12,000
mile voyage from Singapore during which it had burned nothing
but fuel oil, a wide range of guests-including representatives of
the Great Eastern Railway, the Metropolitan Fire Brigade, Naval
Intelligence, Lloyds, and the various shipbuilding firms-were
given a guided tour around the vessel followed by a free lunch and
a proselytizing speech by Marcus Samuel.
The gains to be secured by the use of fuel oil soon became as
plain to merchant shipowners, railway companies and indus-
trialists as they were to the Royal Navy. The higher thermal
efficiency of oil, the increased cargo or passenger capacity which
its use made possible in ships and trains and the greater flexibility
which it offered to industrial processes were all attractive
advantages. Yet fuel oil failed to make significant inroads into the
market for coal before the First World War. Civilian consumers
had no need of the special strategic advantages that oil could give
to a warship. More importantly, a decision to convert to oil had to
be based on strictly commercial criteria. Fuel oil was always more
expensive than the best Welsh coal before 1914, and British
railway companies and the merchant marine usually used much
cheaper coals than Welsh steam. 8
There was also a widespread feeling that the supply of the new
fuel was dangerously unreliable. The Admiralty, of course, shared
this view, and it was in a far better position than individual
commercial customers to overcome some of the difficulties. The
transport of fuel oil was one instance of this. While the Admiralty
was able to construct its own tanker fleet, commercial customers
were entirely dependent on the highly unstable tanker freight
market.
Freight rates were high and in constant fluctuation. One writer
complained of the 'absolute inability of any company or feder-
ation of shipping interests to reasonably limit the rise and fall of
the rates for the sea transport of oil'. 9 These shipping problems
caused price instability in all petroleum products, but fuel oil,
with its high price elasticity of demand, suffered especially.

Moreover, the transportation of petroleum products in general,
and more particularly that of fuel oil, increased much more
rapidly than tanker tonnage in the immediate prewar years. By
1912, the year the Petroleum Review declared Britain to be on the
verge of the 'oil fuel age', 10 freights had risen to such high levels
that fuel oil was virtually taken off the market. By the middle of
that year freights from Port Arthur had risen to about 70/- per
ton, over twice the price of the oil delivered at the port and eight
and a half times the charter rate for 1910.
The requirements for the distribution of fuel oil created further
problems in Britain. Fuel oil demanded a very different selling
organisation from that for kerosene or petrol. It needed special
storage facilities, and was distributed in bulk to large consumers
rather than in small cans and cases to retail customers. The
marketers of fuel oil had therefore to undertake considerable
investment in new distribution facilities, which few were prepared
to do until the demand for the new fuel was well established.
Consequently, fuel oil supply facilities grew rather slowly. By
March 1902 there was said to exist in London a liquid fuel storage
depot for some 30,000 tons. B.P. began constructing fuel oil
depots at major British ports after 1908, but the company
remained primarily concerned with other petroleum products.
The lack of adequate distribution facilities was an even more
potent argument against the adoption of fuel oil by Britain's
mercantile marine. Britain by the early twentieth century had
established coaling stations all around the world. The pioneers of
fuel oil recognised that a similar distribution of fuel oil stations
had to be built before merchant ships would be attracted by the
acknowledged technical advantages of oil. The British tramp
steamer would never convert to fuel oil, Fred Lane told the Royal
Commission on Fuel and Engines, 'until the world is surrounded
with oil stations as freely as with coal stations'. 11 The con-
struction of such storage capacity, however, required consider-
able time and money, and was far from complete by 1914.
As if these problems were not sufficient to prevent fuel oil from
mounting an effective challenge to coal, the new fuel suffered
severely from premature marketing. The culprit was Marcus
Samuel, who proved incapable of fulfilling his confident public
assertions that fuel oil would soon be inexpensive and abundant.
Shell's Texan oil supplies proved unreliable. By the summer of
1902 the Spindletop well had stopped flowing, and within a few
months four Shell tankers, with no oil to carry, had to be
converted into cattle boats. 12 The company's own Borneo fields
proved equally incapable of supplying cheap fuel oil to Britain.
Shell's production of oil in Borneo after 1898 was for a time
highly unstable. 13 Moreover, the amount of fuel oil available for
sale depended on the market conditions for the other products
obtained from the crude. In the first few years of the twentieth
century Shell had considerable difficulty in disposing of these
other products. In particular, Borneo kerosene was virtually
unsaleable, as it produced heavy smoke when it was burnt and
could not be stored for any period without becoming yellow.
Large quantities of oil had to be destroyed simply for want of a
market. In the first six months of 1906, Shell Transport destroyed
18,896 tons of crude oil, 14,576tons of benzene and 11,647 tons of
liquid fuel. 14 Samuel's attempts to market Texan and Borneo fuel
oil before he was sure of his supplies further diminished public
confidence in the new fuel. A writer observed in 1908 that 'British
shipowners and manufacturers have less faith in liquid fuel than
they had six years ago'. 15 Marcus Samuel had much responsi-
bility for that state of affairs.
Shell had failed to provide the promised utopia of cheap f~l oil
to challenge coal. California, Rumania and even Nigeria pro-
vided other false dawns. It was not until just before the First
World War that a large, apparently secure supply of fuel oil was
developed by a British oil company working in Mexico. The
extraordinary career ofWeetman Pearson, later Lord Cowdray,
will be examined in the next chapter, and it is sufficient to note
here that in 1910 his company discovered vast reserves of oil in
Mexico. The crude was of the heavy variety, and after 1912 the
Anglo-Mexican Petroleum Company began a substantial mar-
keting campaign to boost sales of fuel oil in the United Kingdom.
The outbreak of the First World War in August 1914 thwarted
Anglo-Mexican's ambitious schemes. By 1914 fuel oil, despite the
promise of the new Mexican source of supply, had hardly begun
to make inroads on the empire of King Coal. Although the
advantages of fuel oil were widely acknowledged, these were not
considered so overwhelming as to compensate for the high cost of
the fuel and the uncertainties about its supply. Writer after writer
stressed these uncertainties. There was still, one author on fuel oil
observed in 1913, 'no guarantee of a continuous supply'. 16
Doubts about the security of supplies were enhanced by the

widespread distrust among potential users of the pricing policies
of the 'monopolistic' oil companies, and a consequent reluctance
to become dependent upon them. In March 1912 Engineering
argued that an obstacle to the adoption of oil engines in the
British mercantile marine was the fear that prices would rise. 'This
fear is based', remarked the journal, 'not so much upon any
likelihood of demand overtaking supply as upon the supply being
in the hands of a comparatively few large companies who may
manipulate the markets'. 17
Fuel oil remained in Britain in the words of Boverton
Redwood, a fuel de luxe, 'a commodity used for selected purposes,
and only for those selected purposes'. 18 Although fuel oil imports
increased from 4.6 million gallons in 1903 to 48.1 million in 1912,
a large acceleration in consumption came only after 1912. By
1914, the first year of the War, total imports of fuel oil had
reached 212.7 million gallons. Generally, however, the British
mercantile marine and domestic industry remained solidly
coal-burning.
IV THE STATE AS A MARKET
The low level of commercial consumption of fuel oil in the United

Kingdom made the Admiralty market look very attractive. If the
Royal Navy switched entirely from coal to oil it would be a very
large market indeed, and by the early 1900s the prospects for such
a conversion seemed promising. It was obvious that fuel oil
offered the Navy very considerable advantages over coal, and also
that the decision whether to use the new fuel would not be taken
on merely financial considerations.
The Admiralty market had particular attractions for smaller oil
companies. By the early twentieth century the barriers to entry
into the marketing of all oil products in Britain were rising. The
capital required to establish an effective distribution organisation
capable of withstanding the periodic price wars of the industry,
the presence of large oil companies in established positions, and,
in the case of fuel oil, the relatively slow growth of the domestic
market, all contributed towards this. The Admiralty p.ossessed
the downstream ~apacity-storage depots, tankers and the like-
to enable it to take delivery of oil near the production centre. This
saved a small company from the considerable capital expenditure
involved in building a distribution network before large-scale

sales could be made, as well as from dependence on the resources
of one of the larger companies.
The British Government, therefore, received a series of pro-
posals in the decade before 1914 from oil companies seeking to
establish themselves in a special position as suppliers of the Royal
Navy. These requests for fuel oil contracts were sometimes
associated with pleas for financial and diplomatic assistance.
From the late 1890s Marcus Samuel had expressed the hope that
Shell would become the major supplier to the Royal Navy. In
1902 he even suggested to the Government that they should place
a director on the board of the Shell Transport and Trading
Company, with a 'controlling voice' in the affairs of the company.
Marcus Samuel repeated his request for a State director on the
Board of Shell in 1911, offering in return to give special
consideration to Admiralty oil contracts. A representative of the
Scottish shale oil companies suggested before the Royal
Commission on Fuel and Engines that they would be interested in
tying their production to the Navy's fuel oil requirements if they
could be given a permanent Admiralty contract. In 1912 the
Anglo-Persian Oil Company began a campaign to secure a long-
term naval fuel oil contract, as well as a very large State loan and
diplomatic support. A year later Mexican Eagle offered to make a
long-term fuel oil contract with the Navy in return for a State loan
of £5 million. 19
It would be misleading to suggest that the sole motivation
behind the oil companies' interest in supplying the Navy was
commercial. Marcus Samuel of Shell, Charles Greenway of
Anglo-Persian and Lord Cowdray of Mexican Eagle repeatedly
stressed that they were motivated by 'patriotic' considerations, by
a desire to develop a source of, and to supply, the fuel oil on
which the Royal Navy might soon be critically dependent. At
times they portrayed themselves almost as Messiahs, entrusted
with the mission of guaranteeing the future of the British Empire.
It would be as wrong to dismiss these statements as mere cynical
icing covering crude commercial motives as it would be to take
them entirely at their face value.
It would also be misleading to suggest that all the oil companies
with 'heavy' crudes to dispose of were determined to secure Royal
Navy contracts. Marcus Samuel may have continued after 1907
to have the dream that Shell could become the major contractor
to the Royal Navy, but the merger with Royal Dutch gave
effective power in the Shell Group to Henri Deterding. Marcus
Samuel was relegated to the role of an oratorical figurehead. The
Dutchman's views on the British Government and the Royal
Navy were very different from those of Samuel. Although
Deterding's opinions were to change a great deal over time, he
never shared Samuel's 'British-centred' views. Naturally he was
fully aware of the commercial and diplomatic advantages which
Britain could offer to his company. When his Dutch colleagues
opposed British influence in the Shell Group, he berated them for
their parochialism. 'We must,' he wrote to H. Loudon in August
1912, 'not push our chauvinism too far'. 20 Deterding's move to
London after the formation of the Asiatic Petroleum Company,
his acquisition of a country estate and the trappings of an English
gentleman were not, however, evidence that he was becoming
anglicised. Deterding was cosmopolitan in outlook. Both his
native Holland and Britain were too small for him. 'I am',
Deterding wrote in October 1915, 'entirely international'. 21
Deterding's outlook on the oil industry was a world outlook. He
was much more concerned with the affairs of the United States
and Russia than with the Royal Navy. The Shell Group's policy
towards Admiralty contracts after 1907 was strictly commercial.
Deterding was concerned to make money, and not to be the Royal
Navy's Messiah. If he could make money supplying the Navy,
then he would do so. 'I always', he informed the Royal
Commission on Fuel and Engines in 1913, 'want the utmost profit
possible'. 22
* * * * *
The two decades before the First World War had seen
significant changes in the pattern of petroleum consumption in
the United Kingdom. Oil ceased to be synonymous with
kerosene, as the consumption of petrol and fuel oil increased. The
market for oil witnessed a series of fierce battles between
competing companies. The general trend, however, was towards
domination of the market by a few large enterprises.
These matters were of no concern to the British Government. It
held no official views on the virtues of monopoly and competition
in the petroleum industry, except for the one commodity of which
it was a purchaser. It was the conversion of the Royal Navy to fuel
oil which made the State a factor in the British petroleum market.
The relatively slow growth of the commercial consumption of fuel

oil encouraged the companies to become interested in selling their
oil to the Navy. In order to place themselves in a privileged
position when naval fuel oil contracts were given, a number of
these companies strove to forge close, even 'special', links with the
State.
Notes
I. R. W. and M. W. Hidy, Pioneering in Big Business. The History of the
Standard Oil Company (New Jersey), 1882-1911 (New York, 1955) p. 127.
2. Ibid., pp. 146-9, 250-1.
3. R. Henriques, Marcus Samuel (London, 1960) pp. 478-9.
4. There is a partisan discussion of the organisation and operation of the
E.P.U. in F.C. Gerretson, History of the Royal Dutch, vol. III (Leiden,
1958), pp. 88-99.
5. Hidy and Hidy, op. cit., p. 496.
6. Ibid., p. 577.
7. An extended discussion of the growth of the fuel-oil market in Britain and
overseas is given in G. G. Jones, 'The Oil-Fuel Market in Britain 1900-14:
A Lost Cause Revisited', Business History, XX (1978) 131-43.
8. Ibid., p. 137, Table I.
9. J.D. Henry, Oil Fuel and the Empire (London, 1908) p. 9.
10. Petroleum Review (5 October 1912).
II. Evidence of Fred Lane to Fisher Commission, 28 May 1913, vol. 3, ADM
116/1209, p. 185.
12. R. Henriques, op. cit., pp. 410, 462.
13. M.S. Abrahams to M. Samuel and Co., 7 March 1899, SHELL.
14. Company memorandum, 26 September 1906, SHELL. Facts such as these
make Marcus Samuel's persistent attempts to persuade the Royal Navy to
rely entirely on Shell's Borneo fields, and his biographers' claim that the
Admiralty refused to do this because of anti-Shell bias, appear extremely
odd. R. Henriques, op. cit., pp. 458-2, 481-2, 513-4.
15. J.D. Henry, op. cit., p. 7.
16. V. B. Lewes, Oil Fuel (London, 1913) p. 118.
17. Engineering, (8 March 1912).
18. Adm. Oil Committee 1912, evidence ofBoverton Redwood, 3 January 1912,
Q346.
19. Details of the Shell applications are given in R. Henriques, op. cit., pp. 40 I,
535. For the proposal by W. Fraser on behalf of the Scottish shale
companies, see the evidence given by the representatives of these companies
to the Royal Commission on Fuel and Engines, ADM 116/1208 and 1209.
Details of the applications by Mexican Eagle and Anglo-Persian are given in
subsequent chapters:
20. H. Deterding to H. Loudon, 23 August 1912, SHELL.
21. H. Deterding to E. Grube, 28 October 1915, SHELL.
22. Evidence of H. Deterding to Fisher Commission, Second Report,
ADM 116/1209, p. 64.
3 The British in Foreign
Oilfields
I THE BRITISH OIL INDUSTRY
The half century before the First World War saw a massive export
of British capital overseas, arguably to the detriment of the
domestic economy. Between 1905 and 1914 some 5 to 7 per cent of
the British National Income was sent abroad, almost double the
rate of domestic capital formation. By 1914 the United Kingdom
had about £4000 million invested overseas, over 40 per cent of
this sum being in railways.
It is difficult to give an exact figure for the amount of British
capital invested in the world oil industry. Foreign investment
statistics for the period before 1914 are notoriously unreliable. Sir
George Paish, an eminent statistician, produced some useful
foreign investment statistics before the First World War, al-
though he only covered foreign portfolio investment and not
direct investment abroad. He estimated that the amount of
British capital 'publicly invested' in the oil industry abroad was
£14.3 million at the end of 1907, and £40 million at the end of
1913. Another indicator of the size of British investment in the oil
industry is Skinner's Oil and Petroleum Manual. The 1912 edition
of this reference work on the British oil industry listed some 592
companies, with a total nominal capital of £137 million. This
included transport and distribution companies, the Scottish shale
oil firms, and a host of small speculative ventures. About half of
the £137 million nominal capital was represented by companies
which appear to have had producing interests in foreign oilfields,
and a proportion of this £68.5 million represented capital
authorised but not paid up. 1
If the exact dimension of British oil investment abroad remains
elusive, it is clear that this investment represented a considerable
divergence from the norm of British overseas investment. While
47
most British foreign investment was portfolio, involving no

managerial control, oil investment was often associated with
entrepreneurship. While British investors had a strong preference
for high-grade foreign bonds and other reliable securities, oil
investments were frequently risky, although Paish's figure of 4.5
per cent for the rate of return for British capital invested in the
foreign oil industry at the end of 1907 was only a little below his
average of 5.2 per cent for total British overseas investment.
There was also a marked difference in the geographical des-
tination of the investment. Almost half of British overseas
investment was in the Empire, and another 40 per cent in the
Americas. British oilmen and investors, however, spread their
interests far more widely. Both Paish and Skinner's statistics
indicate that Russia attracted a very substantial share of British
oil investment, although under 3 per cent of total British prewar
investment was placed in that country. Some £8.1 million, or 60
per cent, ofPaish's £14.3 million of British capital invested in the
oil industry overseas at the end of 1907, was in Russia. The
Empire came next in importance with £6 million, followed by the
United States, with £3.6 million. The list of companies given by
Skinner confirms this geographical pattern. The Oil and
Petroleum Manual for 1912listed companies with a total nominal
capital of £21.7 million operating in Russia; £10.2 million in
North America; £8.6 million in South America; £7.2 million in
Asia; £6.3 million in Austria-Hungary; £4 million in Rumania;
£3.8 million in North Africa and the Middle East, and various
small amounts spread around the rest of the world.
The age of Middle Eastern oil had obviously not arrived by
1914. Eastern Europe and the Americas were the main focus of
attention of British oil investors. This chapter is concerned with
the spread of British enterprise and capital into two of the
countries of those regions, Russia and Mexico, while subsequent
chapters will examine the growth of British oil investment in the
Middle East and the Empire. It is often overlooked, however, that
by 1900 Britain had possessed an indigenous oil industry in
Scotland for over fifty years, and this experience proved of some
assistance when British entrepreneurs began to take an interest in
foreign oilfields.
The origins of the Scottish shale industry can be dated from the
early 1850s when James Young developed a process for distilling
oil from shale. Within a few years Young's kerosene was being
THE BRITISH IN FOREIGN OILFIELDS 49
widely sold on the Continent. The industry subsequently suffered

greatly from imports of cheap American and later Russian
petroleum, but it survived into the twentieth century, albeit with a
greatly reduced number of firms. The 90 shale oil companies in
1870 had been reduced to 13 by 1894 and to half a dozen by the
turn of the century. Yet the remaining companies were able to pay
steady and reliable dividends in the 1900s. The most successful
company, Pumpherston, paid on average dividends of 33 per cent
per annum on its ordinary shares between 1900 and 1910, and
annual shale oil production increased from over 2 million to over
3 million tons in the two decades prior to the First World War. 2
The very respectable dividend record of the leading firms in the
industry greatly impressed contemporaries, and they were fre-
quently taken as models for other British oil companies by the
trade press. 'What a pity the majority of our petroleum compan-
ies', lamented the Petroleum Rerie'fr in January 1910, 'cannot
show such a good record for Stock Exchange quotations.' 3
However, these dividends were built on a vulnerable long-term
position. By the late nineteenth century the profitability of the
industry had become dependent on the sales of by-products such
as sulphate of ammonia and paraffin wax, and a fall in the prices
of these products rapidly embarrassed the companies. After 1910
a combination of low prices for both kerosene and paraffin wax
forced the industry into financial difficulties. In 1911 three of the
companies, Youngs, Broxburn and Oak bank, paid no dividends.
The offer which the Scottish shale oil industry made before the
Royal Commission in 1913 to switch its entire production to fuel
oil, provided the Admiralty were prepared to guarantee to take it,
made considerable economic sense. It would have meant a switch
from a high-risk, volatile market situation to a low-risk stable
one. The Admiralty market was especially valuable because it was
uniquely immune from foreign competition, for it was the very
nationality of Scottish shale which the Admiralty was likely to
find most attractive.
Scotland was also the home of two of the more successful
British oil companies operating overseas, whose activities will be
examined in subsequent chapters. The Burmah Oil Company was
established in Glasgow in 1886, with its shares being quoted on
the Glasgow Stock Exchange. The company's dividend record
attracted much favourable comment, it only once paying out a
dividend of less than 15 per cent on its ordinary shares between
1902 and 1913. In 1905 Burmah Oil became involved in the search
for oil in Persia, and after a great oilfield had been located there it
floated the Anglo-Persian Oil Company on the Glasgow
Exchange in 1909.
II THE OILFIELDS OF RUSSIA
The Glasgow-based companies represented, however, only a

small percentage of British capital invested in the oil industry.
Considerable amounts of British capital flowed into the oil
industries of eastern Europe. The British were involved in the
Rumanian oil industry over a period of nearly fifty years before
1914. Their record was undistinguished. One pioneer company,
Jackson and Company, invested heavily in buying leases and
constructing facilities. Unfortunately, it subsequently experi-
enced a series of disasters, beginning with gas explosions in the oil
pits, followed by the loss through disease of the oxen on which its
distribution relied, and finally the gutting by fire of its refinery. In
the 1890s the Anglo-Rumanian Oil Company of London brought
American machinery and drillers to the Rumanian oilfields for
the first time, but they found no oil. By the outbreak of the First
World War the British stake in Rumanian oil by value of
investments was 20 per cent of all foreign capital, but it was
spread among numbers of enterprises. Only one major concern
was British-managed and that was a recent consolidation in
1912. 4
The oil industry of Russia attracted large amounts of British
capital. According to the estimates of the Russian statistician
P. V. 01', published in the early 1920s, the petroleum industry
attracted a third, the largest single amount, of the £53.7 million of
British capital invested in Russian industry before the
Revolution. 5
The British arrived, however, relatively late in the history of the
Russian oil industry. By the time British oil companies appeared
in Russia, foreigners had already made a notable contribution to
the oil industry, the main centres of which are shown in Map 3.1
Before 1872 a primitive oil industry had existed around Baku,
operated alternately by the State and by a farming-out system
to private enterprise. Between 1850 and 1872 a monopoly was
held by a Russian merchant. In 1872 the Government began to
auction off oil-bearing lands on a long-term basis in return for a
.·'
)<;"
..... \ .....
,...--w ....,~~.... ,,
/ ' AMAIKOP '··-.•.
'··:;~~~¥1,.~ ..............
TuapH
Black Sea
TURKISH EMPIRE
-·-·-·-·----- National Boundary

1 Oilfield
-..._ _ _ Railway PERSIA
' i.
==Pipeline '
\
'·\
MAP 3.1 The oilfields of the Caucasus before 1914
lump sum payment and a low annual rental. This legislative

change provided the pre-conditions for the birth of a modern oil
industry. In March 1873 one of the Swedish Nobel brothers,
Robert, visited Baku in search of walnut trees for use as
riflestocks in the Nobel family business at St Petersburg. Robert
Nobel, a chemist by training, purchased some oil properties
instead of walnut trees, and constructed a refinery which was soon
producing the highest quality kerosene ever made in Russia. In
1876 his brother, Ludwig, arrived in Baku, and there followed a
veritable revolution in the Russian oil industry. The Swedes
closely scrutinised the American industry, and, on the basis of
this, introduced reforms in every branch of the Russian oil
industry. In 1878 six Pennsylvanian drillers were brought to
Baku, and the American 'rope' system of drilling was introduced,
though this was later modified to meet Russian geological
conditions. The industry in Russia had been greatly hampered by

transport bottlenecks. Oil was transported from the wells to Baku
in wooden barrels on carts known as arbas. This traffic stopped
every time it rained as the rain made the roads impassable. The oil
was refined when it reached Baku, and then transported in sailing
vessels to the Volga and from there to the interior of Russia.
Unfortunately, the Volga was only navigable during the summer
months of the year, while the demand for kerosene naturally
peaked during the winter. The Nobels responded to the in-
efficiency of this system, and the rising cost of the wood used for
the barrels, by introducing pipeline technology into Russia from
America. The first successful pipeline for the carriage of crude
petroleum had been built in the United States in 1865. The Nobels
began the construction of a pipeline from the oilfields to their
refinery in 1877. Shortly afterwards, the Swedes pioneered
techniques for the bulk transportation of oil. In 1879 they had the
world's first ship for carrying oil in bulk, the Zoroaster, built in a
Swedish shipyard. The use of railways for the transportation of
oil was also pioneered. By 1881 a Nobel train was delivering oil by
rail to St Petersburg. Further advances were made in refining. By
1880 Ludwig Nobel had built one of the world's first 'continuous
distillation' refineries, a technique not used in the United States
for another twenty-five years. This refinery greatly increased the
amount of kerosene obtained from the 'heavy' Baku crude. Nobel
crude yielded 35 per cent kerosene, while some of the other
Russian refineries only gave yields of 20 per cent.
The second major foreign group to become involved in the
Russian oil industry were the Paris Rothschilds. The Rothschilds
had had some connection with the petroleum industry for several
years before they became interested in Russia. During the 1870s
they had been involved in the importing of American oil into
France. Later they initiated a refining industry in Spain, and
constructed a refinery at Fiume on the Adriatic for the supply of
oil to the Austro-Hungarian Empire. From about 1880
Rothschild officials began to consider Russia as a possible source
of supply for their Fiume factory. In 1883 a group of Russian
producers, unable to raise sufficient capital to complete their
project of constructing a rail line from Baku to Batum on the
Black Sea, approached the Rothschilds. The Paris house lent
money, in exchange for mortgages on refineries, wells and
transportation facilities. By this means the Rothschilds soon
became owners of various oilfields and storage depots. In 1886

they formed the Societe Commerciale de Naphte Caspienne et de
Ia Mer Noire, usually known as Bnito, the initials of its Russian
name. The Rothschilds were always interested in exporting
Russian oil rather than in supplying the interior markets of that
country, and as part of this process they developed Batum into the
major exporting port for Russian oil. A marketing organisation
was developed abroad, with Fred Lane playing a key role. In 1898
the Rothschild oil empire was consolidated by the formation,
with the International Commercial Bank of St Petersburg, of the
Societe Commerciale et lndustrielle de Naphte, or Mazout. 6
The dynamism of the Nobels and the Rothschilds made
possible a great expansion of the Russian oil industry. The
production of crude oil grew from I. 7 million poods in 1870 to
229 million in 1890 and over 630 million in 1900. 7 (There were 62
poods in I long ton.) At the turn of the century Russia was briefly
the largest petroleum producer in the world, and Russian oil held
a very strong position in world markets. Russian oil was well
placed to compete with that from America. Russian production
costs were between 30 per cent and 50 per cent lower than those of
the United States, partly because of the concentration of the
industry around the extremely prolific oilfields of Baku and partly
because continuous distillation reduced refining costs. A high
excise tax imposed in 1888 encouraged Russian producers to
export, and the marketing methods of the Russian producers
were more effective than those of Standard Oil. By 1884 American
oil had disappeared from Russian markets, and its pre-eminent
position in the rest of Europe had come under attack. After 1891
Russian oil also began to penetrate the markets of the Far East. 8
The Nobels and the Rothschilds dominated the industry. By
1904 they controlled between them 40 per cent of the total sales of
fuel oil and 50 per cent of the sales of kerosene in Russia. 9 The
policy of both enterprises was always in the direction of co-
operation rather than competition. The first attempts to form an
alliance came as early as 1884. Ten years later a market-sharing
agreement for foreign countries was signed between the Nobels,
the Rothschilds and the third largest Russian refiner, Mantashev.
At the turn of the century Nobels and Mazoutjoined together in a
cartel, known as Nobmazout, which had 50 per cent of all
Russian oil exports under its control. 10 The Rothschilds and the
Nobels also sought an alliance with Standard Oil, something
which the Americans, with their tradition of destroying rather

than co-operating with rivals, at first eschewed. The first contacts
between Nobels and Standard Oil were in 1886, and in 1894 the
Swedes suggested that the American company should purchase
49 per cent of the Nobel interests. From 1887 Rothschild officials
were also seeking to arrange an alliance with Standard Oil. The
closest the Americans and the Russians came to co-operation was
a grandiose agreement signed in March in 1895 between the
Nobels and the Rothschilds, 'on behalf of the petroleum industry
of Russia', and Standard Oil, 'on behalf of the petroleum industry
of the United States'. The Americans were to be allocated 75 per
cent of the world's oil export trade and the Russians the
remaining 25 per cent. The agreement was scheduled to last for
ten years, but the negotiations broke down even before all the
details were finalised. 11
The large-scale entry of British capital into the Russian oil
industry came at the very end of the nineteenth century, at a time
when Russia was almost the largest oil-producing country in the
world. However, the British connection with Russian oil pre-
dated this capital inflow. A number of British writers and
journalists had been fascinated by the Baku oil industry. 12
Admiral Selwyn had watched with great interest the early
experiments with the burning of fuel oil on Russian ships. A
Scottish engineer, Thomas Urquhart, who was employed with the
Grozny and Tsaritsyn Railway in south-east Russia, pioneered
the development of fuel oil burning in Russian trains in the early
1880s.
Two British entrepreneurs played a particularly distinguished
role in the early Russian oil industry. One was Fred Lane, whose
involvement with the marketing of Russian oil was discussed in
Chapter 1. The other was an equally neglected figure, Alfred
Suart. Suart was an entrepreneurial risk-taker par excellence, but
unfortunately a man with more foresight and initiative than
commercial judgement. His extraordinary career, therefore, was
marked by a series of bold pioneering initiatives, which turned
into financial disasters. Suart's involvement in Russian oil
stemmed, as did Fred Lane's, from his shipping interests. In this
connection he rapidly followed the Nobels initiative in building
specially-designed ships to carry oil, and he was responsible for
the first British-owned tanker built in a British shipyard, the
Bakuin, launched in 1884. He brought the first British ships to
Batum. He persuaded Armstrongs to build a tanker in sections, so

it could be conveyed from the Baltic to the Caspian Sea. Between
1885 and 1889 he converted several steamers into tankers for
carrying Russian oil from Batum across the Mediterranean, and
in 1887 across the Atlantic to Philadelphia. His Chigwa/1 was the
first British tanker to dock in the United States. By 1892 Suart
had some sixteen tankers of various kinds under his control. He
dealt with Fred Lane in Bnito oil, and it was in this connection
that he met Marcus Samuel when he visited Baku in 1890.
In 1893 Suart launched a completely new initiative, buying a
property in Grozny, which was eventually to become Russia's
second major oilfield. Characteristically Suart's investment was
both extremely successful and financially ruinous. His borings hit
a 'spouter', the Russian equivalent of American 'gushers'. This
'spouter' produced some 20,000 poods of oil on the first day and
drenched the neighbouring countryside. Suart was faced by huge
claims for compensation from neighbouring landowners, and as a
consequence was forced to dispose of his Grozny property 'for a
song'. 13 Suart remained undaunted. In 1896, in order to maintain
his independence from the Nobels and Rothschilds, he purchased
the Zatourov property in Baku. The deal also included properties
in Galacia and Rumania, and a fleet of oil tankers. Using this
purchase as the basis, he founded the first British oil company in
Baku, the European Petroleum Company, with a capital of £1
million. Suart achieved yet another first in the following year,
when his Baku Standard became the first oil-fired tanker to cross
the Atlantic. Once again this proved a technical triumph and a
financial flop. In the last years of the century Suart embarked on
an ambitious, but eventually unsuccessful, scheme to shatter the
position of the Rothschild- Shell Transport alliance by uniting
the British oil companies in Baku with the Royal Dutch. 14
Despite Suart's personal fortunes, his initiatives were taken up
by other British entrepreneurs. The formation of the European
Petroleum Company in 1896 was followed by the floating of
several other British oil companies to operate in Russia. In 1897
the Russian Petroleum and Liquid Fuel Company was formed by
the purchase of property worth £530,000 in Baku. In the
following year the Baku Russian Petroleum Company and the
Schibaieff Company bought Russian property for £370,400 and
£740,750 respectively. 15 British capital rapidly established an
important place in the Russian oil industry. By 1901 foreigners
contributed 30 percent of the total capital invested in the Baku oil

industry, and £4 million of the £5.9 million of this foreign capital
was British. 16 The British, moreover, did not restrict themselves
solely to Baku. Despite Suart's unfortunate experience, they
resumed the development of Grozny oilfields. By 1903 the 7
British firms established at Grozny had a capital of £1.2
million. 17 British companies were responsible for about one sixth
of the oil produced at Grozny between 1896 and 1906. 18
The infusion of British capital was warmly welcomed by the
Russian Minister of Finance, Count Witte, and like-minded
officials in the government. 19 The agent of the Ministry of
Finance in London wrote to St Petersburg in January 1898 that
English capital would help Russia keep her 'proper place' in the
world oil market next to Standard Oil. 20 Russian officials
appreciated the enterprise of men like Fred Lane, and regarded
British investment as an important means of keeping Standard
Oil out of Russia, and indeed preventing monopolisation of the
Russian oil industry by the large oil groups. 21 British investment
in Russian oil, however, also served a useful function in providing
many Britishers with a sound training in the oil industry. Beeby
Thompson, who went out to work with the European Petroleum
Company in 1898, regarded Baku as the 'nursery of British
oilmen.' 22
By 1905, however, it was clear that all was not well in the
'nursery'. The dividends of the Anglo-Russian oil companies fell
sharply after the turn of the century. Russian Petroleum paid 50
per cent on its ordinary shares in 1899-1900, but by 1904-5 this
had been reduced to 2! per cent. The Spies Company, the largest
British oil company at Grozny, paid out one dividend of 5 per
cent in 1900-1, and then nothing until 1905.
A number of things had gone wrong with British oil investment
in Russia. The profitability of all foreign enterprises in Russia
slumped during the 1900-5 depression. Whereas foreign capital
in joint-stock companies was receiving returns of 8.9 per cent in
1895, the return had fallen to a low of 3.8 per cent by 1905. 23 The
rapid expansion of the oil industry following the influx of foreign
capital led to overproduction, and to a sharp fall in prices in
1901. 24 Moreover, yields from the old Baku oilfields were
beginning to fall, and 'spouters' becoming rarer.
The British oil companies were ill-prepared to adjust to these
more difficult circumstances. The typical company had started
life by the purchase of a plot from a Russian owner, often for a

very high price. The Armenian or Tartar owners invariably sold
the property because, in the words of Beeby Thompson, they
believed they 'had extracted the cream'. 25 The second of the
British oil companies to arrive in Baku, Russian Petroleum, was
fortunate in this respect. The property it purchased turned out to
be very far from exhausted, producing about 3 million barrels
(1 05 million imperial gallons) of oil during the first month of
operation. This success, however, was entirely fortuitous. The
company had paid remarkably little attention to either the legal
or the economic position of the property it purchased. Soon after
completing the deal, Russian Petroleum discovered that under a
Russian law dating from June 1892 property could not be owned
by a foreign company, a well-known fact of commercial life which
the company promoters had overlooked. The property had to be
made over to a trustee, and the company chose the British Vice-
Consul at St Petersburg, a Russian subject. This was hardly a
satisfactory arrangement. Had the Vice-Consul died, the com-
pany would have been liable to pay about£ 40,000 in death duties.
Moreover, the Vice-Consul was known to be involved in various
dubious businesses, and if any of these had gone bankrupt,
Russian Petroleum's property would have been confiscated. The
secretary of the company rightly described his firm's position in
January 1898 as a 'very precarious one'. 26 Russian Petroleum's
rights of ownership were not recognised until the summer of that
year, thanks to the intervention of the Minister of Finance, Count
Witte. 27 The company also seems not to have taken the pre-
caution of surveying its property before the purchase, and was
consequently greatly distressed to discover its condition. The
former owner's policy, reported the General Manager, 'appears
to have been to get as much out of the land as possible, by sinking
the smallest amount of capital'. 28 In other words, the property
had been sold just when heavy capital expenditure began to be
required.
The organisation of the Anglo-Russian oil companies was
extremely defective. There was the constant problem that com-
panies were undercapitalised in relation to risks. The trade press
was full of complaints about this, and about the 'watering' of
capital. Britain's lack of a significant domestic oil industry meant
that there was no reservoir of skilled personnel to manage her
investments in foreign oilfields. Many of the expatriate managers
in Russia were ill-qualified for their posts. In 1911 the Petroleum

World attacked the 'professional gentlemen imported from
London' who ran British oil companies overseas. 'The "swell"
Manager', continued the journal, 'is a by-word among the
Russians, some of whom take advantage of his ignorance, sell him
second-rate goods, and watch with equanimity the money of the
shareholders gradually disappearing under his hands.' 29 The
companies had a very primitive level of technical sophistication.
'Personally I am not at all in favour of a Geological expert', the
General Manager of Russian Petroleum informed his London
office in January 1899. 'I have always found that such men have
too many theories and fads and not sufficient practical ex-
perience.'30 This was fourteen years after the Nobels had hired
their first geologist to work at Baku.
These management defects were not confined to the British oil
companies operating in Russia. Shell Transport had been
brought to the verge of disaster by inadequate management
before its merger with Royal Dutch. The Burmah Oil and Anglo-
Persian companies were also to experience considerable problems
with management deficiencies. British oil companies seemed
generally prone to amateurism in management, and to the
retention of obsolete methods of organisation. The companies
which prospered were those which either located large supplies of
crude oil or, as in the case of Shell, merged with a better managed
foreign company.
The weak British oil companies were in no position to
withstand the revolutionary disturbances of 1904/5, particularly
since the Baku region was badly affected. The average age of the
workmen on the Baku oilfield in 1900 was 25-30 years, and fewer
than 50 per cent of them stayed at their jobs for one year or more.
This youthful and transient labour force became increasingly
involved in the strike movement. The first really serious strikes
began in 1903, just when the oil producers were recovering from
the depression at the turn of the century. In December 1904 there
was the first general strike of oil workers, and this was followed by
an outbreak of exceptionally savage racial warfare between
Tartars and Armenians. 31 Serious racial and labour disturbances
lasted until 1906, and the amount of physical damage done to the
oil industry was substantial. Russian oil production in 1905 was
30 per cent lower than in 1904, and the 1904 level of production
was not reached again until 1928. Beeby Thompson estimated in
1908 that at least £2 million worth of property on the oil fields had
been destroyed during this period. 32 'The Russian petroleum
industry for the present time has ceased to exist', the Petroleum
Review gloomily observed in September 1905, 'the producing
fields around Baku have all been fired, and some hundreds of
derricks, together with the necessary plant destroyed. ' 33 The
British oil companies were spared the full fury that damaged the
Rothschild properties, but their already enfeebled condition
meant that even minor losses were sufficient to cause irreparable
damage to a number of them. By the end of 1905 Russian
Petroleum was claiming to have had between £80,000 and
£90,000 worth of property destroyed. 34 A receiver was appointed
for the company in 1908. The other British oil companies in Baku
were in an equally miserable state after 1905. The Schibaieff
Company paid no dividends after 1901, and in 1909 its
position was described by the Petroleum Review as 'deplor-
able'. 35
Yet British investors were far from totally disillusioned with
the oil fields of Russia. The entente between Britain and Russia in
1907, and the return of general industrial prosperity to Russia in
1909, led to renewed interest in the country by English investors.
In 1910 this attention became concentrated once more on the
petroleum industry. During that year there was a sudden boom in
oil shares and a flood of new oil companies appeared. 'Today oil
shares upon the London Stock Exchange', observed the
Petroleum Review, 'are the most sought after of any industrial
securities on the market. We are, without doubt, in the midst of
the greatest oil boom which this country has ever known.' 36 The
boom in oil was triggered off by the annual Admiralty fuel oil
contracts, which were taken by the London stock market as
presaging a great expansion in the Royal Navy's use of fuel oil. 37
The main object of the Stock Exchange's attention was a new
and apparently prolific Russian oilfield at Maikop. The Maikop
oilfield was located in the Kuban district of the Caucasus, in a
very favourable geographical situation for the development of an
export trade. It was only 50 miles from the port of Tuapse on the
Black Sea, and less than a hundred miles from the well-established
oil export port of Novorossiisk. In 1909 a strong 'spouter' set off
an oil boom in the area. In July the first British oil company, the
Black Sea Oilfields Ltd, was formed to exploit the field, and in the
following February this enterprise struck a great oil fountain on
one of its plots. The apparently prolific nature of the oilfield, and
its desirable geographical position, seemed to augur well for
Maikop, and a large quantity of British capital was attracted into
the area. Between 1909 and April 1911 some 53 Maikop
companies were formed in Britain. By the eve of the Revolution
there remained 25 British companies, with a capital of £4 million,
concerned with the exploitation of Maikop oil. 38
The Maikop companies were a disaster. Very little oil was
found. 'With regard to Maikop', a witness told the Royal
Commission on Fuel and Engines, 'perhaps the less said the
better. Of the numerous companies operating there only two have
paid dividends.' 39 In October 1911 the Petroleum Review observ-
ed that the failure at Maikop had left a 'distasteful flavour in the
eyes of thousands of English investors'. 40 There was oil to be
found at Maikop, and indeed under the Soviets Maikop was to
become a major oil-producing region. The British companies,
however, were not properly equipped to exploit the field. The
geological conditions were different from the Baku and Grozny
fields, but the only available skilled labour came from those
established fields. Inappropriate drilling methods were therefore
initially used. 41 Communications were poor, with a total absence
of metalled roads in the region. 42 The port of Tuapse did possess
eighteen feet of water, but there was also a large submerged rock
in the harbour which greatly hindered access. The construction of
the infrastructure required for the successful commercial exploi-
tation of a virgin oilfield was beyond the capacity of the dozens of
small British oil companies.
Despite the depressing Maikop experience the British retained
their interest in Russian oil. In the immediate prewar years British
capital maintained the tradition, begun by Alfred Suart at
Grozny, of pioneering new oil regions. The continued decline in
production on the old Baku oilfields caused oil prices to rise
sharply-the price of kerosene per pood at Baku tripled between
1910 and 1913-and this acted as a major stimulus for further
exploration. The new areas of attention were Emba and
Cheleken, in the Caspian region, and Sakhalin Island, ofT the
coast of Siberia. British capital participated in the development of
these regions in a variety of ways. Some British oil companies
operated directly; others operated through the medium of
companies, registered in Russia, but wholly British-owned;
sometimes British investors held a part of the share capital of
Russian enterprises. The British contribution, made in this

variety of ways, to the growth of these new oil regions was
substantial. By 1914 companies which were wholly or partly
British owned were responsible for 50 per cent of the production
of the Grozny oilfields, 75 percent ofCheleken production, 90 per
cent of Maikop production, and the whole of the oil production
from the Emba region. 43
British oil capital and enterprise in Russia in the prewar years
was increasingly consolidated into a number of large and
interrelated groups. The five British oil companies at Cheleken,
for example, were all linked. The two dominant groups which
emerged in Russia in the prewar years, however, were Shell and
the Russian General Oil Corporation.
During 1911 the Shell Group began to acquire a number of
Anglo-Russian oil companies. These included several enterprises
operating in the new oil regions, such as the North Caucasian
Oilfields and Spies Company at Grozny, and the Ural Caspian
Company in the Emba region. The Shell Group's greatest coup
came in 1912 when it purchased the Rothschild's 80 per cent
holding in Bnito and Mazout. The management of these compan-
ies was reorganised, and the various firms placed under the
control of a central management committee in St Petersburg,
whose chairman was an ex-Nobel official, Ernest Grube. By 1914
the eleven Shell enterprises in Russia controlled 104.9 million
poods of oil production, equivalent to just under a fifth of total
Russian production. 44
The second group was the Russian General Oil Corporation.
'Oil', as this group was commonly referred to, was a holding
company formed by a group of Russian bankers and oil
producers. The company was floated on the London Stock
Exchange, and it attracted large amounts of British capital. The
aim of the venture was to unite a large portion of the Baku oil
industry, and within a short period of time it managed to bring the
major independent ventures, such as Mantashev, Lianozov and
Mirzoiev, under its banner. By the eve of the War a quarter of
'Oil's' capital, about £600,000, was held by British investors, and
two British representatives sat on the board. 45
It is difficult to give precise statistics for the amount of British
capital which had been invested in the Russian oil industry since
the late nineteenth century. Beeby Thompson estimated that the
sum had reached £6t million by 1904. 46 The next decade saw this
amount expand considerably. By 1916 P. V. 01' estimated that

British investment in the Russian oil industry was £18.1 million.
This compared with France's £5.4 million and Germany's £1.4
million. The British investment was distributed by region as
follows: Baku £5.2 million; Emba-Urals £3.3 million; Grozny
£2.7 million; Maikop £2.5 million; Cheleken £2.5 million;
Sakhalin £1.1 million; and other fields £800,000. A further £1.2
million of British capital was invested in various oil refining and
transporting businesses in Russia. 47
The large British investment in Russian oil had clearly met with
mixed fortunes. While much money had been wasted in specu-
lative ventures and the Anglo-Russian oil companies had not
earned the high dividends their founders had anticipated, British
enterprise and capital had pioneered new oil regions in Russia.
Moreover, British interests played an important role in the
consolidation of the Russian oil industry before 1914, a process
which raised hopes of renewal for the industry. The British
economy did not benefit greatly from the investment in Russian
oil. British capital did not develop new sources of oil for the
economy; indeed, Russian oil exports dwindled soon after the
arrival of the British. The dividends earned by British oil
companies in Russia after 1900 were very low, and most of the
investors' money in the Maikop and other speculative ventures
was lost even before the Bolshevik Revolution.
The Russian experience contributed greatly to the view of the
British capital markets that oil companies were a high-risk
investment. 'To the general public', wrote the Economist in 1910,
'perhaps the best known example of oil companies is the Russian
Petroleum.' 48 It was an unfortunate example. The experience of
Maikop was even less appealing, and, after the 1910 boom, oil
shares were an unattractive proposition for the remaining prewar
period. 'Everyone in London financial circles knows', the
Petroleum World observed in 1913, 'that at the present moment it
is a very difficult thing, in fact almost impossible, to induce the
public to take an interest in even a good oil proposition.' 49
The reluctance of the money markets to supply funds for
speculative oil enterprises in these years gave certain of the
smaller oil companies a further reason for seeking an association
of some kind with the British Government. A number of oil
companies, aware of the strategic significance of the commodity
they produced, had made requests for financial assistance from
the State since the turn of the century. In 1903 the West Indian
Petroleum Company, a small British oil company prospecting in
Barbados, asked for a Government loan of £10,000, and in return
offered the Admiralty the right of pre-emption over its pro-
duction. In 1908 the Nigerian Bitumen Corporation proposed
that the Government should join with it to explore for oil in
Nigeria; the colonial government subsequently awarded the
company £25,000. Requests for State finance increased in
number after 1911. Nigerian Bitumen asked in 1912 for a further
Government grant of £12,000 a year. The Cairo Syndicate, a
small British oil company operating in Egypt, asked for a State
loan of £100,000 for two years. The Newfoundland Oil Company
put in a bid for a State loan of not more than £20,000. It was also
in 1912 that the Anglo-Persian Oil Company began a campaign to
secure a very large sum of money from the Government, and a
year later the Mexican Eagle Petroleum Company offered to
make a long-term fuel oil contract with the Royal Navy in return
for a State loan of £5 million. 50
III WEETMAN PEARSON AND MEXICAN OIL
The Americas were the second largest recipient, after eastern

Europe, of British oil investment before 1914, and in general
British oil companies proved rather more successful in the New
World than in the Old. There were a number of relatively small
but successful British oil companies in the United States. The
California Oilfields Ltd was one of these. This company had
been organised in 1902, with British capital and largely American
management. Ten years later it had an annual production of 4.4
million barrels of crude oil, or 4.5 percent of total Californian
production. 51
This section, however, focuses on the most remarkable success
of British oil enterprise in the Americas before the First World
War. The man primarily responsible for this success was Weetman
Pearson, later First Baron Cowdray. Pearson was born in 1856,
and at the age of 16 he joined the family contracting business
which had been founded by his grandfather. He became a partner
in 1875, and by the turn of the century S. Pearson and Son had
earned a worldwide reputation as contracting engineers. The firm
constructed the Blackwall Tunnel under the Thames, built the
four tunnels for the Pennsylvania Railway Company under the
East River, which connected New York with Long Island, and
became a major specialist in dock work. In 1889 S. Pearson and
Son entered Mexico with a contract to drain the capital city. The
construction of the Grand Canal to drain Mexico City's valley
was completed in 1896, and over the next four years the firm built
a modern harbour at Vera Cruz and a 200 mile railway across the
Tehuantepec Isthmus (see map 3.2).
Pearson's interest in oil originated in 1901. One of the partners
inS. Pearson and Son, J. B. Body, discovered petroleum deposits
near San Cristobal while looking for rock for the firm's harbour
works at Coatzacoulcos, soon to be renamed Puerto Mexico. No
action was taken over this discovery until April 1901, when
-·-------- Mextco-U.S.A.Border
---Railway
-~ Pipeline
A Oilfield
W Refinery
Gulf
of
Mexico
~ - '\_,
~~Tompico
BOCAS
1 RE uxpen
' , '
,_./" ·'----- ~ .--..,'-.,. F~URBERO
Mexico CitJ 0'

l••oeo
~oro Cru
z
~\co
- ,-- ~,;'• ""'
/WMinattUin
( ASAN CRISTOBAL
Isthmus of Tehuan!epec
Pacific Ocean
MAP 3.2 Mexico in 1914

Pearson, because of a missed train connection, was obliged to

spend a night at Laredo on the Mexican-American border. The
Spindletop gusher had just been struck about 300 miles away, and
Laredo was in the grip of oil fever. It occurred to Pearson that if
oil could be found on the Isthmus, it would provide an ideal fuel
for the new Tehuantepec railway, especially since supplies of
wood were inadequate. Pearson wrote immediately to Body,
suggesting the acquisition of land around the San Cristobal oil
seepages. 52
Pearson was to become the most brilliantly successful, as well
as the most personally attractive, of British oil entrepreneurs
before the First World War. Yet in 190 I he was completely
ignorant of the oil industry. This ignorance resulted in several
costly mistakes. 'Now I know that it would have been wiser to
surround myself with proven oilmen', he ruefully wrote to his son
in 1908, 'and not relied upon commercial knowledge and hard
work coupled with a superficial knowledge of the trade.' 53 Yet
his great entrepreneurial skills eventually won him more success
in oil than in any other branch of industry with which he was
concerned. Pearson combined in an unusual way a number of
qualities. He had both a complete grasp of details and a vision of
the whole design, seeing both the wood and the trees at the same
time. 'The Chief', as he was universally known to employees of
S. Pearson and Son, was personally active in all of his business
ventures and never asked anyone to undertake a risk he was not
prepared to take himself. Yet he also knew how to delegate
responsibility, something which became increasingly essential as
the Pearson empire expanded. Pearson, motivated less by the
desire for personal financial gain than by the sheer excitement of
business, was always restless, always in search of the new
challenge. On several occasions this was to bring him to the brink
of disaster, and it was therefore fortunate that his greatest
entrepreneurial gift was the proverbial 'Pearson luck'.
In 1902 Pearson acquired his first oil concessions. Further
concessions were steadily acquired, largely because of the
contractor's friendly relations with the Mexican dictator, Porfirio
Diaz. Diaz was extremely impressed with Pearson's construction
works in Mexico, especially the Tehuantepec Railway which
S. Pearson and Son owned and operated in partnership with the
Mexican government. The Englishman in turn respected the
order and stability which Diaz had imposed on Mexico. The
mutual respect between the two men developed into a personal

friendship which was to be of enormous consequence to the
eventual success of Pearson's enterprise. In November 1905 Diaz
promised 1. B. Body that as soon as the company had sufficient
crude production in Mexico, he would increase the duty on
imported oils. 54 The major coup, however, came in 1906, when
Pearson's firm was granted huge new concessions on Federal and
State lands to the north of the San Cristobal oil fields in the
provinces of Veracruz, Tabasco, San Luis Potosi and Chiapas.
The concessions were for fifty years and were exempt from
taxation. By July 1907 the firm owned 600,000 acres and had
secured subsoil leases over l million acres of land.
Pearson made arrangements to market the large supplies of oil
he expected soon to possess. In 1905 plans were laid for a refinery
at Minatithin, twenty miles from Puerto Mexico, the terminal
point of the Tehuantepec Railway on the Atlantic. After the vast
new concessions had been secured in 1906, Pearson ordered the
doubling of the original planned capacity of the refinery and it
eventually began operations early in 1908. A fleet of three small
tankers of sufficiently shallow draught to navigate the
Coatzacoulcos River was ordered. In 1907 the first 3000 ton
capacity tanker was ready for service. Pearson opened an oil
retailing department in London, and in 1907 a contract was
signed with the oldest firm of petroleum importers and distri-
butors in the United Kingdom, C. T. Bowring and Company. 55
August 1908 saw the first shipment to Britain of refined oil
produced at the Minatithin refinery.
The one major obstacle to success was the lack of oil to sell
through this expanding distribution network. 'There is only left',
Pearson wrote to his wife in March 1909, 'the oil.' 56 The
production of the San Cristobal field was small and a ring of new
wells drilled around the original well were dry. In 1908 the San
Cristobal field was given just two years life. 57 Pearson was forced
to purchase crude from other producers to meet his supply
contracts. In late 1907 he made a contract with another English
company operating in Mexico, owned by Percy Furber. Pearson
agreed to buy a minimum of 2000 barrels of crude oil a day and a
maximum of6000 for the next twelve years. The Furbero oilfield,
however, was also unproductive, and Pearson had to purchase oil
in the open market in Texas to maintain his supplies to Bowring.
The process of buying crude oil in Texas, refining it at Minatitlim
and re-exporting the refined products to Europe was financially

disastrous. Overall, the first six years of the enterprise had proved
extremely capital-intensive, and there had been no returns on the
investment. In 1902 Pearson had resolved to put£lt million into
the oil venture. By 1908 he had spent £5 million, and his personal
fortune was wholly pledged.
In 1908 the enterprise was hit by two major disasters, and it
seemed that 'Pearson luck' had finally evaporated. Pearson
drillers had switched their attention from the oilfields around San
Cristobal to the new concession areas secured by the company in
the north. In August 1908 they brought in a huge well at Dos
Bocas in northern Veracruz. Unfortunately the well caught fire
and burned for the next eight weeks, during which a million tons
of oil were destroyed. Pearson was forced to pay heavy com-
pensation to local landowners. A further disaster occurred within
a few months when a serious fire destroyed the greater part of the
Minatitllin refinery and immobilized it for months.
The same year saw the outbreak of a vicious trade war between
Pearson and his major competitor in Mexico, the Walters, Pierce
Oil Company. Two-thirds of the capital of Walters, Pierce was
owned by Standard Oil, and the remainder by an American
oilman, Henry Clay Pierce. The firm imported oil from the United
States, and refined it at two refineries at Tampico at Vera Cruz.
Walters, Pierce had held a monopoly over kerosene and lubricat-
ing oil sales in Mexico for over a decade before the arrival of
Pearson. In 1903 Pearson met Pierce in New York, and expressed
the hope that the two companies could work in harmony. 58 Clay
Pierce was prepared to accept this proposal, provided that
Pearson did not intend to enter the distribution trade within
Mexico. Pearson, however, was not a man to suffer this kind of
restriction for long, and relations with Clay Pierce steadily
deteriorated. In June 1908 negotiations broke down between the
two sides, and Pearson launched his company into the retail oil
trade in Mexico. A bitter price war followed. Clay Pierce used
every possible means to destroy his rival. Inspired press attacks
on Pearson appeared in Mexican, American and European
newspapers, charging him with having corrupted the Mexican
government. 59 Detectives were employed to shadow Pearson and
his associates, and attempts made to lure away Pearson em-
ployees. 'American methods', Pearson observed to his wife, 'are
peculiar.' 60 They were not, however, very successful. Pearson, by
virtue of a superior selling organisation, had secured 40 per cent

of the internal oil trade of Mexico within fifteen months of the
outbreak of the trade war.
The success against Clay Pierce, however, was only a partial
compensation for the continuing failure to locate a large supply of
crude oil. At times Pearson became deeply pessimistic. 'Until our
oil venture is a proved success', he wrote to his wife in February
1909, 'I continue nervous and sometimes despondent.' 61 In that
year Pearson decided to reorganise his geological service. During
the first years of the Mexican enterprise, he had made use of the
English petroleum consulting firm run by Boverton Redwood,
whose activities will be examined in greater detail in subsequent
chapters. W. H. Dalton, one of Redwood's senior geologists,
made a reconnaissance survey for Pearson in 1901, and it was his
findings that led to the commencement of the San Cristobal
drilling programme in 1902. A number of other geologists from
this firm were employed by Pearson, but without conspicuous
success. In April 1909 the Chief Geologist of the United States
Geological Survey, C. W. Hayes, visited the Pearson oil con-
cessions, and expressed optimism about their prospects. 62
Pearson persuaded Hayes to work for him on a part-time basis,
and to recruit some North American geological staff. The
contract with Redwood's firm was ended, and the British
geologists were replaced by promising young men from the
United States Geological Survey. In 1911 Hayes resigned from
public service, and went to Mexico as general manager in charge
of exploration and production of the Pearson enterprises.
In 1910 Pearson's persistence, and his new geologists, finally
brought success. In January 1910 a small well was struck at
Potrero de Llano. In the following month came the far larger
Potrero No. 1 well, which guaranteed Pearson a supply of crude
oil. In December the biggest gusher ever struck in Mexico was hit
at Potrero No. 4. The well, the largest in the world at that time,
ran wild for three months, flowing at a rate of 100,000 barrels (3.5
million imperial gallons) per day. Pearson was in Mexico City at
the time of the strike, and he left immediately for the field, where
he remained until the well had been successfully capped. The well
ceased to flow in December 1918, having given over 100 million
barrels of crude oil. 63 Other discoveries followed. By 1914
Mexico had emerged as the third largest oil producing country in
the world, with an annual production of 4 million metric tons.
Pearson controlled about 60 per cent of this output. 'Pearson

luck' had been vindicated, and the success of the venture secured.
Pearson, who had been raised to the peerage as Baron Cowdray
of Midhurst in July 1910, now saw his investment in downstream
capacity pay handsome dividends, as his integrated oil business
rapidly emerged as a major force in the world oil industry. A
major reorganisation of the Pearson oil interests was undertaken.
As early as 1908 Pearson had planned to establish a Mexican
company to take over the production of oil in the country, partly
because a 'Mexican company would be assured of Government
support much more than a foreign company'. 64 On 31 August
1908 the Compaftia Mexicana de Petroleo El Aguila-Mexican
Eagle-was formed. In March 1909 Mexican Eagle acquired
from S. Pearson and Son all the latter's oil interests except for the
refinery and the tankers and in the following year the company
made its first public issue of shares. The board included several
prominent Mexicans, including Diaz's son, but Cowdray retained
a majority holding.
The tanker side of the business was rapidly developed.
Pearson's gamble of building tankers before he had oil meant that
a tanker fleet was already available when large supplies of oil were
located. Cowdray soon ordered a great expansion of his fleet. The
Eagle Oil Transport Company was formed in February 1912,
with the whole of the share capital taken up by Mexican Eagle
except for some £500,000 ordinary shares owned by S. Pearson
and Son. Eagle Oil immediately ordered twenty tankers. The fleet
included ten 15,000 ton ships, which cost about £160,000 each
and were the largest oil tankers in the world at that time. 65
In 1912 a new distribution company was also founded. In
January 1912 the Anglo- Mexican Petroleum Products Co. Ltd
was formed to sell Mexican Eagle's oil outside Mexico and
Central America. Cowdray's son, Clive Pearson, was made
chairman of the company at the age of25. It began trading in the
United Kingdom in 1912, and within two years had absorbed the
distribution facilities of Bowrings. The company won a major
Admiralty contract in July 1913, when it arranged to supply the
Royal Navy with 200,000 tons of fuel oil. Further branches were
opened in Argentina, Brazil, Chile, Uruguay, Paraguay and
Cuba, and an extensive trade established in fuel oil for ships'
bunkers and bitumen for road-making. By 1913 Cowdray was
even selling Mexican fuel oil to Russian railways. 66
The organisation of Anglo- Mexican was a model of a well-run

oil company, and was markedly different in this respect from
many of its British contemporaries. Its fine headquarters building
at Finsbury Circus House, London, contained a staff of eight
hundred. This staff was divided into five departments. The
European Sales Department handled trade in Britain and
Europe, through Bowrings in the case of kerosene, petrol and
lubricating oils, and directly for crude and fuel oil, asphalt, road
oils and paraffin wax. The Foreign Sales Department controlled
sales to Central and South America, Canada, Australia, Asia and
Africa. The Bunkering Department was concerned with the
establishment of bunkering stations between New York and
Buenos Aires and sales of bunker fuel. The two remaining
sections were the Transportation Department and the Buying
Department, which acted as a centralised purchasing agency for
all the petroleum companies of the Pearson Group. The activities
of the different departments were co-ordinated through daily
conferences of directors and weekly board meetings. 67
The distribution of Pearson products in Mexico and Central
America was undertaken by Mexican Eagle. As the production of
crude oil rose, this company expanded its refining capacity.
During 1912 a site was secured on the Panuco River for a refinery
at Tampico, the old refinery at Minatitlan being both geographi-
cally inconvenient for the new fields and equipped to refine only
the lighter crudes found in the south. The profitability of the
Mexican trade was seriously reduced while the war with Clay
Pierce continued. Pierce persisted in his attacks on Cowdray,
trying in 1911 to use his influence in Washington to block
Mexican Eagle's employment of C. W. Hayes. This position,
however, became steadily more untenable as Standard Oil began
to withdraw their support from their erstwhile subsidiary.
Standard Oil, in the middle of a trade war with the Shell Group,
was eager to secure at least some of Cowdray's crude oil. In 1911
the President of Standard Oil formally apologised to Cowdray for
the methods Pierce had used during his campaign, and in March
1912 Cowdray signed a contract with Standard Oil under which
he agreed to supply the American company with ten million
barrels of crude oil over the next seven years. In the following
month the directors of Standard Oil gave Cowdray a fine dinner
in New York to celebrate their new relationship. This recon-
ciliation left Pierce in an exposed position. Following the
dissolution of the Standard Oil trust, Pierce purchased their

interest in his company. In 1912 the Mexican managements of the
two companies agreed on a basis of co-operation for the sale of
certain products, but Pierce again broke faith. 'No one whom I
have ever met who has done business with Clay Pierce', Cowdray
reflected in August 1912, 'will either believe his word or rely upon
his bond.' 68 Continued pressure from Mexican Eagle, however,
eventually forced him to come to terms. In 1913 Cowdray, with
some magnanimity, agreed to give Clay Pierce a fifty-fifty share in
the Mexican trade.
It was Cowdray's misfortune that his great achievements in the
Mexican oil industry were almost immediately threatened by
political upheaval. Cowdray's great ally, President Diaz, was
eighty when Potrero No. 4 was struck. As his grip slackened
revolts broke out in several parts of the country. In May 1911
Diaz fled from Mexico City to Vera Cruz, where he spent four
days with J. B. Body before taking ship for Europe and exile. The
new President was the mild-mannered and philosophic
Francisco Madero. Cowdray met Madero in Mexico City
shortly afterwards, and the validity of Mexican Eagle's oil leases
was recognised by the new government. 69 Madero, however, was
dependent for his success on wild guerrilla leaders such as
Emiliano Zapata and Pancho Villa, and his term of office was
marked by constant disturbances. In February 1913 Madero was
overthrown, by a half-Indian General, Victoriano Huerta, and
subsequently murdered. Chaos spread in Mexico as Villa and
Zapata revolted against the new regime. After 1911 the northern
part of Mexican Eagle's territory, from Tux pan to Tampico, was
repeatedly fought over or raided by insurgents.
Cowdray's difficulties were increased by the policy of the
United States. Cowdray had been under personal attack in the
United States for many years. Clay Pierce had spread rumours of
his corruption of the Mexican government. It was a newspaper
owned by Pierce which first coined the phrase 'Cowdray has taken
more out of Mexico than any man since Cortez'. 70 The main
problems came, however, with the advent of the new Democratic
Administration of Woodrow Wilson in February 1913. Wilson
hated Huerta, whom he regarded as the murderer of the
'democrat' Madero. The President was determined to bring
American democracy to Latin America, and to end the series of
violent revolutions which brought dictators such as Huerta to
power. The crusade against Huerta soon developed into a crusade

against Cowdray. When the British Government extended diplo-
matic recognition to the hated Huerta, Wilson became convinced
that Cow dray was the main inspirer of this policy. The American
Ambassador in London, W. H. Page, reported home that
Cowdray was moving the Foreign Office in Huerta's favour. 71
Anglo-American tension was further increased in July 1913 when
Sir Lionel Carden, a British diplomat notorious for his anti-
Americanism, was appointed British Ambassador to Mexico.
Cowdray was once more blamed for his appointment. The United
States Administration had soon deluded itself that there was a
massive conspiracy between the British Government and
Cowdray to thwart the interests of the United States in Mexico
and defy the Monroe Doctrine. The fuel oil contract which
Anglo-Mexican signed with the British Admiralty in July 1913
provided the Americans with an obvious motive for the British
Government's susceptibility to Lord Cowdray's wishes. 72
The policy of the United States at this time differed greatly
from that of the post-1918 world in that it was not strictly
nationalistic. The attempt was made to exclude European capital
from Mexico not only because it was European but because it was
capital. 73 Wilson had fought the Presidential election as the
champion of small business against the trusts and Wall Street.
Standard Oil was hated as much as Cowdray by the
Administration, and Cowdray's good relations with that com-
pany only further increased their hostility towards him.
The attitude of the United States government to Cowdray soon
began to have effects beyond Mexico. In 1912 Cowdray had
recruited the former Liberal Chief Whip, Lord Murray of
Elibank, to work for S. Pearson and Son. Cowdray had been the
Liberal Member of Parliament for Colchester between 1895 and
1910, and he was consequently well-connected in Liberal political
circles. Murray's speciality was backroom political negotiations,
and it was with this skill in mind that he was despatched to South
America in January 1913 to negotiate at the highest level for oil
contracts. It was unfortunate that just as Murray reached his
destination his name was linked with the Marconi scandal then
raging in Britain. This only provided further evidence to the
Americans of the corrupt nature of the Pearson oil enterprises,
and American diplomatic pressure was used to thwart Murray's
attempts to secure oil concessions in Costa Rica, Ecuador and
THE BRITISH IN FOREI·GN OILFIELDS 73
Columbia. The bill granting Pearson a concession in Columbia

had been given its first reading by the country's Congress when
the United States forced its cancellation in July 1913. 74
The American government's onslaught against Cowdray trans-
formed a business venture into a matter of international politics.
There was a similar tendency in several parts of the world at this
time for oil to become a matter of inter-governmental tension and
rivalry. This development provided the third area of interaction
between British oil companies and the British Government, for
the companies sought not only naval fuel oil contracts and State
finance, but the protection of diplomatic support.
The relations between oil companies and their home govern-
ments in foreign countries have always been one of the more
controversial aspects of the petroleum industry. The alleged
collusion between oil companies and their home governments in
the cause of exploiting the natural resources of less developed
countries is a familiar theme. The whole subject is plagued by
tantalising, but unanswered and perhaps unanswerable ques-
tions. Have Western governments regularly used oil companies to
further their politico-economic aims? Or have those governments
been used to benefit the shareholders of the oil companies? Or has
there been, and perhaps still is, a conspiracy between companies
and governments to exploit third parties? 'It was never clear',
Anthony Sampson concluded from his study of the relations
between the 'seven sisters' and their respective governments, 'who
was using whom.' 75
There were several requests from oil companies for British
diplomatic assistance before the First World War. Perhaps the
most direct, and characteristically untactful, request came from
Marcus Samuel who, in his evidence before the Royal
Commission on Fuel and Engines in November 1912, offered the
Admiralty a fuel oil contract in return for, in the words of the
horrified Director of Naval Contracts, 'on unconditional terms,
Foreign Office and diplomatic support for [Shell] oil interests in
various parts of the world'. 76 Usually, however, requests for
diplomatic support were rather more specific. Shell Transport in
1907, for instance, requested the assistance of the Foreign Office
in removing what were regarded as obnoxious regulations over
the kerosene trade made by the Chinese authorities. 77 British
diplomatic assistance was even valued by oil companies in Russia.
During the revolutionary disturbances of 1904-6 several pleas for
diplomatic assistance were made by British oil companies. In 1911

Waley Cohen argued that the Shell Group should operate in
Russia through a British-registered company, since they 'should
then enjoy the support of British diplomacy in Russia'. 78
Diplomatic support became essential in several countries where
there was Great Power rivalry. The German government, for
example, gave extensive support to the Deutsche Bank in Turkey,
and British oil companies of necessity needed the support of
their government. In such a situation even Henri Deterding, the
strongest of theoretical opponents of State intervention in the
petroleum industry, recognised the commercial disadvantages of
not having diplomatic support. Government might be rather
unreliable 'old aunts', who best served everyone's interests by
staying aloof from the petroleum industry, but their wrecking
potential was high and could not be ignored. 79
By 1913 Cowdray was at least in as much need of diplomatic
support as any British oil interests in the Middle East. He was not
to receive it. The Wilson Administration's view that the British
government was the puppet of Lord Cowdray was pure fantasy.
Cow dray was the most honest and incorruptible of all the British
oilmen of this period. Moreover, Sir Edward Grey, the Foreign
Secretary, though not in sympathy with Wilson's moral crusade
against Huerta, had no intention of engaging in a major
diplomatic dispute with the United States over Mexican oil. The
Foreign Office placed wider considerations of Anglo-American
relations above any disagreement over oil. The Foreign Office was
particula~ly concerned to secure the repeal of the Panama Canal
Act of 1912, which had exempted American shipping from Canal
dues, and it would take no strong diplomatic action against the
United States until Congress had repealed this legislation. In the
autumn of 1913 Grey, concerned about the damage caused to
Anglo- American relations by Mexican oil, sent Sir William
Tyrrell, a career diplomat, to the American President to explain
British policy. Tyrrell told Wilson that Britain would not
recognise any special privileges granted by Huerta to Cowdray.
The breach with the Americans was healed, at the price of
ordering the British Ambassador in Mexico not to interfere with
United States policy even in defence of British oil interests. 80 'I
find there is a complete understanding between the British and
United States Governments', Cowdray wrote to J. B. Body. 'This
of course, means that the British Government recognises that the

United States is free to act as it is doing.' 81
Eventually Cowdray was given the minimum of British diplo-
matic protection. After November 1913 Mexican Eagle's pro-
perty was under constant attack by rival armies. In December the
refinery at Tampico was taken by rebels, and then recaptured by
Huerta's troops. Early in the New Year the United States
Congress repealed the Panama Canal Toll Act, and this freed the
Foreign Office to take a stronger line in defence of British
property. Cowdray persuaded Lord Morley, the Lord President
of the Council, to see the Prime Minister on his behalf, and plead
for greater protection for his company in Mexico. As a result the
British Ambassador in Washington was instructed to see the
American President. At their meeting on 8 April, the Ambassador
went beyond his strict instructions and made very strong
representations to Wilson about the subject. On the following
day, after a mistaken arrest by federal police of a party of
American sailors, the U.S. Consul in Tampico was told to warn
Government officials and rebels alike to respect the oilfields. The
oil fields were effectively placed under joint Anglo- American
protection. 82
The uncertainty which faced Mexican Eagle after 1910 pro-
mpted Cowdray to give serious consideration to selling his
interest in Mexican oil, or at least diversifying away from total
dependence on it. In 1911 he was approached by two American
companies, the Texas and Gulf Refining companies, about a
possible amalgamation with Mexican Eagle, but the negotiations
fell through owing to problems created by the anti-trust laws of
Texas. In March 1913 a Standard Oil (New Jersey) director,
A. C. Bedford, called upon Cowdray in London and discussed
with him the purchase of Mexican Eagle. In September the
President of that company, Archibold, wrote to Cowdray to say
that he hoped soon to start negotiations about purchase. In the
following October, however, Standard decided for both political
and legal reasons, not to pursue the matter. 83 Another suitor had
appeared a year earlier. In 1912 a M. Benard, a partner in a
leading Paris firm of stockbrokers, saw Cowdray and suggested a
working arrangement between the Royal Dutch and Mexican
Eagle. Royal Dutch proposed a holding company for the two
enterprises, but Cowdray insisted on a cash sale and the
discussions ceased. Calouste Gulbenkian initiated further talks

between Cowdray and the Shell Group in February and March
1913, but nothing came of them. 84
In December 1913 Cowdray extended his policy of attempting
to involve others in his company by offering to make a major
supply contract with the Royal Navy, provided that the British
Government invested £5 million in Mexican Eagle. A day or so
after the meeting with Lloyd George, the Chancellor, during
which this offer was made, Cowdray addressed a letter to the
Government offering to 'specifically dedicate ... the Mexican
Eagle Oil Company to the primary purpose of supplying the
Admiralty with fuel oil .... If it were desired that the control of
the Company should remain in British hands for say seven years,
this can be arranged. But it would mean that we have to look to
the Government for financial assistance instead of selling the
Company's securities to the public.' 85 Cowdray's motive was
obvious. Nothing would have safeguarded Mexican Eagle's
properties so well as to have the British Government committed
as a majority shareholder. Cowdray's proposals, however, found
little support within the Government. The Admiralty was close to
reaching an agreement with the Anglo-Persian Oil Company,
while the Foreign Office was not willing to support a measure
which could only be interpreted by the Wilson Administration as
an explicit attack on the Monroe Doctrine.
Meanwhile Cowdray, ever anxious for a new adventure, had
begun to search for oil concessions elsewhere in the world. In
September 1912 a separate department of S. Pearson and Son
under Lord Murray was established for this purpose, and after
Latin America had been blocked by the Americans, Murray
began to seek concessions in Europe, Asia and Africa.
In 1912, as a result of a preliminary geological investigation, a
controlling interest was secured in the Oran Oil Company Ltd,
which held a concession in Algeria. In the same yearS. Pearson
and Son took an interest in a syndicate which had filed a number
of claims for prospecting for oil in Morocco. In 1913 a geologist
was sent out to China, but he discovered he had been pre-empted
by Standard Oil. In March 1914 two Pearson geologists went to
Hungary, and in the following June Lord Murray visited Vienna
in order to negotiate a concession with the Austrian government.
In May 1914 Pearson geologists were sent to Tunis, and in July to
a region in the south west of France where the firm had been
offered a concession. In the spring of 1914 Pearson came to an

agreement with Vickers to explore for oil on the island of
Sakhalin, and an expedition was despatched in the winter of
1914. 86 In January 1914 negotiations were also started aimed at
securing an oil concession in the Indian Empire. S. Pearson and
Son offered to join the Government of India in a partnership for
the exploration and development of the oil resources of
Baluchistan. 87
IV THE GROWTH OF THE SHELL GROUP 1907~14
Apart from the extraordinary entry ofWeetman Pearson into oil,

the outstanding development in the British oil industry in the
immediate prewar period was the growth of the Shell Group. The
total assets of the two holding companies, Royal Dutch and Shell
Transport and Trading, grew by over two and a half times
between 1907 and 1914. By the outbreak of war Shell Transport's
issued capital of over £6 million placed it amongst the largest
British enterprises in terms of market valuation. After 1910 the
Shell Group began to absorb a series of smaller oil companies,
both British and foreign. In 1911 the Group's only remaining
competitor in the Dutch East Indies, the Dordtsche Petroleum
Industrie, was absorbed, and the Red Sea Oilfields in Egypt taken
into Shell's orbit. In 1912 Deterding decided to invade Standard
Oil's homeland, and the Group organised the Roxana Petroleum
Company to operate in the Mid-Continent region of the United
States. California Oilfields was added to Shell's American
interests in 1913, and by 1915 the Group had a production of 5. 7
million barrels of crude in the United States. 88 In 1913 Shell
purchased controlling interests in the Carribbean Petroleum
Company and the Colon Development Company of Venezuela,
and thereby acquired a very substantial stake in the infant
Venezuelan industry. 89
The Shell Group's major growth area, as seen earlier in this
chapter, was Russia. Shell not only became a large producer itself,
but inherited the Rothschild policy of co-operation with the
Nobels and the other large oil groups. The Russian General Oil
Corporation ('Oil'), after its formation in 1912, briefly offered
strong competition to Shell and the Nobels. The company,
however, was over-ambitious, and in 1914 its independence was
considerably reduced when it failed in a bid to purchase a large
block of Nobel shares, and instead Nobels secured a large holding

in 'Oil'. The two groups were from then on fairly closely allied.
A. E. Putilov, the Chairman of 'Oil', joined the board of Nobels,
while Emanuel Nobel joined the board of one of 'Oil's' sub-
sidiaries. 90 The only change in this situation prior to the
Revolution came early in 1917, when Neft', one of the member
companies of 'Oil', left the group and emerged as the centre of a
new oil alliance centred on French capital. Ambitious plans were
being made for the growth of Neft' when the February
Revolution broke out.
The cartelisation of the Russian oil industry had its equivalent
in the petroleum markets of western Europe. The Shell Group
was allied in various markets with the European Petroleum
Union, representing the Deutsche Bank, the Nobels and the
Rothschilds, and after 1906 many Standard Oil affiliates also
concluded local marketing agreements with their European
competitors. It was paradoxical that the trend in the United
States was in the other direction, with the emergence of new
companies and producing areas resulting in a growth of com-
petition in the industry. By 1911 Standard Oil's competitors
supplied 70 per cent of the nation's fuel oil and 45 per cent of its
lubricants. 91 In 1911 the great Trust itself was broken up by the
Supreme Court.
The process of concentration in the European petroleum
industry provided the small British oil companies with a useful
bargaining counter in their attempts to extract special favours
from the British Government. The Royal Navy's dependence on
foreign oil, and the consequent desirability of supporting British
oil enterprise, was frequently referred to by companies seeking
State assistance in the form of diplomatic support, finance or
naval fuel oil contracts. Companies buttressed their cases by
claiming that if special assistance was not forthcoming they
would be absorbed by their carnivorous 'monopolistic' and
foreign rivals. The small companies naturally made the most of
the alleged dangers posed to consumers and the Government by
Standard Oil and the Shell Group. This was a significant
contribution to the growth of a hostile attitude towards these
companies in government circles. This was far from being an
exclusively British phenonomen. In Russia the Nobels and other
companies made repeated pleas for assistance from the Tsarist
government because of the alleged prosecution of Russian oil
exporters by agressive foreign trusts. 92 Indeed, the large oil

companies themselves were not averse to blackening each other's
reputations. Deterding described Standard Oil to the German
Government in 1910 as a company which worked 'more on the
lines of a Secret Society than a bona fide Public Company'. 93 In
more senses than one, the oil companies have only themselves to
blame for the fact that their industry was, and still is, regarded as
having one of the more 'unacceptable' faces of capitalism.
* * * * *
The two decades before the First World War had seen the
appearance of British entrepreneurs in many of the oilfields of the
world. Over £18 million of British capital had been invested in
Russia, though with indifferent results. Certain individuals and
companies made significant contributions to the Russian oil
industry, but the British companies tended to suffer by in-
adequate management. They were badly weakened by the strikes
and revolutionary disturbances in Russia in the early 1900s, and
the unsuccessful outcome of the 'Maikop boom' further dimin-
ished their reputations. The whole investment was to be lost when
the Bolsheviks seized power in October 1917. There were,
however, success stories to be found in other parts of the world.
Weetman Pearson pioneered the Mexican oil industry. Although
Pearson's initial ignorance of the oil industry caused difficulties in
the early days of the venture, Pearson's entrepreneurial skill,
organisational ability and luck eventually led to brilliant success.
The decade before 1914 also witnessed the dramatic growth of the
Anglo-Dutch Shell Group into a fully-integrated international oil
company.
The British Government was a peripheral element in this story.
Yet certain oil companies had attempted to involve the State in
one way or another. A number of small, risky, companies had
tried to get finance from the Government, especially in the
immediate prewar period when the collapse of the 'Maikop
boom' made it difficult for such firms to attract public funding.
Oil companies in certain areas of the world, such as Mexico, had
also looked to the British Government for diplomatic support to
protect their interests.
The State was attractive to oil companies in the early twentieth
century as a market for fuel oil, a source of finance and a provider
of diplomatic support against foreign governments. As a result,
certain companies were interested in establishing close links with

it. These companies, in order to strengthen their cases for State
assistance, emphasised the dangers posed to Britain and the
Royal Navy by the domination of the world petroleum industry
by foreign 'trusts'. These requests for a 'special relationship',
however, found little response within British governments until
the eve of the First World War.
Notes
I. George Paish, 'Great Britain's Capital Investment in Industrial Colonial
and Foreign Countries', Journal of the Royal Statistical Society, LXXIV
(1911 ); Sir George Paish, 'The Export of Capital and the Cost of Living',
Transactions of the Manchester Statistical Society (1913-14). H. Feis,
Europe: The World's Banker 1870-1914 (Yale, 1930) p. 27 gives a figure of
£40.6 million for British overseas investment in the prewar oil industry.
W. R. Skinner, The Oil and Petroleum Manual (London, 1912). For an
overall assessment of British foreign investment within this period, see
W. P. Kennedy, 'Foreign Investment, Trade and Growth in the United
Kingdom, 1870-1913', Explorations in Economic History, II, 4 ( 1974).
2. Statistics for Scottish shale oil production are given in B. Redwood, A
Treatise on Petroleum, vol. III, (London, 1922), p. 1127. There is an account
of the early growth of the Scottish shale oil industry by J. Butt, 'Technical
Change and the Growth of the British Shale Oil Industry 1680-1870', Econ.
Hist. Rev., 2nd series, XVII (1964- 5).
3. Petroleum Review (I January 1910).
4. SeeM. Pearton, Oil and the Romanian State (Oxford, 1971) passim.
5. P. V. 01', lnostrannye Kapitaly v Rossii (Moscow, 1922) p. 43. Ol's data is
still the main source for estimates of foreign corporate investment in Russia
before 1917. A number of criticisms have been levelled at Ol's statistics,.
however, and it is now generally accepted that his figures may overestimate
British and French investment, though there is evidence that he under-
estimates German investment in Russia.
6. For an account of the Nobel oil enterprises in Russia, see Robert W. Tolf,
The Russian Rockefellers: The Saga of the Nobel Family and the Russian Oil
Industry (Stanford, 1976). For the early years of the Rothschild's investment
in Russian oil, see B. Gille, 'Capitaux Francais et Petroles Russes 1884-94',
Histoire des Enterprises, 12 (1963). There is also useful data in R. Girault,
Emprunts Russes et lnvestissements Francais en Russie 1887-1914 (Paris,
1973). For a Soviet view, see A. Fursenko, 'Parizhskie Rotshildy i Russkaia
Neff', Voprosy lstorii 8 (1962) and ch. 4 of his book Neftianye tresty i
mirot·aia politika (Moscow/Leningrad, 1965).
7. The most recent statistics for Russian oil production are in W. J. Kelly and
T. Kano, 'Crude Oil Production in the Russian Empire: 1818-1919 ', 6, 2,
Journal of European Economic History (1977).
8. The best accounts of the oil marketing battles in the late nineteenth century
are on the American side, e.g. R. W. and M. E. Hidy, Pioneering in Big
Business (New York, 1955).
9. P. V. Volobuev, 'Iz istorii monopolizatsii neftianoi promyshlennosti dore-

voh.izionnoi Rossii ', /storicheskie Zapiski (1955) 82-3.
10. A. Fursenko, Voprosy lstorii, 8 (1962), 42. For the growing co-operation
between the Rothschilds and the Nobels, see R. W. Tolf, op. cit., passim.
II. For Nobel's contacts with Standard Oil, see R. W. Tolf, op. cit. The early
Rothschild negotiations with Standard Oil are surveyed in B. Gille, op. cit.
There is a copy of the March 1895 agreement in Monopolisticheskii Kapital r
neftianoipromyshlennosti Rossii 1883-1914 (Moscow, 1961) pp. 169-171.
12. See, for example, Charles Marvin, Baku: the Petrolia of Europe (London,
1884), and The Region of the Eternal Fire (London, 1884).
13. A. Beeby Thompson, Oil Pioneer (London, 1961) p. 70.
14. Information about Suart's activities is scattered in a wide range of sources.
Among the most informative are: R. W. Tolf, op. cit.; A. Beeby Thompson,
op. cit.; R. Henriques, Marcus Samuel (London, 1960). Soviet sources are
also useful, especially about Suart's involvement in the later 1890s with the
Eastern Oil Association. See A. Fursenko, Nejiianye tresty, op. cit., passim.
15. B. U. Akhundov, Monopolisticheskii Kapital v doreuolu::ionnoi Bakinskoi
nejiianoi promyschlennosti (Moscow, 1959) p. 45. The exchange rate has
been taken as£ I = 9.45 rubles.
16. P. V. Volobuev, op. cit., 81.
17. A. Fursenko, Nejtiannye tresty, op. cit., p. 134.
18. A. Beeby Thompson, The Oilfields of Russia, 2nd ed. (London, 1908) p. 131.
19. A. Fursenko, op. cit., pp. II 0-11.
20. Letter from Mr G. P. Kamenskii, Agent of Ministry of Finance in London,
to Mr V. E. Kovalevskii, Director of the Department of Trade and
Manufacture, 28 January 1898, Monopolisticheskii Kapital (Moscow. 1961)
pp. 214-16.
21. Ibid., pp. 224-5.
22. A. Beeby Thompson. Oil Pioneer (London, 1961) p. 295.
23. J. P. Mckay, 'Foreign Enterprise in Russian and Soviet Industry: A Long-
Term Perspective', Business History Reriew, 48 ( 1974) 348.
24. A. Beeby Thompson, The Oilfields of Russia (London, 1904) pp. 33-6.
25. Ibid .. p. 7. A. Beeby Thompson, Oil Pioneer (London, 1961) p. 55.
26. Secretary of Russian Petroleum and Liquid Fuel Company to
J. B. Aug. Kessler, 31 January 1898. SHELL.
27. Ibid. Telegram from St Petersburg, 13 July 1898. The correspondence
between Count Witte and the company on this matter has been published in
M. Y. Gefter. A. M. Solov eva and L. E. Shepelev. ·o proniknovenii ang-
liiskogo kapitala v neftianuiu promyshlennost' Rossii ( 1898- 1902),'
lstoricheskii Arkhir, 6 (1960), pp. 82-6.
28. Ibid. Report by Mr Schumacher, 19 131 March 1898.
29. Petroleum World (Aug. 1911) 390.
30. Mr Schumacher to London, 16 126 January 1899, SHELL.
31. An account of these racial and labour disputes is given in R. W. Tolf, op.
cit., esp. pp. 157-62. There is a contemporary version in J. D. Henry, Baku:
An Erentual History (London, 1905) Part 2.
32. A. Beeby Thompson, The Oilfields of Russia (London. 1904) p. 38.
33. Petroleum Ret·iev• (9 September 1905).
34. Ibid. (9 December 1905).
35. Ibid. (3 July 1909).

36. Ibid. (26 February 191 0).
37. Economist (26 February 1910).
38. P. Y. 01', op. cit., pp. 51-2.
39. Evidence of A. W. Eastlake to Fisher Commission, First Report, ADM 116
1208, p. 148.
40. Petroleum Rerie1;· (21 October 1911).
41. W. Calder, 'The Maikop Oilfield, South Russia', Transactions of the
Institute(~! Mining Engineers, XlVIII (1915) Part 2.
42. A. Beeby Thompson, Oil Pioneer (London, 1961) p. 306.
43. P. Y. 01'. op. cit., pp. 4 7-54. Crude oil production in 1914 at Grozny was 98
million poods; Emba 16 million poods; Maikop 3 million poods; and
Cheleken 17 million poods. 01' gives total Russian oil production in 1914 as
540 million poods. There is room for discussion about the validity of Ol's
definition of British owned or 'influenced' companies, but his general view
of a very strong British role in the new oil regions of Russia seems to be
correct.
44. P. Y. Yolobuev, op. cit., p. 95. There is a very useful analysis of the
Rothschilds' decision to sell their oil properties in Russia to the Shell Group
by Y. I. Bovykin, · Rossiiskaia Neft' i Rotshil'dy', Voprosy /storii, 4, (1978).
Bovykin has made full use of the archives of the French Rothschilds, which
were recently deposited in the National Archives, Paris.
45. P. Y. 01', op. cit., pp. 44-6.
46. A. Beeby Thompson, The Oiljields of Russia (London, 1904). A. Fursenko,
Nejiianye tresty, op. cit., p. 134.
47. P. Y. 01', op. cit., p. 43. For some reservations about Ol's statistics, which
have been used as the main source for quantitative statements about oil
investment in Russia, see M. Falkus, 'Aspects of Foreign Investment in
Tsarist Russia', Journal of European Economic History, 8, I ( 1979) 30-5.
48. Economist (26 February 1910).
49. Petroleum World (April, 1913). Nevertheless Paish (1913-14), op. cit.,
estimated that £5.7 million was subscribed to oil enterprises in 1913. This is
compared with £6.4 million in 1912,£3.8 million in 1911, and £10.5 million
in 1910.
50. For the first application of the Nigerian Bitumen Corporation, see
Petroleum World (January, 1908), 12. For the 1912 applications of Nigerian
Bitumen, the Cairo Syndicate and Newfoundland Oil, see the evidence given
by the representatives of these companies to the Royal Commission on Fuel
and Engines, ADM 116jl208 and 1209. For the West Indian Petroleum
Company, Mexican Eagle and Anglo-Persian, see below.
51. K. Beaton, Enterprise in Oil: A History of Shell in the United States (New
York, 1957) pp. 72-75.
52. W. D. Pearson to J. B. Body, 19 April 1901; 'How we went into Oil', by
J. B. Body, 21 November 1928; S. Pearson and Son Archives, Box C43, File
LCO 23/3. D. Young, Member for Mexico (London, 1966) pp. 119-22.
53. K. Middlemas, The Master Builders (London, 1963) p. 215.
54. J. B. Body to Weetman Pearson, 4 November 1905, Pearson Papers Box A4,
File: Personal Correspondence, Cowdray- Body 1900-11.
55. D. Keir, The Bowring Story (London, 1962) pp. 230-1.
56. Weetman Pearson to Lady Cowdray, 13 March 1909. Pearson Papers, Box
A9, File: Letters to Lady Cowdray.
57. K. Middlemas, op. cit., p. 215.
58. Historical memo, Pearson papers, Box C44, File: Relations with Henry
Clay Pierce.
59. D. Young, op. cit., p. 128.
60. Weetman Pearson to Lady Cowdray, 20 April 1909, Pearson Papers, Box
A9, File: Letters to Lady Cowdray.
61. Ibid., Weetman Pearson to Lady Cowdray, 24 February, 1909.
62. Ibid., Weetman Pearson to Lady Cowdray, 20 April 1909.
63. J. A. Spencer, Weetman Pearson. First Viscount Cowdray 1856-1927
(London, 1930) pp. 159-161.
64. Weetman Pearson to Lady Cowdray, 17 February 1908, Pearson Papers,
Box A9, File: Letters to Lady Cowdray.
65. Eagle Oil Transport: Finance, Pearson Papers, Box C47.
66. Anglo-Mexican to President of the Vladicaucase Railway, 10 September
1913, SHELL.
67. Anglo-Mexican Petroleum Products, 7 September 1912, Pearson Papers,
Box C50.
68. Private memo for Sir Edward Holden, 13 August 1912, Pearson Papers,
Box C44, File: Relations with Henry Clay Pierce.
69. P. Calvert, The Mexican Revolution 1910-1914 (Cambridge, 1968) p. 101.
70. K. Midd1emas, op. cit., p. 223.
71. Ibid., p. 224.
72. P. Calvert, op. cit., p. 173.
73. Ibid., pp. 295-6.
74. P. Calvert, 'The Murray Contract: An Episode in International Finance
and Diplomacy', Pacific Historical Rer;iew (1966).
75. A. Sampson, The Seven Sisters (London, 1976) p. 323.
76. Evidence of Marcus Samuel to Fisher Commission, First Report, ADM 116
1208, p. 368.
77-. Marcus Samuel to Foreign Office, 24 June 1907, F(oreign) O(ffice), P.R.O.,
F.O. 371 230, no. 21015/21015.
78. F. C. Gerreston, History of the Royal Dutch, vol. IV (Leiden, 1958) 133.
79. The phrase was used by Deterding in relation to the government of the
Dutch East Indies, but it expresses well his opinion of all governments.
H. Deterding to H. Colijn, 9 April 1914, SHELL.
81. D. Young, op. cit., p. 170.
83. J.D. Archbold to Lord Cowdray, 17 October 1913, Pearson Papers, Box
C44, File: Negotiations with Standard Oil.
84. History of S. Pearson and Son, Amalgamation Negotiations, Pearson
Papers, Box C43, File: LCO 23/3.
85. Ibid.
86. Whitehall Petroleum Corporation: Oil History t927, Pearson Papers, Box
C52, File: LCO 6/89.
87. S. Pearson and Son to India Office, 16 January 1914, India Office Library,
L/PS/1 0/358, no. P4554/1913. See also Pearson Papers, Box C 17.
88. K. Beaton, op. cit., p. 784.

89. F. C. Gerretson, Joe. sit., pp. 274-81.
90. R. W. Tolf, op. cit., p. 190. P. V. 01', op. cit., pp. 46-7.
91. G. D. Nash, United States Oil Policy 1890-1964 (Pittsburg, 1968) p. 8.
92. A. Fursenko, 'The Beginnings of International Competition in Oil', Seventh
International Economic History Congress, 1978: Four 'A' Themes, p. 50.
93. H. Deterding to German Ministry of Foreign Affairs, 29 December 1910,
SHELL.
4 Oil and Empire
I THE IMPERIAL PERSPECTIVE
While the major focus of attention of British overseas oil

investment lay in the oilfields of foreign countries, some en-
trepreneurs turned their attention to the vast territories of the
British Empire. The oil industry of the Empire has been almost
completely neglected by historians, for obvious reasons. As Table
4.1 indicates, petroleum production in the British Empire was
extremely small before the First World War.
TABLE 4.1 Crude petroleum production in the British Empire 1890-1914

(thousands of metric tons)
India Trinidad Canada Egypt Sarawakj Total Empire

Brunei Production
as %
total world
production
1890 20 102 1.9%

1895 52 93 1.0%
1900 152 91 1.2%
1905 582 82 2.2%
1910 863 9 41 3.0%
1914 1,042 126 28 100 46 3.8%
Source: A. E. Dunstan, The Science of Petroleum, vol. I (London, 1938) pp. 22-3.
Nevertheless, despite this low level of production, a great

interest was shown in the Empire's oilfields by contemporary
writers, civil servants and oil companies.
This interest had its origin in two main developments. First, the
early twentieth century saw the massive extension of petroleum
exploration over much of the world, and naturally the large land
area covered by the Empire attracted its share of attention. A
85
second consideration made the territories of the Empire particu-

larly interesting. As oil became a strategic as well as a commercial
commodity, it became increasingly anomalous that the greatest
Empire on earth, with the largest navy, should be dependent on
foreigners for supplies. 'We need to develop the oil resources of
the Empire', the Economist argued in March 1910. 'We cannot
possibly leave our naval developments absolutely dependent on
supplies of fuel that may be cut off at any moment.' 1 It was the
Admiralty's interest in fuel oil that made the colonial oil
industries important both to the oil companies and to the
Imperial Government. From the time of the Navy's first experi-
ments with oil, Admiralty planners were deeply concerned about
the foreign control of oil supplies and hoped to see the establish-
ment of a secure reserve of oil production within British-
controlled territory. 2
The oil companies were fully aware of the Imperial
Government's interest in encouraging the development of a
British supply of oil, and attempted to use this to their advantage.
The small companies operating in the colonies used their position
to plead for special assistance from the British authorities. The
Shell Group, on the other hand, were interested in colonial oil in
order to strengthen their credentials as a 'British' company, and
thus qualify for diplomatic support and for Admiralty fuel oil
contracts. This was the main impulse behind Shell exploration in
New Zealand before the First World War. 3 The British manage-
ment of Shell were prepared even to explore such an unpromising
outpost of the Empire as Dorsetshire, in order to secure the
hoped-for advantages of producing on British territory. It was
Marcus Samuel's brother, Sam, who tried after 1910 to involve
the Shell Group in a scheme to develop Dorsetshire shale. The
Hague adamantly rejected this idea, but even Waley Cohen, the
most technically literate of the higher British management of the
Group, was prepared to support the ludicrous scheme. It would,
Cohen told his colleagues, 'strengthen our hands enormously in
our dealings with the British Admiralty and also our dealings with
the Government of India, who always insist on treating us in a
very unfriendly way as foreigners'. 4
The oil companies encountered the British Government far
more immediately in the Empire than in their operations
elsewhere. British oil companies in foreign countries did look to
their Government for diplomatic support or fuel oil contracts, but
OIL AND EMPIRE 87
in most cases this was a very peripheral matter. In the Empire the
Admiralty had a direct interest in oil development. Moreover,
British colonial governments possessed considerable powers over
the granting of prospecting licences, especially on Crown lands,
and they could also influence marketing by their control of excise
duties and of the location of storage depots and refineries.
Decisions on such matters were often referred to the Colonial or
India Offices in London, thus directly involving the Imperial
Government.
The negotiations between the oil companies and the various
British colonial governments hold a position of great interest in
the history of early oil company /host government relations in less
developed countries (L.D.C.s). In several countries during the
early twentieth century governments and oil companies were
locked in tough negotiations, involving issues usually not thought
to have been discussed until the 1960s. Rumania in particular
made pioneer attempts to define the relationship between the
State and private capital in the oil industry. By the early twentieth
century the Rumanian government had imposed legal require-
ments on foreign nationals in regard to registration and tribunals,
had a lien on output through its ownership of some oil-bearing
lands, taxation and the state ownership of rail transport; had
controlled prices in the domestic market; and intervened in export
pricing. The exporter was required to pay the costs of transport,
customs duties and handling expenses at the main export port of
Constanza, before the product left the refinery. 5
It has seldom been recognised that there were similar develop-
ments in the countries of the British Empire. The colonies
possessed in their administrations highly developed and stable
political structures, which, although foreign and often of the same
nationality as the companies, did not recognise an identity of
interest with the companies and were motivated by a strong
concern to conserve their countries' natural resources and to
protect their consumers. The power of these colonial govern-
ments in negotiating with the oil companies was strengthened
through their links with the Imperial Government. The latter
acted as a source of information to local governments about
developments elsewhere in the Empire, allowing them a similar
international perspective to that enjoyed by the large oil groups.
Again, through the interest of the Royal Navy in fuel oil, colonial
governments were brought to an early recognition of the strategic
importance of the commodity their lands contained.

When the oil companies, especially the large ones such as Shell
and Standard, sought to produce or market on British colonial
territory, they therefore faced in the local governments powers of
equal, if not superior, bargaining strength to their own. The
colonial administrations therefore bargained with the oil com-
panies on terms as equal as those enjoyed by the independent
states of the Middle East and Latin America since the late 1950s.
Not suprisingly, many of the issues raised in the 1960s made their
first appearance, even if in unsophisticated forms, in this period.
These included the control of transfer payments of international
companies, the conservation of natural resources, state partici-
pation in oil development, and the control and location of
refinery capacity.
II THE INDIAN EMPIRE
The Indian Empire was the only large-scale producer of oil in

the British Empire. It was also one of the largest markets for
kerosene in the world. 6 By the early 1900s mainland India
consumed over 100 million gallons of kerosene a year. Virtually
all the oilfie1ds were located in Burma, where oil had been
produced by the natives using hand-dug wells, throughout the
nineteenth century. British entrepreneurs had entered the in-
dustry in 1855, but over the next thirty years the small British oil
companies were almost entirely unsuccessful. The crucial change
came in January 1886, when Burma was annexed to the Indian
Empire. The new British administration recognised the rights of
the native miners, the Twinzas, and two areas of the oilfields at
Yenangyaung were reserved for them, but it also provided the
framework in which British capital could confidently operate. In
1886 an oil company was established in Glasgow to work the
Burmese oilfields. The chairman was David Cargill, an East
Indian merchant who had been involved in Burmese oil since the
mid-l870s. Burmah Oil leased some Crown land and some of the
Twinza wells, and began drilling for oil with modern machinery.
The intervention of Burmah Oil resulted in a dramatic
expansion of production. The Twinzas had produced about 2
million gallons of oil annually. By 1894 annual output from the
Yenangyaung oilfield had risen to 10 million gallons, and by 1903
OIL AND EMPIRE 89
it had nearly reached 60 million gallons. Burmah Oil also began to

explore for oil in other regions, the locations of which are given in
Map 4.1. Drilling started on the Yenangyat field in 1891, and at
Singu ten years later. There were similar advances in other
branches of the industry. The primitive refinery which had been in
operation at Rangoon since 1857 was improved by introducing
techniques employed in the Scottish shale oil industry.
The Indian market had originally been dominated by kerosene
imported from the United States. During the late 1880s, however,
Russian exports of kerosene to India expanded rapidly. The
market share of Russian oil further increased after Marcus
Samuel inaugurated bulk shipments of Russian kerosene through
the Suez Canal, and by the late 1890s Russia was supplying nearly
60 per cent of all kerosene consumed in India, while American oil
held less than 30 per cent of the market.
The growth of production in Burma was soon followed by the
emergence of Burmese oil as a major competitor to both
American and Russian oil. Throughout the nineteenth century
almost all of this oil had been sold in Burma. In 1891, however,
Burmah Oil appointed as its managing agents in India the firm of
Shaw Wallace and Company of Calcutta, which initiated a
dynamic marketing campaign for Burmese oil in India. By the
turn of the century sales of Burmese kerosene in India exceeded
American sales, and by 1905 Burma supplied nearly half of
India's kerosene.
The penetration of the Indian market by Burmese oil was
greatly assisted by its exemption from the tariff imposed on
petroleum imported into the Indian Empire. The duty was set at!
an anna per gallon in 1888, doubled in 1894, raised to 1! annas in
1910, and to 2 annas in 1911. The Government of India imposed
this tariff purely for revenue purposes, although officials were not
upset by its protective consequences. The request in 1900 by Shell,
worried about the Burmese threat to its importing business, that a
countervailing excise be placed on Burmese oil sold in India,
received a cold reception in government circles. The Under
Secretary of State at the India Office considered that the
protective element fortuitiously contained in the petroleum duty
should only be removed when the Burmese oil industry had
learned to 'stand alone'. 7 The action of government officials was
circumscribed both by their own ideological preferences and by
what was politically acceptable in London and India, but within
()
I N D I A
-.. --:'-LA 0 S i
•• --' ';(French) :
8 A Y
OF
BENGAL
H A I L A N 0'-,
',-
' ..
l Principal oilfields
MAP 4.1 The Oilfields of Burma before 1914

OIL AND EMPIRE 91
that framework they were eager to see, and to assist, the

development of India's natural resources, including her oilfields.
The State carried out various experimental borings for oil in
Baluchistan in the 1880s, and later in the century the Geological
Survey of India performed useful preliminary geological work in
several prospective oil-producing regions, including Singu.
The concern of the State was the promotion of the Burmese
oil industry, and not the protection of the profits of British oil
companies. Burmah Oil, the most important of the British oil
companies in Burma, never received the unequivocal support of
the British, Indian and Burmese governments. The company's
attempts in the 1900s to persuade the Government of India to
raise the import duty on foreign petroleum, in order to strengthen
its position against its trade rivals, were completely unsuccessful.
Moreover, from the early 1890s certain sections of the
Yenangyaung oilfield were 'reserved' against Burmah Oil, with
the specific intention of preventing the company from gaining a
monopoly over the oilfields. This necessitated repeated appli-
cations by Burmah Oil for extensions in the amount ofland it was
permitted to lease. The company was seldom given as much land
as it desired. The views of government officials were soundly
based on conventional liberal economics. Competition was the
source of economic growth: monopoly was its enemy. It folio wed
that the optimum means to secure the desired development of the
Burmese oilfield was to encourage competition amongst the
oil companies, and resist any company which sought to establish
a 'monopoly'. 8
In 1902 Standard Oil suddenly appeared in India, with a
request by a subsidiary company for a prospecting licence in
Burma. For a number of years Standard had been seeking
oilfields outside North America, mainly as a response to rising
foreign competition. Since the early 1890s the company had been
casting glances at the Dutch East Indies. By the turn of the
century the Russian and Galacian oilfields were coming under
scrutiny, and in 1904 Standard Oil established a producing
company in Rumania. The attempted expansion into Burma
formed part of this pattern. The growth of Burmese oil pro-
duction had disrupted the American company's long-established
markets in the Indian Empire. Standard Oil executives decided
that they could more effectively compete with this dangerous new
competitor, as well as establish a securer base from which to
supply their other Eastern markets, if the company could itself

acquire an interest in the Burmese oilfields, and thus operate
within the Indian tariff barrier. 9
The response by the Government of India to Standard Oil was
immediate and unfriendly, and its application for a prospecting
licence was rejected. A subsequent application in June 1902 in the
name of the Anglo-American Oil Company, Standard Oil's
British-registered subsidiary, was also refused. Standard Oil was
considerably annoyed by this action, and W. H. Libby, one of the
company's chief executives, went to Burma to discuss the matter
with government officials. After nothing had been achieved by
these negotiations, Standard Oil used its influence with the State
Department to get the American Embassy in London to request a
formal explanation from the Foreign Office for the unfriendly
action of the Indian authorities. 10 The Foreign Office, however,
supported the action of the Government of India and the door
remained firmly closed to Standard Oil.
It has been alleged that this anti-Standard policy originated in a
device to protect the economic interests of the smaller British
companies on the Burmese oilfields from the giant American
company. 11 In reality, the objection was not to the 'foreign'
nature of Standard. The Government oflndia's policy was based
on an elementary critique of multinational enterprise, stemming
from its already formulated views on the desirability of encourag-
ing the development of the Burmese oilfields, and its belief that
'competition' rather than 'monopoly' was the best way to achieve
this goal. Officials argued that if Standard Oil obtained a foothold
in the Burmese oil industry the company would use price-cutting
and other forms of business warfare to destroy the existing oil
companies. The company would then, having secured a mo-
nopoly over the Burmese oilfields, subordinate the development
of those fields to its much more extensive producing interests
elsewhere in the world. 12 Over the next few years the suspicion
that the development of the small infant petroleum industries of
the Empire might be given a very low priority by large in-
ternational companies, once they had crushed all local oppo-
sition, was to be a key concept behind the policy of British
colonial governments towards these companies. It is indeed
noteworthy that concern about the level of production has
remained an area of tension in relations between 'host govern-
ments' and international fitms in industries where such integrated
OIL AND EMPIRE 93
companies have several sources of supply for meeting their

marketing requirements. It was a reflection of the basic tension
between national governments, concerned to promote the de-
velopment of their countries' resources, and international firms,
whose basic economic function is that of international olig-
opolists concerned to maximise returns on various assets distri-
buted around the globe.
Where did the Government of India acquire its views about
Standard's likely behaviour? It was partly commonsense.
Modern petroleum economics had merely made explicit the
obvious point that an oil company will first exploit production
areas with expected low exploration costs. The Burmese oilfields
were already gaining a reputation as a high-cost area though their
duty free access to the Indian market made them commercially
valuable. Beyond this, Indian officials, like their British counter-
parts, derived their terminology and views from the United
States. The tendency of trusts such as Standard Oil is 'to become
monopolists', the Government of India explained to the India
Office in October 1902, and 'their existence is regarded in America
itself as a dangerous phase of modern commercial conditions'. 1 3
The Government of India was not the only government which
responded to Standard Oil in this fashion. In Russia, the
government of Count Witte in the 1890s, though eager to
promote French and British investment in the oil industry,
resolutely opposed attempts at entry by Standard Oil.
The level of sophistication, and indeed the consistency, of the
Government of India's 'policy' towards the oil industry should
not be exaggerated. Lord Curzon, the Viceroy from 1898· until
1905, was the first and possibly the last Viceroy who knew
anything about industry. There was no department of industry
and commerce in Calcutta until 1904. The views of officials
concerned with the oil industry differed considerably, and policies
tended to shift according to the personalities concerned.
The Indian authorities' policy towards international oil com-
panies entered a new stage when the Shell Transport and Trading
Company began to display an interest in the oilfields of Burma.
After the summer of 1902 Shell's interests were co-ordinated with
those of the Royal Dutch and the Rothschilds in the Asiatic
Combine. The Asiatic/Shell interests were as concerned as
Standard Oil by the threat posed to their Indian markets by
Burmese oil. Characteristically, their first response was to attempt
to control this unwelcome competition by a joint marketing

agreement with Burmah Oil. In the summer of 1903 Burmah Oil
was approached by Marcus Samuel in London and by Asiatic's
Calcutta Agents, Messrs Graham and Co., in India, with pro-
posals to this effect. Burmah Oil refused to agree, and a
subsequent agreement on prices reached in November 1903
rapidly broke down. 14 Since Burmah Oil refused to compromise,
the Asiatic formulated plans in September 1903 to force it to do so
by dumping cheaper Borneo kerosene on the Indian market. 15
This measure was combined with a plan to enter the Burma
oilfields directly. In July 1903 the Asiatic decided to have a
geological report made on the Burmese oilfields, and by the end
of the year two Dutch geologists were on their way to Rangoon.
On the basis of this geological report, certificates of approval for
prospecting licences were applied for from the Burmese autho-
rities on behalf of the Asiatic on 19 April 1904, and on behalf of
the Shell Transport and Trading Company on 25 June! 6
Shell and Asiatic received a similarly negative answer from the
Government of India. Marcus Samuel was to complain bitterly
about the incident for the next decade, and it has become a major
element in the thesis of those who claim that there was a sustained
bias against Shell in British government policy before 1914. 17
Shell's exclusion from Burma, however, was less the result of a
conspiracy than the natural outcome of the policy already
formulated towards Standard Oil. The Government of Burma
believed the Asiatic to be 'in league with, or at any rate working in
combination with, the Standard Oil Company'. 18 Once that fatal
connection had been made, all the objections to Standard Oil at
once became applicable to Shell and Asiatic. Marcus Samuel's
crass behaviour as he followed his case up the ladder of appeal
from the Government of Burma to the Government of India, and
then to the India Office, only further exacerbated the distrust felt
towards his company. In June 1904 he wrote to the Secretary of
State for India with the ludicrous and offensive allegation that the
officials of the Government of Burma were biased against Shell
because they all had shares in the Burmah Oil Company. 19
Samuel's insistence that the Asiatic company was completely
British, when it was common knowledge that two-thirds of its
capital was foreign, only convinced officials of his total unre-
liability. It was little wonder that Lord Curzon reflected that he
was 'not at all favourably impressed with Marcus Samuel's
OIL AND EMPIRE 95
letters'. 20 It was little wonder either that the Burmese policy of

exclusion of Shell was supported by the governments in India and
London. On March 3 1905 the Secretary of State for India
sanctioned the exclusion 'on the ground that there is proof of their
foreign character, or that in their constitution, policy and
methods [Shell and Asiatic] are international Trust companies
similar to the Standard Oil Corporation'. 21
In many of his speeches Samuel complained that Shell's 'trade
rivals' were behind the accusations against his company. This was
probably nearer the truth than he realised. Burmah Oil supplied
government officials with considerable data about the evil deeds
of Shell, and its alleged collusion with Standard Oil. The whole
episode is a classic example of the use of the 'monopolistic
menace' tactics by small British oil companies discussed in the
previous chapter. Indeed, the methods used by Burmah Oil
between 1903 and 1905 to secure Indian Government support
against its larger rivals, by stressing the menace posed by Shell
and Standard, are strikingly similar to those used by Anglo-
Persian after 1912 to secure support from the British
Government. In both cases Shell was made out to be the principal
'bogey' which made it necessary for the authorities to give special
support to the supposedly threatened British company. It was no
coincidence that the man who orchestrated Burmah's campaign
in India was Charles Greenway, who, as Managing Director of
Anglo-Persian, was to direct that Company's negotiations with
the Government after 1912.
By 1904 Charles Greenway, who had been born in 1857 and
had gone to India in 1885, was a senior partner in the managing
agency of Shaw Wallace and Company. Bumah Oil's associa-
tion with Shaw Wallace proved very beneficial in personnel terms,
as a number of able men from the Calcutta managing agency
either joined the company or served its interest extremely well.
C. M. Wallace, the senior partner of the agency, joined Burmah
Oil's board in 1902, and he made a notable contribution to the
company's expansion until he retired in 1914. Greenway was
similarly to perform valuable services for Burmah Oil.
Greenway's rise to prominence in the world oil industry was
considered, at least by those who disliked him, to be rather
surprising. He seemed to possess little obvious talent for such a
position. An Indian merchant by training, he had the appearance
of a stuffy conservative, and indeed he was immortalised in Upton
Sinclair's novel OIL! as 'Old Spats and Monocle'. According to

Calouste Gulbenkian, Henri Deterding felt a 'great contempt' for
Greenway, and believed that if he had not secured the support of
the British Government 'he would have been anywhere but surely
not at the head of a corporation'. 22 Deterding's verdict, however,
was very much a reflection of the personal dislike felt by the two
men for each other. Greenway did possess considerable com-
mercial talents, and he had pursued a very successful career with
Shaw Wallace before he became involved with the oil business.
His dogged persistence often saw the companies he was as-
sociated with through periods of great difficulty, and on many
occasions 'Old Spats and Monocle' got his way against seemingly
invincible enemies.
Greenway's methods were frequently not those of a 'gentle-
man'. This is well illustrated by the tactics he used to discredit
Shell in the eyes of the Government of India. By repeating again
and again that Shell were in alliance with Standard, Greenway
sought to confuse inextricably the two larger companies in the
authorities' minds. There was 'little room for doubt', Greenway
told the Government of India in July 1903, 'that in some form or
other the Standard Oil Company do control the operations of the
(Asiatic) Combine'. 23 He was not content, however, simply to
point out the connections between Shell and Standard, but also
sought to emphasise that Shell and Asiatic were 'foreign'.
Greenway eagerly drew attention to the Jewish 'role' in Shell. The
Shell Company, he told the Government of India in July 1904,
'though nominally a British Company, is really cosmopolitan,
more than seven-tenths of the capital being held by Jews and
foreigners'. 24
The Indian authorities were fully aware that Burmah's advice
to them was not tendered for purely disinterested reasons.
Officials recognised that Burmah's statements 'must be treated
with caution on account of their hostility to the Asiatic and Shell
Companies'. 2 5 But given the rumours about Shell's links with
Standard Oil, and Marcus Samuel's inept handling of his
company's defence, the evidence assembled by Greenway and his
associates seemed plausible to the authorities.
Indeed, there was a factual basis to this evidence. There was no
single homogeneous kerosene market in India in this period, but
rather a series of local ones. In these local markets temporary
OIL AND EMPIRE 97
alliances were frequently made between the companies, some-

times by agents acting without the knowledge of Head Office. It is
clear that Asiatic did co-operate on occasion with Standard Oil
against Burmah. 26 Burmah Oil did not, however, mention to the
Government of India that it was also willing to make temporary
alliances in local markets with the American 'octopus'. 27
Moreover, Deterding's Asiatic was demonstrably not in a close
amicable alliance with Standard Oil. Asiatic aimed, in the words
ofWaley Cohen, to 'bring the Burmah Oil Company to book'; 28
in effect, to alleviate the de-stabilising effect on the Indian market
of the rapid rise of production from Burma by integrating that
production into a controlled market structure. The long-term
aim, however, was to establish an alliance with Burmah against
Standard Oil. 29
Burmah Oil's position in bargaining with the Government of
India was strengthened when an additional party became in-
volved in the discussions on Indian oil-the British Admiralty.
Admiralty officials, with their concern to see at least part of their
fuel oil supplies drawn from British territory, inevitably regarded
the oilfields of Burma with great interest. In July 1903 the
Director of Contracts at the Admiralty wrote to Burmah Oil
asking whether the company were prepared to offer their oil 'for
use as liquid fuel' and, if so, whether they would supply the Navy
with a sample. 30
An important intermediary role in the subsequent negotiations
between Burmah Oil and the Admiralty was performed by
Boverton Redwood, whom we have already encountered as the
supplier of geologists to Weetman Pearson. Redwood, a chemist
by training, had become associated with the petroleum industry
in 1870, and there followed a distinguished career in petroleum
affairs. 3 1 He made a series of important technical innovations
and inventions, some of which were ahead of their time. In 1890,
for instance, he had patented a process of distillation which was
not developed commercially for several decades. In 1896 he
published a Treatise on Petroleum, which remained a standard
textbook on petroleum matters until after the First World War.
By the early 1900s Redwood had firmly established himself as the
leading British petroleum expert. At a time when few oil
companies employed full-time geologists, his consulting firm was
used by virtually every British oil company. Indeed, as Beeby
Thompson later observed, Redwood 'immaculately attired, with

an orchid in his buttonhole', virtually 'monopolised petroleum
consulting work in England'. 3 2
Redwood's major significance, however, lay in his role as an
intermediary between British oil companies and the British
government. He became an adviser to the Government on
petroleum matters very early in his career. He gave evidence to
every important committee on petroleum established between
1870 and his death in 1919. He submitted evidence before the
Select Committees of the House of Lords in 1872 and 1883, the
Royal Commission on Coal in 1903-5, the Royal Commission on
the Supply of Food and Raw Materials in time of War 1903-5,
the Admiralty Oil Committee· of 1903-6, the Admiralty
Committee on Oil in 1911 and 1912, and Fisher's Royal
Commission on Fuel and Engines. He performed numerous
assignments for government departments. In 1883 and 1886 he
toured a number of foreign countries for the government; he was
sent to Egypt in 1892 in connection with the question of allowing
oil tankers through the Suez Canal, and he conducted official
inquiries for the Board of Trade relative to accidents on ships
carrying petroleum. During the 1900s he became the adviser to
many local authorities and central government departments on
the petroleum industry, including the Corporation of London,
the Port of London Authority, the Thames Conservancy, the
Home Office, the India Office and the Admiralty. Redwood's
uniquely close relations with the Government gave him a position
of great, if informal, influence, and in many ways he was the
eminence grise of British oil policy before the First World War.
Redwood's views on oil matters were relatively straightfor-
ward. From the early 1900s he fully perceived the advantages to
the Royal Navy if it could use oil rather than coal in its vessels. He
had made several visits to the Caspian Sea, and had seen Russian
vessels burning oil. He was well aware, however, of the supply
problems facing the Navy. Consequently he strongly supported
the development of Britain's colonial oil industries. 'Every
reasonable encouragement that is possible', Redwood told an
Admiralty Committee in 1912, 'should be given to the develop-
ment of sources of supply of oil fuel under the British flag.' 33 He
also believed strongly that this oil should be developed by
independent British oil companies and not by the foreign
combines. He developed a strong dislike for both Shell and
OIL AND EMPIRE 99
Standard Oil, an attitude probably related to his long association

with smaller British oil companies threatened by these giants.
Redwood became involved with the oil of the Indian subcon-
tinent early in his career, and in 1890 wrote a paper on the
'Oilfields oflndia'. 34 He acted as an adviser to Burmah Oil from
1893 until his death in 1919. In 1901 Redwood wrote to the
Government of India in support of Burmah Oil's application for
an extension of the area of oilfields it was able to hold,
characteristically arguing that this would strengthen Burmah
Oil's ability 'to successfully repel the dangerous attacks of
powerful foreign competitors'. 35 Redwood, with his knowledge
of Burmah Oil and their oilfields, was the natural person to
consider the prospects of the Burma oilfields as a source of supply
for the Royal Navy. He gave every encouragement to the
Admiralty to pursue its negotiations with the company. Redwood
advised that Burmah Oil would be able to produce 'a considerable
supply of fuel oil' for the Navy, provided certain arrangements
were made. These arrangements were to take the form of a more
favourable attitude by the authorities towards Burmah Oil. 'I am
of opinion', Redwood wrote to the Admiralty in February 1904,
'that it would be better to furnish the Burmah Oil Company with
such inducements as may be necessary to bring about an adequate
extension of its operations than to seek to encourage competitive
work by others who would necessarily lack the special knowledge
and experience which the Burmah Oil Company has acquired.' 36
This policy of support for Burmah Oil as the best available
supplier of naval fuel oil was adopted by the Admiralty.
Redwood's views served to strengthen the resolve of Ernest
Pretyman, the President of the Admiralty Oil Committee of
1903-6, to oppose the entry of'foreign trusts' into the oilfields of
the Empire, and to support smaller British companies such as
Burmah Oil. In August 1904 Pretyman informed Burmah Oil that
the Government of India would not let the company be 'beaten
out of the field' by its rivals. 37 'There is no doubt', Pretyman
wrote 'confidentially' to the Secretary of State for India in June
1904, 'that a large quantity of fuel oil will be required in the near
future and it is very important that the supply should come from
within the Empire, should be available in war as well as peace and
should not be under the control of any foreign Trust or
syndicate.' 3 8
The interest of the Royal Navy in the Burmese oilfields
strengthened the bargaining position of Burmah Oil vis-a-vis the

Government of India. The Government of India was far from
being subservient to British business interests. Officials genuinely
saw themselves as guardians of India, and even as being engaged
in a process of regenerating that continent. The Government of
India could only be persuaded to subordinate Indian to British
economic interests by the strongest of British commercial press-
ure groups, such as the Manchester cotton manufacturers. These
groups usually exercised their influence on Indian policies
through the medium of the India Office in London. In the early
1900s the relatively small Glasgow-based oil company carried
little weight in such circles. As a naval contractor based in the
largest oilfield in the Empire, however, Burmah Oil was able to
secure the support of another department of the Home
Government, the Admiralty, in its negotiations with the
Government of India.
By 1904 serious discussions were under way between the
company and the Admiralty about a fuel oil contract. Burmah
stressed the technical difficulties and cost of producing fuel oil of
Admiralty specification, and consequently argued that it expected
the Admiralty to secure a quid pro quo from the Indian authorities
in return for an oil contract. The company's reply to the
Admiralty's first approaches mentioned its dissatisfaction with
the limitations imposed by the authorities on the area of land it
could hold in Burma. 3 9 By March 1904 Burmah was arguing that
if the Government wanted more than 50,000 tons of fuel oil per
annum, the company 'would look to the good offices of the
Admiralty with the Indian Government to help them obtain
additional concessions'. 40 Burmah increased its demands as the
difficulties with Shell and Standard Oil became acute. By January
1905 Burmah was pressing the Admiralty to persuade the Indian
Government to agree to three measures. First, Burmah wanted
the oilfields reserved for British companies, thereby excluding
forever Standard and Shell. Second, Burmah wanted all the
British oil companies to be under the same obligations to produce
naval oil as itself. Third, Burmah repeated its old request that the
restrictions on the amount of land it was able to hold should be
withdrawn. 41
The Admiralty, anxious to secure a contract from Burmah Oil,
pressed these terms on the Government of India. It was largely
due to this pressure that the Government of India decided on a
OIL AND EMPIRE 101
policy of excluding oil companies from Burma simply on grounds

of nationality. As late as January 1905 an Indian Office official
had thought that Asiatic's foreign composition was a 'question-
able argument to use' in excluding the company from Burma. 42
In March 1905, however, it was finally agreed between London
and India that all future concessions should be given to British-
controlled companies. 43
The new policy was a bad one for India. It meant that the
government policy was no longer underpinned by a rational
economic argument. The 'trusts' were henceforth to be excluded,
not because they might retard the development of Burma's
oilfields, but simply because they were 'foreign'. There were
similar tendencies in a number of other countries during this
period. By 1907 the Rumanian statesman, Vintila Bratianu, was
advocating the use of State power against foreign oil companies
not because they had committed any offence, but merely because
of their nationality. 44
The Admiralty failed to persuade the Government of India to
adopt a policy of special support for Burmah Oil. The exclusion
policy, the Secretary of State observed to the Viceroy in March
1905, 'makes it doubly incumbent on the Government to free
itself from any suspicion that the Burmah Oil Company enjoys its
favour in a special manner, and can rely on peculiar privileges and
support against other British competitors'. 45 The Admiralty also
failed to persuade the Indian government to support the other
two points in Burmah's programme. It would neither force every
future British lessee to produce naval fuel oil nor remove the land
restrictions on Burmah Oil.
A clear difference of emphasis was apparent between the Indian
authorities and the Admiralty. The former still had the mainten-
ance of competition on the Burma oilfields as their primary aim,
even though their purity of doctrine had been tarnished by
strategic considerations. The Admiralty's approach was more
pragmatic. It wanted fuel oil and, more importantly, it wanted a
certain supply in wartime. This could only be guaranteed, officials
reasoned, if the oil was produced on British territory by a British
company. If by granting such a company special privileges,
though not financial assistance, it would produce the fuel oil the
Navy needed, then the Admiralty was prepared to give those
privileges even if they infringed the .strict dictates of free
competition. 46
The divergence of opinion between India and the Admiralty

was fully revealed in the autumn of 1905 when Burmah Oil began
to move towards an agreement with the Asiatic. A rates war
launched by the Asiatic both seriously depressed prices and meant
that Burmah Oil was unable to dispose of all its products. By
September 1905 Burmah had been forced into serious nego-
tiations with its competitor. 47 The basic outlines of an agreement
were soon arranged. Burmah was to be guaranteed its existing
turnover in the Indian markets, while the rest of its production
was to be taken over by the Asiatic. The Admiralty, informed by
the company that it faced total defeat unless an agreement was
reached, supported Burmah Oil, and pressed the Indian autho-
rities to give their formal assent to the agreement. The
Government of India steadfastly refused to give this, reflecting
that 'on grounds of principle [they were] opposed to give
approval to combinations of this nature' .48 This approval was
not legally necessary, however, and on 31 October 1905 Burmah
Oil signed the agreement with the Asiatic. As an attempt to
reassure the Government of India, Burmah gave a guarantee that
they would never charge more than a certain price (3 rupees 8
ann as per eight gallons) for their 'Victoria' quality of kerosene. 49
The way was now clear for the naval fuel oil contract to be
signed. The contract, dated 21 November 1905, was very
favourable to the Admiralty. The company agreed to erect the
required plant capable of producing up to 80,000 tons of fuel oil
per annum within two years, to have a reserve stock of20,000 tons
ready within three years, and in time of war to hold their entire
production of fuel oil at the disposal of the Admiralty. Although
the company was to supply the Navy with 100,000 tons during
time of emergency, the Admiralty was under no obligation to
purchase oil if it did not wish. The quid pro quo from the
Admiralty came in the unwritten part of the Agreement. 'The set-
off', explained an Admiralty official, 'is the assistance the
Admiralty have been able-and may possibly hereafter be able-
to give the company in their contest with foreign competition.' 5°
The main pattern in the relations between the British and
Indian Governments and the oil companies in India was now
fixed, and in the following decade there was little change. Indeed,
little changed before 1947. Foreign oil companies continued to be
excluded from India. This policy was maintained until
Independence, apart from the grant in 1937 of a prospecting
OIL AND EMPIRE 103
license to a company which had a 45 per cent American holding.

By the 1930s, at the latest, it was having a retarding effect on the
development of India's oil resources. It was not the case that only
the large multinationals had the capital resources to explore and
develop mainland Indian oil deposits. S. Pearson and Son
mounted a major, though unsuccessful, oil exploration effort in
the Punjab and Assam in the 1920s. Burmah Oil was also anxious,
at least for some of the period, to develop new sources. Hence its
acquisition of the Assam Oil Company in 1921. Yet the oil glut
from the late 1920s made the company increasingly concerned to
acquire concessions mainly for 'pre-emptive' reasons. 51
Despite the exclusion policy, Burmah Oil and the large
international oil companies increasingly co-operated in the
marketing of oil products. The Shell Group marketed a share of
Burmah's production in India under the terms of the 1905
agreement. By 1911/12 some 50 per cent of Asiatic's sales in India
were of Burmese oil. There were a series of joint marketing
agreements between the two companies. The Wax Pool of 1910
was followed by the Kerosene Pool in 1919. In 1928 the marketing
interests of Shell and Burmah were formally merged into
Burmah-Shell. After 1905 Standard Oil followed the price levels
agreed between Burmah and Shell, except during the brief price
wars of 1909, 1911 and 1928. These agreements diminished the
effectiveness of the Government of India's exclusion policy. The
Shell Group, by virtue of its marketing agreements with Burmah,
could influence (untill919) the amount of kerosene the company
could produce, and so Shell secured some of the advantages of
producing inside the Indian tariff barrier without having to
undertake any exploration work.
The Government of India retained its policy of allowing, and
even encouraging, competition among British oil companies.
Burmah's high profits attracted into the industry a number of
small British companies such as the Indo-Burmah Petroleum
Company, the British Burmah Petroleum Company and the
Upper Burmah Company. Burmah Oil's frequent warnings about
the dangers of unregulated competitive drilling, and the damage it
was doing to the oil fields, went unheeded. Government sympathy
for Burmah Oil was further diminished in 1908 when the
Committee on the Twinza Reserves dismissed the company's
claim that its drilling methods were more 'scientific' than those of
its smaller competitors. 52 Indeed, Burmah's drilling methods
became increasingly out-of-date, with a long delay in the

introduction of rotary drilling. Government officials were ex-
tremely slow to admit that there could actually be too much
competition in oilfield exploration. As late as 1928 the Indian
Tariff Board felt obliged to argue that it would be advantageous
to have a fusion of the smaller companies on the Burma oil fields
as it would lead to a 'more methodical and scientific system for
drilling'. 53
Burmah Oil was still incapable of extracting special favours
from the authorities. The company failed to secure the removal of
the principle of 'reserving' land against it. 54 Its continued
campaign to secure an increase in the duty imposed on foreign oil
imported into India also met with no success. Interestingly,
despite its friendly relations with Shell, the company continued to
use the 'monopolistic menace' theme to strengthen its case for
State support. Burmah directors stressed to the authorities that
their company's close relations with Shell were purely a distaste-
ful necessity. They were quite prepared to say derogatory things
about their allies before secret bodies such as the Royal
Commission on Fuel and Engines. Cargill, the chairman, told
that body 'in confidence' how Shell had strongly resisted
Burmah's scheme to set a maximum price for consumers in
India. 55
Burmah Oil's apparent duplicity in its dealings with Shell and
the Indian authorities had its origins in the weak situation the
company felt itself in after 1905. This pessimism was ostensibly
rather strange, as Burmah's financial position looked healthy to
the public. The company declared dividends of 30 per cent for the
three years 1907-9 and 70 per cent in 1910. Yet the company's
long-term prospects looked increasingly unfavourable as the
search for new oilfields in Burma proved unproductive. By the
end of 1911 the company had spent £200,000 on the exploration
of new areas, and found no oil at all. 56 Burmah pioneered the use
of geologists in the search for oil, many of them supplied
by Boverton Redwood's consulting firm. In 1907 the company
began to employ full-time geologists, many of whom, like E. H.
Cunningham Craig, Basil Macrorie and Lister James, were later
to use the experience they gained in Burma in the service of
Anglo-Persian. Yet they could find no oil.
The atmosphere of gloom was increased in 1904 by the
appointment as Burmah's chairman of John Cargill, the son of
OIL AND EMPIRE 105
the company's first chairman. John Cargill was an able and honest
man, but a born pessimist. After 1904 both shareholders'
meetings and the British Government were treated to Cargill's
forebodings of impending doom. In 1912 he told the Royal
Commission on Fuel and Engines of 'the day that will eventually
come, when the oil will be exhausted, and all the capital that has
been spent in the business will be lost, and our refineries and our
pipeline will be worth nothing'. 57
With Cargill at the helm, Burmah Oil entered a period of
growing caution and conservatism. The company's sales were tied
by the 1905 agreement with the Shell Group. Its geologists were
unable to locate further oil reserves and its drilling and refining
technology showed a constant failure to keep up-to-date with
basic research and improvements in techniques. Its managing
agents in Burma, Finlay Aeming, were highly conservative and
unresponsive to the need for change.
III THE WEST INDIES
There were some interesting similarities, as well as contrasts,

between events in British India and in the British West Indies.
The production of oil in the West Indies was extremely small
compared to India. Trinidad, the island where the main oilfields
were located, produced only 1000 metric tons of oil in 1909, and
only 126,000 metric tons by 1914. The island's future importance
as a major producer within the British Empire-Trinidad was to
produce over 30 per cent of the Empire's oil by 1930-was barely
perceived in 1914. Moreover, the West Indies entirely lacked
India's importance as a market. Yet the islands' geographical
position made them attractive to oil companies and to the British
Government alike. Trinidad was not only British but, unlike the
other British oil-producing areas, it was both sufficiently close to
the United Kingdom and lacking in a home market to make an
export trade to Britain seem viable. For the same reasons it held
obvious attractions to the Admiralty as a potential 'reliable'
supplier of fuel oil.
The first of the West Indies islands to come under the attention
of the British Government was Barbados. In the last years of the
nineteenth century a small British enterprise, the West India
Petroleum Company, began drilling for oil in that colony. It laid a
number of pipelines and built a refinery. Unfortunately, the
landholding system, based on small estates with mineral rights

vested in the surface owners, made the acquisition of prospecting
land expensive. By 1903 the company, capitalised at £60,000, had
spent £44,000 in acquiring rights over 4000 acres and laying down
some basic machinery. The results were meagre, with a weekly
production rate of only 1400 gallons being achieved during 1902.
Unable to raise extra capital, the West India Petroleum Company
turned to the British Admiralty and the colonial government for
assistance. In 1903 the company applied to the Admiralty for an
advance of £10,000 and in return it offered the Navy the right of
pre-emption over its oil. 58
The events which followed initially bore a strong resemblance
to those in India. The company, in order to support its case for
State assistance, stressed the dangers of the oil fields falling under
the domination of the foreign, monopolistic Standard Oil. The
ubiquitous Boverton Redwood supported the company with a
favourable report on the Barbados oilfields. However, despite
Redwood's best endeavours, it was obvious that the West India
Petroleum Company had a much weaker case than, say, Burmah
Oil, and the Admiralty decided that there was little to be gained
from lending it support. The Admiralty would go no further than
to offer to purchase any oil the enterprise could produce and
refine. 59 The company's hopes were further dashed when a Bill it
had introduced into the island's House of Assembly, aimed at
giving it a monopoly over the export of oil from the island for the
next twentyfive years, was defeated by local opposition.
As the hopes of the West Indian Petroleum Company faded,
the focus of attention shifted from Barbados to Trinidad. An
embryonic oil industry had developed in Trinidad after the first
successful well had been drilled on the island near the Pitch Lake
at La Brea (see Map 4.2). By 1868 Trinidad had shipped 46 barrels
of crude oil (1610 imperial gallons) to England and 126 barrels
(4410 imperial gallons) to the United States. The Pitch Lake area
was to remain the centre of the island's oil industry untill91 0, but
after 1899 an ingenious local entrepreneur, Randolph Rust,
began searching for oil around Guayaguayare. 60 Rust was in
constant need of additional capital, and in 1903 he approached
the Oil Exploration Company of Canada with a view to selling the
concessions he held on Crown lands.
Rust's request to be allowed to transfer his concessions
stimulated much lively discussion in government circles. Early in
OIL AND EMPIRE 107
GULF
OF
PAR I A
ATABAOUITE
A BARRACKPORE
GUAYAGUAYARE A
A Oilfield
MAP 4.2 The oilfie1ds of Trinidad before 1914
1904 a Joint Committee was established in London by the

Admiralty and the Colonial Office to consider the issues that had
been raised in Trinidad and Barbados. A few months later an
Indian official joined the committee in order to give it the benefit
of India's experience. This was the first instance of regular and
formal interdepartmental discussion of oil matters of concern to
the Government. The Committee's deliberations were based on
the assumption that the Admiralty would soon require large
amounts of fuel oil, and that it was highly desirable that some of
this should be produced in the Empire. As in India, it was strongly
believed that the 'trusts' would retard rather than stimulate the
development of the embryonic oil industries of the colony. 'The
competition of the great syndicates in the United States and
elsewhere,' the Committee warned 'may retard any purely

commercial development of the oil industry in the West Indian
colonies unless the support and the assistance of the Imperial
Government is forthcoming.' It was characteristically vague
about the nature of this assistance. It did not approve, any more
than the Government of India, of giving single companies a
monopoly, nor did it think that the State working of oilfields
should be encouraged 'unless urgent necessity should arise'. It did
put forward some positive proposals for the terms to be included
in future oil leases in Crown lands in the West Indies, and indeed
in other British Crown colonies. Seven main stipulations were
suggested. Future concessionaries should be British; refining
should be undertaken within the colony; the Imperial
Government was to have the right of pre-emption over all the oil
produced; there was to be a 'continuous working clause' to force
companies to develop their concessions; the local authorities were
to be given powers over refinery location, etc.; the refinery process
had to be capable of producing a fuel oil up to Admiralty
specification; and during wartime the Government was to have
power to take over the whole of a company's output. 61
The Joint Committee's recommendations were made on the
basis of a worldwide perspective, and were meant for application
throughout the Empire. Admiralty officials argued that the
Empire faced only two choices. 'One to allow the colonial oilfields
to be developed and worked by any capitalists who are prepared
to pay a fair royalty, leaving them free to deal with the output as
they please. The other to reserve the concessions for exploitation
by British money and in the interests of the Colony and of the
Navy.' 62 The lease regulations were obviously designed to
encourage the second course of action. In theory at least they were
tough, if not as tough as the controls exercised over the oil
industry by the Rumanian Government. Their practical signifi-
cance, however, was limited. Although they were embodied in
new leases issued in Crown Colonies after 1905, none of the
territories concerned-the Gold Coast, Brunei, Southern
Nigeria, British Guinea-developed into major producers of oil
before 1914. Moreover, the impetus behind this nationalist oil
policy was lost after 1906.
Meanwhile oil exploration in Trinidad continued. In 1905
Beeby Thompson went to Trinidad to prospect for a British
company in the area around Guapo. The scale of operations on
OIL AND EMPIRE 109
the island remained tiny in these years. By 1906 there were still
only 30 people employed in the oil sector. A few years later
Trinidad became a minor focus of attention during the 'oil boom'
of 1910. In that year some thirty companies were floated on the
London market for the purpose of exploring for oil in Trinidad.
It was during the 'oil boom' that the British and Foreign Oil
and Rubber Trust began to express an interest in the oilfields of
Trinidad. The Trust comprised some of the leading British oil
companies, including Burmah Oil and its offspring Anglo-
Persian, the Assam Oil Company, Lobitos Oilfields, California
Oilfields and Pacific Oilfields. The chairman was the familiar
figure of Charles Greenway.
In the summer of 1910 the Trust began negotiations with the
Trinidad Government about various modifications it wanted in
the standard prospecting licence and mining lease before it would
begin to search for oil in the colony. The Company's demands
were as familiar as the chairman. The special support of the
Government was requested in return for undertaking oil explo-
ration. The specifics were spelled out at a conference in London in
N ovem her 1910, attended by Charles Greenway, the Governor of
Trinidad, and representatives from Colonial Office and the
Admiralty. The Trust wanted to be able to take up 100,000 acres
of land anywhere on the island for prospecting purposes, a long-
term lease (50-60 years) on these lands and, most importantly, a
monopoly of oil pipelines on the island. Pipelines held a special
position in oil demonology as the means by which Standard Oil
had exerted its control over much of the American oil industry.
Greenway, as usual, brandished the 'monopolist menace' card.
Unless the Trust was given its pipeline monopoly, he warned the
Conference, 'it might be worth the while of a powerful opposing
company (that is, of course, the Standard) to lay lines even at a
loss merely to interfere with them'. Boverton Redwood, the great
champion of British oil companies against foreign 'trusts', was
also present at this Conference as the Admiralty representative.
He strongly supported Greenway, arguing that 'it would be
necessary to safeguard the Trust in some way', and suggested that
'a de facto monopoly such as that which the Burmah Oil
Company secured through their agreement with the Secretary of
State for India, might be arranged'. 63
The Governor of Trinidad was initially as unwilling to grant
any single company 'exclusive privileges' as the Government of
Burma had been. However, he was soon pushed a little further in

that direction when the ugly spectre of Standard Oil appeared.
Early in 1911 one of the small British companies already
on the island, Trinidad Oilfields, informed the authorities that
the Trinidad Lake Petroleum Company, which was about
to start the construction of a refinery in the colony, was
under the control of Standard Oil. 64 The very mention of
Standard Oil's name was sufficient to cause a flurry of activity
among officials. Further legislation was introduced to keep
refining in British hands, and this was made into law in the Oil
Mining and Refining Ordinance of 1911. Colonial Office officials
in London were similarly moved to take a more sympathetic view
of the Trust's application for special privileges. 'In light of recent
development,' the Colonial Office telegraphed to the Governor
late in January 1911, 'it may be necessary to reconsider question
of pipeline monopoly being granted to strong British
combination. ' 65
At this stage the Shell Group made a sudden appearance in the
negotiations. The company was unlucky in that, as in India, the
policy of the colonial government and the authorities in London
regarding 'foreign monopolists' had recently been under energetic
discussion because of the activities, or alleged activities, of
Standard Oil. On 20 January 1911 an interdepartmental meeting
was shocked to hear that the Trust had been presented with an
'ultimatum' from Shell. Shell wanted a re-arrangement of the
Trinidad syndicate, with its interests controlling 25 per cent, and
the associated interests of the Rothschilds and Frederick Lane a
further 25 per cent. 66 It is not altogether clear why this meeting
was so surprised by the appearance of Shell in the negotiations.
The Group had for some time expressed an interest in Trinidad's
oil, and Waley Cohen had actually attended the Colonial Office
conference on 7 November 1910. 67 While it seems probable that
Greenway did not go out of his way to emphasise to the
Government the fact of Shell's involvement in the Trust during
the early stages of the negotiations, it is clear that government
officials were not well-informed about oil company matters.
The Government's reaction to the Shell 'ultimatum' was at first
very hostile. At the conference on 20 January 1911 the Admiralty
representatives argued strongly that Trinidad should be reserved
for an exclusively British company. Boverton Redwood made a
point of stressing that the Shell Group was in the hands of the
OIL AND EMPIRE 111
disagreeable Dutch. Unfortunately, however, officials soon re-

ceived a further blow. It emerged during the discussions that
Burmah's relations with Shell were closer than had been believed,
and indeed that Burmah would withdraw from the syndicate if
Shell were not allowed to participate. 68 The whole issue was
further clouded when Marcus Samuel launched one of his florid
harangues against the British Government. On II February he
wrote a long letter to the Colonial Office protesting about the
'extraordinary view' he had found in certain Government circles
that the Anglo-Saxon Company, the company through which
Shell intended to operate in Trinidad, was not a British
company. 69
Marcus Samuel's outbursts could usually be counted upon to
stiffen the resolve of any British civil servant to oppose the Shell
Group, but fortunately this time a number of different factors
were prompting officials to re-consider their initial hostility to
Shell. As in the case of Burmah Oil, the Admiralty was prepared
to sacrifice some liberal economic principles in return for a supply
of fuel oil. Admiralty officials began to come round to the view
that their first priority really was to secure the development of
Trinidad's oilfields rather than to fight Shell. As the Director of
Contracts asked during an interdepartmental meeting on 20 April
1911, 'if we could not develop Trinidad without foreign help, why
not reconsider our all-British Policy?'7° The Colonial Office,
whose priorities in any case lay in the direction of achieving the
economic development of Trinidad rather than securing a supply
of a strategic commodity for the Navy, came independently to a
similar conclusion. 'I wish we could have had a purely British oil
company,' a Colonial Office official wrote in a minute on 25 May,
'but ... we cannot do without either the Shell or Standard Oil.
Other companies may be able to put up sufficient money for
development, but Trinidad oil can hardly hope to get on the
market without one of these two corporations to sell it.q 1
This was a marked divergence from the policy that had evolved
in India. The Government of India never abandoned the view that
'trusts' would hinder the development of Burma's oilfields. The
Admiralty supported this argument because it was anxious to
secure a supply of British oil, and consequently wanted to support
the established British oil company on the Burma oil fields against
its foreign rivals. If the Admiralty wanted to see an oil industry
developed in Trinidad it had to accept a part-foreign oil company.
The colonial authorities, meanwhile, came to a dual recognition

of the importance of downstream operations to the successful
development of their oilfields, and of the fact that only a large
integrated company could provide such facilities. There was a
similar recognition of the same fact of life in the petroleum
industry in Egypt in the same year. Yet this was not to become a
permanent feature of oil policy in British government depart-
ments. The most spectacular episode in prewar British oil policy,
the State's purchase of a majority shareholding in the Anglo-
Persian Oil Company, seemed to signal a reversion to the older
policy of supporting smaller British companies against dangerous
foreign 'trusts'. It was to take the exigencies of war to revive the
thoughts of 1911.
In Trinidad, at least, Shell was given permission to take part in
the oil syndicate. A new company was formed in July 1912, the
United British West Indies Petroleum Syndicate, which was
broadly an amalgamation of the British interests in the old Trust,
Burmah Oil and the Shell Group. After extensive negotiations the
company secured a very favourable lease in January 1913. A large
team of geologists was sent out, but no major finds were made
before the First World War. 72
The significance of the Trinidad oil industry before 1914,
therefore, did not lie in the level of production it achieved. Rather
the developments in the colony are of interest from the point of
view of the new ideas about the development of the oil industry
which they stimulated among government officials. Moreover,
the Trinidad oil industry had prompted officials from several
different ministries in London to sit in committees together and
discuss the oil industry. The Joint Committee of 1904-6 had
initially been established to deal with the West Indian oil industry,
and developments in those islands were also the stimulus which
led to the revival of this Committee, now known as the Inter-
Departmental Committee, in May 1911. The practical import-
ance of this committee is open to doubt. It was a purely advisory
body, and could not provide the machinery through which a
genuine Government oil policy could be formulated. The acqui-
sition of Anglo-Persian was not even discussed by it. Yet it did
remain as a means whereby information about oil leases and oil
companies derived from one colony could be made available to a
wider audience. During the years before 1914 developments in the
West Indies, Brunei, Egypt, Somaliland, New Zealand and
OIL AND EMPIRE 113
Canada were examined. Given that the greatest obstacle to the

development of a coherent Government oil policy was the sheer
number of ministries with some special interest in the matter, the
Committee did provide at least a token attempt at co-ordination.
The Committee brought together the Admiralty, the Colonial
Office, the India Office and the Crown Agents, representing the
Crown Colonies. This meant that the Foreign Office was the only
major department with an interest in oil which was not consulted.
More important still, perhaps, was the fact that the Committee
assembled together a number of Government officials who were,
or were shortly to become, major influences on oil policy. One of
the Colonial Office representatives was John Cadman, while
Boverton Redwood and Frederick Black were among the
Admiralty representatives.
IV EGYPT
The situation in Egypt was, in certain respects, rather different

from that in India and the West Indies. The country was not
legally a British colony. Although it had been under British
administration since 1882, and very firmly so since the beginning
of the twentieth century, there still existed the remnants of a local
administration and 'public opinion' which had to be taken into
account. Egypt was not an established oil producer at the turn of
the century, and indeed the geology of the country was unfavour-
able, given the prevailing state of petroleum exploration tech-
nology. As with Trinidad, however, Egypt's geopolitical position,
beside the Suez Canal, made it attractive to oil companies and the
British Government alike.
The search for oil in Egypt had been in progress since the
middle of the nineteenth century. The Egyptian Government
drilled a well at Gemsah (see Map 4.3), and the oil produced from
this well was examined by British chemists as early as 1877. Four
years after the arrival of the British in Egypt in 1882, an Army
intelligence officer reported on the favourable oil prospects at
Gebel Zeit, and speculated on the economic importance pet-
roleum could have for the Egyptian economy. 7 3 In 1904 the
Egyptian Government established a Mines Department to en-
courage interest in Egypt as a petroleum producer.
The reports of oil seepages, the strategic position of Egypt, and
the British political control of the territory attracted a number of
EG~J
(
\ HURGHADAA :
RED
SEA
.l Oilfield
MAP 4.3 The oi1fie1ds of Egypt before 1914
British oil companies during the 1900s. In 1905 the Egyptian

Petroleum Company was formed to prospect for petroleum in
areas around Gemsah. In 1907 the Egyptian Oil Trust was
registered to take over that company's rights. Another company,
the African Prospecting Syndicate, was formed in 1907 to explore
the same region. One of the chief participants in this Syndicate
was the London firm of Grahams, which had links with
M. Samuel and Co., and they offered their concession to Shell. 74
Shell Transport was already well-established in Egypt as a
marketer of kerosene, and indeed it had been the first company to
import Russian kerosene into Egypt in bulk. Marcus Samuel,
with his vision of acting as a supplier of fuel oil to the Royal Navy,
was eager to secure a source of production in British territory, and
in 1908 negotiations were started. 7 5
OIL AND EMPIRE 115
The Shell Group, after its unfortunate experience in British

India, fully appreciated the political hazards for an oil company
with a strong non-British element operating in British territory,
and consequently made certain administrative readjustments in
order to camouflage its 'foreign' element. The Shell Group was
later to become expert at taking advantage of its transnational
ownership in this way. It was decided that Shell would enter
Egypt under the name of the Anglo-Saxon Petroleum Company,
officially the transport company, rather than through the
Bataafsche Petroleum Maatschappij, the production company. 76
On 23 September 1908 Anglo-Saxon signed a preliminary
agreement with the African Prospecting Syndicate.
Unfortunately, despite all the Group's precautions, tension
soon mounted with government officials. The first step of the
Shell Group had been to send out their leading geologist, Dr Erb,
to investigate the value of the concession held by the Syndicate. 77
He had to work with Mr Wells, the chief representative of the
Syndicate. Wells had formerly been with the Egyptian Mines
Department. He and Erb proved seriously incompatible, and as
relations between the two men deteriorated, the Shell manage-
ment became concerned lest Wells should use his influence with
his old government colleagues against the company. 78 When
Erb's report on the Syndicate's territory proved unfavourable, it
was decided not to continue the negotiations.
In April 1909 interest in Egypt revived when the Egyptian Oil
Trust struck oil in the Gemsah Peninsula, in an area which Erb
had found interesting. In January 1910 the Red Sea Oilfields
Company was formed to develop this soil. At first Shell was
reluctant to re-consider the decision not to enter Egypt as a
producer. 79 However, Red Sea Oilfields' need for additional
capital and a more favourable report by another of the Group's
geologists, Kruisheer, eventually prompted Shell to come to an
arrangement with the Red Sea Oil fields. In July 1911 Anglo-
Egyptian Oilfields came into existence. The management of
company's operations in Egypt was given to the Anglo-Saxon
Petroleum Company, an arrangement which was to last until
1953.
Meanwhile Egyptian oil had also come to the attention of the
Admiralty. The initiative came from one of the small British oil
companies. In 1906 the Admiralty had been approached by a
Mr J. S. Bergheim who, together with W. MacGarvey, had play-
ed an important role in the development of the A ustro-Hungarian

oil industry. Bergheim was mainly interested in securing
Government money to support his operations in Nigeria, but he
also wanted the assistance of the Admiralty to enable him to use a
government boat to assist his prospecting operations in Egypt.
The Admiralty's disinclination to be involved with 'speculative'
oil enterprises meant that Bergheim's application did not meet
with success, but the ministry continued to have a casual interest
in Egyptian oil.
Early in 1911, after Egyptian oil had become a proven reality,
the Admiralty encouraged Egypt to conform to a general policy
of reserving production whenever possible in British oilfields to
British-controlled companies. However, in Egypt, unlike the
West Indies and India, officials were not initially hostile to foreign
enterprise. Moreover, there was a local public opinion to be taken
into account. The Admiralty was informed that the policy of
excluding foreign companies would 'involve a corresponding
sacrifice of Egyptian interests, which could not be easily
justified'. 80
As in Trinidad, the Admiralty, whose primary aim was to
secure fuel oil for the Navy, accepted the failure of its all-British
policy with relatively good grace and, after the purchase of Red
Sea Oilfields by Shell, was even prepared to extend a welcome to
that Group. 'The Admiralty,' wrote the Director of Contracts,
'need not regret in any way the active development of oil in the
Red Sea littoral (South of Suez) by an admittedly able and
enterprising concern with capital behind it.' 81 Indeed, within a
few months the Admiralty intervened with the local adminis-
tration to make Shell's life easier. A fortnight after Samuel and
Deterding complained before the Admiralty Oil Committee in
December 1911, about the difficulties they were having with the
authorities in Egypt, the Fourth Sea Lord wrote to Lord
Kitchener requesting that, 'although the Admiralty did not wish
to appear as backing this company officially', a more sympathetic
attitude should be adopted towards Shell. The Admiralty, he
continued, were under great obligations to the company, and they
considered it 'very important that every proper facility should be
accorded to the Agent of the company in Egypt, with a view to
their acquiring an interest in whatever oil-field may be available in
Egypt. •82
This incident illustrates the nature of Admiralty policy towards
OIL AND EMPIRE 117
Shell before 1914. Although there was an underlying suspicion of

the Group, there was no consistent policy of opposition to the
company, simply because the Admiralty did not have a consistent
oil policy. The lack of a strong departmental memory on oil
matters meant that the Admiralty would tend to treat each
problem as it arose without detailed reference to previous action.
Thus the letter to Lord Kitchener was an immediate response to
the complaints of Samuel and Deterding before the Admiralty
Committee. A few months later Churchill, the First Lord, would
be involved in a scheme to exclude Shell from Egypt completely.
Shell's problems, however, were at first exclusively with the
British administration in Egypt. The relations between the two
parties soon became extremely tense. 'The attitude of the
Egyptian Department of Mines', wrote H. Loudon in The Hague
in November 1912, 'is to be deprecated, and we would advise
rather to abandon the licenses than to yield to the utterly
unreasonable demands of the Egyptian Government.' 83 In the
following month Marcus Samuel complained bitterly before the
Royal Commission on Fuel and Engines about his company's
treatment in Egypt. Waley Cohen was forced to go to Cairo twice
in 1912 and 1913 to negotiate with government officials. 84
The disputes between the Shell Group and the British adminis-
tration in Egypt provided a very early example of the recurrent
conflict of 'host governments' in less developed countries with
international oil companies. Almost all the areas of tension which
have become familiar during the disputes between government
and companies in the 1960s and 1970s are to be found in Egypt in
the prewar period. Underlying the tension was, as so often, the
Government's profound suspicion of the intentions of the oil
company. It feared that Shell might squander the country's oil
wealth unless a close watch was kept on that company's
operations. 'Owing to the special requirements of the Industry
and the great harm which may ensue from careless or incom-
petent work', the Department of Mines explained in June 1912,
'the Government feels bound to supervise and control the
industry within reasonable limits.' 85 The State, therefore, sought
to acquire the greatest amount of information about Anglo-
Egyptian's operations. To Shell, as to all oil companies sub-
sequently, this was unwarranted interference by an ill-informed
bureaucracy. 'They have just issued a lot of new rules', a Shell
man wrote to London in December 1911, 'which call upon us to
keep the Government informed of everything that is going on and

will require quite a staff of clerks to comply with .... Ifl had my
way I should have written a stinking letter back and asked
Government who was going to pay for the staff, etc.' 86
There were also more specific areas of conflict. The Egyptian
Government accepted the current orthodoxy that if one company
secured a monopoly over Egypt's oil lands, it would not develop it
as quickly as if there were several companies. 'Your company',
the Financial Adviser to the Egyptian Government wrote to
Anglo-Egyptian in December 1913, 'in its natural desire to
establish a virtual monopoly, is anxious to control large areas of
undeveloped land, and possibly to restrict temporarily the
production of petroleum. The Government, on the other hand, is
anxious to develop its oil-bearing territory. ' 87 The Egyptian
Government, therefore, wished to enforce strict 'continuous
working' clauses in its leases, as well as to encourage several
companies. to work the territory. Shell considered the
Government's suspicions ridiculous. The Government still be-
lieved, Waley Cohen observed in a letter to The Hague, that 'we
may have some desire to restrict production and have interests
opposed to those of the Government, which is quite untrue'. 88
The company saw matters from an altogether different point of
view. Shell considered that it was offering Egypt the benefit of its
extensive production, marketing and refining expertise. A con-
siderable capital outlay would be required, including a refinery
costed at around £500,000, and Shell felt that in return it should
be granted large blocks of land 'from which they can expect to
maintain a sufficient production over a long period of years to
supply the refinery with sufficient crude oil to keep it constantly
working'. 89 No more than Burmah Oil in India did Shell want the
territory parcelled out in small blocks of land, which would mean
that its neighbours would benefit from its own drilling and might
also result in the kind of manic competitive drilling seen in the
United States.
Meanwhile the multinational nature of the Shell Group caused
further difficulties with the Egyptian Government in what was
one of the first host country oil company disputes over 'internal
transfer prices'. Transfer prices are those charged by one
subsidiary of a company to another. They become a matter of
dispute when these companies are located in different countries,
for international firms can use transfer prices to minimise global
OIL AND EMPIRE 119
tax outlays, and as a means of moving profits out of a country

where there are controls over income repatriation. 90 In March
1912 Anglo-Egyptian decided to market its oil through the
Asiatic Petroleum Company, using the transportation facilities of
the Anglo-Saxon Company. 91 The first shipments, however,
raised the immediate suspicion of the Egyptian Customs
Department, which was far from satisfied with the price, on which
export duties were payable, charged by Anglo-Egyptian to the
other Shell subsidiaries. Waley Cohen was forced to write a long
letter to the Egyptian Government, assuring it that the price was
'a proper valuation of the merchandise at the point at which it is
sold'. 9 2 The Egyptian administration rather grudgingly accepted
Waley Cohen's word over the matter.
One of the reasons for the difficulties the Shell Group met in
Egypt was that there was a shift of opinion at the highest levels of
the Egyptian administration about the optimum method of
securing the development of Egypt's oil industry. This was part of
a wider change of opinion among British officials concerning the
role of the Government in the development of the Egyptian
economy. The British Representative in Egypt in the early years
of the century, Lord Cromer, had believed that government
involvement in the economy should be largely confined to
'infrastructure' investment, that is, providing a suitable frame-
work within which private entrepreneurs could operate. The
financial depression of 1907, however, led to a slow re-assessment
of this view. Under Cromer's successors, Gorst and Kitchener,
the role of the State in economic affairs began to expand.
After the appointment of Lord Kitchener as head of the British
administration in Egypt in 1912, the Egyptian Government began
to consider schemes not only for the strict control of the oil
industry but also for actually entering production itself. This view
found some support from within the Admiralty, especially from
the new First Lord, Winston Churchill. In June 1912 Churchill
wrote of his agreement with Lord Kitchener's view 'that it would
be much better for the Egyptian oil to be worked as a government
monopoly for the Egyptian Government and for the Admiralty,
we making an unlimited forward contract for what he can supply.
This is much better than trading it off to the Shell Company.' 93
Although the Director of Contracts expressed great reservations
about the capacity of the State to work the oilfields with 'as much
success as an experienced company like the Shell Group' 94 , the
political leadership of the Admiralty continued to press an anti-

Shell policy on the Egyptian Government. In May 1913, the
Additional Civil Lord at the Admiralty, Sir Francis Hopwood,
wrote to the Foreign Secretary requesting him to ask Kitchener to
support one of the small companies in Egypt, the Cairo
Syndicate, because of the 'dangers lying ahead if the Dutch
inft uences are allowed to absorb the majority of the new fields'. 9 5
Although that scheme was rejected, the Egyptian Government
had resolved to participate more directly in oil development. By
January 1913 Egyptian Government officials were contemplating
an arrangement whereby the Government would take a share of
Anglo-Egyptian's profits. 96 By the end of the month Lord
Edward Cecil, the Financial Adviser, put forward a scheme which
he hoped would solve the problems between Shell and the
Government. 'It had occurred to me', Cecil wrote to Waley
Cohen on 30 January 1913, 'that the simplest solution would be
for the Government to become a shareholder in the Company.' 97
A classic solution was formulated to what were to become classic
host country /oil company points of contention-namely govern-
ment participation in the oil company. This was a formal
recognition of the 'kind of symbiotic relationship' 98 which exists
between producing country and oil company, and it was to the
mutual advantage of both parties. The Government could
reassure itself about the activities of the company by means of its
direct participation in the company while the oil company, freed
from governmental suspicion, could devote itself to the com-
mercial development of the oilfields.
An agreement was formally signed on 14 September 1913. The
Anglo-Egyptian Oilfields were granted new prospecting licences
for five years, with the right to take up a lease for thirty years. In
return the State was issued with l 00,000 £1 shares out of a total
capital of £1,350,000, with a fixed dividend of 5 per cent. This
entitled the Egyptian Government to nominate one Director to
the Board. In addition a maximum price was set for fuel oil and
kerosene (55/- per ton and 3j6d per eight gallons respectively) sold
in Egypt. 99
This arrangement was not to prove an unqualified success.
Egyptian oil production did grow quite quickly. Production of
crude oil rose from 13,000 metric tons in 1913 to 100,000 tons in
1914 to 282,000 in 1918, a figure not surpassed until 1930. The
Egyptian Government received a steady flow of dividends from
OIL AND EMPIRE 121
the company. Yet the joint venture scheme failed to remove the
tension between the two parties. Indeed, future events have
demonstrated that the joint enterprise is rarely a panacea. The
two parties to an agreement need to be of equal strength for it to
be really successful. In recent years governments have been
getting ever-stronger ris-a-ris companies, and it has been argued
that extensive host country participation in international com-
panies will threaten their structure and identity. 100 In the period
before the First World War the problem was the reverse. The
companies possessed such a monopoly over commercial and
technical expertise that few governments were a match for them.
The Egyptian Government certainly found that it could exercise
little control over the activities of the company in which it was a
shareholder. Immediately after the end of the War, it began
complaining both about the prices charged by the company and
the speed of the drilling programme. The company, on the other
hand, found the Government continuing to block its requests for
further prospecting land. 'The experience of the Egyptian
Government', the Under Secretary of State at the Egyptian
Ministry of Finance concluded in April 1920,' is definitely against
the advisability of any shareholding in an oil mining company.
The ability of the Royal Dutch group to manipulate profits
between the numerous companies under its control makes it
impossible for the Government to ensure its obtaining its proper
share of such profits.' 101
* * * * *
The importance of the oilfields of the British Empire before
1914 was out of all proportion to their position in the world oil
industry and the share of total British oil investment which they
attracted. The Empire did not witness dramatic successes such as
that achieved by Weetman Pearson in Mexico, although Burmah
Oil did establish a very respectable, if conservative, oil business in
the Indian Empire. Small and rather unsuccessful British oil
companies searched for oil in the West Indies and Egypt, but
these were largely overshadowed by the Shell Group before 1914.
The Empire did provide the British oil industry with able
personnel; the colonies being second only to Russia as a 'nursery'
of British oilmen. Beeby Thompson was in Trinidad between
1906 and 1913 working for Trinidad Oilfields. A very prominent
British oil geologist, E. H. Cunningham Craig, was the govern-
ment geologist in Trinidad between 1903 and 1907, when he

became the chief geologist of BUTmah Oil. Many of Burmah Oil's
staff were to serve the new, and what was to prove far more
important, British oil enterprise in Persia. Perhaps the most
important of all, it was as Chief Inspector of Mines in Trinidad
that John Cadman first became interested in petroleum.
The State was deeply concerned in colonial oil. The fuel oil
requirements of the Royal Navy gave the Admiralty an interest in
the matter. The various colonial administrations, and the
Colonial and India Offices in London, were concerned to
promote the economic development of their territories, even if
they did only possess policies which now seem extremely elemen-
tary and unsophisticated. The oil companies and these various
levels of government were therefore brought into close contact.
The British oil companies did not receive the unequivocal support
of the State. There was no conspiracy to fleece subject peoples.
British officials were genuinely concerned to see the growth of
infant oil industries and regarded competition as the way to
achieve this aim rather than special privileges for select groups of
British capitalists. However, fears of the great oil 'trusts', and the
Admiralty's desire to see British oil exploited by British compan-
ies, did in time prompt the colonial administrations to consider
ways of assisting the small British oil companies on their
territories. India went farthest in this direction, by excluding all
foreign oil companies from the country after 1905. On the other
hand, the British administrations in Trinidad and Egypt, al-
though not friendly towards the 'trusts', eventually came to the
conclusion that large integrated oil companies were more likely to
develop their oil industries than small competing ones. The Shell
Group, which was less obnoxious than Standard Oil because of its
part-British ownership, was therefore eventually allowed to
participate in the oil industries of both these countries.
There was little in these years which could be described as a
British Government oil policy. This was partly because of the
different levels of government and different ministries involved in
the subject, and partly because oil was still of sufficiently low
priority as not to warrant consistent and strong policies from civil
servants and ministers. Nearly everyone in Government wanted
to see an oil industry established in the Empire, preferably run by
British companies. There was also a widespread suspicion of
Standard Oil and the Shell Group. These desires were not,
OIL AND EMPIRE 123
however, translated into a strong and consistent policy.

Perhaps the final point about these events in the Empire is their
relevance to the making of Anglo-Persian's agreement with the
British Government in 1914, the subject of the following two
chapters. It is clear that neither the negotiations leading up to, nor
the terms of, the A.P.O.C. Agreement were as original or unique
as has been generally accepted. The plot had been acted out in the
colonies before 1914. The pleas for State assistance of small
British oil companies, claiming to be threatened by aggressive
monopolists, had been regularly heard in the colonies before they
were ever voiced by A.P.O.C. Similarly, aspects of the
Government's response to A.P.O.C. were already quite familiar.
The Admiralty had made an oil fuel contract with Burmah Oil
and in return offered that company some protection against the
'trusts'. Moreover, a British administered government had be-
come equity shareholders in an oil company nearly a year before
the A.P.O.C. agreement was concluded.
Notes
l. Economist (5 March 1910).
2. Minute by A. J. Durston, 29 October 1902, ADM I/7676, no 25546/02.
3. F. C. Gerretson, History of the Royal Dutch (London, 1958) voi.IV, p. 90.
4. W. Cohen to H. Loudon, 7 April 1910, SHELL.
5. Paper by M. Pearton, May 1978, Proceedings of the Anglo-Rumanian
Colloquium 1976-8 (Bucharest, 1980).
6. This is a more detailed discussion of the oil industry in India before 1947 in
G. G. Jones, 'The State and Economic Development in India 1890-1947:
The Case of Oil', Modern Asian Studies, 13, 3, (1979). The following
section has benefited greatly from Mr Tony Corley's criticisms of this
article.
7. A. Godley to Lord George Hamilton, 10 December 1901, India Office
Library (IOL), L/E/7/441, no. R & S 3436/00.
8. Jones, op. cit., 359-60.
9. R. W. and M. E. Hidy, Pioneering in Big Business (New York, 1955) pp.
499-501.
10. American Embassy to Foreign Office, 28 August 1902, L/E/7/414, no. R&
s 2609/1902.
II. G. Subramania Iyer, Some Economic Aspects of British Rule in India
(Madras, 1903) p. 124; B. Dasgupta, The Oil Industry in India (London,
1971) p. 209.
12. Government of India to Secretary of State, 23 October 1902, L/E/7 /414,
no. R & S 3141/1902.
13. Ibid.
14. Asiatic Petroleum Company, minutes of meetings, 10 November 1903.
SHELL.
I 5. F. C. Gerretson, op. cit., III, p. 342.

16. Government of Burma to Government of India, 5 September 1904,
L/E/7 /543, no. R & S 43.
17. R. Henriques Marcus Samuel (London, 1960) pp. 390, 482-5, 491.
18. Government of Burma to Government of India, 5 September 1904,
L/E/7 /543, no. R & S 43.
19. M. Samuel to A. Godley, 20 June 1904, L/E/7/528, no. R & S 52.
20. Ibid., Lord Curzon to A. Godley, 4 August 1904.
21. India Office to Viceroy, 3 March 1905, L/E/7/543, R & S 43/1905.
22. Memoirs of C. S. Gulbenkian, SHELL, p. 12.
23. C. Greenway to Secretary of Government of India, 29 July 1903,
L/E/7 /543, no. R & S 43.
24. Ibid., C. Greenway to Government of India, 4 July 1904.
25. Government of India to Secretary of State, 22 December 1904, L/E/7 /543,
no. R & S 43.
26. R. Henriques, Sir Robert Waley Cohen, 1877-1952 (London, 1966) pp.
108, Ill, 117.
27. Waley Cohen to H. Loudon, 3 April 1905, SHELL.
28. Ibid.
29. R. Henriques, op. cit., pp. 122-3.
30. Director of Contracts to Burmah Oil, 24 July 1903, ADM 116/3807,
no. CP 9919/1903.
31. Boverton Redwood ( 1846- 1919) was born in London and studied at
University College School. In 1899 he received an honorary Doctorate of
Science at the Normal University of Ohio. He was knighted in 1905, and
received a baronetcy in 1911.
32. A. Beeby Thompson, Oil Pioneer (London, 1961) pp. 75, 80.
33. Admiralty Oil Committee 1912, evidence of Boverton Redwood, p. 105.
34. B. Redwood, 'The Oil fields of India', Journal oft he Societyofthe Chemical
Industry ( 1890).
35. Memorandum in reference to Memorial of the Burmah Oil Company, 26
October 1901, contained in Messrs Finlay, Fleming and Co. to Chief
Secretary to Government of Burma, 21 November 1901, R & S 2413/1902,
L/E/7/414.
36. B. Redwood to St J. Jenkins, 4 February 1904, ADM 116/3807, no. CP
17576j3826.
37. Report of company-Government meeting, 5 April 1904, no. A.G.OI1,
ADM 116/3807, no. C.P. 17576/3826.
38. E. G. Pretyman to Hon. St. John Broderick, 13 June 1904, L/Ef7/498,
no. R & S 1402/1904.
39. Burmah Oil to Director of Contracts, 2 November 1903, C.P. 17576, ADM
116/3807.
40. Ibid., Admiralty Memorandum, 17 March 1904, no. C.P. 4310/1904.
41. Admiralty to India Office, 25 January 1905, L/E/7/498, no. R & S 2879.
42. Minute on Burmah Oil Memorial, 3 January 1905, L/Ef7/528, no. R & S
43.
43. India Office to Viceroy, 3 March 1905, L/Ef7/S43, no. R & S 43/1905.
44. Pearton, Anglo-Romanian Colloquium, 1978.
45. Secretary of State to Viceroy, 10 March 1905, L/Ef7/498, no. R & S
335/1905.
OIL AND EMPIRE 125
46. For a parallel situation in the armaments industry seeR. C. Trebilcock,· A

"Special Relationship"---Government, Re-Armament, and the Cordite
Firms', Econ. Hist. Rev., Second Series, 19 (1966).
47. Minute of an interview between Cargill and Wallace and Accountant
General, 28 September 1905, L/E/7/543, no. R & S 43/1905.
48. Telegram from Viceroy, 23 October 1905, L/E/7/543, no. R & S 2751/1905.
49. Ibid., copy of Agreement between Burmah Oil and Asiatic Petroleum
Company, 31 October 1905. F. C. Gerretson, op. cit., 211-2. The
maximum price guarantee was regarded as extremely important by the
Government of India.
50. Admiralty- Burmah Oil agreement, 21 November 1905. Minute by
G. Miller, 3 November 1905, ADM 116/3807, C.P. 20392/1905.
51. For an attempt to justify this argument, see Jones op. cit., 369, note 59.
52. Report of Committee on Twinza Reserves, L/E/7/608, no. R & S
1023/1909.
53. Report of the Indian Tariff Board regarding the Grant of Protection to the
Oil Industry, p. 43.
54. Burmah Oil to India Office, 10 November 1905; Government of India to
Government of Burma, 9 January 1907, L/E/7/545, nos R & S 2903/1905
and R & S 247/1907.
55. Evidence of J. T. Cargill to Fisher Commission, 29 October 1912, First
Report, ADM 116/1208, p. 187.
56. Adm. Oil Committee 1912, evidence of Charles Greenway, Q 246.
57. Evidence of J. T. Cargill to Fisher Commission, 29 October 1912, First
Report, ADM 116/1208, p. 187.
58. Memorandum on position of West India Petroleum Company, C.O.
C(olonial) O(ffice) papers, P.R.O., 28/263 no. 43614/1904.
59. Ibid., Admiralty to Colonial Office, 23 March 1904, no. 10411/1904.
60. There is a brief historical survey of the Trinidad oil industry, and of Rust's
activities, in V. C. Mulchansingh, The Oil Industry in the Economy of
Trinidad', Caribbean Studies XI, I (1971).
61. Draft report of the Joint Committee, June 1904, C.O. 885/22, Misc. 284.
62. Admiralty to Colonial Office, 20 July 1904, L/E/7/498, no. R & S
1914/1904.
63. Conference on Oil Matters, 7 November 1910, C.O. 295;461, no. 34505/10.
Standard Oil's use of its control over pipelines was a constant theme in, for
instance, Ida Tarbell's History of the Standard Oil Company (New York,
1904).
64. Trinidad Oilfields to Colonial Office, 2 January 1911, C.O. 884/11, West
Indian no. 183.
65. Ibid., Telegram to Governor, January 1911, no. 29.
66. Conference on Oil in Trinidad, 20 January 1911, C.O. 295/469,
no. 2897/1911.
67. Waley Cohen to H. Loudon, II November 1910, SHELL.
68. Crown Agents to Colonial Office, 27 January 1911, C.O. 295/469,
no. 2897/1911.
69. M. Samuel to Col. Seely, II February, enclosure in no. 37, C.O. 884/11,
West Indian 183.
70. Report of meeting 20 April 1911, C.O. 295/470, no. 11299.
71. Minute by Mr Grindle, 25 May 1911, C.O. 295/469, no. 15025/1911.
72. F. C. Gerretson, op. cit., IV, 271-2.

73. Report by Colonel J. C. Ardagh, 7 May 1886, F.O. Confidential Print,
Egypt January-June 1886, pp. 118-21.
74. R. Henriques, Marcus Samuel (London, 1960) p. 521.
75. F. C. Gerretson, op. cit., III, pp. 236-7.
76. Ibid., III, p. 239.
77. Dr J. Th. Erb was the chief geologist of the B.P.M. He became head of the
Group's Central Geological Department when it was established in
1913.
78. Waley Cohen to H. Loudon, 23 November 1908, SHELL.
79. H. Loudon to Waley Cohen, 21 September 1909, SHELL.
80. Draft letter to Foreign Office, January 1911; Sir Eldon Gorst to Sir Edward
Grey, 24 February 1911, ADM 116/1242, nos C.P. 19993/1910 and C.P.
12624/1911.
81. Ibid., minute by F. W. Black, 28 July 1911, no. C.P. 18365jl911.
82. Minute by Mr Tyrrell, 6 January 1912, F.O. 368/665, no. 1343/490.
83. H. Loudon to Anglo-Egyptian Oilfields, 6 November 1912, SHELL.
84. Evidence of Marcus Samuel to Fisher Commission, 19 November 1912,
First Report, ADM 116/1208, p. 362. R. Henriques, Waley Cohen
(London, 1966) pp. 174-8.
85. Memorandum on Petroleum Mining in Egypt by Department of Mines, 3
June 1912, ADM 116/1242, no. C.P. 18335/1912. For the similar fears of
contemporary governments, see E. T. Penrose, The Large International
Firm in Developing Countries. The International Petroleum Industry
(London, 1968) p. 250.
86. M.S. Abrahams to Anglo-Egyptian, 8 December 1911, SHELL. Mark
Abrahams was the head of the Shell's operations in Egypt.
87. E. H. Cecil to Waley Cohen, 4 December 1912, SHELL.
88. Waley Cohen to H. Loudon, 13 December 1912, SHELL.
89. Memorandum by Waley Cohen to Sir Paul Harvey, 23 January 1912,
SHELL.
90. For the post-1945 disputes about this, see E. T. Penrose, op. cit., pp. 43-6;
T. G. Parry, The International Firm and National Economic Policy',
Economic Journal83, (1973).
91. 13th Meeting of Anglo-Egyptian Directors, 6 March 1912, SHELL.
92. Waley Cohen to Paul Harvey, 18 April 1912, SHELL.
93. W. S. Churchill to Additional Civil Lord, II June 1912, ADM 116/1242,
no. C.P. 17825/12.
94. Ibid., minute by F. W. Black, 18 June 1912.
95. F. Hopwood to Foreign Secretary, 2 May 1913, F. 0. 368/808,
no. 20452/11074.
96. R. Henriques, Waley Cohen (London, 1966) p. 178.
97. E. Cecil to Waley Cohen, 30 January 1913, SHELL.
98. Penrose, op. cit., p. 252.
99. Appendix to 66, Anglo-Egyptian Oilfields Ltd., C.O. 884/12, West Indian
no. 194.
100. E. Penrose, 'International Economic Relations and the Large
International Firm', in E. F. Penrose, Edith Penrose, P. Lyon, (ed.),
Essays in International Relations (London, 1970) p. 132.
OIL AND EMPIRE 127
101. Memorandum by E. M. Dowson on the proposals for the exploration of

petroleum in the Sudan, 10 April 1920, enclosure no. 5, in no. I, F.O.
371/5024, no. E 3945/3548/16.
5 Persian Oil 1900-14
I THE D'ARCY CONCESSION
The British oil investment which held the greatest significance for
the future was in Persia. The discovery of oil in that country not
only marked the effective beginning of the modern oil industry of
the Middle East, but the company concerned was to become the
only one of the seven sisters to be wholly British-owned. The
British Government was far more closely involved in events in
Persia than in Mexico, the other great success story of British oil
enterprise before 1914. Indeed the support of the Government
was an essential factor in the success of the company. It was,
therefore, no coincidence that it was to be the Anglo-Persian Oil
Company, rather than Mexican Eagle, in which the State
eventually decided to purchase a majority shareholding.
The prospects of finding oil in Persia had attracted a growing
number of Europeans from the middle of the nineteenth century
onwards. In 1872 the Shah had granted to Baron de Reuter, a
naturalised British subject, a concession which included a pro-
vision giving rights over the development of all minerals,
including petroleum, for seventy years. This was soon cancelled
by the Persian Government, but in 1889 de Reuter secured a
second concession. He passed this on to the Persian Bank Mining
Rights Corporation, which, however, was a failure. 1 The next
European to become seriously involved with Persian oil was
William Knox D'Arcy. D'Arcy had been born in Britain but
emigrated with his parents to Australia, where he became a
millionaire by exploiting Queensland gold. In 1891 Jacques de
Morgan, a French archaeologist, had gone to Persia to investigate
its oil prospects, and he had been favourably impressed, particu-
larly by the petroleum indications at Chiah Surkh 2 (see Map 5.1 ).
In February 1901 Edouard Cotte, the brother-in-law of one of the
members of de Morgan's expedition and a former secretary to
Baron de Reuter, and General Kitabji, a former Persian Director
128
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MAP5.1 Persia in 1914
of Customs, met D' Arcy, who was immediately attracted by their

suggestion that he should join with them in seeking an oil
concessiOn.
Soon after that meeting D' Arcy, who was never to visit Persia
himself, despatched his secretary, a Mr Marriot, to Teheran to
negotiate for an oil concession. Marriot went to Persia armed
with a formal letter of introduction from the Foreign Office and,
more importantly, a letter of introduction from Sir Henry
Drummond Woolf, the former British Ambassador to Persia, to
Sir Arthur Hardinge, the Ambassador in post, recommending
Marriot to his good offices. Although he had received no direct
instructions from the Foreign Office, Hardinge took the matter
up directly with the Grand Vizier, and this helped to secure a
concession for D' Arcy.
The famous concession from the Shah was signed on 28 May
190 I. D' Arcy was given the exclusive right for the next sixty years
to find, exploit and export petroleum in all of Persia except the
five northern provinces of Azerbadjan, Ghilan, Mazanderan,
Khorasan and Astra bad, which were excluded because of possi-
ble Russian political objections. He was authorised to build
pipelines to the south coast, and granted comprehensive taxation
and customs exemption. D' Arcy was bound to form within two
years a company to implement the terms of the concession, and
when this was formed he was to pay the Persian Government
£20,000 in cash and a further £20,000 in paid-up shares. A
royalty equivalent to 16 percent ofthe annual net profit was also
due to the Persian Government. 3 The terms of the concession now
seem remarkably generous, and in the 1920s they were to become
a source of increasing tension between the British and the
Persians.
The securing of the concession was a case of the British
Government and the oil interests 'using' each other to their
mutual benefit, and to the possible disadvantage of the Persians.
D' Arcy probably owed most of the credit for his success to the
support of the British Ambassador. Sir Arthur Hardinge gave his
support to Marriot as part of Britain's political strategy in Persia.
By 1900 the Russians had established themselves as the most
influential foreign power in Persia, and Hardinge sought to
challenge this influence by supporting British commercial in-
terests such as D' Arcy's.
This remained the main reason for the continued British
PERSIAN OIL 1900-14 131
diplomatic support for D'Arcy. The company acquired an extra

significance after Persia was 'partitioned' between Britain and
Russia in 1907, since it was the only substantial British com-
mercial interest operating in the 'neutral' zone between the British
and Russian zones. 4 When oil was eventually struck in 1908 there
was rejoicing in the Foreign Office as well as in the oil company.
'This discovery of oil', noted one official in July 1908, 'should
bring prosperity to the region and greatly increase our interest in
south west Persia.' 5 The Foreign Office and the oil company were
mutually dependent. The Russians and the vast internal political
problems of Persia at once made it difficult for the oil company to
operate in Persia without diplomatic support and made the
British authorities eager to give such assistance. Coincidentally,
this element of symbiosis between the oil company and the British
Government was strengthened after 1911, when the Persian
company began looking for a market for its fuel oil at the same
time as the Admiralty began searching for a supplier of large
quantities.
There is no evidence that the Foreign Office was concerned
about the commodity D' Arcy was hoping to find. Many British
commercial interests in Persia were supported, and D' Arcy was
given a low priority by officials. In the early years few expected the
enterprise to succeed, partly because of the difficult internal
political conditions of the country. 6 Even in the oil tradeD' Arcy's
Persian venture attracted little attention. The first mention of the
D' Arcy concession in the Petroleum Review came in a translated
article from a Russian trade journal in August 1902. 7
There was a marked distinction between the support given to
D' Arcy by the Foreign Office in London and that given by British
diplomats in Persia. Generally speaking, the 'men on the spot'
took the initiative in supporting the company. This was true of
Hardinge's support for Marriot in 1901. It was also true of the
assistance given by British consular officials later in the decade.
The attitude of the Foreign Office was permissive; it gave ex post
facto approval to its representatives' actions in support of the
company after they had been successful. London, however, did
support its local representatives' policy. 'It seems important',
the Permanent Under Secretary at the Foreign Office, Lord
Cranborne, wrote in 1901 in reference to the D' Arcy concession,
'that we should convince English enterprise that the Foreign
Office is not merely neutral but definitely on its side-we don't
want to back up a rotten concern, so we should take advantage of

a sound one to say pretty things to it.' 8 The Foreign Office itself,
however, deliberately refrained from suggesting courses of action
to the company as it always feared that, in doing so, it would
make itself 'responsible' for the company. 'Responsibility' for a
commercial enterprise was something all ministries looked upon
with horror, at least before 1913.
The British Government was also not prepared to assist a
company in its prospecting for oil. Once the concession had been
gained, the D' Arcy interests had to begin the search for petroleum
on their own initiative. D' Arcy turned to the doyen of British
oilmen, Boverton Redwood. Even before the concession nego-
tiations had been successfully concluded, Boverton Redwood had
arranged for a geologist, H. T. Burls, to go to Persia to examine
the area of Chiah Surkh that de Morgan had reported on so
favourably. Burls' survey generally supported the conclusions
reached by de Morgan. 9 Redwood, on the basis of Burls' report,
recommended that D' Arcy should begin drilling at Chiah
Surkh. 10 In August 1901 D'Arcy engaged a driller, G. B.
Reynolds, who had formerly been with the Indian Public
Works Department, in order to implement Redwood's advice. In
1903 the First Exploitation Company was formed in order to
develop the concession.
II THE INTERVENTION OF BURMAH OIL 1904-5
Oil prospecting was an expensive business, especially when

conducted in difficult terrain several hundred miles from the sea.
By the end of 1903 D' Arcy was in need of further funds. In
December he contacted the Admiralty, probably through the
medium of Boverton Redwood, to warn officials that he had
already spent £160,000 in Persia and that he would be forced to
look abroad for further capital unless the Government could
arrange some assistance. 1 1 D' Arcy meanwhile tried to raise
capital from several British firms and individuals, including Sir
Ernest Cassel and Joseph Lyons and Co., and from the Paris
Rothschilds, all apparently without success. 12
The first reaction of the British Government to D' Arcy's pleas
was characteristically cautious. The Foreign Office consulted
Hardinge about the matter, and although he warned of the danger
of an expansion of Russian influence if the concession passed to
their hands, he did not object to it passing to other foreigners. 13

The Admiralty, however, responded more positively.
Boverton Redwood provided the link between the company
and the Admiralty. He had maintained his interest in Persian oil
after Burls' mission, and in the winter of 1902-3 another of his
geologists, W. H. Dalton, visited the area of Chiah Surkh. When
D' Arcy's financial situation became critical in 1904, Redwood
formulated a scheme for saving the company with the help of the
Admiralty and Burmah Oil. He already had close connections
with both these parties, and during 1904 he was involved in the
negotiations between them over a fuel oil contract. After
persuading D' Arcy to give the British Admiralty the first chance
of saving his Persian oil company, Redwood then put the matter
of Persian oil before the Burmah Oil directors. He subsequently
brought the three parties together by arranging a meeting
between J. T. Cargill, C. M. Wallace, D'Arcy and Pretyman at
the Admiralty. 14 Redwood's arguments convinced the Admiralty
that this was a company worthy of support, and not just another
small enterprise doomed to failure like the West Indian Petroleum
Company. Persia was not, it was true, a politically 'safe' territory,
but Britain could exert a certain amount of influence in the region
and it was located relatively near to India, the military power-
house of the Empire. The most weighty of Redwood's argu-
ments, however, was his prediction that the oilfields would prove
extremely prolific. Pretyman smelt oil, and enthusiastically took
up the cause of preventing the D'Arcy concession falling into the
hands of foreigners. In August 1904 he put Cargill and Wallace in
touch with the Foreign Office, arguing that it was 'most desirable
that this concession should remain in British hands and especially
from the point of view of supplies for the navy of the future'. 15
D' Arcy's interests in Persia had become an 'oil problem' as well as
a diplomatic one.
The reasons for Burmah Oil's willingness to become involved in
Persia have never been fully established. Redwood was certainly
an important influence. His optimistic views on the future of the
D' Arcy concession encouraged Burmah to regard an investment
in Persia as more than purely speculative. It also encouraged the
company to regard Persia as a potential threat if its oil fields ever
fell under the control of some hostile enterprise. Indeed, re-
trospectively Burmah Oil stressed that its motives were primarily
pre-emptive, 16 though it should be remembered that the company
was in an expansive mood in the early 1900s and the Persian

adventure may have been regarded as part of the general policy of
developing new oilfields and diversifying into new products. A
more important factor behind Burmah's intervention in Persia
was the influence of the Admiralty. There is strong evidence that
pressure was exerted on Burmah Oil to save D' Arcy, 17 and since
the company was in need of Admiralty help in India in 1904,
Burmah could not be too unresponsive. The Government,
however, did not make any guarantees about the security of any
investment it undertook in Persia. The Foreign Office made it
clear in February 1905 that although the Admiralty had invited
Burmah Oil to assist D' Arcy, and the company might become a
major supplier of fuel oil to the Royal Navy, it would continue to
regard the company as just another British commercial enterprise
in Persia. No special diplomatic support was promised. 18
Burmah Oil's negotiations with D' Arcy were eventually
brought to a successful conclusion. On 5 May 1905 the
Concessions Syndicate Ltd was formed, with D' Arcy as a
director, to take over the assets of the First Exploitation
Company. D' Arcy was to be repaid part of his expenditure, while
Burmah Oil was to provide a further £100,000 for exploration
purposes. If the oilfields were proved, a company was to be
formed with a capital of £3 million in order to work the
concessiOn.
Burmah Oil's connection with the Persian company was to
prove of considerable value over the following decade. Burmah
provided the Persian enterprise with further capital in 1909, and
by 1913 it had invested £11 million in Persia. It also supplied
management, the most notable example being Charles Greenway,
who became Chairman and Managing Director of the Anglo-
Persian Oil Company (A.P.O.C.). There was a steady flow of
personnel between Burmah Oil and the Persian company,
especially on the technical and geological side of the business, and
this enabled the Persian company to draw upon the long
experience of its adopted parent. Most of the geologists employed
by A.P.O.C.-E. H. Cunningham Craig, Basil F. Macrorie,
S. Lister James-were on hire from or had close links with
Burmah Oil. The plans for A.P.O.C.s first refinery were made by
personnel seconded by Burmah Oil, while two of the chief
technical officers employed by A.P.O.C.-R. G. Neilson and
Andrew Campbell-were from Burmah. Much of the preliminary
PERSIAN OIL I900-14 135
analysis of Persian oil after 1908 was undertaken in London at the

works of the New Oil Refining Process Ltd, a subsidiary of
Burmah Oil. Through their contacts with G. & J. Weir & Co.,
Burmah also handled most of A.P.O.C.s first pipeline con-
struction. The influence of Burmah was also strong on the
commercial side. Shaw Wallace & Co., Burmah Oil's managing
agents in India, provided a variety of services for A.P.O.C. in its
early years. 19 It was characteristic that when A.P.O.C. was
considering how to manage its affairs in Persia, it followed the
Burmah tradition by appointing managing agents, Strick, Scott &
Co., who were to remain as A.P.O.C.s agent until 1922.
III THE SEARCH FOR OIL 1905-8
After the young Persian enterprise had been saved for Britain by
Burmah Oil, the Admiralty's involvement lapsed and the
company's relations over the next few years were again with the
Foreign Office. The Concessions Syndicate reverted to being a
Persian diplomatic problem rather than a British naval fuel oil
supply problem. Force of circumstances, however, led the
Foreign Office into closer contact with the company than had
been the case in the first few years of the concession. This
increased contact was the result solely of Persian factors rather
than the company's potential as a supplier of naval fuel. At the
end of 1903 G. B. Reynolds had gone on an extended tour of the
area covered by the D'Arcy concession, and he was particularly
interested in certain lands in the south west around Maidan-i-
Naftun ('The Plain of Oil'). Subsequently drilling was suspended
at Chiah Surkh and the company moved south. In 1905 drilling
started at Marmatain, and within two years another well was
ready at Maidan-i-Naftun. This was near an ancient fire temple
called Masjid-i-Sulaiman, and when oil had begun to flow
Maidan-i-Naftun was renamed after this temple. Unfortunately,
this area was not only extremely remote but it presented new and
formidable political problems. By the beginning of the twentieth
century the Persian government in Teheran was largely incapable
of exerting any control over the peripheral areas of the country.
Real power in many areas was in the hands of regional rulers,
such as the Sheikh of Mohammerah and the Bakhtyari Khans. 20
The new drilling area of the Concessions Syndicate was in the
Bakhtyari winter pasture area.
From the beginning the Concessions Syndicate sought the

assistance of the Foreign Office in their dealings with the Khans.
The Foreign Office, which was already almost as interested in its
relations with the Bakhtyaris as it was with its relations with the
impotent Persian government, was on the whole willing to be
involved. The first priority of the company was to establish a
working relationship with the Khans. In November 1904
Hardinge suggested to D' Arcy that Mr J. R. Preece, the consul
general at lspahan, should conduct the negotiations with the
Bakhtyaris. 2 1 D' Arcy agreed, and Preece eventually secured a
very favourable agreement for the company. By an agreement
signed on 15 November 1905, D' Arcy was allowed to explore for
petroleum for five years in the Bakhtyari lands in return for an
annual payment of £2000. The Khans agreed to appoint guards
to protect the company's works, presumably from the Bakhtyaris
themselves. If oil was found, the Khans were to get 3 per cent of
the ordinary shares of any company formed to exploit it. 22 The
agreement, however, was not a success. The Khans were united in
little except their rapaciousness, and proved difficult business
partners. The guards provided by the Khans were extremely
unsuitable and the Concessions Syndicate was soon in serious
dispute with the Bakhtyaris.
By September 1907 the tension between the two parties had
become so serious that the Concessions Syndicate had begun to
fear for the physical safety of its employees and for its property.
At the beginning of October D'Arcy visited the Foreign Office
and formally asked the British Government for assistance. 23
Unlike Lord Cowdray, he received it. At D'Arcy's suggestion, the
Royal Indian Marine mail steamer Comet, which was armed with
a small machine gun, was despatched from Baghdad up the
Karun river to Ahwaz. In addition, a force of two British officers
and twenty Indian sowars, under the command of Lt A. T.
Wilson, was sent overland to protect the oil company drillings at
Maidan-i-Naftun. 24
The Comet episode was fated to end in farce. The boat was
unable to sail within four miles of Ahwaz owing to the shallow-
ness of the river at that time of the year, and was soon perched on
the top of a sandbank. Moreover smallpox broke out on board
and the vessel had to be ordered to quarantine at
Mohammerah. 2 5 However, the Indian Guard, the cost of which
was shared equally between the British and Indian Governments,
proved of more value to the company. By January 1908 the

British vice-consul at Ahwaz was able to report that since the
arrival of the Guard a 'quite phenomenal state of tranquility' had
developed. 26
The objective behind the British Government's despatch of the
troops and a 'gunboat' can be misunderstood. The purpose was
not to coerce the Bakhtyari Khans by military force. The function
of the Indian sowars and the Comet was to protect British lives
and property by their 'moral' impact. The importance of 'moral'
influence was repeatedly stressed during discussions at the
Foreign Office. While the oil company tended to press for actual
military force to be used to support their interests, the Foreign
Office never agreed to such a policy. 'Mr D'Arcy should realise',
Sir Edward Grey, the Foreign Secretary, observed in October
1907, that 'the effect of the Comet can only be a moral one and he
must take the chance of its not being great.' 27 The Indian Guard
was despatched with the same purpose in view. If the choice, Grey
reflected, lay between 'sending a large expedition and withdraw-
ing the employees to the coast it should be clearly understood that
the latter is the alternative chosen'. 2 8 In these circumstances the
reason put forward for the withdrawal of the Guard in the spring
of 1909 is not surprising. 'The moral effect of the Indian Guard at
the oilworks', Sir George Barclay, the British Ambassador at
Teheran, told the Foreign Office in April 1909, was now
'declining.' 2 9
However, gunboat diplomacy, even 'moral' gunboat dip-
lomacy, was not the most effective way in which the Foreign
Office supported the oil company. The services performed for the
company by the various British consular officials-Captain
Lorimer, Percy Cox, Arnold Wilson-were of far greater value.
The Concessions Syndicate faced immense difficulties, of which
the task of finding and exploiting oil formed only a part. Oil had
to be found, a pipeline to the coast had to be constructed, and a
refinery had to be built. Virtually all the materials and all the
skilled labour for this had to be imported, and the whole
operation had to be conducted under difficult political
conditions.
In these circumstances, British consular officials performed the
important function of managing some of the company's political
and quasi-political negotiations, thus leaving the company free to
concentrate on oil. By the spring of 1909 A. T. Wilson was
describing himself as 'de facto the Adviser to the oil company on

local matters'. The most important of these matters was relations
with the Bakhtyaris. The company's chief representative in
Persia, G. B. Reynolds, Wilson observed, had 'no assistant to
handle local questions and I am personally undertaking land
acquisition and even arranging to rent buildings for him'. In May
1909 Wilson went to Mohammerah to undertake a preliminary
survey of the land on Abadan island needed by the company for a
refinery. Wilson later wrote that it was on his 'maps that the
company made its decision' where to build a refinery. 30 It was
also consul-general Cox, assisted by Wilson, who conducted the
negotiations with the Sheikh ofMohammerah for the sale ofland
on Abadan.
Yet the importance of the assistance given by the consular
officials should not be exaggerated. According to Arnold
Wilson's memoirs, written thirty years later, he and the other
officials played star roles. In reality the company was not
altogether helpless in political matters. Though he had many
other duties, G. B. Reynolds was involved in negotiations with
local tribes, while the company's medical officer, Dr Young, was
to prove at least of equal value to the consular officials in winning
the confidence of the Bakhtyaris. The business of prospecting for
oil always remained entirely in the hands of the company.
It was precisely in this sphere that prospects were looking as
black by the end of 1907 as they were for Pearson in Mexico at the
end of 1909. The two wells at Marmatain, after being drilled to
depths of 2170 and 1940 feet, proved unproductive and drilling
was suspended. The first well at Maidan-i-Naftun was drilled in
January 1908 on a site selected by G. B. Reynolds. The events
which followed were later to assume pride of place in oil
mythology. In April 1908 A. T. Wilson apparently heard from
Reynolds that the London directors of the Concessions Syndicate
had ordered him to suspend drilling in Persia. Wilson im-
mediately wrote an indignant letter to consul general Cox to
complain about this 'short-sighted decision'. 'Cannot
Government be moved to prevent these faint-hearted merchants,
masquerading in top hats as pioneers of Empire, from losing what
rna y be a great asset?' 3 1 According to the traditional story,
Reynolds delayed action on Burmah's instructions until he
received confirmation. Oil was struck on 26 May 1908 before
confirmation was received.
The question whether the 'faint-hearted merchants' did order

the suspension of operations has never been satisfactorily re-
solved; it was a matter of controversy in the late 1920s when it
became an issue in the conflict on the A.P.O.C. Board between
John Cadman, the chairman, and the Burmah Oil directors.
Cadman recounted how, when Reynolds received 'the cable
telling him to dismantle his drilling rig and move everything away,
he decided to wait for the confirming letter, knowing that this
would give him another five or six weeks. And just before the
Jetter arrived in May 1908-the first of the great gushers of Persia
came in with a roar.' Within a month of Cadman's speech, John
Cargill, speaking as 'the only surviving director of the concessions
syndicate', delivered an angry riposte. It was true, he admitted,
that the 'directors of the concessions syndicate had under serious
consideration the abandonment of the syndicate's operations in
Persia and had made all preparations for that eventuality', but 'no
instructions to finally abandon operations were ever sent to
Mr Reynolds'. 32
The evidence supports Cargill's version of events. Cunningham
Craig's geological report, sent to Burmah in early January 1908,
recommended further testing of the area until oil had either been
conclusively proved or disproved. 33 Burmah seem to have taken
his advice. On 5 May 1908 J. R. Preece, now employed by the
Concessions Syndicate, wrote to the Foreign Office about what
would happen 'if oil is found in the south west, and a company is
formed to work it'. 34 On 14 May the Concessions Syndicate
informed Reynolds that Burmah Oil had advanced sufficient cash
to enable him to continue drilling until he reached 1600 feet. This
letter reached Reynolds on 13 June. 3 5 Oil was in fact struck at a
depth of 1180 feet. There is little doubt, therefore, that the exact
details of Sir Arnold Wilson's account of events were wrong, and
that either Reynolds misunderstood a letter from London or
Wilson misunderstood something Reynolds told him.
The number of different parties then involved in the Persian oil
venture, and the problems of communication between them,
made such misunderstandings very probable. There were, at
different times, strained relations between company and consular
officials in Persia, between them and their respective masters in
Britain, and between the Foreign Office and the Concessions
Syndicate in London. The problem of distance, Jet alone conflict-
ing interests, made these tensions inevitable. 'The position of a
company', reflected Wilson in March 1909, 'which is working

under a concession from one Government (Persian) but depends
on the goodwill of a provincial administration (Arab and
Bakhtyari) and the military and moral support of a third (British
and Indian) with a head office in Glasgow, dealing with the
Foreign Office (in London) and a Foreign Department (Simla)
through local officers (in Persia) is not easy'. 36 Reynolds himself
was in constant disagreement with his management in Britain,
and eventually his contract was terminated by 'mutual consent'.
There was a variety of tensions between the different parties.
The Foreign Office displayed impatience on a number of oc-
casions about what it considered the company's excessive de-
pendence on consular officials. Moreover, the Foreign Office was
unable to divest itself of the conviction that oil companies were
basically unscrupulous, and officials were suspicious of the
motives of the Persian company. In 1909, after the discovery of
oil, the Bakhtyari Oil Company was formed along with the
Anglo-Persian Oil Company to exploit the oilfields of south west
Persia. The Khans were given 3 per cent of the shares of this
company. Consul Lorimer immediately expressed the fear that
A.P.O.C., by switching profits among its subsidiaries, would be
able to ensure that the Bakhtyaris saw very little of the profits
from the oil drilled on their lands. 37 The company was called
upon to give a detailed explanation of its intended practice, and
the Foreign Office found this far from convincing. One official
observed that he was 'still in some doubt whether the Company
meant to swindle the Khans or not'. 38 The British in Persia, as in
the colonies, saw themselves more as protectors of the interests of
the local inhabitants than as supporters of oil companies. The
concern for the Bakhtyaris, however, was not completely
altruistic. If the Bakhtyaris were being exploited, one Foreign
Office official explained to his colleagues, the British Government
had 'not only the right but the duty to intervene for their
protection, not less on moral than on political grounds, since their
friendship is important to us from a general point of view'. 39
The strong flow of oil which emerged early on the morning of
26 May 1908 from the well at Maidan-i-Naftun was the turning
point for the Persian enterprise. Ten days later oil was also
struck by drillers at a second well nearby. Persian oil was a proven
reality. Burmah Oil at once began the formation of a company to
exploit the oilfields. The Admiralty, who had apparently lost
interest in the Concessions Syndicate after 1905, re-emerged as an

interested party and exercised pressure to secure the appointment
of a desirable figure as chairman of the new concern. The position
was first offered to Lord Milner, who declined it, and then to Lord
Strathcona, who had already been mentioned in 1905 as a
possible chairman. In April 1909 Strathcona, then aged 89,
became A.P.O.C.s first chairman. Strathcona later recollected
that he had only taken on the position out of 'Imperial'
considerations, and that Mc~enna, the First Lord of the
Admiralty, had promised him that 'the Government would give
every assistance that they properly could to this company'. 40
IV THE BIRTH OF A.P.O.C
The Anglo-Persian Oil Company Ltd was launched in April 1909

amidst much favourable publicity. The Petroleum World de-
scribed A.P.O.C.s board of directors as 'brilliant', 41 though other
observers felt that the prospectus was more noticeable for what it
omitted than for what it said. A. T. Wilson's private remarks to
the Foreign Office were highly critical, 42 and there can be little
doubt that A.P.O.C.s prospectus did paint a substantially more
optimistic picture than events in Persia warranted.
The problems faced by the company in 1909 were very
substantial. A telling comparison can be made with the Pearson
enterprise in Mexico. When large reserves of crude were located at
Potrero de Llano, Pearson was already well on the way to
possessing an integrated oil business. He had a refinery, pipelines,
oil tankers and distribution outlets. By contrast, when oil was
struck at Maidan-i-Naftun in 1908, the Persian company had
nothing except a large supply of crude. An infrastructure had to
be built in Persia, and this was both time-consuming and capital-
intensive. The first delivery of pipe reached Abadan in December
1909. The pipeline from Maidan-i-Naftun to Abadan was finally
completed in July 1911 and the first cargo of crude oil was
exported from Abadan on 12 May 1912. It was another year
before A.P.O.C.s refinery was operational.
An even more critical problem for the young company was how
to dispose of its products. There were three aspects to the
marketing question-what to market, where to market it and how
to market it. The first problem stemmed from the fact that little
was known about the nature of the newly discovered crude, and
hence of the yields and qualities of products which could be

expected from it. The analysis of the crude, largely done in
London, and the construction of the refinery at Abadan to deal
with that crude, were carried out contemporaneously, a night-
mare situation for a modern oilman. The original plans for a
refinery were made in 1909, and these were based on Burmah Oil's
Syrian refinery at Rangoon. The plans projected merely the
production of two grades of kerosene, the product of which
Burmah Oil had most experience. By 1911, however, the refining
scheme had been modified to cover the production of petrol,
kerosene and fuel oil for river steamers. A few years later such
changes in refinery design would have been the result of a rational
consideration of two factors, the nature of the crude and the state
of the market. Such considerations were not a factor in A.P.O.C.s
haphazard refining plans. Even by 1912 knowledge about Persian
crude was extremely limited. The techniques for analysis of
petroleum were primitive compared to those in use by the 1920s.
The standard procedure of five per cent fractional distillation of
crude was not properly developed until after 1914. Moreover, the
Burmah Oil staff who were presented with the Persian crude for
analysis found it a very different compound from the one to which
they were used. The early chemical analyses, therefore, were very
rough and ready affairs which gave the company little detailed
guidance about the commodity with which its refinery would
soon be expected to deal. Boverton Redwood, for instance,
produced an elementary analysis at the beginning of 1909, but it
was extremely general and limited to observations on such
matters as sulphur content and specific gravity. 43 Within a few
years, the company's petrol, kerosene and fuel oil were all to give
A.P.O.C. severe technical problems and to show how much still
remained to be discovered about Persian crude.
The question as to where to market A.P.O.C.s products was
also difficult. The local market in southern Persia was fairly
substantial and, although dominated by Standard Oil, easily
capturable by A.P.O.C. By 1913 A.P.O.C. was selling some
180,000 cases of kerosene per annum in Baghdad, 40,000 at
Mohammerah, 70,000 at Basra and 400,000 at Bushire and other
ports, with limited quantities of fuel oil being supplied to a few
river steamers. 44 This local market, however, was far smaller than
Cowdray possessed in Mexico, and it clearly would not take more
than a small proportion of A.P.O.C.s prospective large supply of
crude. India was the nearest large foreign market, the equivalent
to Cowdray's Latin America. It was a vast market for kerosene,
and Burmah Oil had an established distribution organisation and
excellent local knowledge of the market. Also transport costs
from Persia were low. Burmah Oil did have a restrictive
marketing agreement with the Shell Group, but the company
expressed a willingness to break it if Persian oil was allowed into
India duty free. 45 This was the problem. Persian oil was subjected
to the same import duty as other foreign oils, and was thus made
too expensive for the Indian market. As long as the Government
of India refused to grant Persian oil exemption, there remained
only the markets of the eastern hemisphere, and these were
already dominated by the well-entrenched organisations of the
Shell Group and Standard Oil.
As it was, there remained the problem of how to market
A.P.O.C.s products. Even by 1914 A.P.O.C. entirely lacked the
requisite downstream capacity to market its own products. It
possessed neither a tanker fleet nor a distribution organisation in
overseas countries. Burmah Oil could not help in either direction.
After the 1905 agreement with Shell, it marketed almost entirely
within India. Burmah had operated a tanker fleet since 1899, but
its five tankers were exclusively engaged in carrying kerosene
between Rangoon and the principal ports in India. The alter-
native facing A.P.O.C. was to charter tankers to carry its
products overseas, yet this was exceptionally difficult since, at the
same time as Persian oil was coming on stream, tanker freight
rates were soaring to new heights.
By 1912 A.P.O.C. found itself in the paradoxical position of
possessing excellent medium-term growth prospects, based on its
vast reserves of crude oil, together with extremely adverse short-
term prospects, owing to its lack of a downstream capacity
commensurate with its oil supplies.
A.P.O.C. was forced to turn to the company which possessed
the worldwide distribution network it so badly lacked, the Shell
Group. In March 1912 talks began between Charles Greenway
and Waley Cohen. It is clear that A.P.O.C. needed Shell. It was
less clear that Shell needed or wanted A.P.O.C. The early
activities of D' Arcy passed unnoticed by Shell management. In
January 1909 the Asiatic Petroleum Company considered the
possibility of entering Persia as marketers of imported crude. 'It
seems to us that there should be large possibilities in Persia', an
official in London wrote to The Hague in January, but 'at the

present time no one appears to know anything about the trade of
the country. ' 46 When news of the prolific Persian fields eventually
reached the Group, consideration began to be given to securing
some control over production. By March 1912 the Group's
chemists had conducted a preliminary analysis of Persian crude,
and the results, which included the belief that 25 per cent water
white kerosene, a high quality product, could be obtained from
the crude, were considered generally favourable. 47 At the very
least Shell had no wish to see this supply fall into the hands of its
rivals. 48 Considerable relief was felt when the negotiations
between Shell and A.P.O.C. were brought to a successful
conclusion in October 1912. 'I think', Waley Cohen wrote to The
Hague in November, 'the situation of these people, apparently
with very large supplies, made them rather a serious menace in
the East. ' 49
The marketing agreements between A.P.O.C. and the Asiatic,
which were to become a major bone of contention in the murky oil
politics of the First World War, were signed on the 15 October
1912. A.P.O.C. agreed to supply the Asiatic with crude oil, at an
agreed monthly rate of collection, and all its petrol and kerosene
production other than that required for 'local' markets (Persia,
Mesopotamia and Arabia) for a period often years. 50 During the
following years A.P.O.C. was to talk incessantly about the 'Shell
menace' and about how unreasonable these agreements were; it is
thus worth emphasising that the Persian company was very
anxious to make these arrangements in 1912. It regarded Shell not
so much as a menace, more the indispensable solution to an acute
short-term marketing problem.
V A.P.O.C. AND THE BRITISH GOVERNMENT 1912-14
There was, nevertheless, little affection between Shell and

A.P.O.C. even in 1912. Apart from any purely commercial
considerations, considerable personal antagonism between their
respective managements was already apparent. Although Charles
Greenway had recently co-operated with Shell in Trinidad, he
never reconciled himself to the Shell Group in the way his former
Burmah Oil colleagues, such as J. T. Cargill, were able to do. The
fact that Greenway controlled vast supplies of crude oil while
Cargill faced apparently dwindling reserves was an important
factor in this divergence of attitudes. Greenway was determined

to maintain the independence of his company, and in particular to
keep it out of the clutches of the Shell Group.
If these objectives were to be attained, A.P.O.C. clearly had to
find a market for at least one of its products which was outside the
control of Shell. It was for this reason that one major by-product,
fuel oil, was excluded from the Asiatic agreement. Fuel oil held
several advantages for the company. Prices for the product rose
rapidly after 1911 owing to rising demand from the world's
railways and navies. A.P.O.C.s predominantly paraffin mixed-
base crude produced a residual after the kerosene and petrol
fractions had been removed which could apparently be readily
used as a fuel oil. Such paraffinic oils could be easily burnt
without smoke, a primary military requirement, unlike asphalt-
based oils which tended to give much trouble to anyone trying to
get clean combustion. The comparative ease in production
contrasted markedly with A.P.O.C.s kerosene and petrol, which
had to be treated for considerable deficiences in their odour and
colour. 51 The greatest advantage of fuel oil, however, was that
there existed a potentially vast market for it which would remain
forever outside the control of the Shell Group. That market was
the British Government.
The British Government was a prospective purchaser of fuel oil
in two capacities, as the ultimate controller of the Indian railway
system and as the possessor of the largest navy in the world.
Charles Greenway, who by now was the main director of
A.P.O.C. policy, at first attempted to break into the Indian
railway market. In March 1912 the company made tentative
enquiries about the possibilities of the railways of western India
converting to fuel oil. The scheme made economic sense, for most
of India's coal was produced on the eastern side of the country.
Yet the conversion of the Indian railway network from coal to oil
would of necessity take years to implement, and Greenway
always regarded an Indian railways contract as a second-best
arrangement, and indeed as a kind of 'backdoor' approach to an
Admiralty contract. In November 1912 he made a characteristi-
cally devious proposal that a contract should be ostensibly made
by the Government of India for the State railways, but that 'the
Indian Government might make an arrangement with the
Admiralty to give them a call on as much of the oil contracted for
as the Admiralty might require in times of peace, and in times of
war on the whole quantity'. Such a scheme, Greenway thought,

'would overcome ... the necessity for any direct reference to
Parliament in connection with this question. ' 52 As it happened,
however, A.P.O.C. was able to secure an Admiralty fuel oil
contract several years before it secured one for the Indian
railways. Despite urgent pleas from the Admiralty to the
Government of India for a quick decision on the matter, the
Indian authorities insisted on examining the whole matter of the
use of oil fuel on Indian railways with meticulous care. Early in
1913 it was decided to have a thorough trial made of oil fuel
on the Kotri- Karachi section on the North Western Railway,
but these trials were still being conducted in the summer
ofl916. 53
Greenway always regarded the Admiralty as the most promis-
ing market. The Admiralty had involved itself in the Persian
company's affairs in 1904/5 and in 1909, and on both occasions
the question of the company's future role as a supplier of fuel oil
to the Royal Navy held a central place in the discussions.
Greenway made considerable use of these precedents in his
negotiations with the Admiralty after 1912, though since a strong
departmental memory and consistency of policy were not the
Admiralty's most notable characteristics, the argument carried
less weight than one might have expected. The Admiralty's
attraction to A.P.O.C. was not merely historical. The Royal
Navy's potentially large consumption of fuel oil was naturally a
magnet to any oil company. A more important short-term factor
was that the Admiralty could supply for itself the downstream
facilities which A.P.O.C. so noticeably lacked.
Greenway made approaches to the Admiralty about the
possibilities of a large supply contract even before the Abadan
refinery was completed. In December 1911 he tried to elicit from
the Director of Naval Contracts estimates of likely naval fuel oil
consumption in the East over the forthcoming years. 'The point
of my question is', Greenway explained,' that the Anglo-Persian
Company would doubtless be able to supply the whole of the
requirements, whatever they were. ' 54 By the time Greenway gave
evidence before Fisher's Royal Commission a more specific
proposal had been formulated. He offered a contract for 500,000
tons of fuel oil per annum for a 15-20 year period. A.P.O.C.s
directors, Greenway observed, had always 'had the belief that
when the Company came to a producing stage the Admiralty
would desire in some form or another to exercise control over the

field'. 55
Unfortunately A.P.O.C. needed more than just a fuel oil
contract. A large injection of fresh capital was also required in
order to enable the company actually to produce the large
quantities of fuel oil it hoped to sell to the Admiralty. The
development of the Persian oilfields proved a capital-intensive
venture, and by December 1912 A.P.O.C. had exhausted its
working capital. 56 The labour costs of the venture were low. In
August 1914 A.P.O.C.s staff in Persia totalled only 18 Europeans
and 876 Persians. However, heavy capital expenditure was
required for essential equipment and on the cost of transporting
that equipment from overseas to the interior of Persia. Both of
these costs were substantial. Sixty miles of6 inch pipe and 80 miles
of8 inch pipe had to be purchased from the United States at a cost
of £83,000. In 1913 the company estimated that the average
transport cost of all goods from Mohammerah to Maidan-i-
Naftun was 162/- per ton. By the summer of 1913 A.P.O.C. had
spent £900,000 on the works at Maidan-i-Naftun, Mohammerah
and Abadan and on the pipeline. 5 7 Yet if the company was to
become a naval contractor even more capital had to be raised. 'In
order to produce 500,000 tons of fuel oil per annum,' Greenway
told the Royal Commission on Fuel and Engines in November
1912, 'we should have to spend two millions in further developing
the field and in putting down additional pipelines.' 58
The £2 million was the minimum capital required by the
company if it was to become a viable, even partially integrated, oil
enterprise. The two largest items of expenditure were £600,000 on
refinery extensions and£ 400,000 on new pipeline. The remaining
£1 million was to be spent on additional tugs and barges, further
geological exploration, a deep water port and £200,000 on a
projected tanker company. 59
The request for Government financial assistance became an
integral part of A.P.O.C.s negotiations with the Admiralty.
Greenway was characteristically imaginative about the means by
which this State support could be given. Three broad categories of
suggestions were made. First, that the Government should
guarantee the interest at 4 per cent on the £2 million fresh capital
required over a certain period. Ten years were regarded as a
minimum. Secondly, that a Government subsidy of £100,000 a
year should be paid to the company by means of advance
payments on a naval fuel oil contract. Thirdly, there was a

proposal for a straightforward State capital investment in the
company.
The need for Government finance was so urgent because
A.P.O.C. was unable to raise funds from the only two other
sources, Burmah Oil and the capital markets. Burmah Oil was the
obvious source of extra finance for A.P.O.C., as it had already
subscribed most of the new capital in 1905 and 1909. By 1912,
however, Burmah was reluctant to lend further sums to its Persian
offspring, as it was preoccupied with the search for new oilfields in
India. In February 1913 it attempted to secure exploration rights
in Baluchistan, a territory safely within the Indian Empire and
thus able, if oil was discovered, to supply Burmah's kerosene
markets. 60 In July 1913 Burmah even refused to guarantee the
cash advances the Government proposed to make to A.P.O.C.
Burmah Oil's reluctance to supply extra capital was the partial
consequence of the growing divergence of opinion between the
management of the two concerns. This should not be exag-
gerated. There was still considerable co-operation between the
two companies, and not merely in the technical side of the
business. They tended, for instance, to use each other in their
special pleading to their respective governments. Burmah Oil told
the Government of India that if it raised duties on foreign oils it
could supply all oflndia's needs with Persian oil. A. P.O. C. hinted
to the British Government that if it succumbed to Shell one of the
consequences would be that Burmah Oil would soon follow, and
that would eventually lead to a large rise in kerosene prices on the
domestic Indian market. Yet the management of the two
companies was growing apart. Cargill and his Burmah Oil
colleagues became increasingly averse to risks as they worried
about their company's long-term future. One consequence of this
was their willingness to accommodate the Shell Group.
Greenway, however, had moved far away from the parochial
world of Indian oil. He and his colleagues negotiated at the
highest level with the Admiralty over fuel oil contracts and with
the Foreign Office over Mesopotamia. This new status, plus the
unique concession in Persia, gave Greenway the confidence in his
company and the ambition to build it up, which Burmah Oil's
directors lacked.
The British capital markets were also unlikely to be generous
suppliers of capital. A.P.O.C. did not reach the dividend-paying
stage until after the outbreak of the War, and after the failure of
the 'Maikop boom' the stock markets were wary of speculative oil
ventures. The Company also operated in an 'unpopular' country
for British investors. In 1903 it was reported that British capital
would not flow into Persia without the guarantee of the British
and Indian governments, 61 and this state of affairs did not
markedly change in the following years. Hence the significance of
Greenway's requests that the British Government should guaran-
tee any large loan A.P.O.C. attempted to raise.
By 1912 A.P.O.C. needed, if it was to remain independent from
Shell, both a substantial State fuel oil contract and a large
increase in capital which could probably only be supplied by the
State. It also needed further support from the Government in the
shape of strong diplomatic support to prevent Shell establishing
itself in neighbouring Mesopotamia and, more importantly, to
enable A.P.O.C. to establish itself there instead.
There had been many reports on the oil potential of
Mesopotamia even before the turn of the century. The Ottoman
government was well aware that there was something valuable
under the soil of the region, and in the late nineteenth century the
revenue from oil found in the provinces of Mosul and Baghdad
was placed directly under the Sultan's Civil List. The Deutsche
Bank's Anatolian Railway Company had been the first European
enterprise to secure a concession including oil rights in the region,
in 1888. After D'Arcy had secured his concession in Persia, he
also became interested in neighbouring Mesopotamia, and sent
an agent to Constantinople in order to secure a concession. There
followed a number of years of fruitless negotiations between
competing oil interests and the Sultan's government, with the
Persian company receiving spasmodic British diplomatic sup-
port. In 1909 the Shell Group joined the scramble for
Mesopotamian oil. 62
The hitherto tedious and unproductive Mesopotamian oil
negotiations entered a new phase in the summer of 1912, with an
event which was to act as a catalyst in increasing the urgency of
A.P.O.C.s desire for British Government assistance. In August
1912 the Foreign Office learned that a new and powerful company
had been formed to secure a Mesopotamian oil concession, the
Turkish Petroleum Company (T.P.C.). The T.P.C.s members
were the British-owned National Bank of Turkey, the Shell
Group and the Deutsche Bank. The Foreign Office forwarded this
news to Charles Greenway, who immediately interpreted it as a

flank attack by the Shell Group on A.P.O.C.s Persian concession.
If Shell secured the Mesopotamian oilfields, Greenway informed
the Foreign Office, it 'will have achieved its object and the
A.P.O.C. will be obliged to come to terms because the
Mesopotamian oil supply will be overwhelming'. 63 The turning
of this 'flank attack' became a primary object of A.P.O.C. policy
in late 1912 and early 1913.
A.P.O.C. was in need of all three things which an oil company
might expect from the British Government-a market, money
and diplomatic support. It was for this reason that Greenway
sought from the Admiralty a 'closer relationship than that of
temporary independent buyers and sellers'. 64 The company's
long-term future could only be secured by such an alliance with
the State. A.P.O.C. was fortunate that in general its aims
coincided closely with those of the Government. The Admiralty
did require large quantities of fuel oil. The Foreign Office, for
political reasons, was reluctant to see what had become by then
'the most important British concession in Persia ... pass under
foreign control'. 65 There was not, however, a complete identity of
aims between the two parties. This meant that while the company
had a relatively coherent bargaining position and a clear idea that
all the various issues were interrelated, the British Government,
with its lack of any departmental co-ordination on oil matters,
was in no such happy position. A.P.O.C. was unlucky that while
the Admiralty was concerned with fuel oil the Foreign Office gave
diplomatic support. In addition, no ministry was very en-
thusiastic about financially committing themselves to an oil
company, and the Admiralty in particular was initially very
hostile to the proposal.
These factors meant that the negotiations between the
Government and A.P.O.C. were long and drawn out. A.P.O.C.s
problems seemed to get worse as each month passed. The
company's production of crude steadily mounted, even though
output was restricted, and this made the need for a fuel oil
contract and extra capital ever more urgent. A production of
42,000 tons in the six months from July to December 1912
increased to 95,000 tons in the following six months. 66 In
December 1912 A.P.O.C. warned the Foreign Office that stocks
of liquid fuel were 'rapidly accumulating', and that it was urgent
that a sales outlet was found for them. 67
Under these circumstances Greenway sought to push the

Government into a quick decision to support A.P.O.C. His main
weapon was the 'Shell menace'. He was an experienced player of
the 'Shell menace' card, and this stood him in good stead except
with the Indian authorities, who after their experience of Burmah
Oil were less gullible than the Foreign Office and the Admiralty.
The 'Shell menace' argument proceeded in three main stages.
First, Greenway maintained that A.P.O.C. was in imminent
peril of being totally absorbed by the Shell Group. 'Ever since the
company was formed', Greenway told the Foreign Office in
October 1912, 'the Shell Combine has made strenuous endeav-
ours to secure control of, or a controlling interest in, it.' 68 In
December 1912 Greenway reported that the Burmah Oil directors
in Glasgow had been approached by Shell with a view to that
company buying Burmah's holding of A.P.O.C.s ordinary sha-
res.69 Unless A.P.O.C. secured the Mesopotamian concession
and the proposed Admiralty contract, A.P.O.C. told the Foreign
Office in June 1913, it would be impossible for them to 'maintain
our independence'. 70 Greenway, therefore, sought to maintain an
atmosphere of crisis during his negotiations with the
Government, insisting that only two courses of action were open
to it-to help A.P.O.C. or to see that company fall to Shell.
The second stage of A.P.O.C.s case was to point out the dire
consequences that would follow to the Government if the
company was absorbed by Shell. The threat to the Admiralty,
A.P.O.C. insisted, was that Shell was aiming at a monopoly ofth~
world's oil fuel supplies, and once that was achieved it would use
its market position to force up prices. This was the point of some
correspondence between Waley Cohen and Greenway and
Cargill in October 1912 over the question of fuel oil, which
A.P.O.C. had printed and circulated to the Foreign Office. 71 This
purported to show that Shell sought to control all A.P.O.C.s fuel
oil output and that Greenway was frantically striving to maintain
his right to sell to the British Government. Although the
correspondence reads as if it had been deliberately orchestrated
by Greenway with a view to later showing it to the Government, it
convinced the Foreign Office, and the point was driven home
during Greenway's evidence to Fisher's Royal Commission. Shell
were working, Greenway told the Commission, 'in the direction
of securing a monopoly of Oil Fuel for the whole world'. If the
Admiralty was threatened with 'monopolists', the Foreign Office
was presented with the spectre of an expansion of 'foreign'

influence in Persia and Mesopotamia. Greenway pointed out that
Shell were 'foreign', this time stressing their Dutchness rather
than their Jewishness. Moreover, he worked hard to link Shell
directly with Britain's great international rival, Germany. Not
only was Holland very susceptible to German political pressure,
but Shell's alliance with the Deutsche Bank in the T.P.C. enabled
Greenway to make a direct connection between Shell and the
Germans. Control by Shell, Greenway stated, meant control by
the Royal Dutch, which meant 'according to the latest infor-
mation that is before us ... that we should become, through the
Royal Dutch Company, under the control of the German
Government itself. 72
The third stage of Greenway's argument was to state that it was
in A.P.O.C.s best interests to join with the Shell Group. The
company, however, claimed that it did not look at matters solely
from a commercial point of view, but possessed a patriotic
determination to do its best for the Empire. The presence on
A.P.O.C.s Board of such 'patriotic' figures as Lord Strathcona
and Sir Hugh Barnes, a member of the Council of India, was
emphasised to the Government. 'This may be somewhat difficult
to believe of financiers,' Greenway wrote to the Foreign Office,
'but it is true-the Imperialist element on our Board being
... very strong.' 73 It was not, however, totally self-
sacrificing, for A.P.O.C. argued that it should get something in
return for its patriotic resistance to Shell. 'If we join hands with
the Shell', Greenway told the Royal Commission in November
1912, 'we shall make a very large sum of money and will be a very
prosperous concern; and if we refrain from doing that we want a
quid pro quo in some shape or form-we want a guarantee and a
contract that will at any rate give us a moderate return on our
capital.' 74
Greenway's case was, like the Burrnah Oil campaign of 1903-5,
a distortion of the true situation. Subsequent events were to
disprove the allegations about Shell's susceptibility to German
influence. Greenway's claim that there was an imminent threat of
A.P.O.C.s absorption by Shell was fallacious. There was indeed
tension between the two companies after 1912, particularly over
the enforcement of the Asiatic contract. Shell complained
regularly about the quality of the kerosene and benzene delivered
to it under the terms of that contract. Persian kerosene, Shell
officials complained, deposited on combustion an excessive film

on the glasses of lamps in which it was burnt. A.P.O.C.s product,
however, shared this defect with many of the world's kerosenes,
including even Anglo-American's high quality 'Snowflake' grade,
and most of the controversy centered on A.P.O.C.s petrol. In
order to secure high volatility, the terms of the Asiatic contract
dictated that Persian petrol should have the low specific gravity
of 0. 720. Unfortunately, this proved very difficult for the A bad an
refinery to meet, especially during the hot summer months when
progressive evaporation of the volatile light hydrocarbons pre-
sent as the petrol passed through the refinery tended to cause the
specific gravity to rise. As a result, many shipments reaching
Britain were in excess ofO. 720 specific gravity. Even more trouble
was given by the objectionable odour Persian petrol was found to
have, a satisfactory solution to which was not found until
A.P.O.C.s Sunbury Research Centre developed the hypochlorite
process. The conflicts between the two companies over these
matters were increased by the fact that there was often no
standard measure of many of the items, such as sulphur content,
specified in the contract. But all this was not a question of an
aggressive Shell attempting to harass A.P.O.C. At most Shell had
sought to keep A.P.O.C. to the strict terms of the contract which
it had voluntarily signed, before the qualities of Persian crude
were fully known.
The Shell Group were not planning the imminent destruction
of the independence of A.P.O.C. It had a rather different aim in
view. 'I hope', Waley Cohen wrote to H. Loudon in February
1913, 'that some day or other the Anglo-Persian may offer us to
come into their company and take over the management,
therefore I am very anxious to impress them with the much better
way in which we can manage the refining and treatment of their
oil than they can themselves.' 7 5 Shell sought not to bully
A.P.O.C. into submission but to establish the kind of close
marketing agreement it had with Burmah Oil, an aim which was
reasonable enough given the interlocking directorships between
A.P.O.C. and Burmah Oil. The possibility of a merger was a
desirable long-term aim.
Ironically, given Greenway's grossly exaggerated stories about
the Shell menace to A.P.O.C., there was indeed a real Shell threat
facing the company. It came from a direction that Greenway
never seems to have considered: Russia. Russia had continued to
export large quantities of kerosene to Persia even after the

setbacks of 1904/5. The discovery of oil in south west Persia posed
an obvious challenge to this trade. It was consequently also a
challenge to the Shell Group, which at that time was rapidly
expanding its stake in Russian oil. Early in 1914 Deterding
discussed with Ernest Grube and Shell's other Russian executive
whether domestic Persian oil production would seriously damage
Russian exports. Grube felt that the deplorable internal transport
system in Persia would keep Russia's north Persian business
relatively safe. 76 The growing Persian production, however, soon
prompted a more serious discussion of the problem. In 1916 news
was received in London of the grant by Persian ministers of an oil
concession in the five northern provinces excluded from the
D' Arcy concession, to a Russian, A. Khostaria. Deterding was
prompted into action by this news, and he instructed one of the
Shell Group's companies, the Schibaieff Petroleum Company, to
'get into touch with the proper people as quickly as possible and
see what can be done' about obtaining a concession for Shell in
Persia. The company was authorised to spend up to 10,000
rubles on the matter. 77 Fortunately for A.P.O.C., the Russian
Revolution prevented what could have been a major Shell
incursion into northern Persia. A.P.O.C. itself purchased the
Khostaria concession after the Revolution for £100,000, only to
have it cancelled after the Russo-Persian Treaty of February
1921.
Whether the 'Shell menace' was real or not, however,
Greenway's use of it played a very substantial part in finally
persuading the Government to make an agreement with A.P.O.C.
On 20 May 1914 an agreement was signed between the
Government and A.P.O.C., and on 17 June the Anglo-Persian Oil
Company Bill was introduced into Parliament. It received the
Royal Assent on 10 August. Under the terms of the Bill, the
Government agreed to subscribe £2.2 million to the company's
capital. In return it was to be allowed to appoint two ex-officio
directors with powers of veto over the company's decisions. The
circumstances in which his veto would be used were specified in a
letter sent by the Treasury to A.P.O.C. on 20 May. The
Government was allowed to exercise a veto over matters concern-
ing the Admiralty fuel oil contract, foreign and military policy, or
the independence of the company, but not over the company's
commercial affairs.
As part of this deal, a long-term naval fuel oil contract was also
signed. The company agreed to supply some 6 million tons of oil
to the Admiralty over the next twenty years, at a price of 30/- per
ton, on which a rebate would be granted up to a maximum of IOf-
a ton in proportion to the surplus profits of the company. 78
The Mesopotamian affair was also brought to a successful
conclusion for the company. The scheme for a purely Anglo-
German monopoly over the Mesopotamian oilfields was not
implemented, but the final agreement worked out during a
meeting of all the parties at the Foreign Office on 19 March 1914
was most favourable to A.P.O.C. The Foreign Office Agreement
gave the company a 47! per cent share in a reconstituted T.P.C.
The Deutsche Bank received 25 per cent, shell 22! per cent and
Calouste Gulbenkian 5 per cent. After this agreement had been
reached, the British and German Governments exercised con-
siderable diplomatic pressure on the Turkish Government to
grant the company a concession. On 28 June the Grand Vizir
wrote a formal note to the ambassadors of the two countries,
promising to do this. 79
By June 1914 the directors of A.P.O.C. had reason to feel well
pleased with themselves.
* * * * * *
The discovery of oil in Persia in 1908 was one of the most
significant events in the history of British oil enterprise before
1914. It had been, even more so than Pearson's adventure in
Mexico, a considerable drama, with the oilmen doing battle with
both the local inhabitants and the desert. There was, however, no
great entrepreneurial figure in Persia to compare with Weetman
Pearson. William D'Arcy never went to the country, while the
greatest contribution of Charles Greenway to the success of the
enterprise was his bargaining skill with the British Government.
The Government had been involved with the company from
the start. The support of the British Ambassador had played an
essential role in securing the original concession. The Admiralty,
contemplating the possibility of Persian oil supplying the Royal
Navy, had saved the company from bankruptcy in 1905 by
arranging for financial assistance from Burmah Oil. Indian
troops had protected the early drillings of the company. By 1912,
however, it was clear that much greater support would be
required if the small British company was to retain its inde-
pendence. A.P.O.C. lacked a distribution network for the vast

supplies of crude it possessed. In 1912 the company was forced to
make a marketing agreement with the Shell Group for most of its
products. Only the Government could preserve its independence,
by providing a secure outlet for its fuel oil production, substantial
sums of money for further development, and diplomatic support
in neighbouring Mesopotamia. Remarkably, by the spring of
1914 A.P.O.C. had secured all three of these from the State, and
its future seemed guaranteed.
Notes
I. R. L. Greaves, 'British Policy in Persia 1892-1903', I, Bulletin of the School
of Oriental and African Studies (1965) 43-4.
2. Chiah Surkh was then on the Persian side of the Perso-Turkish frontier, but
was transferred to Turkey by the decision of the International Frontier
Commission of 1913-14.
3. There is an English translation of the concession in J. C. Hurewitz,
Diplomacy in the Near and Middle East (Princeton, 1956) vol. I, p. 249.
4. The Anglo-Russian Convention of 31 August 1907 divided Persia into
British, Russian and neutral spheres of influence.
5. Minute by Sir Charles Hardinge, the Permanent Under Secretary, 29 July
1908, F.O. 371497, no. 26158;414.
6. For the pessimistic assessment by the Viceroy of India, Lord Curzon, in
1902 of the chances of any British commercial enterprise operating
successfully in Persia, seeR. L. Greaves, op. cit., II, 297. Sir A. Hardinge, A
Diplomatist in the East (London, 1928) p. 278, described the gaining of the
concession as his 'first important duty', but this was surely a retrospective
opinion.
7. Petroleum Review (30 August 1902).
8. Minute by Lord Cranborne, and the letter to Mr D'Arcy, July 1901, F.O.
60 731.
9. Reports by H. T. Burls to Boverton Redwood on Persian Oilfields, 13, 20
and 27 July 1901. Printed in First Interim Report of the Admiralty
Commission on the Petroleum Resources of the Countries Adjoining the
Persian Gulf, 28 November 1913, Enclosure I to Appendix 9. ADM
116/3806, no. CP 12053/1914.
10. E. W. Owen, Trek of the Oil Finders (Tulsa, 1975) p. 1254.
II. Foreign Secretary of State to Viceroy, 7 December 1903, F.O. 60 7~ I.
12. Ibid. Draft letter to Sir A. Hardinge, 12 March 1904.
13. Ibid. Telegram from Sir A. Hardinge, 24 December 1903.
14. J. T. Cargill's speech at the Annual General Meeting ofBurmah Oil in 1919.
Petroleum Times (28 June 1919).
15. E. G. Pretyman to Sir Eldon Gorst, 10 August 1904, F.O. 60 731.
16. J. T. Cargill's speech at the Annual General Meeting ofBurmah Oil in 1909,
Petroleum Review (22 May 1909). R. W. Ferrier, 'The early management
organisation of British Petroleum and Sir John Cadman', in L. Hannah
(ed.) Management Strategy and Business Development (London, 1976)

p. 133.
17. Evidence of Charles Greenway to Fisher Commission, 19 November 1912,
First Report, ADM 116/1208, p. 335. Evidence of Lord Strathcona to Adm.
Oil Committee 1912, p. 97.
18. Foreign Office to Boyd and Miller, 24 February 1905, F.O. 60 731.
19. Sir Harry Townend (ed.) A History of Shaw Wallace and Co., and Shaw
Wallace and Co Ltd. (Calcutta, 1965) pp. 46, 107, 135.
20. The very complicated internal politics of the Khans, and their relations with
the British Government, are examined in G. R. Garthwaite, 'The
Bakhtiyari Khans, the Government of Iran and the British 1846-1915',
International Journal of Middle Eastern Studies ( 1972).
21. W. K. D'Arcy to Foreign Office, 15 June 1905, F.O. 60 731.
22. For the terms of the agreement see Enclosure 3 in no. I, report on
negotiations with the Bakhtyari Khans, F.O. 371 104, no. 2478/1588.
23. W. K. D'Arcy to Sir C. Hardinge, 6 October 1907, F.O. 371 306, no.
33524/5269.
24. Ibid., Government of India to Mr Marling, 12 October 1907; India Office to
Foreign Office, 18 October 1907, F.O. 371 306, nos 34166/5269 &
34530/5269. Sir Arnold Wilson, South West Persia: A Political Officer's
Diary 1907-1914 (London, 1941) p. 18. Arnold Talbot Wilson ( 1884-1940)
was British Consul to Mohammerah 1909-11 and Acting Civil Com-
missioner in Persian Gulf March 1918-0ctober 1920. In 1921 he joined
A.P.O.C., and was appointed joint General Manager of Strick Scott in
Persia. In 1924 he was transferred to London as General Manager of the
D'Arcy Exploration Company.
25. Mr Marling to Sir Edward Grey, 28 October 1907, F.O. 371 306, no.
35731/5269.
26. Captain Lorimer to Major Cox, 22January 1908, in Marling to Grey no. 49,
7 March 1908, F.O. 371 497 no. 12623/414.
27. Minute by Sir Edward Grey, 14 October 1907, F.O. 371 306, no.
34124/5269.
28. Ibid., minute by Sir Edward Grey, n.d., no. 39225/5269.
29. Sir G. Barclay to Sir Edward Grey, I April 1909, F.O. 371 709, no.
12460/185.
30. Sir Arnold Wilson, op. cit., pp. 83, 93.
31. Ibid., p. 40.
32. The speeches of Cargill and Cadman were reported in the Petroleum Times
(1927).
33. Report by E. H. Cunningham Craig, 2 January 1908, printed in First
Interim Report of the Admiralty Commission, 28 November 1913,
Enclosure 3 to Appendix 9, ADM 116/3806, no. CP 12053/1914.
34. J. R. Preece to Foreign Office, 5 May 1908, F.O. 371 497, no. 15545/414.
35. J. R. L. Anderson, East of Suez: A Study of Britain's Greatest Trading
Enterprise (London, 1969) p. 37.
36. Sir Arnold Wilson, op. cit., p. 84.
37. Letter from H. M. Consul to H. M. Minister in Teheran, 17 March 1909, in
P. z. Cox to Secretary to Government of India in the Foreign Department,
N 775, 28 March 1909, F.O. 37l 717, no. 19109jl9109.
38. Ibid., A.P.O.C. to Foreign Office, 3 September 1909; minute on that letter,
no. 33286(19109.
39. Ibid., 'Private and confidential' letter from Mr Maxwell to Mr Ritchie, 5
August 1909, no. 28261/19109.
40. Adm. Oil Committee 1912, evidence of Lord Strathcona, p. 97.
41. Petroleum World (1909) p. 152.
42. Memorandum by A. T. Wilson toP. Cox, 14 May 1909, F.O. 371 717, no.
28261/19109.
43. Report by Boverton Redwood, 26 February 1909, printed in First Interim
Report of Admiralty Commission, 28 November 1913, Enclosure 4 in
Appendix 9, ADM 116/3806, no. 12053/1914.
44. Ibid., Appendix 4, memorandum on local markets.
45. Memorandum by Burmah Oil on Kerosene oil in India, II September 1911.
LiEi7 /696, no. R & S 2762/1911.
46. H. Debenham to H. Loudon, 29 January 1909, SHELL.
47. Waley Cohen to H. Loudon, 18 March 1912, SHELL.
48. H. Loudon to Waley Cohen, 2 April 1912, SHELL.
49. Waley Cohen to H. Loudon, 8 November 1912, SHELL.
50. Agreement between A.P.O.C. and Asiatic, 15 October 1912, SHELL.
51. Paradoxically, it was A.P.O.C.s fuel oil that would in a few years cause the
company the greatest worry. Severe problems arose, particularly concern-
ing viscosity, when the Royal Navy used Persian oil during the War. Most of
A.P.O.C.s wartime research effort was to be devoted towards solving these
problems, which were to provide the primary impulse behind the establish-
ment of the A.P.O.C. research centre at Sunbury in 1917.
First Report, ADM 116/1208, p. 339.
53. No. 10 Railway of 1918, Railway Department to Secretary of State for
India, enclosure no. I, L;PS;I0/410, no. P 5102;1918.
54. Adm. Oil Committee 1912, evidence of Charles Greenway, p. 100.
56. A.P.O.C. to Sir Frederick Black, 17 October 1913, ADM 116(3806, no.
CP 27229.
57. Data on some of A.P.O.C.s costs are given in the First Interim Report of the
Admiralty Commission to the Persian Gulf, 28 November 1913, ADM
116/3806, p. 338.
59. Rough Estimate of Probable Expenditure, ADM 116/1687C, no. CP 12417.
60. Burmah Oil Company to Foreign Office, 17 February 1913, F.O. 371 1723,
no. 7830(7830.
61. D. C. M. Platt, Finance, Trade and British Foreign Policy 1815-1914
(Oxford, 1971) pp. 26, 226-9.
62. M. Kent, Oil and Empire: British Policy and Mesopotamian Oil /900-20
(london, 1976) ch. 3. Dr Kent provides a very full narrative account of the
Mesopotamian negotiations, which this book will not attempt to duplicate.
63. Minute by L. Mallet on National Bank to Foreign Office, 29 August 1912,
F.O. 371/1486, no. 36674/472.
64. A.P.O.C. to Sir Frederick Black, 17 October 1913, ADM 116/3806, no.
CP 27229.
65. Minute by Alwyn Parker, 6 December 1912, F.O. 371/1486, no. 51935/472.
66. Final Report of Admiralty Commission to Persian Gulf, 6 Aprill914, p. 6,
ADM 116/1687D, no. CP 16424/1914.
67. A.P.O.C. to Foreign Office, 19 December 1912, F.O. 371/1486, no.
54317/472.
68. The position in the Persian Oilfields, enclosure in C. Greenway to Foreign
Office, 21 October 1912, F.O. 371/1432, no. 44428/52.
69. Foreign Office to India Office, 27 December 1912, F.O. 371/1486, no.
53820/472.
70. A.P.O.C. to Foreign Office, 23 June 1913, F.O. 37ljl761, no. 28805/16.
71. The correspondence was enclosed in C. Greenway to R. Maxwell, 30
October 191.2, F.O. 371/1486, no. 47482/3472.
First Report, ADM 116/1208, pp. 335, 337.
73. Charles Greenway to Alwyn Parker, 20 November 1912, F.O. 371/1486, no.
49498/472.
First Report, ADM 116;1208, p. 339.
75. Waley Cohen to H. Loudon, 7 February 1913, SHELL.
76. E. Grube to H. Deterding, 25/7 April 1914, SHELL.
77. H. Deterding to Schibaieff Co., 26 October 1916, SHELL.
78. Navy (Oil Fuel) Agreement with the Anglo-Persian Oil Company (Ltd). cd.
7419 (1914). The fuel oil contract is in ADM 116/16870, and this file also
contains the Treasury letter to A.P.O.C. of 20 May 1914.
79. M. Kent, op. cit., pp. 89-112.
6 The Making of an
'Exceptional
Relationship'
I THE INDIA OFFICE, THE FOREIGN OFFICE AND A.P.O.C.
The British Government's Agreement with A.P.O.C. was the

most remarkable event in British oil policy before 1914. This
'State take-over bid' has been taken as clear evidence of the
demise of /aissez-faire. 1 It was certainly an aberration from the
general nature of the Government's relations with the oil
companies. For over a decade requests from various companies
seeking some form of close or exclusive relationship with the State
had been resisted. It was ironical that A.P.O.C., the company
which made the most ambitious requests for State support, was
also the company which came closest to achieving all its goals. It
was not surprising that after 1914 civil servants described the
Government's relationship with A.P.O.C. not as 'special', but as
'exceptional'. 2
The last chapter may have given the impression that it was the
company's skilful bargaining tactics which prompted the British
Government to enter into this 'exceptional relationship'. In
reality, the process by which the State became a majority
shareholder in an enterprise exploiting oilfields in a distant
foreign country was more complicated. There may have been
long-term 'trends' towards greater State intervention in the
economy, and A.P.O.C. may have had close relations with the
Government since its inception, but the response of politicians
and civil servants to Charles Greenway's requests for assistance
after 1912 was far from being either automatic or welcoming.
Two years of tortuous negotiations were required before an
agreement was reached.
This chapter examines the reactions of the three main depart-
160
THE MAKING OF AN 'EXCEPTIONAL RELATIONSHIP' 161
ments of State concerned with Persian oil, the India Office, the
Foreign Office and the Admiralty, to Greenway's campaign. 3
The response of the India Office and the Government of India
to A.P.O.C.s pleas for assistance was uniformly hostile. This was
unfortunate because every other party attempted to involve India
as fully as possible in the matter.
A.P.O.C., with its close links with Burmah Oil, looked to India
for the solution of several of its problems. It viewed the Indian
railways as a second-best market if the Admiralty refused to make
a large fuel oil contract; it was also attracted by the large Indian
kerosene market, which Persian oil could easily penetrate if only it
were exempted from excise duties. Moreover, one of Greenway's
arguments for State assistance was that, if such help was not
forthcoming A.P.O.C. was absorbed by Shell, Burmah Oil would
also lose its independence and the Shell Group thereby acquire a
monopoly over the Indian kerosene market.
The company was not alone in wishing to involve the Indian
authorities. After 1912 the Admiralty and the Foreign Office
argued that the A.P.O.C. problem was really an Indian problem
to which an Indian solution was necessary. Although first the
Foreign Office and later the Admiralty recognised that the
company would require financial assistance to maintain its
independence, both ministries attempted to shift the burden on to
Indian revenues. This was partly because they would then be
saved the embarrassment of justifying a large Government loan
to a private company before Parliament. Winston Churchill
argued throughout the first half of 1913 that the Admiralty and
India had an equal interest in maintaining the independence of
A.P.O.C., and should act accordingly. 4
These arguments impressed neither the India Office nor the
Government of India, who adamantly maintained that the affair
was not of direct concern to India. The Indian interests involved are
so infinitesimal', observed the Financial Member of the Viceroy's
Council in April 1913, 'that there is no sort of justification for
pledging Indian credit, or for finding Indian money.' 5 Moreover,
it was feared that if India became involved with A.P.O.C., it
would be drawn into policing Persia. Lord Hardinge, the Viceroy,
had been at the Embassy at Teheran between 1896 and 1898, and
this experience left him with a determination to avoid entangle-
ments in Persia. In any case, Hardinge seriously doubted that
A.P.O.C. possessed a valuable concession. 'I do not believe', he
wrote in July 1913, 'in the Anglo-Persian Oil Company.' 6

The previous experience of the Government of India and the
Indian Office with Burmah Oil reinforced its reluctance to become
committed to A.P.O.C. Greenway's use of the 'Shell menace' was
familiar to the Indian authorities as a bargaining tactic. 'It seems
quite possible', an official at the Indian Office reflected in
February 1913, 'that the idea of amalgamation or absorption may
have been held out in order to stimulate H. M.G. to fall in with the
Company's wishes, and that it may not actually be con-
templated.' 7 There were similar doubts about the alleged con-
sequences if A.P.O.C. were acquired by Shell. Civil servants
remembered that even after Burmah Oil had received support, the
company had come to terms with Shell. It was assumed A.P.O.C.
would do the same if it suited that company's commercial interests.
Greenway's argument that if A.P.O.C. were absorbed, Burmah
Oil would also fall under Shell control, carried little weight with
officials aware of the close working arrangement in the Indian
market between Burmah Oil and Shell. The position, as the India
Office saw it, 'would be no worse in this respect than it is now'. 8
As a result, the India Office and the Government of India
remained unmoved by the pleas from all quarters that they should
become involved in A.P.O.C.s affairs. The Government of India
declined to put its tariff agreements with other countries in
jeopardy by allowing Persian kerosene into the country duty free.
It also refused to convert the Indian railway system to oil without
a prolonged and detailed examination of the technical and
financial issues involved. All attempts to secure Indian financial
assistance for the company were firmly opposed. A Cabinet
meeting on 9 1uly 1913 finally rejected the idea oflndian support
for A.P.O.C.
During the following twelve months of detailed negotiations
between the British Government and A.P.O.C., the India Office
and the Government oflndia were largely ignored by the Foreign
Office and the Admiralty. The Indian authorities heard only
casually of the continuing negotiations, and since they had no
interest in A.P.O.C. they remained unaware of the full impli-
cations of what was happening. The hints grew ever stronger. In
February 1914 the India Office was actually informed by the
Admiralty that 'under the plan now proposed the British
Government will be the predominant partner' in A.P.O.C. 9
Nevertheless, a considerable shockwave reverberated around the
Indian Office in June when Churchill presented the A.P.O.C.

agreement to Parliament. This alarm was hardly justified. India
officials had allowed their basic distate for the Persian entangle-
ment to obscure the growing hints from the Admiralty of the
nature of the impending agreement with the company.
The position of the Foreign Office was very different to that of
the Indian authorities. The Foreign Office had supported the
Persian company from its inception, and many officials were
convinced of the validity of Greenway's arguments about the
menace posed by Shell. While the Admiralty and the India Office
had had substantial contacts with the Group before 1912, the
former as a buyer of fuel oil and the latter as the administrator of
the Burmese oil fields, Shell represented a new phenomenon to the
Foreign Office. A.P.O.C.s description of Shell as foreign, vulner-
able to German influence and an economic menace, seemed
plausible.
The Foreign Office was greatly impressed by A.P.O.C.s
description of the threat to the supply of the Royal Navy's oil if
Shell acquired the Persian oilfields. The letters exchanged be-
tween A.P.O.C. and Shell concerning fuel oil, which purported to
show Shell's determination to secure a monopoly over the Royal
Navy's fuel oil supplies, were sent by Greenway to the Foreign
Office rather than to the Admiralty. During most of 1912 and
1913 the Foreign Office expressed more concern than the
Admiralty about the monopolist threat posed to the Navy's oil
supplies. The alternatives facing the Royal Navy, the Assistant
Under Secretary of State informed his colleagues at the Foreign
Office in November 1912, were the 'formation of a foreign
controlled monopoly' or the 'maintenance of competition by
keeping the Anglo-Persian Oil Company on its legs'. 10
Yet the menace of oligopoly control of the world petroleum
industry was not the primary reason for the Foreign Office's
desire to prevent the absorption of A.P.O.C. by Shell. The very
conventionality of the Foreign Office's views, and its readiness to
accept the arguments put forward by A.P.O.C., were indicative of
that ministry's essential lack of interest in, and knowledge of, such
matters. The complexities of international oil were largely beyond
the comprehension of the Foreign Secretary. 'Is the Anglo-Saxon
Company the same as the Shell?' Sir Edward Grey wearily asked
his permanent officials in July 1913. 11
The Foreign Office's interest in A.P.O.C. was, as before 1912, a
political one. The ministry was determined not to allow a

substantial foreign enterprise to be established in southern Persia.
The main priority of the Foreign Office, the Assistant Under
Secretary of State wrote to Greenway in January 1913, was 'that
the Anglo-Persian oil concession, embracing as it did the entire oil
fields of Persia ... should not pass under the control of a foreign
syndicate'. 12 Consequently, the emergence of Shell and the
T.P.C. as a rival claimant to a Mesopotamian concession, and
Greenway's argument that if the Mesopotamian oilfields fell to
Shell A.P.O.C.s concession in Persia would be outflanked,
stimulated the Foreign Office into action.
The Foreign Office responded instantly and favourably when
A.P.O.C. made its first request for some form of State subsidy in
September 1912. 'It is clear that diplomatic assistance alone will
be useless in preserving the independence of the A.P.O.C.', the
Foreign Office wrote to the Admiralty in November 1912. 'It is
pecuniary assistance in some form that they require.' 13
Moreover, the ministry was soon contemplating even more
extreme measures to assist the company. By the summer of 1913,
the Foreign Office was committed to a plan to exlude Shell
altogether from the oilfields of Mesopotamia in favour of a simple
division between A.P.O.C. and the Deutsche Bank, the German
interest in the T.P.C.
This scheme received strong support from the Board ofTrade
and the Admiralty. Sir Hubert Llewellyn Smith, the Permanent
Secretary at the Board of Trade, was particularly hostile to Shell.
In July 1913 he advised the Foreign Office against adopting a more
sympathetic attitude towards company, because it was 'a very
powerful combination with which it is quite impossible to discuss
frankly the strategical needs of the Empire'. 14 The Admiralty
firmly supported this position, and it was the combined pressure
of both these ministries which persuaded the Foreign Office to
work for the exclusion of Shell from the Turkish Petroleum
Company. 15 Some Foreign Office officials expressed doubts
whether this was the right policy to pursue in regard to 'so
powerful a Syndicate which controls such large supplies of oil
which is never tired of professing itself to be British' . 16 It was not
surprising that the Foreign Office was rather annoyed in March
1914 when Winston Churchill reversed Admiralty policy and
urged it to adopt a more conciliatory approach to the Shell
Group. 17
The relations between Shell and the Foreign Office were very
badly soured by the long dispute over Mesopotamian oil.
Deterding was particularly annoyed by the attempts to com-
pletely exclude Shell from the T.P.C. He complained in March
1914 of the 'discourtesy of the offensive treatment to a Company
of the standing of the Anglo-Saxon Petroleum Company and the
Shell Company', 1 8 and in the same month he even tentatively
suggested to Winston Churchill that he might take legal action
against the Crown over the issue. 1 9 On the other side, certain
officials at the Foreign Office acquired a considerable dislike of
Shell during these negotiations, which was to manifest itself
during the War. This was particularly true of Alwyn Parker, who
had been responsible for the Mesopotamian negotiations, and
who was to become head of the Contraband Department after the
outbreak of War.
II THE ADMIRALTY AND THE MAKING OF THE A.P.O.C.

AGREEMENT
The Foreign Office was a strong supporter of retaining the

independence of A.P.O.C. After 1913, however, the ministry was
preoccupied with the Mesopotamian aspect of the negotiations.
The making of the A.P.O.C. agreement, the arrangements for
financial assistance and a fuel oil contract, became the re-
sponsibility of the Admiralty. When A.P.O.C. made its first
requests for State assistance the prospects of a positive response
from the Admiralty seemed unfavourable. A.P.O.C.s warnings of
the dangers posed by the 'foreign monopolist' Shell might have
been expected to have helped its case with the Admiralty before
1911. Events in Egypt and Trinidad in that year, however, seemed
to indicate that the ministry had begun to reconcile itself to the
fact that a large, semi-foreign integrated oil company could
be a better contractor than several small British competitive
ones. The Admiralty wanted oil, and to secure supplies it would
deal with both foreigners and monopolists. Moreover, the
Admiralty had traditionally refused to commit itself financially to
any oil company, either in the form of providing subsidies or
long-term supply contracts.
The first Admiralty reaction to A.P.O.C.s proposals was
indeed extremely lukewarm, though it was eager for other
ministries to assist the company. In September 1912 the
Admiralty wrote to the Foreign Office to support A.P.O.C.s

request for divlomatic assistance in Mesopotamia. 20 The
Admiralty itself, however, as it wrote to the Foreign Office in the
following December, would not consider lending money to
A.P.O.C. and was appalled by the prospect of the Government
being 'obliged to appoint representatives to sit upon the Board of
a commercial Company engaged in a business subject to much
speculative risk?' The granting of Admiralty financial assis-
tance to an oil company seemed a particularly dangerous
precedent as officials were fully aware of the number of other
companies seeking such assistance.
The first half of 1913 saw a critical shift in opinion at the
Admiralty. This was essentially due to changes in the fuel oil
market. The raise in freight rates and the rapid growth of world
demand for fuel oil led to a seemingly inexorable rise in prices.
This was not necessarily advantageous to the oil companies. The
Shell Group, for instance, found itself committed to long-term,
low-price supply contracts, and in 1912 the company actually had
poor financial results with its fuel oil sales. 22 Deterding resolved
to avoid making further long-term contracts. In October 1912 he
ruled out a ten year contract as 'absolutely out of the question',
and stated that he was prepared to make such contracts only with
the proviso that they could be cancelled with 'two years notice on
either side'. 23
It was an unfortunate coincidence that Winston Churchill
chose precisely this time to commit the Royal Navy to long-term
dependence on fuel oil. Just as Admiralty estimates of future
consumption rose, there was a fall in the quantity of fuel oil
offered in response to Admiralty tenders and a rise in its price. 24
In February 1913, the Director of Contracts approached various
companies about the possibility of supplying the Admiralty on a
forward contract basis. The results were highly discouraging.
Anglo-American was unable to quote. Asiatic offered only high-
cost Borneo oil. British Petroleum could only offer Oklahoma oil
for two years at a price which the Admiralty regarded as
impossibly high. Both A.P.O.C. and Anglo-Mexican offered
large quantities of fuel oil on a forward basis, but it seemed that
even the Mexican oil would require special treatment if it was to fit
the current Admiralty specification. 25
There were also considerable doubts about the reliability of
each of the prospective sources of supply. Naval officials believed
that North American oil would eventually be diverted to meet the

expanding demand of the United States. Borneo was under Dutch
control and its oil was extremely expensive due to the prevailing
high freight rates. Rumania was a member of the Triple Alliance.
Burma was too far away and its industry seemed on the verge of
decline. The oil industries of Trinidad and Egypt were in their
infancy.
These considerations led to Persia's assuming, by the beginning
of 1913, an ever greater importance in Admiralty supply pro-
jections. In an Admiralty estimate, in February 1913, of the
amount of oil considered likely to be available in wartime, Persian
oil was projected to rise from 5 per cent of consumption in 1913-
14 to over 25 per cent in 1917-18. 26 Although this was only one of
several supply profiles drawn up by the Admiralty, in all of them
the trend was in the same direction. The growing projected
importance of Persian oil inevitably affected the way the
Admiralty regarded the fate of the oil company.
Moreover, the increasing supply difficulties made the
Admiralty more favourably inclined towards making the long-
term fuel contract desired by Greenway and his colleagues. By
1912 it was becoming obvious even to the Admiralty that its fuel
oil specification was too rigorous and the system of meeting
requirements by annual contracts too uncertain. In December
1911 an Admiralty Committee was appointed under the Fourth
Sea Lord, Captain Pakenham, to consider these problems. It
called a variety of expert witnesses, including Charles Greenway,
Lord Cowdray, Marcus Samuel and Henri Deterding. The report
of the committee in January 1912 called for the institution of
forward contracts and an investigation of the possibilities of
reducing the high naval fuel oil specification. 2 7 There was the
usual painful delay in the implementation of these proposals. By
the time the Admiralty fuel oil specification was lowered and
enquiries began to be made about long-term contracts, most of
the oil companies had become extremely reluctant about com-
mitting themselves on a long-term basis. 28
The Royal Commission on Fuel and Engines, established by
Winston Churchill in 1912, was a grander version of the earlier
Admiralty Committee. Fisher, the chairman, was given the task
of finding the oil required by the Royal Navy. The Royal
Commission has frequently been credited with prompting the
Admiralty to make the 'exceptional' agreement with A.P.O.C. 29
This overestimates its significance. It lacked executive powers

and, moreover, Churchill and Fisher were essentially at cross
purposes. While Churchill wanted the Commission to find a
secure supply of oil for the Navy, Fisher was more concerned with
prompting the cause of the new diesel engine in warships and
opposing the 'bloody fools who like Canute want to stem the tide
of internal combustion'. 30 A considerable portion of the three
reports of the Commission was occupied with restating the
superiority of oil over coal, which everyone in the Admiralty
accepted, or in calling for the adoption of diesel engines in large
warships, a technologically utopian step. Admiralty officials, on
the other hand, had arrived independently at many of the
Commission's recommendations, including the need for forward
contracts.
The detailed recommendations of Fisher himself and of his
Commission made only a marginal impact on naval oil policy.
The Commission never recommended A.P.O.C.s proposals to the
Admiralty; instead it suggested, in February 1913, that it 'may be
desirable, as a general principle, for the Government to give
financial help in cases where such help may be necessary for the
preservation of independence of control of important sources of
supply already developed'. 31 The Admiralty never accepted this
general principle, while many more detailed proposals, such as
Fisher's recommendation that the Navy should make a large
supply contract with California Oilfields, were ignored. 32 Fisher's
views were, in any case, far from constant. The Second Report of
the Commission, written after hearing the strongly anti-Shell
evidence of a number of witnesses, delivered a strong warning
that 'the control of a large proportion of the available supply of
petroleum is rapidly being acquired by the Royal Dutch Shell
combination'. 33 In February 1913, however, Deterding gave
evidence before the Commission, and Fisher was considerably
impressed by him. 'The greatest mistake you will ever have made',
Fisher subsequently wrote to Churchill, 'will be to quarrel with
Deterding. He is Napoleon and Cromwell rolled into one. He is
the greatest man I hare erer met! Placate him, don't threaten
him!' 34 Fisher's advice, however, was not immediately accepted
by Churchill. While the Admiralty was anxious to secure supply
contracts with Shell it displayed considerable hostility towards
the Group in Mesopotamia and Egypt during the summer of
1913.
It is probable that after the spring of 1913, Churchill viewed the

main function of the Commission as being a propaganda
instrument, designed to keep the oil supply issue as an issue while
the controversial A.P.O.C. agreement was worked out. As early
as April 1913 Fisher told Churchill that 'the Royal Commission
had fulfilled its purpose and should be dissolved'. Yet even in
December 1913 Churchill was insisting that 'the R.C. must
continue for the present'. 35
By the middle of 1913 the disturbing trends in fuel oil price and
availability had led to very considerable modifications in the
Admiralty view concerning assistance to A.P.O.C. In July 1913
Winston Churchill informed the Foreign Secretary that the
Admiralty regarded 'the development of the Anglo-Persian oil
supply as indispensable to the solution of the liquid fuel problem'.
There could be no doubt, he continued, 'that the Anglo-Persian
Oil Company will receive substantial financial aid in one form or
another from the British or Indian Government'. 36 During an
important speech in the House of Commons on oil policy on 17
July 1913, Churchill gave notice of the Admiralty's intention to
'become the owners, or at any rate, the controllers, of the source
of at least a proportion of the supply of natural oil which we
require'. 37 Quite clearly, with the absolute refusal of the
Government of India to provide financial assistance to A.P.O.C.,
the Admiralty was on the brink of lending the assistance the
company required.
It is for this reason that the Admiralty's decision in July 1913 to
send a commission of experts to examine A.P.O.C.s concession
has been usually seen as an ex post facto justification of a policy
which it had already decided upon. 38 This assessment under-
estimates the importance of the Admiralty Commission to the
Persian Oil fields. The negotiations between the company and the
Admiralty were virtually frozen for six months pending its report
which would indicate that it was more than a rubber stamp.
Moreover, the report of the Persian Commission may in fact have
influenced the form the eventual A.P.O.C. agreement assumed. It
was also important in bringing together two men who were to
play critical roles in the development of British oil policy over the
following decade, John Cadman and Vice-Admiral Edmond
Slade.
John Cadman had first become interested in petroleum while
serving as Chief Inspector of Mines in Trinidad. In 1908 he was
appointed Professor of Mining and Petroleum Technology at

Birmingham University. He continued, however, to retain his
links with the Government, acting as petroleum adviser both to
the colony of Trinidad and to the Colonial Office. In the following
years, Cadman steadily grew in influence in both the oil industry
and government. During the War he functioned as a highly
successful civil servant, and by the end of it he was also heavily
involved in international oil diplomacy. After joining A.P.O.C. in
the early 1920s, he rose rapidly to become the company's
Chairman. He was in every way a remarkable man. 39
Edmond Slade, who was chosen to head the Admiralty
Commission, was also a remarkable man, though in different ways
to Cadman. He had been President of the War College between
1904 and 1907, Director of the Intelligence Division of the
Admiralty (D. I. D.) between 1907 and 1909, and Commander-in-
Chief East Indies between 1909 and 1912. His duties as D.I.D.
brought the importance of oil directly to his attention, while his
service in the East Indies acquainted him with the Persian
oilfields. Slade was an independent and strong-willed man,
capable of holding controversial opinions and, as events after
1914 were to demonstrate, adopting controversial courses of
action to implement those actions.
Slade's Commission was shown the Persian fields by S. Lister
James, one of the Burmah Oil geologists on hire to A.P.O.C. The
company made available to the Commission all the previous
geological reports on the Persian fields. Slade and his colleagues
were suitably impressed. In their report delivered in January 1914,
they argued that 'all possible steps should be taken to maintain
the Company as an independent British undertaking'. In return
for investing State funds in the firm, the Commission recom-
mended that the Government should exercise tight controls over
A.P.O.C.s operations. They suggested State control of the
company's future capital investment decisions, over pricing
policy at least as far as sales of fuel oil to the Admiralty were
concerned, and over the depletion of the oil reserves. 40
III THE "EXCEPTIONAL RELATIONSHIP'
The report by Admiral Slade confirmed the value of the Persian

oilfields, and negotiations between the Admiralty and A.P.O.C.
were authorised to proceed by a Cabinet decision of 18 February
1914. The Anglo-Persian Bill became law six months later.

The Agreement left the company surprisingly free from direct
State control, and this clearly requires some explanation.
Ministers and officials were firmly convinced that they could not
run an oil company as successfully as private enterprise, and the
location of A.P.O.C.s oilfields in a foreign country further
encouraged the limiting of State control over the company. The
absence of tight Government controls was also partly a quid pro
quo for the very generous fuel oil contract which the company
signed with the Admiralty.
There were a number of paradoxes in the making of the
A.P.O.C. Agreement. By the time all the arrangements were
finalised, the circumstances which had made the agreement so
attractive to the Government had changed. The disturbing rise in
fuel oil prices had abated by the beginning of 1914. Tanker freight
rates began to fall in 1913. The overall index of tramp shipping
rates was 13 per cent lower in 1913 than in 1912, and there was a
further fall at the beginning of 1914. Shell's 'flank attack' in
Mesopotamia had also been defeated, by ordinary diplomatic
methods, before the A.P.O.C. agreement was concluded.
The greatest paradox was that Winston Churchill made the
'Shell menace' argument the central part of his case when
justifying the Government's investment in A.P.O.C. to the House
of Commons in June 1914. The Admiralty had experienced,
Churchill informed his fellow Members of Parliament, a 'long
steady squeeze by the oil trusts all over the world'. The most
dangerous of these, he argued, was the Shell Group, which was
poised to take over A.P.O.C. and then squeeze the Admiralty
even further. 41 Churchill maintained that the 'acquisition' of the
company represented a vital defence of the national interest
against the ravages of the trusts.
This view was strictly intended for public consumption.
Churchill and his colleagues were well aware that neither the
trusts in general, nor Shell in particular, were responsible for most
of the rise in fuel oil prices. An Admiralty memorandum had
informed the Cabinet in June 1913 that, although the rapid
increase in demand for fuel oil had given rise to 'formidable
schemes on the part of a comparatively small number of wealthy
combinations to control the oil market and to raise and maintain
prices ... to a very large extent the causes which raise prices and
create stringency are natural and automatic'. 42 Even at the height
of the resurgence of the Admiralty's anti-Shell sentiment in

the summer of 1913, officials recognised their dependence on the
company. 'We lead a very stormy life in our interviews with the
"Shell",' wrote Sir Francis Hopwood, a junior minister at
the Admiralty. 'I always try to keep on good terms with them
myself, because I feel we want their stuff. ' 43
The relations between Shell and the Admiralty grew con-
spicuously warmer after Deterding and Churchill had become
personally acquainted. The two men were greatly attracted to
each other. By the New Year Churchill had taken over from his
contract officials the task of negotiating fuel oil contracts with
Deterding. In March 1914 Churchill reversed his previous policy
of seeking to exclude the Shell Group from Mesopotamia, and
instead urged the Foreign Office to allow Shell participation.
Deterding, unaware of the First Lord's earlier eagerness to
exclude Shell, was suitably grateful. 'Whenever I can reciprocate
by being of any service to you', he wrote to Churchill in March
1914, thanking him for his help in the Mesopotamian nego-
tiations, 'I shall feel most happy to render this unhesitatingly. ' 44
Shell's relations with the Admiralty had never been better when
the A.P.O.C. agreement, justified by Churchill in terms of
providing protection against the 'Shell menace', was signed.
Churchill clearly considered that the unorthodox coup had to be
justified before Parliament by recourse to the orthodox voca-
bulary of /aissez-faire and by an appeal to the public's mild anti-
trust sentiments.
There were several reasons why A.P.O.C. was so much more
successful than the other companies which sought a 'special
relationship' with the British Government. It was partly the
timing of A.P.O.C.s application. The company was prepared to
sell large amounts of cheap fuel oil to the Admiralty just when the
Navy was expanding its consumption and facing a difficult
market situation. At a time of Anglo-German rivalry, the
company held an important concession in a diplomatically
sensitive area. The Foreign Office was as prepared to support
British commercial interests in the Middle East against Germany
as it was reluctant to support British interests in Mexico against
the United States. The fact that A.P.O.C. had had a close
relationship with Government departments from the beginning
was also a significant factor. Above all, A.P.O.C.s oilfields were
prolific and, if not ideally located from a geopolitical point of
view, far better situated than that of any other available

company. 'The real point', Sir Edward Grey observed to Winston
Churchill in May 1914, 'is that South Persia near the coast is more
controllable by us than other centres of oil production in the
world, which are entirely out of our reach. ' 45
A string of unanswered questions remained after the A.P.O.C.
agreement had been revealed to Parliament. Was the British
Government declaring war on the 'trusts', in a similar way to the
crusade of the state and federal governments in the United States
against Standard Oil? Would the British Government now
become committed to giving even greater support than before to
A.P.O.C.? Would the Government now favour 'its' oil company
above all the others?
The British Government's future relations with the Shell
Group after Churchill's attack upon it in the House of Commons
were also much in doubt. Marcus Samuel, who had struggled
for so long to secure a 'special relationship' for his company, was
furious about the A.P.O.C. agreement and denounced it
violently. 46
Deterding took the affair in a more jocular fashion. He advised
the enraged Samuel to regard it as a 'fait accompli' and to 'make
the best of it', and added insult to injury by offering Samuel odds
on the probable outcome of the Parliamentary debates-'evens'
for a Parliamentary majority of I 00 for the A.P.O.C. Bill, 6 to I
for a majority of 200. 47 Deterding had been personally excluded
by Churchill from his attack on Shell in Parliament, and this was
emphasised by a personal message Churchill sent to him via his
brother and Gulbenkian. 48 This was not, however, the most
important reason why Deterding reacted so calmly to the
A.P.O.C. coup. The Dutch management of the Group fully
recognised that the Admiralty would continue to need Shell fuel
oil, and that Churchill's attack on them was largely a tactical
measure designed to ease the passage of the A.P.O.C. proposals
through Parliament. Gulbenkian told Churchill's brother that,
although Winston's comments had been 'anything but chic
towards Deterding', in his personal opinion 'barring a few details
the action of the Admiralty regarding the contract was right'. 4 '~
Indeed, the Dutch leaders of the Group were more annoyed by
Samuel's reaction than by Churchill's Bill. They were particularly
concerned that Samuel's loud public declarations about how he
had secured the oilfields of Dutch Borneo for the Royal Navy
would damage their negotiations with the Dutch Government

over a concession on Djambi in the East Indies. 50 Deterding, as a
result of his new friendship with Churchill, was increasingly
favourably disposed towards the British Government. 'I have just
received a most patriotic letter from Deterding to say he means
you shan't want for oil or tankers in case of war', Fisher wrote to
Churchill five days before the outbreak of the First World War.
'Good old Deterding! How these Dutchmen do hate the
Germans! ' 51
* * * * *
The responsibility for the making of the 1914 Agreement
with A.P.O.C.lay with the Admiralty. The India Office wanted no
part in the arrangement, while the Foreign Office, although a
strong supporter of A.P.O.C., was not involved in
the last year of the negotiations. It was the Admiralty which,
faced by growing fuel oil consumption, declining supplies and
higher prices, eventually found irresistible A.P.O.C.s offer of
large supplies of oil on a long-term basis. By 1914 most officials at
the Admiralty had little fear of the 'Shell menace', and Churchill's
use of this in Parliament to justify the investment in A.P.O.C. was
essentially an exercise in public relations.
It remained to be seen exactly what the Admiralty had
achieved. The Royal Navy was still dependent for its oil on
producers thousands of miles away from the United Kingdom.
Two journalists writing in 1923 described the 'egregious fallacy'
in Admiralty oil policy at this time. The fallacy was 'that
command of oil production was essential for command of the
seas'. This, in their view, was 'the truth turned upside down'. 52
During the war tonnage shortages meant that Persia sent almost
no oil to the United Kingdom, and the solution to the Royal
Navy's supply problems had to be found in other countries and
with other oil companies.
Meanwhile, the British Government had created for itself a
problem of another kind. It is arguable that in the first few years
after 1914 the 'exceptional relationship' with A.P.O.C. created
more problems for the State than it solved, for the company soon
began to display severe symptoms of the 'Frankenstein
syndrome'. 53
NOTES
I. J. W. Grove, Gorernment and Industry in Britain (London, 1962) p. 32.

2. This phrase was used several times by Admiralty officials to describe the
State's relations with A.P.O.C. Memorandum by Director of Contracts, 4
August 1920, where he referred to the 'exceptional relationship [with
A.P.O.C.] through the big Government holding', ADM 116 2318B.
Memorandum by Deputy Director of Contracts, 2 August 1935, 'The
relationship of the Anglo-Iranian Oil Company to H.M.G. is so excep-
tional .. .'ADM 116 3999, no. 02927/35. (A.P.O.C. was renamed Anglo-
! rani an in 1935). The obvious comparison is with t·he government's 'special
relationship' with the armament firms before 1914.
3. A narrative account of the British Government's negotiations with
A.P.O.C. is given in M. Jack (now Kent), 'The Purchase of the British
Government's Shares in the British Petroleum Company 1912-1914' Past
and Present, 39, (1968).
4. Memorandum by W. Churchill, 4 July 1913, R. S. Churchill, Winston S.
Churchill Vol. II, Companion Part 3 1911-1914 (London, 1969) pp. 1945 7.
5. Memorandum, 28 April 1913, enclosed in Sir Guy Fleetwood Wilson to
Lord Hardinge, 29 April 1913, Hardinge M SS., File 57 jl52.
6. Ibid., Lord Hardinge to Sir Valentine Chirol, 16 July 1913. File 93,'52.
7. Minute by F. C. Drake, 7 February 1913, L;'PS/10'300, no. P465;13.
8. Ibid.
9. Admiralty to India Office, 24 February 1914, L/PS;I0/358, no. P730.
10. Minute by L. Mallet, November 1912, F.O. 371 1486, no. 49104,472. Mallet
subsequently became British Ambassador to Turkey.
II. Minute by Sir Edward Grey, July 1913, F.O. 371 1761, no. 32788,16.
12. Minute by L. Mallet, January 1913, F.O. 371 1760, no. 2463,'16.
13. Foreign Office to Admiralty, 28 November 1912, F.O. 371 1486, no.
49104;472.
14. Llewellyn Smith to L. Mallet, 30 July 1913, F.O. 371 1761, no. 36361;16.
15. Ibid .. Foreign Office to Sir Francis Hopwood. 29 July 1913, no. 35070!16.
16. Ibid., minute by L. Mallet, I August 1913, no. 35263il6.
17. Minute by A. Parker, 13 March 1914, F.O. 371 2120, no. 11273.
18. H. Deterding toR. Macleod. 6 March 1914, SHELL. The letter was marked
'not sent ofT'.
19. H. Deterding toW. Churchill, 17 March 1914, SHELL.
20. Admiralty to Foreign Office, 26 September 1912, L/PSfi0/300, no. P3877.
21. Ibid., Admiralty to Foreign Office. 24 December 1912, no. P 4969.
22. Asiatic to B.P.M.: Report on 1912 Financial Figures, SHELL.The
main problem was caused by a long-term contract with the Paketvaart
Company.
23. H. Deterding to H. Loudon, 7 October 1912, SHELL.
24. Admiralty memorandum. 16 June 1913, CAB 37/115.
25. Admiralty letter of 26 February 1913, CP 15530, Fisher Commission.
Second Report, ADM 116;1209.
26. Director of Contracts Report, 28 February 1913, ADM 116;1219.
27. Adm. Oil Committee 1912, Interim Report. 19 January 1912.
28. Details of changes in the Admiralty specification are in Admiralty
Specification for Oil Fuel ( 1910) and the Revised Specification (1912), em
7010 (1913).
29. M. Jack, op. cit., 148.
30. Lord Fisher to Winston Churchill, 31 March 1913, R. S. Churchill, op. cit.,
1937 -8; Ruddock F. Mackay, Fisher of Kilrerstone (Oxford, 1973) pp. 438-
9.
31. Fisher Commission, Second Report, ADM 116/1209.
32. Lord Fisher to Winston Churchill, 24 April 1913; Lord Fisher to Edward
Marsh, 29 April 1913, R. S. Churchill, op. cit., pp. 1939-40.
33. Fisher Commission, Second Report, ADM 116/1209.
34. Lord Fisher to Winston Churchill, 13 July 1913, R. S. Churchill, op. cit., p.
1948. R. Henriques, Marcus Samuel (London, 1960) p. 562, argued that
Deterding was 'taken over much the same ground' as Samuel by the Royal
Commission. This obscured the fact that Deterding's evidence had a
markedly different impact on the Commission from Samuel's.
35. Lord Fisher to Winston Churchill, 24 April 1913; note by Winston
Churchill on Lord Fisher to Winston Churchill, 13 December 1913, R. S.
Churchill, op. cit., pp. 1939, 1960- I.
36. Ibid., memorandum by Winston Churchill, 4 July 1913, pp. 1945-7.
37. Parliamentary Debates, Commons, 5, 1913, lv, 1474-5.
38. M. Jack, op. cit., p. 158.
39. There is a biography of John Cadman by J. Rowland and B. Cadman,
Ambassador for Oil (London, 1960).
40. Second Interim Report of Slade Commission, 26 January 1914, ADM
116/3806, no. CP 12053/1914.
41. Parliamentary Debates, Commons, 17 June 1914.
42. Admiralty memorandum, 16 June 1913, CAB 37f115.
43. M. Kent, Oil and Empire (London, 1976) p. 78. Sir Francis Hopwood was
the Additional Civil Lord.
44. H. Deterding toW. Churchill, 20 March 1914, SHELL.
45. Sir Edward Grey to Winston Churchill, 29 May 1914, R. S. Churchill. op.
cit., p. 1964.
46. R. Henriques, op. cit., pp. 586-90.
47. H. Deterding to H. Loudon, 23 June 1914, SHELL.
48. C. S. Gulbenkian to H. Deterding 23 June 1914, SHELL.
49. Ibid.
50. H. Colijn to H. Deterding, 24 June 1914, SHELL. For the Djambi
concession, see F. C. Gerretson, History of the Royal Dutch, vol. IV (Leiden,
1958) pp. 92-8.
51. Lord Fisher to Winston Churchill, 31 July 1914, R. S. Churchill, op. cit., p.
1961.
52. E. H. Davenport and S. R. Cooke, The Oil Trusts and Anglo-American
Relations (London, 1923) p. 56.
7 The Politics of Oil 1914-18
I OIL AND THE FIRST WORLD WAR
The First World War saw closer contacts than ever before
between the State and the oil companies. Oil policy became a
concern of ever-higher levels of Government. Ministers and their
civil servants were involved in matters of company structure,
suggesting or prohibiting mergers between various oil companies,
while the rival companies lobbied for the State's favour.
The backdrop for these events was the First World War.
Petroleum acquired a new status during the War, a fact which
carried great implications for the relations between the State and
the oil companies. The new weapons, such as tanks and aero-
planes, were fuelled and lubricated by petroleum products, and
although the main burden of the fighting always fell on the human
'donkeys' in the trenches, both mechanical transport and planes
became very important for the Allied war effort. The British
Army's fleet of motor lorries expanded from l 0 to 60,000 between
August 1914 and the Armistice. By the end of the War the United
States Army in France had a further 50,000 vehicles, and the
Royal Air Force some 22,000 machines. Petroleum products also
proved unexpectedly important in munitions production. The
advent of trench warfare led to a sharp rise in the demand for high
explosives such as T.N.T., to which the War Office changed from
Lyddite as a filling for shells in the summer of 1914. The gas works
which before the War had supplied the toluol necessary for the
manufacture of this high explosive were unable to keep up with
the increased demand, and toluol produced from petroleum had
to be extensively used.
The most crucial use of oil, however, was as a naval fuel. By the
end of the War almost all of the Royal Navy's vessels were oil-
fired. The full implications of this situation were revealed in the
spring of 1917, when the worst fears of the prewar Admiralty
planners seemed about to be realised. The German campaign of
177
unrestricted submarine warfare, which began in February 1917,

led to a dramatic decline in British naval fuel stocks. By 1917 over
three quarters of British oil came over the Atlantic from the
United States, and the German submarines made a special effort
to sink the tankers carrying the precious fuel to Britain. By May
Admiralty officials were predicting that the Royal Navy would
soon be critically short of fuel oil, and urgent orders were
despatched to Fleet commanders instructing them to restrict the
operations of their vessels. Armaggedon, however, was avoided.
The institution of the convoy system eventually reduced tanker
losses. The United States, provoked by the German submarine
campaign to join the Allies, transferred additional tankers to the
Atlantic routes. A more rational world oil supply and distribution
system was eventually worked out by the Allies. 1 The impli-
cations of the crisis of spring 1917, however, were not lost on the
British Admiralty, 'Without the aid of oil fuel from America', one
naval official wrote in September 1917, 'our modern oil burning
Fleet cannot keep the seas.' 2 The mobility of the Royal Navy
depended on the goodwill of the United States.
II THE FRANKENSTEIN SYNDROME
The outbreak of war so soon after the formal ratification of the

'exceptional relationship' with the British Government was in
many ways a stroke of considerable good fortune for A.P.O.C. By
August 1914 the company had acquired £2 million from the
Government and a secure market for its fuel oil, and it had also
defeated the Shell'flank attack' in Mesopotamia. Yet it was still a
small and relatively insignificant force in the world petroleum
industry. The company lacked the downstream capacity to
market either its commercial fuel oil or its petrol and kerosene.
The latter two products were in any case tied to marketing
agreements with the Shell Group until 1922. The task of
constructing a tanker fleet and establishing distribution facilities
in the United Kingdom and elsewhere promised to take many
years and considerable capital.
The War, however, presented A.P.O.C with many opportu-
nities for growth. The company, with its 'exceptional relation-
ship' with the Government, was in an excellent position to benefit
from the unprecedented wartime demand for petrol and fuel oil.
Moreover, the company's highly-cultivated 'all-British' image,
THE POLITICS OF OIL 1914-18 179
useful enough for extracting special favours from the British

Government before 1914, seemed likely to prove of even greater
value during the xenophobic War years. A.P.O.C. was quick to
take advantage of the new opportunities offered by the War,
switching its previous lobbying tactics aimed at getting
Government assistance, to using the assistance that it had
obtained as a lever to extract new favours. The company, Charles
Greenway told the Board of Trade in March 1916, had become
'virtually a Government department desirous of doing its best for
the Nation', 3 and one Government department clearly deserved
the support of other departments.
One of the top priorities of Charles Greenway and his
associates was to use the opportunities presented by the War to
break A.P.O.C.s marketing arrangements with the Shell Group.
The company had very badly needed Shell before reaching its
agreement with the British Government, but the contracts now
seemed restrictive and a hindrance to future expansion. A.P.O.C.
therefore made strenuous efforts to enlist the help of various
ministries in breaking these contracts, which, civil servants were
informed, had only been signed under duress and because of the
weakness of Burmah Oil. By early 1915 the A.P.O.C. manage-
ment had produced a characteristically ingenious plan. The
scheme was based on the fact that legally A.P.O.C. produced no
crude oil but purchased its supplies from two wholly-owned
subsidiary companies, the First Exploitation Company and the
Bakhtyari Company. The proposal was that these two producing
companies should sell their oil to a new company, thus depriving
A.P.O.C. of its supply of crude and so rendering the Shell
agreement useless. 4 The plan, however, was too blatantly dis-
honest even for A.P.O.C.s supporters in Government, and the
Admiralty refused to sanction the scheme. 5
The Admiralty's failure to support this scheme did little to
diminish Greenway's determination to break A.P.O.C.s de-
pendence on Shell for the distribution of Persian oil, and to
achieve full vertical integration for his company. In the short term
A.P.O.C. could not hope to construct its own distribution
network. Greenway's solution was to attempt to ally with the
other successful British oil enterprise, the Pearson group. During
the opening months of 1915 Greenway approached Lord
Cowdray about the possibility of Anglo-Mexican marketing
Persian products in the United Kingdom. After a meeting
between Cowdray and Slade in April 1915, Cowdray offered to

sell Persian oil on a commission basis. 6 Greenway, however, was
determined to achieve a more ambitious arrangement, and he
pursued this idea during a series of meetings between the two
companies in April. On 20 April Greenway suggested a joint
selling company and a joint refinery. 7 By May this had evolved
into a scheme for a 'National Oil Company'. Greenway proposed
the formation of a distribution company, with a capital of £3
million. Mexican Eagle was to provide the chairman and
A.P.O.C. the vice-chairman. There were also to be four Mexican
Eagle directors, three A.P.O.C. directors, and one or two
Government directors with powers of veto over certain matters.
The new company was to control the sale of both companies'
manufactured products, except Mexican Eagle sales in Mexico,
A.P.O.C.s sales in Persia and Mesopotamia, and Admiralty fuel
oil contracts. By June this scheme had become yet more
ambitious, with the projected 'New Imperial Oil Company' also
acquiring the Eagle Oil Transport Company. 8
Greenway's plans also soon came to include the acquisition of
various oil distribution companies which had German capital in
them, the most important being the British Petroleum Company
(B.P.). Soon after the outbreak of war, the Public Trustee had
taken over B.P., the Homelight Oil Company, the Petroleum
Steamship Company and the British Creosote Company as
enemy property. Their old trade rivals were soon putting in bids
for them. In October 1915 Anglo-American made a tentative
approach to the Contraband Department of the Foreign Office
about the possibility of its acquiring B.P.s property. 9 However
Alwyn Parker, by then the head of the Contraband Department,
was not at all in favour of increasing Standard Oil's hold on the
British oil market, and instead he put Charles Greenway in touch
with one of the Nobel directors on B.P.s Board.
Greenway immediately took up the idea that A.P.O.C. should
acquire the companies. They possessed precisely the distribution
facilities in Britain which A.P.O.C. lacked. In October 1915
Greenway wrote to the Government that B.P. would supply the
company which he hoped would be formed by a merger of
A.P.O.C. and Anglo-Mexican 'with a ready made organisation
which otherwise it would take years to complete'. 10 Although the
plan for the association with Mexican Eagle was not successful,
Greenway continued to press for the transfer of the B.P. and the
other companies to A.P.O.C. By June 1917 this pressure had

proved successful, and B.P., the Homelight Oil Company and the
Petroleum Steamship Company were transferred to A.P.O.C.
The two distribution companies' 850 depots, and the tanker
company's 11 tankers, provided the nucleus of A.P.O.C.s grow-
ing downstream capacity. 11
A.P.O.C. also pressed hard to develop its distribution facilities
out of its own resources; or, more precisely, out of the resources of
the British Government. In October 1914 A.P.O.C. launched a
scheme for a refinery in Britain. 12 Refineries at that time were
usually located near centres of production, rather than con-
sumption, and the only refinery in Britain before 1914 was the
Pumpherston plant which refined Scottish shale. The scheme for
the A.P.O.C. refinery was the particular brainchild of Admiral
Slade, the Admiralty representative on the A.P.O.C. Board, and
he pushed forward his idea on the various official committees on
which he sat. In February 1915 the Admiralty's Standing
Committee on Liquid Fuel, the chairman of which was Slade,
gave formal approval to the suggestion that A.P.O.C. should
build a refinery in Britain. 13 The exigences of war, however,
disrupted the company's plans, and in 1917 the scheme for the
refinery had to be temporarily abandoned.
Greenway also attempted to use the 'exceptional relationship'
to strengthen his company's position in Mesopotamia by exclud-
ing Shell for once and all from the Turkish Petroleum Company
(T.P.C.). In November 1915 the Foreign Office informed the
company that the Foreign Office Agreement of 19 March 1914,
which had involved representatives of the German Government,
no longer had any legal validity. 14 Greenway and his colleagues
took this as a cue to put in a bid for the entire Mesopotamian
concession. In a letter addressed to the Foreign Office on 24
February 1916, the company observed that it hoped to be 'given
the complete oil rights over any portion of the Turkish Empire
which may come under British influence'. 15
This outrageous claim was the first, though not the last, time
that Greenway overplayed his hand. It led to a major reassess-
ment within Government departments of their attitude to
A.P.O.C., and the extent to which they should support it against
other oil companies. The Mesopotamian affair also increased the
tension between A.P.O.C. and Shell. A.P.O.C.s refusal to contri-
bute towards the routine office expenses of the T.P.C. after the
outbreak of war irritated Deterding, especially because he rightly

suspected that the reason for A.P.O.C.s parsimonous behaviour
was that it wished to destroy the T.P.C. and secure for itself the
entire Mesopotamian concession. After a fruitless discussion
between Gulbenkian and Greenway over Mesopotamia, during
which the latter had diverted the conversation on to the topic of
Persian potteries, Deterding denounced the attitude of A.P.O.C.
as 'not being cricket'. Although there is no evidence that
Deterding knew of A.P.O.C.s February letter to the Foreign
Office, he was fully appraised of A.P.O.C.s long-term ambition to
exclude Shell from the Middle East. Deterding, Gulbenkian later
wrote, said 'he would see them d ... first'. 16
Ill THE RETURN OF THE SHELL MENACE
A.P.O.C. clearly wanted a great deal from the British

Government. It had requested support in breaking a legal
contract, the transfer to it of the 'German' oil companies,
assistance in establishing a refinery in Britain and the promise of a
monopoly over Mesopotamian oil. A.P.O.C. hoped to persuade
the British Government to support its claims by resurrecting the
'Shell menace'. A vivid picture was presented to the Government
of the menace posed to Britain by Shell. The anti-semitic attack
on the British leaders of Shell, which had lain dormant since
Greenway's work for Burmah Oil between 1903 and 1905, was
revived. 'Mr Deterding,' Admiral Slade wrote in a letter in July
1915, 'the real manager of all this concern, is an extremely clever
["unscrupulous" crossed out) business man who is ably sec-
onded by the ["Jewish" crossed out] other interest in the Shell
Company.' 17 Shell's monopolist position was strongly attacked.
'It is my conviction', Greenway told the Board ofTrade in March
1916, 'that for patriotic reasons it is necessary to check the further
growth of this vast foreign monopoly, inasmuch as it has become
a serious National menace.' 18
The War gave added force to Greenway's insistence that Shell
was a 'foreign' company, partly under German influence. The
attacks on Shell's foreign ownership were now reinforced by
evidence that the Group was using its international position to
supply oil products to the Central Powers as well as the Allies. 'I
know that after the fall of Antwerp they sold all their supplies in
that City to the Germans, as I have intercepted letters to show it',
Slade wrote in an Admiralty memorandum in July 1915. 'They

are also', he continued, 'suspected of supplying oil through their
Scandinavian Companies or rather through some of the directors
of these companies. They are also suspected of endeavouring to
supply Austria from their Roumanian resources through the
Astra Romana, their Roumanian Company.' 1 9 The Shell Group,
Greenway wrote to the Government a year later, were 'not only
making enormous profits out of their sales to the British
Government, but are through the Astra-Romana Com-
pany ... at the same time making large profits out of the
sale of Oil Products to Germany'. 20
This aspect of A.P.O.C.s campaign was very dubious. There
can be no doubt that the serious allegations about Shell's
relations with the enemy originated with Admiral Slade, and that
he obtained his information from the various official government
bodies on which he sat.
Slade's position after 1914 was highly anomalous. As one of the
Government directors on the Board of A.P.O.C. he was officially
the State's watchdog over that company. Yet he fully associated
himself with the cause of expanding A.P.O.C., and joined with
Greenway in lobbying the British Government and vilifying Shell
in order to achieve that end. At the same time, however, he
continued to play an important role in the formulation of naval
oil policy. He acted as chairman of the Standing Committee on
Liquid Fuel, which advised the Admiralty on policy towards
A.P.O.C., and he used that position to forward the interests of the
company. He also attended several interdepartmental committees
on oil as the Admiralty representative, and he seldom failed to
make his distinctive viewpoint known. He informed one such
meeting in February 1916, which had been called to discuss a
shortage in petrol supplies, that Shell and Standard had a
'working understanding and they are both out to fleece the British
public'. 21
Slade's appointment as vice-chairman of the Restriction of
Enemy Supplies Committee gave him an excellent vantage point
for collecting information about Shell's international activities.
This committee was concerned with the role of the various
European neutrals, particularly the Scandinavian countries and
Rumania, in supplying goods to Germany. On many occasions
the problem of contraband oil supplies was discussed. 22 It was
through this committee that Slade received information about
Shell's Rumanian and Scandinavian subsidiaries, and he clearly

had no scruples about forwarding that information to Charles
Greenway.
Slade's charges against Shell, therefore, had a foundation in
fact. He and Greenway were not alone in accusing the Group of
trading with the enemy. The Contraband Department of the
Foreign Office was also gravely suspicious of Shell. The prewar
experience of oil diplomacy of Alwyn Parker, who headed that
department, had given him a considerable dislike of the Group. 'I
have had a great deal to do with these Companies in connection
with the Mesopotamian oil negotiations and cognate matters
before the war,' Parker explained to his colleagues in June 1915,
'and I have formed a most unfavourable impression of the
Directors, and in particular Sir Marcus Samuel, Mr Waley
Cohen and Sir Reginald Macleod. ' 23 (The latter was a former
civil servant, now a Shell director specialising in negotiations with
the government.) When news began to reach the Contraband
Department that Shell's companies in Scandinavia, particularly
the Anglo-Swedish Oil Company, were under suspicion of
supplying oil to Germany, it was at once believed. The truth was
that one of the directors of Anglo-Swedish had been involved in
pro-German trade, but as soon as Shell officials discovered this
they despatched a man from London to replace him. The
Contraband Department, however, blamed Shell for not exercis-
ing a greater control over a subsidiary operating in the most pro-
German of the neutral northern European countries. 24 Indeed
suspicion of the London directors of Shell was as great as
suspicion about the company's foreign subsidiaries. In September
1915 Parker voiced his suspicions of the London Board of Shell
'in which there is a large German interest, though the Company
endeavour to conceal this'. 25 At Parker's request the Home Office
asked the Censor to place the Anglo-Saxon Company under
'special observation'. 26 Over the next year the activities of several
other Shell subsidiaries came to the attention of Foreign Office
and Contraband officials. In September 1916 Shell protested
against the sequestration of its subsidiary, Astra Romana in
Rumania. When the Foreign Office took this up with the
Rumanian Government, the British Ambassador was informed
that the company had been 'sequestrated because it was run on
German lines and largely in German interests ... the company
was looked upon as a centre of espionage'. 2 7
In addition to these suspicions about the behaviour of Shell

subsidiaries, Foreign Office officials felt a very considerable
personal animosity towards the Shell management. Every visit of
Marcus Samuel and Waley Cohen to the Foreign Office was
followed by a flurry of angry minute writing. In October 1916
Parker dismissed Cohen as 'utterly unscrupulous' and 'insuffer-
able', and Eyre Crowe, an Assistant Under Secretary of State at
the Foreign Office, described him as 'a slippery and dangerous
person'. In the same month Cohen was forbidden either to visit or
to telegraph the Foreign Office, and was instructed to make all
future communications in writing. 28 As late as April 1917 Parker
described Marcus Samuel as 'utterly unreliable'. 29
It was not very surprising, therefore, that the Foreign Office at
first pursued a policy of strong support for A.P.O.C. at the
expense of Shell. The ministry, Parker wrote in November 1915,
was 'impressed with the desirability of breaking the existing
monopoly of the U.K. market by the Shell and Standard Oil
companies by the establishment of a competing, all-British
controlled company'. 30 The War had clearly radicalised Foreign
Office views, or at least Parker's views, on the subject of State
intervention in the oil industry. Before 1914 Parker and his
colleagues had been the most eager of Government ministries to
support A.P.O.C. This policy had been, however, to protect the
fuel oil supplies of the Royal Navy and Britain's diplomatic
position in Persia. By November 1915 Parker was contemplating
even more dramatic Government engineering of the company
structure of the oil market in the United Kingdom itself.
Moreover, A.P.O.C. was envisaged as challenging the 'trusts' not
only in the fuel oil market, but also in such purely commercial
petroleum products as kerosene. As if the Germans were not
enough, war was to be declared on Shell and Standard Oil.
A.P.O.C., however, had an ever more powerful friend in
Government circles, Reginald Hall. Hall, known as 'Blinker'
because of an unfortunate personal mannerism, had become
Director of the Intelligence Department of the British Admiralty
in October 1914. Brilliant and unorthodox, he was to be a
remarkable Director of Naval Intelligence (D.N.I). The in-
terception of the Zimmerman telegram by Room 40, the secret
code-breaking unit under Hall, and his timing of the release of its
contents both to the United States and other government
departments, may have contributed significantly to the entry of
the United States into the First World War. 31 Hall was distin-
guished by, among other things, the range of his activities while
D.N.I., and one of his interests was oil. He fully recognised the
importance of oil for the Royal Navy, and as a result supported a
nationalist oil policy for the British Empire. 'It should be a
cardinal principle', he reflected in July 1916, 'that under no
circumstances should any oil-bearing territory in British po-
ssessions come under the control of a foreign or quasi-foreign oil
company.' A /aissez-faire policy, he continued, 'which permits of
the encroachments of immensely wealthy, and possibly unscrupu-
lous foreign oil companies, to exploit our possessions is one
which, apart from every other consideration, would bring about a
storm of indignation in the British people'. 32
This kind of thinking closely paralleled that of A.P.O.C.s
management. A high degree of co-operation was soon established
between Hall and the company, an alliance forged by Admiral
Slade, a former D.N.I. himself and an acquaintance of Hall. The
support lent by Hall took several forms. The memoranda
addressed to various ministries by Greenway and Slade were
frequently typed in Hall's office, and composed with the assis-
tance of Naval Intelligence staff. Hall strongly supported
A.P.O.C.s case within the Admiralty. He also assisted the
company in bringing its case to a wider public. Thus on 14 July
1916 Greenway wrote to Hall suggesting that he might find
someone to put a series of Parliamentary questions, concerning
Shell's relationship with Astra Romana and that company's role
in supplying oil to Germany, to the President of the Board of
Trade. 33 Six days later a Conservative M.P., Major Roland
Hunt, put a series of questions in the House of Commons, about
Astra Romana's activities. In the following weeks Hunt asked a
number of other Parliamentary questions about the links between
Shell Transport and Astra Romana. 34 Hall also actively worked
for the transfer of B.P. to A.P.O.C. In August 1916 he wrote
privately and with 'diffidence' to the Board of Trade, calling for
urgent measures to keep B.P. out of the hands of Shell. 'Now is
the golden opportunity', Hall advised, 'to break down the
monopoly which has obtained for the last few years in the U.K.
and to secure freedom of action for ever.' 35
The allegations about Shell have a contemporary ring about
them. The ability of multinational oil companies to thwart the
wishes of national governments, and the fear that these enter-
prises place corporate profits above other considerations, have

always been powerful factors in governmental suspicions of their
activities. Several western European governments voiced such
thoughts during the 1973 Arab oil embargo, when the companies
seemed to be shifting oil around the world regardless of the wishes
of governments. The Shell Group, however, cannot be accused of
pursuing a ruthless policy of profit maximisation during the First
World War. The allegations of Hall, Parker and Slade were
either unfair or based on misunderstandings. The British manage-
ment of the Group was entirely, and the Dutch side largely, pro-
Ally. At the beginning of the War some ofthe Dutch management
had wanted the Group's Dutch-registered companies to follow a
policy of strict neutrality. 36 This view was fully understandable,
not least because the Royal Dutch management had close links
with the Netherlands government. Deterding, however, was
decidedly pro-Ally, and indeed he remained in London through-
out the War. Both the 'British and French Governments place the
greatest confidence in the fairness of Companies connected with
our Group', Deterding wrote to the Bataafsche Petroleum
Maatschappij in December 1914, 'and I should think it a betrayal
of such confidence if any injurious act were committed, however
profitable it would be'. 37 After a few months of war even the
directors at The Hague had become convinced that friendship
with the Allies was, if nothing else, in the long-term commercial
interest of the Group. 'We have always taken into account the
interests particularly of Great Britain and its Colonies,'
H. Colijn, who had been the Dutch Minister of War before
joining the Royal Dutch, wrote to Deterding in December 1914,
'as we fully appreciate that this is of vital importance to the
interests of our Group.' 38
The Group's management was not responsible for the supplies
that reached Germany via the Scandinavian and Rumanian
subsidiaries. The management in London was greatly annoyed at
the Foreign Office's accusations over the Anglo-Swedish affair,
and the company was at most guilty of not watching its Swedish
subsidiary as closely as it might have done. The Rumanian
situation was rather different. Astra Romana was wholly con-
trolled by the Dutch side of the Shell Group. The company did
supply Germany and Austria-Hungary with petroleum products
during Rumania's period of neutrality before 1916. The com-
pany, however, was subject to Rumanian laws, and the British
Government recognised this fact. 39 The Rumanian Government's

allegations of German influence in the company were part of the
regime's strategy to reduce the role of foreign capital in the oil
industry. Deterding resigned from the Board of Astra when it
became clear that the company would supply oil to the Central
Powers. 'I must absolutely refuse to be connected as chairman', he
wrote to Astra Romana in March 1915, 'with a Company who
would supply enemies with contrabands.' He supported this
action with a quite uncharacteristic emphasis on the importance
of sentiment in business. 'Although sentiment may not entirely
rule business', he observed, 'still a business without sentiment
must in the long run have a degrading effect on the man who
conducts it.' 40
It was paradoxical that, at the very time plans were being made
in Whitehall to break the power of the 'trusts', these obnoxious
international oil companies were playing a key role in the British
war effort. The determination of the British Government to fight
the War using the old, well-tried economic system meant that
until at least 1916 State interference in the oil trade was minimal.
The companies themselves had to take the lead in introducing the
supply re-adjustments necessitated by the disruption caused by
war. Rationing was introduced and operated by the companies,
including Anglo-American and Shell. The shortage of tonnage
made it necessary to import most of Britain's oil from the United
States, and the American oil companies assumed a major role in
supplying Britain. 41 The Shell Group also made important
contributions to Britain's oil supply situation. One instance was
the supply of toluol. Early in 1915 Shell, on its own initiative,
transferred its production plant from Rotterdam to Britain, thus
leading to a great increase in Britain's toluol capacity. 42 Shell also
took the initiative in developing more rational uses of shipping
tonnage. In August 1915 the company suggested the use of the
'double bottoms' of ships for the carriage of oil in the East, and it
also arranged inter-company transfers of tonnage. 43
Shell's assistance to the war effort was not entirely the product
of selfless patriotism. The introduction of the practice of carrying
oil in the 'double bottoms' of liners and cargo vessels, for
instance, was not only envisaged as a brilliant scheme to increase
the amount of tonnage available to the Admiralty, but as a means
of enabling Shell to recover some of its tankers which had been
requisitioned. 44 Yet the company's impressive contribution to
the war effort, for whatever reasons it was made, inevitably

prompted the supply departments of the various ministries to
adopt a more favourable attitude to the Group.
This trend was most noticeable in the case of the War Office.
The Shell refineries in the Dutch East Indies provided the toluol
needed for the manufacture of T.N.T., and the aviation fuel
needed by aeroplanes. Shell petrol kept Army lorries moving. The
War Office soon began to develop close contacts with Shell
officials and in 1916 the company co-operated with Military
Intelligence in a scheme to destroy the Rumanian oilfields to
prevent them falling into German hands. 45 Waley Cohen was
appointed Petroleum Adviser to the War Office in April 1917.
Naval officials were at first more cautious. In the prewar years
the Admiralty contracts department had been wary of the Group,
though respectful of its efficiency and resources. This attitude
persisted for the first year of the War. In July 1915 Sir Frederick
Black, the Director of Contracts, described the company as
'excellent contractors whose usefulness we appreciate', but he still
considered that 'the Shell Companies' directors are adept at
driving a one-sided bargain'. 46 The officials who replaced Black
after he left the ministry to become the Director General of
Munitions Supply in August 1915 were less guarded in their
appreciation of the company. An assistant Director of Contracts
described the Group in February 1916 as 'most efficient and in-
deed indispensable contractors'. The assistant Director of Stores
agreed that Shell had 'invariably rendered every assistance, and
have never attempted to erode the conditions of any contract
which has been entered into'. 47
IV THE SEARCH FOR A NATIONAL OIL COMPANY
The divergence of opinion among Government departments on

the policy to be adopted towards oil companies was revealed
during the discussions on the various oil company merger
schemes launched during the War. In 1915 and 1916 various rival
merger proposals were presented to the Government by Lord
Cowdray, A.P.O.C. and the Shell Group. All these schemes
claimed to have as their object the creation of a large national oil
company with a British majority on its Board.
In the summer of 1915 Shell proposed to the Government that
it should be allowed to merge with Burmah Oil. The resulting
company would have had a 51 per cent British majority on its

Board. By the New Year Marcus Samuel and Waley Cohen had
expanded this suggestion into a scheme which also included the
merger of A.P.O.C. with Shell.
Charles Greenway and Lord Cowdray, however, had other
plans for the British oil industry. During the summer of 1915 they
continued to discuss ambitious schemes for the creation of a large
British oil company, based on a merger of A.P.O.C. and Mexican
Eagle, and probably including Burmah Oil and B.P. The for-
mation of such a company, Cowdray wrote to the Board of Trade
in December 1915, was 'a British necessity'. 48 In April 1916 he
composed a long memorandum on the need for a British Imperial
Oil Company. This company would market petroleum products
in the United Kingdom and the Empire, develop the colonial oil
industry, establish a refining industry in Britain and provide a
focus for the training of the technical experts required by the
petroleum industry. The creation of such a company, Cowdray
argued, was needed to 'counteract the all powerful American
control', and prevent Britain having to 'pay undue tribute to the
Oil Companies who today dominate the oil situation, and who
will continue to do so in the future'. In September Cowdray sent
his memorandum to Sir Francis Hopwood, the Additional Civil
Lord at the Admiralty and a close acquaintance of Lord
Murray. 49
Cowdray's enthusiasm for the creation of a large British oil
company led to misunderstandings of his true position. Cowdray
drew a distinction between giving disinterested patriotic advice
and his own business policy. He was always extremely cautious
about involving either himself or Mexican Eagle in any scheme
for a merger of British oil companies. He had considerable
reservations about being involved in a company in which the State
would have capital invested and directors on the Board. 'Whilst
there are many advantages to be got by an association with the
British Government,' he wrote in Aprill915, 'there would also be
disadvantages, as a concern in which so much Government
capital was invested might be subject to continual parliamentary
criticism.' 5°
There were more substantial reasons, however, why Cowdray
was reluctant to participate in a giant British oil company. He had
little faith in 'managerial capitalism', believing strongly that a
successful firm was one managed by people with a substantial
financial interest in it. In the projected new company, he wrote, no

one except himself would have the 'big personal interest which
would ensure that personal management of those having big
stakes in a concern, which is so essential to success'. 51 Cowdray
considered that if he joined the combination he would be
committed to oil, 'a very fascinating but huge business', for
ever. 52 He was sixty in 1916, and although he was very far from
being tired with work, the managerial responsibilities of the kind
he could forsee were not over-appealing. Moreover, he was
reluctant to tie his sons and the whole family business so closely
and permanently to the petroleum industry. If Mexican Eagle
became involved in the new company, he wrote in 1916, he and his
sons 'must remain for an indefinite period in the oil business.
Whereas today we are free to clear out whenever we want'. 53
This freedom to 'clear out' was a very important consideration
for Cowdray, who was always in search of new adventures
rather than new administrative responsibilities. By the middle of
the War, Lord Murray's department had a number of oil ventures
in progress. The plans for oil exploration in Algeria and Sakhalin
were progressing, while there were new plans to enter Trinidad.
Moreover, in October 1914 Cowdray became interested in
exploring for oil in Britain. Pearson geologists were ordered to
conduct investigations in the Midlands, and later in the North of
England and southern Scotland. By early in 1915 Cowdray was
convinced that petroleum existed in Britain, and probably in
commercial quantities. In June 1915 Murray raised the matter
with Sir Francis Hopwood, and he expressed great interest in the
scheme on behalf of the Admiralty. 5 4
Cowdray's reluctance to participate in the oil merger schemes
was not a great disappointment to many government officials.
Diplomatic considerations were, as ever, a major consideration.
A merger between Mexican Eagle and a company in which the
British Government was a majority shareholder seemed likely to
lead to an outburst of criticism from the United States, and by the
middle of the War Britain was very dependent on American oil.
Moreover, Cowdray's strong character made him unattractive to
civil servants. Cowdray, the Director of Naval Contracts argued
in 1915, was a 'man of strong will', who would not allow any oil
group of which he was a member to be subordinate to the wishes
of the British Government. 55
Cowdray's reluctance to participate in the merger schemes
grew during 1916. He wanted cash to pursue his new business

ventures, and cash was something which a merger with A.P.O.C.
would not provide. Moreover, the Mexican political situation
remained threatening. Mexican Eagle's property largely survived
the continuing ravages of the Mexican civil war. Production was
maintained, and 200,000 tons of fuel oil were duly supplied each
year of the War to the British Admiralty, under the terms of the
1913 contract. Cowdray's interests were well-protected by his two
extremely able managers in Mexico, J. B. Body and C. W. Hayes.
Nevertheless, Cowdray was determined to reduce his Mexican
commitment, and perhaps to dispose of it altogether. After
considerable wavering, he renewed his discussions with Standard
Oil (New Jersey) in November 1916 about a possible sale of his
company. The negotiations proceeded smoothly until March
1917, when Cowdray, at the Treasury's request, consulted the
Admiralty about the matter. E. G. Pretyman, who had returned
to the Admiralty as Civil Lord at the end of 1916, raised
immediate objections. A very heated correspondence followed,
despite the fact that Cowdray was now himself in the higher levels
of government as President of the Air Board, a position he held
between December 1916 and November 1917. Cowdray angrily
pointed to the disturbed conditions in Mexico, arguing that it was
unfair that he should be expected to bear such great risks single-
handed. At one point he offered to sell Mexican Eagle to the
Government for half the price he had quoted to Standard Oil, but
the response to this offer was no more enthusiastic than to his
similar proposal in 1913. By May 1917 the affair had gone to the
War Cabinet, which expressed the strong opinion that Cowdray
should not sell Mexican Eagle to the Americans. Although
Cowdray continued to maintain that the Government did not
have the powers to prevent a sale, Jersey Standard would not
pursue the negotiations while there existed doubts about the legal
situation. Cowdray was eventually threatened with the Defence
of the Realm Act, and the negotiations with Standard Oil
collapsed. 56
As prospects of a merger with Mexican Eagle faded, Greenway
and Slade concentrated on lobbying the government to prevent a
merger between Shell and Burmah Oil, and instead promote one
between A.P.O.C. and Burmah. The fact that Burmah Oil itself
was in favour of a merger with the Shell Group was explained
away by A.P.O.C. as being due to Shell threats.
At first many civil servants felt most favourably disposed

towards the proposals made by Greenway and Slade. There was
considerable initial resistance to Shell's scheme for a merger with
Burmah Oil, especially from the Admiralty and the India Office. 57
Yet by the beginning of 1916 the Shell proposals were beginning
to receive more favourable consideration. The Admiralty's
contract and supply branches had learned to value Shell assis-
tance and wished to tie the company even more closely to Britain.
'It seems desirable', the assistant Admiralty director of contracts
reflected in February 1916, 'to consider whether it is not
practicable to secure British control of Shell in some way rather
than alienate it or arouse its hostility.' 58 The Foreign Office
moved independently towards a similar conclusion. A.P.O.C.s
claim for 'monopoly oil rights' in the Middle East prompted the
Foreign Office to reconsider its attitude to the company. It raised
in the most direct way the perennial question, who was using
whom? The answer seemed increasingly obvious. The company
was blatantly trying to use the British Government, and its
interests no longer seemed identical with those of the State. In an
important letter written to other ministries on 2 March 1916, the
Foreign Office expressed doubts whether either A.P.O.C. or
Burmah Oil had the 'economic independence, the areas of supply
or the commercial ability' to develop the Middle Eastern oilfields
for Britain after the War. The company which clearly did possess
such attributes was Shell. The Admiralty, it will be remembered,
had had similar thoughts in 1911 regarding the oilfields of Egypt
and Trinidad. The Foreign Office began to wonder whether the
Group could not be brought under 'British control by an
amalgamation with the Burmah and Anglo-Persian Companies'.
The Board of Trade which was involved in similar merger
schemes in the British chemical industry, soon formulated a
scheme on these lines. In August 1916 it launched a plan for an
'Imperial Oil Company', involving a merger of Burmah Oil and
Shell, the resulting combination being 51 per cent British
owned. 5 9 By November 1916 this scheme had overcome a rival
'all-British' scheme put forward by Slade on behalf of A.P.O.C.
and the Admiralty, and had received approval from a Cabinet
Committee. The plan, however, collapsed when it came to
working out the details.
By 1916, therefore, one part of officialdom had become
convinced of the need to create a large British oil group based on
the Shell company, and were in favour in the meantime offriend1y

co-operation with the Group. Other elements in Government,
however, such as Naval Intelligence, were pursuing precisely the
opposite policy. They felt a strong distaste for Shell, and wanted
to see a large British oil group based on A.P.O.C.
There was, in other words, no clear British Government oil
policy. Different ministries, and sometimes different sections
within the same ministry, pursued contradictory policies. There
was nothing unique about this muddle. Bureaucratic conflict is
the norm rather than the exception in any government except,
perhaps, over matters of critical and immediate urgency.
Government policy on oil, however, had a particular tendency
towards confusion because so many ministries had some interest
in the question. By the middle of the War the Cabinet, the Foreign
Office, the Admiralty, the War Office, the India Office and the
Board of Trade were all heavily involved in the question of
Government/company relations. Moreover it is clear that even
departmental policies showed a marked lack of consistency, with
decisions which had the appearance of being major policy
changes being forgotten or reversed within a week.
This confusion was allowed because Britain's long-term oil
prospects did not count as an issue of top priority in government
circles. This was fully revealed by the terms of the Sykes - Picot
agreement of 1916 which promised M osul, the region of
Mesopotamia thought most likely to contain oil, and about which
so much diplomatic effort had been expended before 1914, to
France in any carve-up of Turkey after the War. The draft of the
Sykes-Picot agreement was accepted by the Foreign Office one
month before it circulated its March letter stressing the future
importance of Mesopotamian oil to Britain, and the consequent
need to have a large British oil group to exploit it. Middle Eastern
oil was evidently a long way down the Foreign Office's list of
priorities. In April 1915 the British Government had established a
Committee chaired by Sir Maurice de Bunsen to formulate British
territorial aims in the event of a partition of Turkey. 60 The
Committee had included the Mosul oilfields in the projected
British sphere of influence. When, however, the French asked in
December 1915 for the inclusion of Mosul in their sphere of
influence the British negotiator, Mark Sykes, was perfectly
prepared to transfer it to them. Oil played a very marginal role in
the negotiations. Neither the French, 61 nor the British, displayed
much interest in Mosul's oil potential. The elements in the British

Government which did voice objections to the Sykes-Picot
arrangement, such as Naval Intelligence and the India Office, did
not mention oil in their lists of reservations sent to the Foreign
Office. 62 The strategic arguments of the War Office, which
wanted Mosul as a buffer of French territory between the
projected British sphere of influence in Mesopotamia and
Russian territory, carried all before them. It could be argued that
the British stake in Mesopotamian oil had not been totally
surrendered to the French, since the Sykes-Picot agreement did
stipulate that 'existing British concessions' in the French sphere of
influence would be maintained. 63 It was very doubtful, however,
if the Grand Vizier's promise of a concession to the T.P.C. in his
letter of 28 June 1914 amounted to an 'existing British
concession'. 64
V THE PETROLEUM EXECUTIVE AND THE RAPPROCHEMENT

WITH SHELL
Throughout the first half of 1917 the oil company amalgamation

schemes remained in a state of suspended animation. The
possibility of a new initiative came, however, with the arrival on
the oil scene of Walter Long, the Secretary of State for the
Colonies, and John Cadman. The oil supply crisis of the spring of
1917 finally prompted the Government to contemplate a major
reform of the ramshackle organisation it possessed to control and
regulate petroleum supplies. 6 5 On 22 May 1917 the War Cabinet
instructed Walter Long to examine the whole question of
petroleum supplies. This was a depressing choice, indicative of the
low priority still given to oil. Long's previous appointments at the
Local Government Board and the Colonial Office had given him
little experience of oil and oil companies. Nor was there much
hope that he would be able to learn the intricacies of the oil
industry quickly. He was, as his biographer later tactfully put it,
'not clever in the ordinary academic sense of the term'; a man
possessing 'all the qualities and all the defects of the squires'; a
man who, unlike Charles Greenway, always 'played cricket'. 66 It
was, therefore, a great stroke of luck that Long had on hand the
Colonial Office's adviser on petroleum, John Cadman. Long,
after reporting to the Prime Minister about the confusion
reigning in British oil policy, was given emergency powers over all
petroleum products. He and Cadman then began the long process

of administrative reorganisation. In December 1917 the
Petroleum Executive was created, with Long as the Minister-in-
charge and Cadman as its Director. Long and Cadman planned a
ministry for petroleum affairs. It remained to be seen whether
they could extract oil from the jealous grip of the other
government departments.
Long and Cadman soon recognised the need for a change in the
Government's policies towards the oil companies as part of this
process of reorganisation. Fortunately for Shell, they were
unaffected by the stream of'advice' received from Marcus Samuel
soon after their appointment. Samuel's letters were characteristi-
cally tactless and seemingly calculated to provoke the greatest
amount of hostility from officials. Long was informed how 'every
time our advice has been followed splendid results have been
achieved, whilst every time ... it has been ignored, trouble has
arisen', and advised to appoint Waley Cohen to head the
government's oil supply organisation. 67 Long and Cadman,
however, survived these outbursts and, appreciating the import-
ance of the Shell Group to Britain's war effort, they resolved to
improve the relations of the British Government with the Group.
'Government departments', Cadman noted in July 1917, 'have
been in the habit of treating the Shell Group with a reserve which
does not cultivate good feeling. I hope we shall be able to remove
this state of affairs. ' 68
At A.P.O.C. Charles Greenway and Admiral Slade viewed this
new policy with considerable distaste. The company had expand-
ed quickly during the War. Its production of crude oil grew by
nearly 35 percent per annum between 1913/14 and 1917/18, and it
paid its first dividend in December 1917. The acquisition of the
'German' oil companies had considerably advanced the
company's plans to achieve vertical integration. The company
was now a viable economic unit, and Greenway became con-
vinced that it could survive if necessary without the Government
connection, and that such a course would be necessary if the
Government, in its desire to improve relations with Shell, began
restricting the activities of A.P.O.C. In December 1917 Greenway
used the occasion of A.P.O.C.s Annual General Meeting to
launch another 'all-British' oil company scheme, involving the
creation of a company 'free from foreign taint of any kind'.
Cadman was extremely annoyed by this speech, which he
considered 'very wrong' and 'irritating to both the Shell and the
Standard Oil Companies'. 69 The activities of Lord Harcourt's
Committee, which will be discussed in greater detail below, were
also looked upon with grave suspicion by A.P.O.C., who feared
restrictions on their growth or perhaps even a forced merger with
Shell. The company must be left 'free to carry on its operations',
A.P.O.C. told the Treasury in August 1918, 'whether producing,
refining, transporting or distribution to consumers-in any part
of the world'. 70 In the following month Greenway informed Lord
Harcourt's Committee that the Government's interest in A. P.O. C.
was of no value to the company, and they would prefer to be
without the State investment. 71
Admiral Slade responded by utilising his contacts inside the
Admiralty to press A.P.O.C.'s case. By 1918 his position was even
more irregular than previously. In December 1916 Greenway had
agreed, apparently at the suggestion of the Admiralty, to retire as
chairman two years hence in favour of Slade. This may have been
an attempt by the Admiralty to bring A.P.O.C. under a tighter
rein. 72 It may also have been related to the schemes for an all-
British oil company, for which Slade was a better prospect as
chairman than Greenway. Cowdray had found Slade 'quite an up
to date business man' when he met him in March 1915, and in
November 1916 he had told Slade that he was the obvious choice
'to handle' the proposed Imperial Oil Company. 73 In January
1917 Slade resigned as a Government director and became a full-
time director and vice-chairman of A.P.O.C. Yet he continued to
act as an adviser to the Admiralty on oil matters, and he retained
his old contacts with Naval Intelligence. Slade was prompted by
the apparent threat to A.P.O.C.'s expansion to produce a series of
papers for the Admiralty. One of these, 'The Threatened Foreign
Oil Monopoly', was sufficiently scurrilous in its attacks on Shell
for him to leave its authorship anonymous. Another paper, on
'The Petroleum Situation in the British Empire', eventually
reached the War Cabinet as an official Admiralty memorandum.
The paper drew attention to the importance of the oilfields of
Persia and Mesopotamia as 'the largest undeveloped resources at
present known in the world', and called for the development of
these oilfields by exclusively British companies. The Shell Group
must be excluded, argued Slade, because 'the interest that is most
inimical to British control at the present time is the Royal Dutch
Company'. 74 The British Government, Slade wrote to Lord
Harcourt at the beginning of October 1918, must develop 'the

Anglo-Persian-Burmah Group to the very utmost and ... use it
to eventually obtain control of the petroleum markets'. 75
The story of how Slade's paper got to the War Cabinet with
official Admiralty endorsement illustrates the very peculiar state
of A.P.O.C.'s relations with the Government. The paper on
'Petroleum Situation in the British Empire' received the full
backing of Reginald Hall as it made its way through the offices of
the Admiralty. 'The importance of all-British controlled supply
and distribution of fuel oil can hardly be overestimated,' Hall
wrote in support of Slade's paper, 'and I view with some alarm the
possibility of the Royal Dutch through their subsidiary
company-the Shell-having any interest in British oil fields.' 76 A
day previously Slade had had lunch with Maurice Hankey, the
extremely powerful Secretary of the War Cabinet. Hankey had
served before the War in Naval Intelligence and was a close friend
of Hall. 77 During their lunch, Hankey recorded in his diary,
'Slade told me some interesting things about the oil outlook from
which I deduce that we ought to make it a first class war aim and
peace aim to acquire oilfields in Persia and Mesopotamia'. On
l August Hankey saw the First Sea Lord, Admiral Wemyss, about
Slade's paper. 'I got him', Hankey wrote, 'to send the paper to the
Imperial War Cabinet with a covering Memo, which he dictated
in my presence, urging the importance of these oil wells as a war
aim.' 78 Wemyss' memorandum endorsed 'in the strongest man-
ner possible, the general conclusions set forth' in Slade's paper.
On the same day Hankey wrote to the Foreign Secretary,
A. J. Balfour, describing Slade's paper as 'vitally important'. 79
There were, of course, two aspects of Slade's paper. The emphasis
on Middle Eastern oil made an important strategic point, and
Slade helped to convince Lloyd George and Balfour of the need to
acquire the Mesopotamian oilfields for Britain. 80 Slade's paper
was also, however, a strongly partisan attack on the Shell Group,
and it was remarkable that that aspect of the document should
also have received Admiralty endorsement, and have been placed
before the Imperial War Cabinet. Hankey seems to have been
unaware that this was a statement in the continuing conflict
between A.P.O.C. and Shell, and was merely interested in Slade's
observations about the importance of Middle Eastern oil. Hall
knew better.
Slade's memorandum to the War Cabinet was the second
occasion during the War that A.P.O.C. overplayed its hand.

Slade's paper brought to a head the discontent which had been
simmering in several Government departments about his and
Greenway's behaviour. By 1916 even Alwyn Parker was be-
ginning to feel the same distaste for the A.P.O.C. management
that he had previously reserved for Shell. In March 1916 he
observed that Slade seemed 'unable to see anything but per-
fection' in A.P.O.C., and reported that during a conversation he
had had with Lord lnchcape, the other Government director,
Inchcape had argued that it would be best 'to get the whole
concern taken over ... by the Shell and run on sound com-
merciallines'.81 In December 1917 Parker told Cadman 'con-
fidentially' that he considered Greenway to be 'a very unreliable
person, and that he runs the Anglo-Persian, with the support of
Admiral Slade, who follows all Mr Greenway recommends'. 82
The Admiralty took a very dim view of Greenway's 'all-British oil
company' speech of December 1917, calling it 'ill-advised' and
suggesting that changes in A.P.O.C.'s Board might be necessary.
The Government's investment in the company, the Admiralty
observed to the Petroleum Executive, required 'much tact and
judgement in the conduct of the affairs of the company'. 83
Slade's Cabinet paper raised a storm of protest inside the
Admiralty. Slade had by-passed the 'supply' officials in the
Admiralty, headed by the Fourth Sea Lord, and also the
Admiralty's representative on Lord Harcourt's Committee, the
Civil Lord, E. G. Pretyman. Neither Pretyman nor the Fourth
Sea Lord were consulted about the paper before it was endorsed
for the Cabinet, and both were extremely angry when they
discovered its contents. Many of the statements in Slade's papers,
Pretyman wrote on 12 September, were 'inaccurate or exag-
gerated', and as a whole he considered it represented an 'ex parte
statement by the A.P.O.C. who are in bitter rivalry with the Royal
Dutch Shell Group'. 84 Six days later the First Lord, Geddes, took
action. In an internal minute he reminded his officials that
'Admiral Slade is not an Admiralty servant'. Hall was re-
primanded for his excessive support for Slade. 'D.N.I.'s interest
in this matter', the First Lord wrote, 'is right and proper but must
not exceed the functions with which his office is charged.' 85 In a
memorandum to the War Cabinet Geddes dissociated the
Admiralty from Slade's partisan comments and restricted the
Admiralty's endorsement 'to the contention that the oil bearing
districts of Mesopotamia and Persia are of very great national

importance to us'. 86
The Petroleum Executive was even more annoyed by Slade's
paper, especially by the apparent ease with which he was able to
place it before the Cabinet. On 18 September Long complained to
Geddes about how 'without consulting us and without our
knowledge', Slade was 'able to get his partisan views specially
considered by the Admiralty and the War Cabinet'. Such
behaviour, the shocked Long concluded, was not 'in accordance
with the "laws of cricket"'. 87 The Petroleum Executive were
deeply disturbed by the anomalies caused by Slade's dual
position. It was 'extremely difficult', Cadman told the Fourth Sea
Lord on 26 September, 'to refute the accusations made by the
Shell and Standard that the Anglo-Persian Company receive
preferential treatment when the vice-Chairman of the Company
writes letters direct from the Admiralty'. 88 Slade added insult to
injury by informing the Petroleum Executive that the reason he
did not show them his memorandum before it was sent to the
Cabinet was because they might leak the information to the Shell
Group. 89
There was no great public 'oil scandal' to parallel the 'dope
scandal' which grew up at the end of the War about the activities
of the British Cellulose and Chemical Manufacturing Company,
which had also received a considerable amount of State finance in
the War years. 90 Oil was too important and too sensitive a
subject, and too many important men were involved, for Slade's
behaviour and the growing disquiet in Government circles about
A.P.O.C. to be allowed to become public knowledge. Yet there
were clearly similarities in the problems faced by the British
Government with both A.P.O.C. and British Cellulose. The
Government, still fundamentally /aissez-faire in its economic
ideology, was prepared if necessary to invest in a private
company, but not to exercise direct control over that company's
activities. The State at most limited itself to exercising a veto over
any course of action proposed by a company. The Government
thereby laid itself open to being used by the very companies over
which it exercised a theoretical control. It was not surprising that
civil servants rapidly lost their enthusiasm for these thoroughly
unsatisfactory experiments in Government participation in pri-
vate industry. During the early 1920s most of the experiments on
these lines were abandoned, the State withdrawing its investment
in both British Cellulose and the British Dyestuffs Corporation in

this period.
By 1919 the British Government was seriously considering
withdrawing its investment in A.P.O.C., as annoyance at the
behaviour of Slade and Greenway reached a climax. Moreover, as
oil became a matter of increasing tension between States, the
British Government's holding in an oil company began to look
embarrassing on the international scene. 'Direct Government
interest in the Anglo-Persian Oil Company, though entirely
justified in the conditions prevailing five years ago', John Cadman
wrote in December 1919 to Sir Hamar Greenwood, Walter
Long's replacement as Minister for Petroleum Affairs, 'has very
serious disadvantages and handicaps us not only in our dealings
with other British companies, but also with foreign Govern-
ments.'91
As relations with A.P.O.C. grew more tense, so relations
between the British Government and the Shell Group became
more cordial. By the beginning of 1918 these relations were based
less on wartime expediency than on considerations about the
postwar world. The attempts to secure 'British control' of Shell
had ground to a halt by 1917. Greenway's 'all-British' oil
company speech of December 1917, however, acted as a catalyst
for a renewed round of negotiations on these lines. Marcus
Samuel renewed his old request for a State director to be placed
on the Board of Shell. This prompted the establishment of a
committee to discover, in effect, what the policy of the British
Government was on petroleum matters. In May 1918 the
Petroleum Imperial Policy Committee was established, under the
chairmanship of Lord Harcourt, who had been Colonial
Secretary between 1910 and 1915, to formulate a long-term
petroleum strategy for the British Government. The committee
included most of the prominent civil servants who had been
concerned with petroleum policy over the previous few years-
Alwyn Parker, John Cadman, Frederick Black and Lancelot
Smith.
Lord Harcourt and his colleagues faced a very different
political situation from that prevailing in 1914. Before the War,
and even as late as 1916, Germany had been seen as the great rival
for oil regions outside the Americas, and especially in the Middle
East. By 1918, however, the United States had assumed that role.
Britain's humiliating dependence on American goodwill for most
of her oil supplies served to reinforce a general determination to

greatly expand the number of oilfields under British control. One
obvious way of reducing Britain's dependence on American oil
was to recruit a major oil company to Britain's service. Since the
Standard Oil companies were obviously out of the question, the
only candidate was the Shell Group. The thoughts of Lord
Harcourt turned, therefore, to the problem of how to make the
Shell Group more reliably British. Shell and A.P.O.C., Cadman
advised Harcourt's Committee in June 1918, had to be united
against American oil interests. 'The Dutch interests,' he con-
tinued, 'should be moulded so as to become identical with our
own, and the question is at what price this could be done. ' 92 1t was
the 'price' which held up negotiations. The situation was com-
plicated by the disagreement within Shell between Deterding and
Marcus Samuel. Deterding, who was becoming increasingly
impatient with Samuel, absolutely rejected his idea of a British
Government director on the Board of Shell; a scheme which, he
told a member of the Harcourt Committee, Samuel had only
proposed 'out of vanity.' 93 Deterding made it clear that he, and
he alone, controlled Group policy. The Dutchman instead
proposed, in October 1918, that Shell should purchase half the
Government holding in A.P.O.C., the rest of the Government
stock to be sold otT to Burmah Oil and the public. In return, the
Shell companies, apart from those operating in the Dutch
Empire, were to become 'British-controlled'. This scheme was not
well received by the Harcourt Committee, and in their interim
report at the end of 1918 the Committee decided on a policy of
continued support for A.P.O.C.
The last months of the War did, however, see one event which
many hoped would be of enormous consequence. Cowdray had
continued his quest for oil in Britain after 1916. He was
determined to avoid the introduction of the American small plot
into Britain, and the consequent wasteful competitive system of
drilling. He therefore negotiated with landlords in particular
regions hoping to build up large blocks of land on which to drill.
These negotiations had to be suspended in August 1917, when the
Government introduced a Bill reserving to the Crown the
exclusive right to search for oil in Britain. This Bill was eventually
withdrawn due to opposition, and replaced by the Petroleum
(Production) Act of 1918, which, while leaving the question of the
final ownership of any oil found open, gave the Government the
power to control the process of drilling by the issuing of licences,

and so to prevent the waste which might occur by indiscriminate
drilling. Cowdray immediately placed S. Pearson and Son at the
disposal of the Government, and in September 1918 the company
was appointed Petroleum Development Managers to the
Ministry of Munitions. A grant of £1 million was put at the
disposal of Cowdray, and he assembled a team of American
drillers and American drilling equipment. Drilling started at
Hardstoft near Chesterfield on 15 October 1918. Cowdray, his
sons, Boverton Redwood, a collection of government officials,
and the Australian Navy Minister, were amongst those who
watched the opening ceremony. The Petroleum Review announ-
ced 'The Birth of England's Crude Oil Industry'. 94 Twenty seven
days later the Germans signed an Armistice with the Allies.
* * * * *
During the War the State had become more closely involved
than ever before in the affairs of the oil companies. The growing
strategic and commercial importance of oil made the commodity
a concern of international diplomacy. Although, as the Sykes-
Picot agreement demonstrated, oil had not become a matter of
top British diplomatic priority, it was sufficiently important for
the Government to block the sale of lord Cowdray's oil interests
to the United States on purely nationalistic grounds.
The British Government's newly acquired oil company,
A.P.O.C., had been unable to play a significant role in supplying
Britain with oil during the War. Britain imported a mere 0.5
million gallons of Persian oil during 1918, compared with 1150
million gallons from the United States. The country had been
dependent on the great 'trusts', the Shell and Standard Oil
companies, and on the oil fields of the United States. The United
Kingdom, many British politicians and civil servants began to
argue, needed its own large national oil company which would
reduce the country's dependence on foreigners for a crucial raw
material. At first the majority opinion in the Government was
that this should be achieved by a merger between the various
medium-sized British oil companies. This view was partly based
on a strong dislike of Shell, especially in the Foreign Office and
Naval Intelligence. However, the balance of opinion in
Government shifted towards the promotion of a merger between
the small British oil companies and the Shell Group. This would
create a large oil company in which the Dutch would only have a
minority position; the company would be able to do battle with
the American companies on equal terms. Shell's impressive
contribution to the war effort had provided a clear demonstration
of the company's expertise and power, and of its devotion to
Britain. On the other side of the coin, the Government's
'exceptional relationship' with A.P.O.C. seemed to possess many
defects. The company used its connection with the State to further
its own commercial future, while the State seemed unable to
exercise any control over its operations. By 1919 there were
influential voices in government calling for an end to the
embarrassing experiment of State investment in an oil company.
No clear British Government oil policy had emerged by the end
of the War. There had been serious disagreements over policy
during the War between different ministries and departments,
and these were increased by the lobbying of the rival oil
companies. The establishment of the Petroleum Executive failed
to relieve this situation. It remained to be seen if the Armistice
would extend to the interdepartmental disputes within the British
Government.
Notes
I. There is a discussion of the role of oil in the First World War, and the supply
crisis of 1917, in G. G. Jones, 'The British Government and the Oil
Companies 1912- 1924; The Search for an Oil Policy', 20, Historical Journal
( 1977).
2. Minute by M. Waller, I September 1917, ADM 116(1687B, no. C.P.
72530(17.
3. C. Greenway to Sir George Barnes (Board of Trade), 3 March 1916, ADM
I /8537/240.
4. Report by Admiral Slade on A.P.O.C., 8 July 1915, ADM 1/8446/13.
5. Ibid., Director of Contracts Report, 20 July 1915.
6. Memorandum by Lord Cowdray, 8 April1915, Pearson Papers, Box C49.
File: AMPP Co. Ltd Anglo-Persian.
7. Ibid., Anglo-Persian Interview, 20 April 1915.
8. Ibid., Draft Memorandum re: The Sales Company by Lord Cowdray, II
June 1915.
9. Anglo-American to Foreign Office, 4 October 1915, F.O. 382 469, no.
144483/133419.
10. Memorandum on British Petroleum by C. Greenway, 13 October 1915,
ADM 1(8537/240, no. 151100.
II. R. W. Ferrier, 'The Early Management Organisation of British Petroleum
and Sir John Cadman', p. 134, in L. Hannah (ed.) Management Strategy and
Business Development (London, 1976).
12. Ibid.
13. First Interim Report of Standing Committee on Liquid Fuel, 20 February
1915, ADM 1/9799, no. C.P. 21404/1915.
14. Foreign Office to A.P.O.C., 23 November 1915, F.O. 371 2475, no.
172576/3884.
15. A.P.O.C. to Foreign Office, 24 February 1916, F.O. 371 2721, no.
36846/36846.
16. Memoirs of C. S. Gulbenkian, pp. 15-16, SHELL.
18. C. Greenway to G. Barnes, 3 March 1916, ADM 1/8537/240.
20. Memorandum by C. Greenway, 8 July 1916, ADM 1/8537/240.
21. Admiral Slade to Mr Booth, (Ministry oi)MUN(itions), P.R.O., I March
1916, MUN 5/215 1970/17.
22. The proceedings of the Restriction of Enemy Supplies Committee are
located in ADM 137/2988 and 2989.
23. Minute by A. Parker, 8 June 1915, F.O. 382 320, no. 72576/69862.
24. Ibid., Foreign Office to Anglo-Saxon Company, 9 June 1915.
25. Minute by A. Parker, 29 September 1915, F.O. 371 2426, no.
137673/103311.
26. Foreign Office to Home Office, 4 September 1915, F.O. 382 326, no.
124755/84530. Home Office to Foreign Office, 18 September 1915, F.O. 382
327, no. 135393/845307.
27. Sir George Barclay to Foreign Office, 27 September 1916, F.O. 368 1594, no.
1934491176806.
28. Minute by Alwyn Parker, 20 September 1916; minute by A. Parker, 14
October 1916; minute by Eyre Crowe, 17 October 1916; Foreign Office to
Waley Cohen, 19 October 1916. F.O. 382 792, nos. 177088, 205404, 205690,
163006.
29. Minute by A. Parker, 13 April 1917, F.O. 368 1839, no. 76670;76670.
30. Minute by A. Parker, 3 November 1915, F.O. 382 469, no. 151100jl33419.
31. There is a rather inadequate biography of Admiral Hall by Admiral Sir
W. M. James. The Eyes of the Navy: A Biographical Study of Sir Reginald
Hall (London, 1955).
32. Memorandum by D.l.D., 31 July 1916, ADM 1/8537/240.
33. Ibid., C. Greenway toR. Hall, 14 July 1916.
34. Parliamentary Debates, Commons, 1916, vol. LXXXIV, questions by
Major Hunt, 20 July, 31 July, 8 August, 14 August, 16 August.
35. Memorandum to L. H. Smith, I August 1916, ADM 1/8537/240.
36. C. Gerretson, Geschiedenis der 'Koninklijke', vol. IV (Baarn, 1973) p. 67.
This, and the subsequent volume, is not available in English.
37. H. Deterding to B.P.M., 10 December 1914, SHELL.
38. H. Colijn to H. Deterding, 14 December 1914, SHELL.
39. For details of the Rumanian oil situation, and Astra Romana's position in
that country, seeM. Pearton, Oil and the Romanian State (Oxford, 1971).
40. H. Deterding to C. M. Pleyte, I March 1915, H. Deterding to C. M. Pleyte,
3 April 1915, SHELL.
41. H. F. Williamson, R. L. Andreano, et a/., The American Petroleum
Industry: The Age of Energy 1899-1959 (Evanston, 1963) ch. 8.
42. R. Henriques, Waley Cohen (London, 1966) pp. 201-7; R. Henriques,

Marcus Samuel (London, 1960) pp. 597-605.
43. G. G. Jones, The Oil Companies (Cambridge Ph.D., 1977) ch. 6.
44. Waley Cohen to Director of Transports, 14 December 1915, SHELL.
45. M. Pearton, op. cit., pp. 80-1. R. Henriques, Marcus Samuel (London,
1960) pp. 616-18.
46. Report by Director of Naval Contracts, 20 July 1915, ADM 1/8446(13.
47. Ibid., memorandum by C. W. Olivery, 10 February 1916 and,
M. M. Walley, 12 February 1916, no. C.P. 28293(16.
48. Lord Cowdray to George Barnes, 6 December 1915, Pearson Papers, Box
C44, File: LCO 1/120.
49. Ibid., Private Memorandum for Mr Kindersley, 13 April 1916. Private
Memorandum from Lord Cowdray to Sir Francis Hopwood, September
1916, ADM 116/3486.
50. Lord Cowdray's remarks on interview with Sir Boverton Redwood, 7 April
1915, Pearson Papers, Box C49, File AMPP Co. Ltd and Anglo-
Persian.
51. Ibid. Summary of Programme, 21 December 1916, Box All.
52. Ibid. Interview with Mr Chilcott, 23 November 1916, Box C44, File:
Negotiations with Standard Oil.
53. Ibid. Summary of Programme, December 1916, Box All.
54. Ibid. Notes on History of Oil Exploration in England, Box C2.
55. Report by Director of Naval Contracts, 20 July 1915, ADM 1/8446(13.
56. Summary of Correspondence with the Admiralty, Pearson Papers, Box
C44, File: Negotiations with Standard Oil.
57. India Office to Admiralty, 18 September 1915, F.O. 371 2426, no.
137673(103311.
58. Minute by C. W. Olivery, 10 February 1916, ADM 1/8446(13, no. C.P.
28293(16.
59. Foreign Office to Admiralty, 2 March 1916, F.O. 371 no. 36846(36846.
M. Kent, Oil and Empire (London, 1976) p. 131. For the merger schemes in
the chemical industry, see W. J. Reader, Imperial Chemica/Industries: A
History, vol. I (Oxford, 1970) pp. 270-81.
60. J. Nevakivi, Britain, France and the Arab Middle East 1914-1920 (London,
1969) p. 40.
61. C. M. Andrew and A. S. Kanya-Forstner, 'The French Colonial Party and
French Colonial War Aims 1914-1918', Historical Journal XVIII (1974)
81-6.
62. Memorandum by A. Hirtzell enclosed in T. Holderness to Sir A. Nicolson,
13 January 1916; Memorandum by D.I.D., 6 January 1916, F.O. 371 2767,
nos 8116 and 8117(938.
63. The text of the Sykes-Picot Agreement, as formalised by the Grey-Cambon
exchange of letters, is in E. L. Woodward and R. Butler, Documents on
British Foreign Policy 1919-1939 1st Series, vol. IV (London, 1952) pp.
244-7.
64. For an alternative view, see J. Nevakivi, op: cit., p. 40.
65. G. G. Jones, 'The British Government and the Oil Companies', Historical
Journal, XX (1977) 663--5.
66. Charles Petrie, Walter Long and his Times (London, 1936) pp. 45, 235-6.
67. Marcus Samuel toW. H. Long, 26 June 1917: note by W. H. Long, 14 June
1917, (Ministry of) POWE (r), P.R.O. POWE 33(2.
68. J. Cadman to Mr Batterbee, 24 July 1917, POWE 33(3.
69. J. Cadman to Mr Batterbee, 17 December 1917, POWE 33(42.
70. A.P.O.C. to Treasury, 2 August 1918, POWE 33(40.
71. Report of proceedings of Petroleum Imperial Policy Committee, vol. I,
evidence of Charles Greenway, 19 September 1918, POWE 33(13.
72. Minute by E. Pretyman, 24January 1918, ADM 116(1687B, no. C.P. 29097.
73. Memorandum by Lord Cowdray, 8 April1915, Box C49: File: AMPP and
Anglo-Persian. Interview with Admiral Slade re:Imperial Oil Company 15
November 1916, Box C44, File: LCO 1(120.
74. The two papers by Admiral Slade are to be found in ADM 1(8537(240.
75. Admiral Slade to Lord Harcourt, 7 October 1918, POWE 33(45.
76. Note by R. Hall, 30 July 1918, ADM 1/8537(240, no. NID 14074.
77. S. W. Roskill, Hankey: Man of Secrets, vol. I (London, 1970) p. 246.
78. Ibid., pp. 583-5.
79. M. Hankey to A. J. Balfour, I August 1918, F.O. 800(204.
80. V. H. Rothwell, 'Mesopotamia in British War Aims 1914-1918', Historical
Journal XIII (1970) 289-91. An alternative view is expressed by M. Kent,
op. cit., p. 126.
81. Minute by A. Parker, 17 March 1916, F.O. 371 2721, no. 53167(36846. Lord
Inchcape reported to the Treasury in the same way as Slade reported to the
Admiralty.
82. A. Parker to J. Cadman, 21 December 1917, POWE 33(42.
83. Ibid., Admiralty to Petroleum Executive, 28 February 1918.
84. Minute by E. G. Pretyman, 12 September 1918, ADM 1(8537(240.
85. Ibid., Minute by First Lord, 18 September 1918.
86. Admiralty memorandum to War Cabinet, G.T. 5710, 17 September 1918,
Cab 21(119.
87. W. Long to First Lord, 18 September 1918, POWE 33(45.
88. Ibid., J. Cadman to Fourth Sea Lord, 26 September 1918.
89. Ibid., Admiral Slade toW. Long, 24 September 1918.
90. D. C. Coleman, 'War Demand and Industrial Supply: The" Dope Scandal"
1915-1919', in J. M. Winter (ed.) War and Economic Development
(Cambridge, 1975).
91. J. Cadman to H. Greenwood, 4 December 1919, POWE 33(67.
92. Proceedings of the Petroleum Imperial Policy Committee, vol. I, 19 June
1918, comments by John Cadman, POWE 33(13.
93. Ibid., II November 1918, comments by Henri Deterding.
94. Petroleum Rel'iew (19 October 1918).
8 The Road to Achnacarry
I THE 'INITIALLED AGREEMENT' 1919-20
The twenty years before the end of the First World War had
witnessed a remarkable transformation in the position of the
British oil industry. Although the War had demonstrated that the
United Kingdom was still dependent for its oil on foreign
countries, British enterprises were established on many of the
oil fields of the world. Lord Cowdray controlled the largest share
of Mexican oil production. Burmah Oil was entrenched in the
Indian Empire. A.P.O.C. possessed vast oil reserves in Persia,
and the company's wartime expansion had set it on the path to
full vertical integration. In I o 19 A.P.O.C. acquired its first
Continental distribution company, the Belgium firm L'Alliance.
Moreover, the victory of the Allies seemed certain to place British
oil companies in a favourable position in other regions. The end
of the War left both Mesopotamia iln" the Baku oilfields occupied
by the British Army, and for a time it looked as if British interests
would also inherit the German stake in the Rumanian oil
industry.
There was even the prospect of an oil industry within the
United Kingdom. In May 1919 Cowdray's drillers struck oil of
high quality at Hardstoft in Derbyshire, and a number of schemes
for the manufacture of oil from non-petroleum sources also
seemed promising. In 1919 the Fuel Research Station at
Greenwich began research into the production of oil from coal. In
1918 an Alcohol Motor Fuel Committee was established to
investigate the use of alcohol as a substitute for petrol. Admiralty
officials were sufficiently interested in the subject to plant two
acres of Dorsetshire with Jerusalem artichokes for alcohol-
producing purposes.
The greatest coup came in January 1919, when Lord Harcourt
and Henri Deterding initialled a provisional agreement designed
to give British interests majority control over the Shell Group. By
208
THE ROAD TO ACHNACARRY 209
the terms of this agreement, there was to be an internal

rearrangement of the Group, with Shell Transport instead of
Royal Dutch becoming the dominant holding company. The
majority of the Group's operating subsidiaries were to be
registered in Britain, and placed under the control of Shell
Transport. These companies were to have a Government no-
minee on their Boards, possessing a right of veto over certain
matters.'
Deterding's willingness to sign this agreement displayed a
considerable shift in his attitude since October 1918, when he had
insisted on half of A.P.O.C. as the 'price' for placing the Shell
Group under British control. He was not to receive any part of the
Persian company under the terms of the 'initialled agreement'.
The reason for his change ofheart can be traced directly to the end
of the War in November 1918. Britain emerged in a strong
position in several parts of the world where Deterding needed the
support of a Great Power. The granting of that support to Shell
was to be the 'price' which the British Government was required
to pay.
Rumania was one of the countries where Shell required British
diplomatic support. The Liberal party in Rumania had been
campaigning for a 'national' oil industry even before 1914. The
War intensified nationalistic sentiments, and pressure to national-
ise the industry began during the period of postwar recon-
struction. At the end of the War the Shell subsidiary, Astra
Roman a, was placed under a sequestrator. 2 Deterding at once
appealed to the British and French governments to intervene, and
their representations secured a lifting of the decree by the
Rumanian government. 3 There had not even been a Dutch
Ambassador in Bucharest at that time. The implication seemed
clear. Strong diplomatic support from one of the Great Powers
was going to be necessary if Shell was to retain its stake in
Rumania in the difficult postwar political conditions.
The political problems facing Shell in Russia were far greater.
The Bolshevik Revolution, and the Soviet nationalisation of the
oil industry in 1918, shattered the Group's position as the third
largest oil-producing enterprise in Russia. The sequestration of
the company's Russian assets had a profound effect on
Deterding. His driving ambition before 1914 had been to build a
company which would rival Standard Oil. After 1918 he became
obsessed with the desire to re-establish Shell's position in Russia.
The British intervention in the Russian Civil War briefly made

it seem possible that Shell's position could be restored by force of
arms. British troops under General Dunsterville held Baku from 4
August to 14 September 1918. Although the small 'Dunster-foree'
was subsequently driven out by the Turks, British troops returned
to Baku in the following November. A British major-general was
installed as Governor of Baku, and the oil industry returned to
private enterprise. 4 In October 1919 Waley Cohen, using his close
contacts with the War Office, formulated a scheme for the export
of petroleum from South Russia to world markets with the
assistance from the British Military Mission in south Russia. 5
These plans collapsed with the defeat of the White Russian army
under General Denikin in the Ukraine in December 1919. Shell
subsequently abandoned all hope of a military solution, and
Deterding declined to give financial support to the remaining
White armies. In September 1920 he refused to join with the other
Baku oil producers in a plan to raise funds for the White General
Wrangel. 'I do not think', he wrote to Gulbenkian, 'we can do
anything in the matter, as I do not want to get mixed up in politics.
It is alright for the Baku people to act as they propose, but we
cannot do it.' 6
Over the next five years the management of the Shell Group
remained convinced that the Soviet regime would either collapse
or, at the very least, be forced to invite Shell back to Russia to
manage the oilfields. 'The Bolsheviks will be cleared', Deterding
observed in September 1920, 'not only out of the Caucasus, but
out of the whole of Russia in about six months.' 7 A year later a
senior Dutch member of the Group reflected that 'the Russians
will never be able to pull themselves out of their present state of
misery, and they will want foreign help and management to get
their businesses going again'. 8
The support of the British Government, however, seemed a
prerequisite if Shell was to stage the hoped-for return to Russia.
This became clear during 1919, when plans were made for a
British syndicate to acquire the legal title to the Nobel oil interests
in Russia. The syndicate was composed of Shell, A.P.O.C.,
S. Pearson and Son and an independent financial group, the Cen-
tral Mining and Trust Company. From the very beginning the
syndicate emphasised to the Foreign Office and the Petroleum
Executive that it wanted the guarantee of strong British diplo-
matic support before it would take the risk of purchasing the
Nobel interests in Russia. When the Foreign Office consistently

declined to give any guarantees, the syndicate refused to purchase
the Nobel company outright, insisting that the Nobels retain a
minority shareholding. It was on this issue that the negotiations
broke down in November 1919. 9
Fortunately for the Nobels, there were other suitors for their
property. In January 1919, Standard Oil (New Jersey), now very
anxious to secure foreign sources of oil, concluded a contract with
the White government of the region for the purchase of unde-
veloped government land at Baku. Later in the year the American
company made a contract with four Baku companies, including
the Nobels, for the sale of 64,000 tons of kerosene. In November
1919 Standard began negotiations with the Nobels, and these
continued even after the Soviets reoccupied the Baku oilfields in
the Spring of 1920. In July of that year Jersey Standard purchased
from the Nobels title to one half of their Russian holdings. 10 It
was, therefore, the remarkable good fortune of both the old
European oil groups, the Rothschilds and the Nobels, to bequest
most of their Russian property to the 'second generation' of
international oil companies, Shell and Jersey Standard, before it
was irretrievably lost to the new Union of Soviet Socialist
Republics.
Deterding was unperturbed by the American acquisition of the
Nobel interests. 'We have already several good seats and a very
great part of the food on the Russian table,' he explained to
Gulbenkian in September 1920. 'Dining is very much better in
company with other people who have also got a very big interest
in the dinner.' 11 He did, however, object to the purchase from the
Soviet Government by other companies of former Shell proper-
ties. By 1920 the Soviet economy was in chaos. The response of
Lenin, the Soviet leader, was the New Economic Policy, which
involved the partial restoration of private capitalism and the
granting of concessions to Western firms. During 1920 A.P.O.C.
began negotiations for an oil concession. Gulbenkian obtained a
copy of an agreement which A.P.O.C. reached with the Soviets
over the Grozny oilfields almost as soon as it had been signed in
December 1920, 12 and this led to an immediate protest from Shell
to the British Government. 'The management of Shell could not,
for one moment, believe',H. Colijn wrote to the Board of Trade,
'that a British company, in which the British Government is a
prominent shareholder', would be allowed to acquire the pro-
perty 'stolen' from other British enterprises by the Soviets. 13

Shell's willingness to put its Russian companies under British
'control' stemmed from a desire to prevent any such occurrence.
In May 1921 a Colonel Boyle was recruited to the company's
service with the task of recovering the lost Russian properties.
Boyle, a Canadian Army officer and friend of Walter Long, had
been employed by the Petroleum Executive in Rumania shortly
after the end of the War. 14 He immediately contacted the Foreign
Office, requesting, in exchange for the transfer of Shell's Russian
properties to British-controlled companies, 'an assurance of its
support in obtaining possession of the Royal Dutch properties in
Russia'. 15 The Foreign Office agreed, and even before all Shell's
properties had been transferred to British control, the Ministry
gave Boyle a 'pretty warm recommendation' to the Soviet Trade
Commissioner in London, L. Krasin. 16 However, there was little
else that the Foreign Office could do, and an introduction to
Krasin proved insufficient for Shell to recover its lost properties.
The prospect of strong British diplomatic support in Rumania
and Russia was attractive to Deterding in the immediate postwar
period, but it was in the Middle East that the British Government
was expected to pay most of the 'price' for the 'initialled'
agreement. Deterding was determined to re-establish Shell's
control of the Turkish Petroleum Company, which had been lost
in the early months of 1914. Under the terms of the agreement
with Lord Harcourt, Shell was to receive an equal share with
A.P.O.C. in a reconstituted T.P.C. and, more importantly, Shell
was promised the management of the Mesopotamian company
for the next seven years. 'The question as to the management of
the Mesopotamian fields by one of the Shell companies',
Deterding wrote to Cadman in January 1919, was 'the main thing
which induced [him] to all the other considerations.' 17
Deterding was characteristically 'international' in his quest for
Mesopotamian oil, and his activities were not confined to the
corridors of Whitehall. He was simultaneously engaged in
extensive negotiations with the French government. The Shell
Group played a critical role in the French petroleum supply
organisation during the War. France, devoid of any significant oil
companies of its own, was much more dependent on the Group
than Britain. Calouste Gulbenkian served as Shell's special agent
in Paris, and he displayed his usual gifts for intrigue in pursuing
close relations with government officials. By the end of 1917 a
close working relationship had been formed between Deterding

and Henri Berenger, the head of the Co mite General du Petrole,
the French petroleum supply agency. 'Je suis tres sensible a cette
nouvelle preuve de vos sentiments de sympathie envers notre
Pays,' Berenger wrote to Deterding in November 1917, 'senti-
ments que vous avez deja si genereusement manifestes a plusieurs
reprises.' 18
The relationship between France and Shell rapidly developed
political connotations. Berenger considered that an alliance with
the Shell Group would enable his country to enter the world oil
industry 'sur un pied d'egalite' with the British and the
Americans. 19 During the last year of the War the French
government, already promised the physical possession of Mosul
by the terms of the Sykes-Picot agreement, was encouraged by
Shell to press for the transfer to it of the Deutsche Bank's 25 per
cent holding in the T.P.C. This share was to be given to a French
registered company, to be owned by the Shell Group. Deterding
considered this scheme, Gulbenkian later wrote, 'another trump
to deter the designs of the Anglo-Persian Company'. 20 In the
summer of 1919 he established the Societe Francaise pour
!'Exploitation des Petroles to manage the French share of the
T.P.C. The company had the Banque de !'Union Parisienne as
minority shareholders. British officials seem to have been un-
aware of the extent of the co-operation between Shell and the
French, yet it altered the whole significance of the Harcourt-
Deterding agreement. The British Government thought the
'initialled' agreement secured British 'control' over Shell and, as a
result, British domination of the T.P.C. From the point of view of
Shell, however, the arrangement gave their Group, through its
British and French companies, a majority shareholding in the
T.P.C.
The 'initialled agreement' was approved by the War Cabinet in
May 1919. It was never to be implemented. A succession of
technical details held up the negotiations, the most difficult
problem being how to prevent the companies transferred from
Royal Dutch to Shell control from being subject to British as well
as Dutch taxation.
The greatest responsibility for the failure to finalise the
agreement, however, lay with the British Government. During the
War British Middle Eastern policy became steadily more com-
plicated and confused, and oil policy shared in this general
confusion. Moreover, there remained the perennial problem that

there were too many ministries involved in policy-making on oil
matters, with too little co-ordination at the centre.
The affair of General Cowans was indicative of the confusion in
British policy. Cowans, the wartime Quarter Master General, was
approached by Deterding in February 1919 and asked to
undertake an important mission in Mesopotamia for the Anglo-
Saxon Company on behalf of the T.P.C. 21 He was instructed 'to
go and secure any rights which natives or others may have in the
way of drilling wells, refining, selling or anything'. 22 This mission
was undertaken with the entire approval of Long and the
Petroleum Executive. Cowans, however, soon ran into difficul-
ties. Neither the Foreign Office nor the India Office had been
informed of the purposes of his mission. The Foreign Office was
particularly angry when it did find out, since it was the
Government's policy to prohibit the initiation of commercial
enterprises in Mesopotamia until the Peace Conference had
reached a decision as to who would have the Mandate. The
Cowans visit, apparently undertaken with official sanction,
threatened to turn this policy into a shambles. A Foreign Office
official complained bitterly in July 1919 about the 'job put
through by the War Office about which neither we nor the India
Office were consulted'. 23 Cadman was obliged to ask Deterding
to withdraw Cowans from Mesopotamia. Deterding was left
understandably non-plussed by the behaviour of the British
Government. 'Cowans', he wrote to Cadman in May 1919, 'had
been engaged, not only with the approval ofMr Walter Long, but
I was even complemented by him on the choice ... Sir John
Cowans is not there on sufferance: he is there by right. ' 24
A similar confusion was to be seen in the higher levels of
Government policy. The British apparently achieved a major
diplomatic victory in December 1918, when the British and
French Prime Ministers agreed to overturn the Sykes-Picot
agreement. Mosul was to be allocated to the projected British
sphere of influence, in return for British support for French aims
in Europe and a French share in the exploitation of
Mesopotamian oil. 2 5 Lloyd George, however, did not feel obliged
to share his triumph with the rest of his Government. It was not
until June 1919 that the Foreign Office found out, by accident,
about the agreement. French officials also remained ignorant of
Clemenceau's negotiations with Lloyd George.
This was a most unfortunate situation, since from the be-

ginning of 1919 the officials on the British and French petroleum
ministries had been developing a joint Anglo-French oil policy.
The negotiations were conducted in Paris, the two sides being led
by John Cadman and Henri Berenger. Berenger aimed to secure a
long-term agreement with the British for the joint exploration of
the world's oil resources, especially those of the Middle East. The
primary objective of the British was more negative, namely to
prevent a possible Franco-American alliance on oil matters.
An agreement was initialled between Walter Long and
Berenger on 6 April 1919. This provided for a policy of 'cordial
co-operation and repicrocity' on oil matters in Rumania, Asia
Minor, the British and French colonies and, most importantly,
Mesopotamia. The British Government undertook, if they re-
ceived the Mandate for Mesopotamia, to secure a concession for
the T.P.C. from the local government. Seventy per cent of the
shares of the T.P.C. were to be held by British interests, 20 per
cent by the French and 10 per cent by the native govern-
ment.26
Lloyd George chose this moment to intervene once more in oil
policy. He was as ignorant of the Cadman- Berenger negotiations
as they were about his arrangement with Clemenceau. When he
found out about the Anglo-French agreement in June 1919, he
unceremoniously cancelled it. 27 A further period of confusion
followed until Cadman managed to re-negotiate another oil
agreement with the French which was initialled on 21 December
1919. 28
This was again disrupted by Lloyd George. Both the Anglo-
French agreement and the 'initialled' agreement with Shell were
wrecked by a Ministerial decision on 23 January 1920 to reserve
the exploitation of the Mesopotamian oilfields to the State. 29
This implied the abandonment of the T.P.C.'s claim to a
Mesopotamian concession, and thus it also made nonsense of the
agreements concerned with defining the French and Shell shares
in that company. Although this decision has been attributed
simply to a sublime misunderstanding of the situation by British
Ministers, it had much to do with a revival of anti-trust
sentiments. 30 Arnold Wilson, the Civil Commissioner in
Mesopotamia, had first proposed the State working of the
Mesopotamian oil fields in April 1919. 31
Lloyd George felt a deep suspicion of the oil trusts. 'Oil profits',
he reflected in March 1920 'generally seem to find their way by

some invisible pipeline into private pockets.' 32 Lloyd George had
a particular dislike of oil profits finding their way into the pockets
of Marcus Samuel. In April 1920 Gulbenkian reported to
Deterding that the major reason why Lloyd George opposed
giving the Mesopotamian oil concession to the T.P.C. was that he
had Marcus Samuel 'on the brain'. 33 Lloyd George's failings did
not, however, ultimately prevent the making of an Anglo-French,
oil agreement. On 24 April the San Remo oil agreement, broadly
on the same lines as the original Long- Berenger agreement, was
initialled by representatives from Britain and France. 34
The muddle in British policy wore down Deterding's en-
thusiasm for an agreement with the British Government. 'There is
no finality,' he complained to Cadman as early as January 1919,
'we must not constantly re-open questions. 35 By November 1919
he was writing to Colijn in The Hague that he could not be bound
by 'negotiations which either in 1919 or in the year 2000 may
come into effect'. 36
One consequence of these constant delays was that the Group's
agreement with the French Government was never implemented.
Deterding became steadily more anxious about the fate of his
French company. In October 1921 the Societe Franc;aise pour
!'Exploitation des Petroles modified its shareholding in order to
give French interests a 51 per cent stake in the company. In
December Deterding wrote to the Minister of Commerce stress-
ing that the Royal Dutch was a Dutch company, which was
entirely independent and not controlled by any government. 37
These legal adjustments and statements, however, proved of no
avail. In 1923 the new administration of Raymond Poincare
resolved to create an entirely French oil company, 'capable de
realiser une politique nationale de petrole'. 38 In March 1924 the
Compagnie Franc;aise des Petroles (C.F.P.) was founded by a
group of leading French companies, with representatives of the
Ministries of Commerce and Finance on the Board. The C.F.P.
was allocated France's share in Mesopotamian oil.
Deterding's frustration, and suspicion that A.P.O.C. was
receiving more favourable treatment from the British
Government than Shell, grew as one delay over Mesopotamian
oil followed another. 'The Government cannot ask us to trust
them', he complained in a moment of exasperation in January
1920, 'seeing they are Anglo-Persian.' 39 He increasingly withdrew
from the negotiations, the burden of which fell on Colijn and his
fellow directors in The Hague.
The Royal Dutch had agreed, subject to certain conditions, to
the terms of the Harcourt Deterding agreement early in 1919. 40
As time progressed, however, the Dutchmen began to reflect on
the diplomatic disadvantages of having most of their companies
under British 'control'.
The difficulties seemed greatest in the America's. After the end
of the War and the loss of the giant Russian investment, North
and South America emerged as the greatest growth area for the
Shell Group. By 1918 Shell was in a strong position in the United
States. Shell's daily production of oil was 27,500 barrels (962,000
imperial gallons), compared to Jersey Standard's 18,800 barrels
(660,000 imperial gallons). The Group had also established itself
in several South American countries, the most important of which
was Venezuela. During the 1920s Venezuela was to leap from
fifteenth to second place among the world's oil producers, and
Shell was by far the biggest oil company in the country.
The Shell Group's greatest single act of expansion in Latin
America, however, came with their acquisition of Lord Cowdray's
Mexican interests. At Deterding's request Gulbenkian approach-
ed Cowdray in early October 1918 about the possibility of a sale
to Shell. Cowdray, once the War had ended, was free to sell his
company to whom he liked. Although he had no respect for
Marcus Samuel, and indeed made his retirement from Shell a
condition of any merger between Mexican Eagle and the Group,
he did admire Deterding. 'Men of Deterding's qualifications', he
advised Lord Harcourt in February 1919, 'are simply priceless.' 41
The negotiations between the two sides proceeded rapidly. By
an agreement of26 March 1919 the Shell Group purchased 35 per
cent of the ordinary capital of Mexican Eagle, and 50 per cent of
the total shares of Anglo-Mexican, and Shell Group repre-
sentatives were given a majority on both Boards. A second
agreement of 17 April1919 provided for the appointment of the
Bataafsche Petroleum Maatschappij as managers of Mexican
Eagle for the next twenty one years. In 1920 a new company, Shell-
Mex, was established in Britain as the sole distributor of Shell and
Mexican Eagle products. The whole deal was a further example of
'Pearson luck', for by 1922 the great Potrero well had been
invaded by salt water, and sixteen years later all foreign oil
properties in Mexico were nationalised.
The final day of this great independent British oil venture saw
recriminations between Cowdray and the British Government.
When the Government expressed regrets about the decision to sell
Mexican Eagle, Cowdray responded by cataloging the unfair
treatment he considered he had received at the hands of the State,
and he referred to his offers to sell part of his company to the
British Government. He was simply not prepared, he told
Cadman in May 1919, 'to carry indefinitely, and single-handed,
the financial burden' of the Mexican oil business.42
Cowdray was fated not to repeat his Mexican success in the
years before he died in 1927. The search for oil in Britain petered
out in 1922, when the State grant of£1 million was exhausted.
Pearson's explorations in Canada, Egypt, Greece, Morocco,
Portugal, India and Tunisia met with little success.£ 100,000 was
lost prospecting for oil in the Sahara. Ironically, given President
Wilson's crusade against Cowdray before the War, the greatest
postwar success came in the United States. In 1919 Cowdray
formed the Amerada Petroleum Corporation, with Thomas
Ryder, the former head of Mexican Eagle, as the company's
President. Amerada drilled on lands in Oklahoma, Kansas,
Louisiana, Arkansas and Texas, and soon established itself as a
very successful oil-finding organisation. The company's pro-
duction of crude oil rose from 240,000 barrels in 1920 to over 5
million in 1926. In that year Cowdray disposed of his majority
control over the company, although the Pearson family company
retained a minority interest until the Second World War.
The acquisition of Mexican Eagle greatly increased Shell's stake
in the Mexican oil industry. The Group already possessed a small
subsidiary in the country, La Corona, which had been established
in 1912. This was just at a time, however, when hostility to foreign
ownership of the oil industry was growing in Mexico and
elsewhere in South America. In July 1919 J. B. Body informed
Deterding that rumours of an agreement between the British
Government and Shell had reached the Mexican government. As~
result that Government had threatened to sequestrate Shell's
Mexican enterprises, since their concessions stipulated that no
foreign government was to be involved in the company.43
A. J. C. Stuart, one of the most influential members of the Dutch
management of the Group, wrote in August 1919 of the probable
'opposition from other Governments (Mexico and North
America)' to the Group's agreement with the British Government,
and in a long memorandum he drew attention to the threat to the

Group's 'popularity' in the world if it became too closely identified
with the British Government. 44
The Dutch were rather inclined to exaggerate the degree of anti-
British feeling in South America. Anglophobia was, however,
visibly on the increase in the United States after the War.
The first immediate postwar period witnessed growing tension
between Britain and the United States on oil matters. During 1919
and 1920 the United States, though it produced nearly 70 per cent
of the world's oil and supplied the United Kingdom with about 85
per cent of her oil during the War, became gripped with the idea
that British interests were about to secure a monopoly over the
world's oil supplies.
Two factors contributed to this extraordinary view. First, there
was a widespread belief that the oil of the United States was
running out, a process increased by the rapid growth of petrol
consumption and wasteful exploration methods. A spate of
official reports predicted the imminent disappearance of
American oil. In 1919 the Director ofthe United States Geological
survey predicted the exhaustion of American petroleum reserves
within ten years. A Bureau of Mines report in 1920 calculated that
American supplies would last no longer than twenty years. 45
Petrol scares began to fill the newspapers. During 1919 the Navy
Department became extremely concerned about future fuel oil
supplies, and in the following year the Secretary of State for the
Navy, Josephus Daniels, tried to commandeer privately-owned
stocks of petroleum. He was soon contemplating even more
radical steps. 'Oil and coal', Daniels confided to his diary in
December 1920, 'should be nationalised.' 46
The concern of the United States about the finite nature of its
oil supplies was heightened by the realisation of how little of the
oil outside her borders was exploited by American interests. By
1919, whilst Britain seemed to have established itself all over the
world, American oil companies held a firm position only in
Mexico. 'Talked about oil', Daniels wrote in his diary in January
1919, 'and how Great Britain was controlling all over the world. ' 4 7
The British success in overseas oilfields was emphasised by a
number of incautious remarks by British nationals which greatly
irritated the Americans. 'America has skimmed the cream of her
oil wealth at a period when prices were low', Beeby Thompson
told the London Chamber of Commerce in 1921, 'while we enter
the world's market with our flush production when the value of oil
is appreciated and prices are high.' 48 Federal officials and oilmen
became convinced that the solution to the threatened American
oil shortage was overseas exploration, and that Britain was
determined to block this.
The largest American company, Jersey Standard, had a parti-
cular interest in securing foreign oil concessions. The dismember-
ment in 1912 left Jersey Standard with a great deal of refining
capacity, but dependent on other companies for raw materials and
markets. Jersey Standard resolved to expand the supply of crude
oil under its control. The acquisition of a controlling interest in
the Humble Oil and Refining Company, one of the largest
producers in Texas, in 1919, was one consequence of this policy.
Jersey Standard's determination to obtain foreign concessions
was another.
From the American perspective British postwar policy looked
extremely menacing. When Jersey Standard sent a representative
to Mesopotamia in October 1919 to prospect for oil, he was
turned back by the British authorities. The company appealed to
the State Department, contrasting their exclusion from
Mesopotamia and Palestine with the British Government's
apparently permissive attitude to General Cowans and Shell
geologists. In October 1919 the State Department ordered the
American Ambassador in London to protest at this discrimi-
nation.49 American fury reached new peaks when the terms of the
San Remo agreement became public. The State Department
refused to recognise the agreement, and Anglo-American oil
relations sank to a new low. Senator Henry Cabot Lodge made a
bitter attack in the Senate on British policy in Mesopotamia. The
Mineral Leasing Act of February 1920 barred citizens of foreign
countries or foreign corporations from acquiring oil leases on
public lands in the United States, and prohibited nationals or
corporations of any country that did not extend similar privileges
to American interests from acquiring control in American
companies holding leases on public lands.
The Wilson Administration initiated a policy of positive
support to American oil companies in their search for foreign
concessions. In June 1919 the Department of State instructed its
representatives to be alert to new sources of petroleum in foreign
countries, and in the following August United States diplomatic
and consular officers were instructed to 'lend all legitimate aid to
reliable and responsible United States citizens or interests which

are seeking mineral oil concessions or rights'. 5° In May 1920 the
British Ambassador to Washington reported to his superiors in
London on the significance of the apparent rapprochement
between the Wilson Administration and the Standard Oil in-
terests, which had 'completely reversed the prewar relationship
under which it was nothing less than courting disaster for any
member of the administration to incur the suspicion of an
affiliation with the oil interests'. 51
As tension with the United States mounted, the Dutch ne-
gotiators began to exclude Group companies they did not wish to
see transferred to British control from the terms of the 'initialled
agreement'. In October they asked that companies which the
Group acquired in the future and which were established in the
United States, Mexico, Venezuela and Panama should be ex-
cluded from the British control provision. In November 1919
Stuart and Colijn wrote to Cadman asking if the British control
requirement could not be achieved in some other way than
changing companies' Articles of Association. Such a change, they
wrote, 'would carry with it very grave dangers and risks for the
whole business of the Royal Dutch-Shell Group. It would place a
weapon in the hands of our competitors which, advertised by
them as they are doing and will certainly be doing to the utmost of
their ability, would endanger our position especially against the
Governments of several countries in which we are working
concessions and/or in which we should want either to obtain new
concessions or extend our existing business.' 52
These views were indicative of one of the most noticeable
differences between the pre- and postwar worlds. Western
European governments had experienced not so much a loss of
physical strength as of moral power. The League of Nations and
the new diplomatic importance of the United States limited the
degree to which the British and French governments could
support their oil interests. Moreover, rising nationalism in
countries such as Mexico, Peru and Rumania made association
with one of the imperial powers an increasing handicap. The
Dutchmen in Shell were probably correct in their suspicion that in
many parts of the world a large oil company was capable of more
effective action if it was not tied to one of the Great Powers,
especially if it could mobilize the 'underdog' advantage of not
being connected with the Anglo-American oil empire. 53
II THE OIL COMPANY MERGER SCHEMES 1920-24
By 1920 all hopes of revising the Harcourt-Deterding agree-

ment had faded. However, over the following four years the idea
of securing British 'control' over the Shell Group continued to be
mooted. The various proposals resembled those of the War years
rather than the 'initialled' agreement, for they reverted to the idea
of merging the Shell Group with A.P.O.C. and Burmah Oil.
In July 1921 Charles Greenway informed the Petroleum
Department of the British Government of a project for the co-
operation of A.P.O.C. and Shell-Mex in a joint distribution
company for the United Kingdom, and within a few months this
had become a proposal for a complete merger between A.P.O.C.,
Burmah Oil and the Shell Group. 54
The merger proposals received the energetic support of Burmah
Oil. Since 1905 it had co-operated with Shell, and in 1919 it joined
with that company and several small British companies in India to
form the Kerosene Pool, which aimed at controlling the prices of
kerosene in the Indian market. Burmah Oil had welcomed the
wartime merger proposals, and the company was even more
enthusiastic in the early 1920s.
This enthusiasm was partly the result of the rise to power in the
company of R. I. Watson, who was appointed a director of
Burmah in 1918, and who increasingly assumed control of the
policy from John Cargill. Watson's policy was governed by the
possibility that Burmah's supply of crude oil would run out within
twenty years. He initiated a number of reforms in the management
of the company and the exploitation of the oilfields, designed to
increase efficiency and conserve supplies. He regarded the merger
scheme as a means by which his company could broaden the
whole basis of its business, by diversifying from its dependence on
the dwindling reserves in India and on mining to 'an interest in
world-wide oilfields and markets'. ss
The Shell Group was also an enthusiastic supporter of the
merger schemes, although this did not stem from any sympathy
for the Government's ambition to have the Group under British
'control'. The Shell management considered that the reasoning
behind this policy was fallacious. 'It does not matter twopence
whether the oil companies are under British control or not,' wrote
J. Aug Philips, the British could always get 'all the oil they
wanted, irrespective of the question in whose lands they found it'
because they had the 'largest sea power.':>o The British manage-
ment of Shell expressed similar feelings. 'The whole question of
control', observed Waley Cohen in December 1923, was 'very
largely nonsense. It is a matter of sentiment, but if by transferring
control to the Hottentots we could increase our security and our
dividends I don't believe any of us would hesitate for long.' 57
The Shell Group was attracted by the real commercial advan-
tage which it hoped to secure from the scheme. The Group
continued to believe that British diplomatic support would be
effective in assisting its recovery of the lost Russian properties.
Moreover, the company felt that there was a need for the
rationalisation of the British oil industry. New methods of retail
and distribution were being developed, such as the replacement of
the two-gallon can by the kerbside petrol pump, and greater co-
operation between the companies meant that the expensive
duplication of facilities could be avoided. 58 This was not merely a
search for 'monopoly' by Shell. Deterding in the 1920s was
genuinely concerned about the problem of 'waste' in the pet-
roleum industry. He regarded this as much as a 'moral' issue as any
contemporary conservationist. 'It is the moral duty of the large
companies of the world', he told the American press in May 1922,
'to avoid waste.' 59 'The world', he wrote to W. C. Teagle, the
President of Jersey Standard, three years later, 'is now suffering
from over-production, over-refining, over-transporting and-last
but not least-over-retailing.' 60
The merger scheme also had another attraction for Shell. The
company was eager to retain some control over A.P.O.C.s vast
reserves of Persian crude. By the early 1920s the Group was facing
a chronic shortage of petrol, an estimated 200,000--250,000 tons in
1922. 61 Shell's ten-year contract with A.P.O.C. was scheduled to
end in that year.
The oil company amalgamation scheme was strongly supported
by certain ministries in the British Government. John Cadman,
before he left the Government to join A.P.O.C. in 1921, continued
to regard the securing of British 'control' over the Shell Group as
'one of the main objectives of the oil policy of H.M.G.'. 62 After his
departure the most consistent support for the merger proposals
came from the Treasury. Their primary concern was to divest the
State of its investment in A.P.O.C. 'As a matter of general policy', a
Treasury representative explained to an interdepartmental meet-
ing on the oil companies in October 1921, the Treasury would
'welcome any opportunity of going out of business undertak-

ings.'63 An official observed in a memorandum to the Chancellor
early in 1922 that the Government's holding in A.P.O.C. was both
'politically and financially embarrassing'. 64
The Treasury expressed great doubts about the efficiency of the
company's management. This opinion was no doubt influenced
by the reports the ministry received from Lord lnchcape, the
Treasury's representative on the Board of A.P.O.C. He was a
strong opponent of State intervention in industry, and soon after
his appointment to A.P.O.C.s board he began to express his
disapproval of the Government's investment in that company. In
March 1916 he had spoken in 'disparaging terms' about the
company to Alwyn Parker, and argued that the best course of
action would be 'to get the whole concern taken over, on terms, by
the Shell and run on sound commercial lines'. 65
Although he was subsequently impressed by the commercial
success of the company, he continued to express serious re-
servations about its management. There were also many external
critics of the company. Lord Cowdray, the doyen of British oil
enterpreneurs, was asked his opinion of A.P.O.C. by several
ministers, and his answers were repeatedly critical. He believed
that the company's postwar expansion into several countries,
such as Mexico, Rumania and France, was badly planned. In
May 1923 he informed Stanley Baldwin that some of A.P.O.C.s
business activities had been 'simply incredible' and 'foolish'. This
was partly, Cowdray continued, because the company had
become 'a dumping ground for ex-Admiralty civil servants or
officers'. 66
There were legitimate grounds for these criticisms. A.P.O.C.s
material expansion undoubtedly proceeded faster than the ca-
pacity of its administration to control it. The company, for
instance, retained the managing agency system in Persia long
after the inappropiateness of the system for an undertaking of
A.P.O.C.s size had become apparent. Strick, Scott and Company
remained as management agents till A.P.O.C. resumed direct
responsibility for its Persian operations in 1922. There were
discussions within the company from the end of the First World
War about the need for a new administrative structure, but no
serious action was taken. In June 1923 Admiral Slade produced a
long series of radical reforms aimed at turning A.P.O.C. into a
holding company controlling subsidiaries such as the Transport
Company, Refining Company etc. 67 Charles Greenway must

take much of the blame for the drift in the company in these years.
Although he did make some radical innovations in policy in the
postwar years (for instance he was the main force behind the
company's postwar expansion to the Continent), he showed little
enthusiasm for reforming the management structure.
Major changes in management had to await the rise of John
Cadman in the hierachy of A.P.O.C. The initiative behind the
recruitment of Cadman to A.P.O.C. in 1921 came from
Greenway. The Government, however, used its influence to
facilitate his advance in the company. The Chancellor of the
Exchequer, Stanley Baldwin, wrote to Greenway in September
1922 that A.P.O.C. 'would be strengthened by the appointment of
Sir John Cadman as a managing director in order that his
intimate knowledge of the oil policy of the Government and his
technical knowledge of the oil industry may be utilised to the best
advantage of the Company'. 68 Cadman's appointment in 1925 as
deputy chairman and successor to Greenway was similarly
strongly supported by the Government. 69
Cadman turned his attention to the management problem soon
after joining the company. He visited Persia in 1924, and on the
basis of this and a further visit two years later he planned, and
introduced, a number of important administrative reforms. 70
The deficiencies in A.P.O.C.s management prompted some
civil servants and politicians to consider disposing of the
Government's investment in the company, but there were also
serious diplomatic disadvantages to the State's link with
A.P.O.C. 'Government participation in the A.P.O.C.', a Foreign
Office official told an interdepartmental meeting in October 1921,
'led to continual difficulties, as every action of the company was
ascribed to direct Government inspiration.' 71
The problems created for the company by the State sharehold-
ing, however, were even greater. Columbia and Venezuela passed
legislation in the early 1920s barring companies controlled by
foreign governments from securing concessions in their countries.
The United States encouraged the Latin American states to adopt
this policy. 72 This was an important reason for the failure of
A.P.O.C.s persistent attempts to obtain concessions in South
America. The interest of the British Government in the company
was also an increasing handicap in Persia. After 1919 Persian
politics were radically transformed by the rise to power of Reza
Khan. He became Minister of War in 1921, Prime Minister in

1923, and Shah in 1925. Khan embarked on a programme of
unification and modernisation of Persia, and he was determined
to reduce British influence in his country. He viewed with great
suspicion the close tie between A.P.O.C. and the British
Government, a suspicion which was greatly increased by the
appointment of Sir Arnold Wilson, the former Civil
Commissioner in Iraq, as managing director in Persia,
Mesopotamia and the Persian Gulf of Messrs Strick, Scott and
Co. 73 The diplomatic disadvantages of A.P.O.C.s association
with the British Government, however, were finely balanced with
the advantages. Greenway on the whole considered (or so he told
a Cabinet committee in March 1922) that the ·British
Government's holdings did not embarrass the Company with
foreign countries-rather the reverse'. 74
It is perhaps the extent of the opposition to the oil company
merger schemes within the Government which requires the
greatest explanation. Interwar governments, supported by public
opinion as expressed in most of the press, were generally in favour
of industrial mergers and rationalisation, even if continued
laissez-faire sentiments did not allow the State to become an
energetic promoter of mergers itself.? 5
The oil industry, however, was a special case. It had a political
dimension, both at home and overseas, which had to be taken into
account. Abroad, the Foreign Office feared that the creation of a
large all-British oil company, with or without direct State
participation, would further heighten tension with the United
States. Moreover, the Foreign Office valued A.P.O.C.s position in
Persia as a 'big political asset in the country'. 76 At home, the evil
reputation of the oil companies was firmly entrenched in the
public mind, and even ministers and officials who believed
mergers to be advantageous to the economy were reluctant to be
accused of assisting the 'oil trusts'. The President of the Board of
Trade, Stanley Baldwin, told an interdepartmental meeting in
July 1921 that he considered the proposed scheme for co-
operation between Sheii-Mex and A.P.O.C. in the marketing of
oil products 'perfectly sound from a business standpoint, but it
would be bitterly attacked in Parliament and by the public, who
had a prejudice against oil companies and combinations and did
not recognise the big work which the oil companies had done'. 77
Fierce opposition to the merger schemes came from the
Admiralty, which had a considerable vested interest in retaining

the State's 'exceptional relationship' with an independent
A.P.O.C. By the early 1920s, Admiralty officials had reverted to
their prewar coolness towards the Shell Group. 'Winston
Churchill ... in 1913 described the Shell Group as an octopus',
the Director of Contracts observed in an internal minute in 1923,
'and the experience of the Admiralty since that date has not
disclosed that its tentacles are fewer or less extensive.' 78 Shell's
attempt to re-negotiate the Anglo-Mexican fuel oil contract with
the Admiralty, after they had acquired the controlling interest in
Cowdray's company, was particularly responsible for this resur-
gence of dislike for the Group. 79
By the early 1920s the Admiralty had become extremely
attached to its fuel oil contract with A.P.O.C., which supplied half
of the Navy's oil. The Ministry had no desire to see this contract
re-negotiated with a company in which the Shell was the dominant
member. Officials were suspicious of Burmah's and Shell's
arguments that a merger would enable the Admiralty to broaden
its area of supply, considering that the Persian oilfields were very
well located geographically. The opportunity of drawing supplies
from Shell's oilfields in Tarakan had little attraction, given that
the territory was Dutch and located 1000 miles east of
Singapore. 80 It was also feared that if Shell was an influence over
the Persian oilfields, production would be diverted for com-
mercial reasons away from fuel oil, in favour of more re-
munerative by-products, such as petrol.
A more significant factor was cost. World fuel oil prices rose in
the 1920s and this made the A.P.O.C. contract increasingly
lucrative for the Admiralty. It was generally recognised that no
commercial company would make a contract with the Admiralty
on such good terms. In March 1922 the Admiralty told the
Cabinet Committee on oil company amalgamation that their
contract with A.P.O.C. was 'far more advantageous to
H. M. Government as a buyer and consumer of oil than to the
company'. 81 These supplies of 'cheap' oil were of special import-
ance to the Admiralty as its budget, and especially its plans for the
establishment of a world-wide oil reserve, were under constant
attack by the Treasury throughout the 1920s.
Although the Admiralty greatly valued its 'exceptional re-
lationship' with A.P.O.C., this relationship was not always
amiable. The terms of the 1914 agreement left the Government
with few powers of intervention in the company's affairs. The

State was able to influence only a few of A.P.O.C.s policies
directly. In 1919, for instance, the company was persuaded to
acquire the Scottish shale oil companies in order to maintain a
supply of home-produced oil, and later to undertake a geological
investigation of Somaliland. 82
The tension between the two parties was demonstrated by the
acrimonious conflict about the amount of 'rebate' due to the
Admiralty. Although the 1914 fuel oil contract had fixed a price of
30/- a ton for A.P.O.C.s fuel oil, it was also arranged that a rebate
would be granted to the Admiralty of up to 10/- a ton in
proportion to the 'surplus' profits of A.P.O.C. after interest on
preference shares and debentures and a dividend of 10 percent on
ordinary shares had been paid. In 1920 the Admiralty disputed
the Company's offers to rebate for the years 1917, 1918 and 1919.
The conflict revolved around exactly what profits the company
had made and, in particular, how much the company should be
allowed to 'write off' against profits. The company proposed to
allow 4 percent on issued share capital for amortisation.
Admiralty officials considered this to be excessively high. The
dispute was complicated by the introduction of the excess profits
tax. A.P.O.C. claimed that this tax should be deleted before the
calculation for abatement was made, while civil servants claimed
that it should not. Admiralty officials suspected that the company
might switch profits among its subsidiaries in order to reduce the
Admiralty rebate. 'The impression I have formed', noted the
Director of Contracts in January 1925, 'is that the Company are
exerting every effort and seeking every possible device to pare
down the rebate which is properly due to the Admiralty.' 83 The
dispute was not finally settled until 1927, when the Admiralty and
the company agreed that the rebate system should be superseded
by a fixed price of 22/-per ton.
Despite these tensions, the Admiralty was fiercely attached to
the A.P.O.C. contract, and the Navy resisted all attempts to
merge A.P.O.C. with Shell. In February 1922 a Government
Committee on oil companies' amalgamation was established.
This heard evidence from all the companies and received
representations from various Government departments. In June
1922, after carefully considering the matter, the Committee
recommended to the Cabinet that the Government should retain
its investment in A.P.O.C., and that permission should be refused
for the company to amalgamate with Burmah Oil and Shell. The
issue, however, remained under constant review, with Treasury
ministers in particular arguing over the withdrawal of the State
investment in A.P.O.C. In May 1923, Stanley Baldwin told Lord
Cowdray that he considered that it was 'most unwise' for the
Government to retain its interest in A.P.O.C., because there
'could not be the same good management in a Company
controlled by the Government that there would be if it were a
private enterprise'. 84 In October 1923 the idea of an oil company
amalgamation was formally revived by the new Chancellor,
Neville Chamberlain, who claimed to have received reports that
A.P.O.C. was being inefficiently run and would shortly be
requesting further injections of State capital. 85 The matter was
referred to the Cabinet in January 1924, and it was proposed to
reconstitute the committee of 1922 to re-examine the question of
the oil companies' amalgamation. On 22 January, however, the
Conservative Government resigned and was replaced by a new
minority Labour administration. The amalgamation proposals
were rapidly considered and rejected. This decision has been seen
as 'an early stand for nationalisation against private enterprise'. 86
In reality, the decision owed less to ideological considerations
than to the continued opposition of the Admiralty.
The return of the Conservatives to power in the autumn of 1924
led to much speculation that the sale of the State's shares in
A.P.O.C. would finally go ahead. In a statement to the press in
November 1924, however, the new Conservative Government
announced its intention to retain the State holding in the
company.
III CARTELS AND COMBINES
The decision of November 1924 meant that there was to be no

equivalent in the British oil industry of Imperial Chemical
Industries, a government-inspired but essentially private amalga-
mation of British interests in opposition to foreign takeover. The
Shell Group was to remain with its 60 per cent Dutch sharehold-
ing, and A.P.O.C. was to retain its 'exceptional relationship' with
the State.
Although some observers hoped that the collapse of the merger
schemes would strengthen competition in the British petroleum
industry, the rest of the decade saw the market for petroleum
products in the United Kingdom fall steadily under the domi-

nation of the major companies acting in collusion. Moreover the
principal British oil companies became increasingly allied to their
American counterparts in joint ventures around the world.
The reasons for the oligopolistic structure which descended on
the world petroleum industry during the 1920s have been much
debated. Some economists have argued that the peculiar technical
and other characteristics of the oil industry necessitate some form
of market regulation. In most industries the market solved the
problem of over-production. Prices fall, marginal firms are forced
out of business, production declines, and a balance is restored
between demand and supply. In the petroleum industry, however,
the price inelasticity of the major products and the fact that,
historically, lower prices have not tended to reduce production
mean that this self-adjusting mechanism does not function
effectively. The process of cartelisation, therefore, is regarded as
inevitable. 87 Other economists, however, believe that oil does not
differ substantially from other products, and that in the long run
the oil industry, in competitive conditions, behaves like any other
and is 'inherently self-adjusting'. 88
The second view is lent support by the fact that throughout the
history of the industry the degree of market control by monopoly
or cartel has fluctuated widely. The 1920s saw the rapid growth of
cartelisation in the world industry, but in the following decade
pluralistic conditions were partially restored because of the entry
of new firms. The growth of cartels in the 1920s cannot be
regarded as simply inevitable. A number of obvious factors
encouraged them. One was the growing excess of supply over
demand by the end of the decade. Another was the permissive
attitude of the British and American governments to joint
ventures and international cartel schemes. A third factor was
rising barriers of entry into the world oil industry, partly due to
governmental policy.
The basic underlying factor influencing developments in the oil
industry was the increasing surplus of supplies over demand in the
late 1920s. The glut had its origins in the United States. The fears
at the end of the First World War that American oil was being
exhausted prompted a massive exploration effort. Advances in
technology and petroleum geology aided the search for oil.
Subsurface geology became accepted procedure, and the growth
of surface-structure mapping opened several great new pro-
ductive regions with a multitude of oilfields. The increased use of

rotary rigs speeded operations, and the rapid improvement of
drilling and production practices promoted efficiency. The year
1923 saw an unprecedented number of large wells struck. Excess
capacity became perennial in the American industry following the
discovery of the giant Seminole, Oklahoma City and East Texas
fields in 1926, 1928 and 1930 respectively. The production of
crude oil in the United States increased from 52 to 140 million
metric tons between 1919 and 1929.
This extraordinary expansion coincided with a large growth in
crude oil production in the rest of the world. Western technology
aided the recovery of the Soviet oil industry after 1920, with
production increasing from 3.8 to 18.6 million metric tons over
the decade. Persian oil production rose from 1.6 to 6.0 million
metric tons over the same period. A steady decline in production
from Mexico, which was still the third largest producer of oil in
the world in 1927, was offset by a very rapid rise in output in
Venezuela. Venezuelan crude oil production was a mere 46,000
metric tons in 1919. Ten years later it had grown to nearly 20
million metric tons. By 1927 it was clear that there was excess
capacity in the world industry, and this problem became severe as
world production increased by a further 30 million metric tons
over the next two years. In addition, from 1929 the onset of
general economic depression inaugurated a period of static
demand.
The growth of new producing areas was reflected in the
changing composition of Britain's sources of supply shown in
Fig. 8.1. There was a fall in the importance of the United States,
and a steady rise in the importance of Persia and Venezuela. By
1932 the latter country had emerged as Britain's major supplier.
The growing excess of production over demand helped to
reduce international tension over oil. The determination of the
American oil companies to secure a share of Middle Eastern oil
began to wane. Nevertheless, the 'oil war' between Britain and the
United States continued until 1923. In that year a Federal Trade
Commission Report on foreign ownership of the American oil
industry gave a detailed account of the Shell Group's holdings in
the United States, and reviewed American difficulties in obtaining
concessions in British and Dutch territories. Following the
issuing of this report in February 1923, the Secretary of the
Interior, Albert B. Fall, denied an application by the Roxana
en 1,200
z ----U.S.A.
0
...J
...J
<{ -----RUSSIA
(!)
-------DUTCH EAST INDIES
~ 1,100
a: ---------·-MEXICO
...
w
-----PERSIA
~
i5 1,000 ----RUMANIA
:::;
...J ----BRITISH INDIA
::;;
-·-BRITISH WEST INDIES
900
800
700
600
500
400
300
200
100
FIG. 8.1 Sources of United Kingdom oil imports 1914-29

Petroleum Company, one of Shell's subsidiaries in the United

States, for permission to lease oil lands belonging to various
Indian tribes in Oklahoma. This decision, however, was taken
when Fall was already under a cloud because of his involvement
in the Teapot Dome scandal, and his successor in office reversed
the decision. 89
Britain's willingness to accede to the demand by the United
States to be allowed to participate in the development of the
oilfields of the Middle East further reduced international political
tension. The British Government had been considerably annoyed
by American policy. In the eyes of Whitehall, the allegation that
Britain was aiming at a monopoly over the world's oil was simply
absurd. Lord Curzon, the Foreign Secretary, pointed out the
huge disparity between the oil production of the United States
and the British Empire during an acrimonous exchange of
diplomatic correspondence in 1920 and 1921. 90 It seemed only
fair to the Foreign Office that Britain should control Middle
Eastern oil in order to offset her massive dependence on
American oil. Ministers and their officials regarded the American
campaign for an 'open door' as hypocritical. The constant
opposition in the United States to any British oil company
seeking a concession in Latin America was a particularly sore
point. The systematic frustration ofCowdray's attempts to secure
concessions was remembered with bitterness. 'The Americans',
one official observed in a minute in April 1920, 'are a brazen
lot.' 91
The Foreign Office, however, soon reconciled itself to meeting
the American demands. The ministry was never prepared to put
Britain's oil interests before general diplomatic considerations,
and especially the cause of good Anglo-American relations. This
had been demonstrated in Mexico before the War, when the
Foreign Office had refused to support Cowdray against the
American Administration, and it was demonstrated again after
1920. Once the hope that an Anglo-French alliance would be
sufficient to thwart American designs in the Middle East had
faded, and unsure of the legal validity of the concession held by
the Turkish Petroleum Company and thus anxious to avoid a
fundamental American challenge to it, the Foreign Office worked
to placate the United States.
The growing surplus of oil in the world, and the relaxation of
tension between the British and American governments, en-
couraged the co-operation of the large international oil compan-

ies in joint ventures and market-control schemes. This co-
operation was, on the whole, supported by the governments in
both London and Washington. Another important factor en-
couraging co-operation between European and American oil
companies was the friendship between Henri Deterding and
Walter Teagle, who became the President of Standard Oil (New
Jersey) in 1917. The two men had first met in 1907, when
Deterding had gone to New York to try and persuade Standard
Oil to abandon its price-cutting wars. Deterding had failed to
convince the Standard Oil leadership, but he had been very
impressed by one of Standard's younger executives, Walter
Teagle. 92 Their relationship developed, with Deterding growing
in respect for the American if not for his company. In 1917
Deterding wrote to Colijn about his liking for Teagle, 'whose
father was a Briton and who is undoubtedly one of the most
straightforward men of the S.O.C. and a gentleman in every
respect'. 9 3 Three years later he described Teagle as 'one of the best
men in the Standard Oil Company'. 94 By the 1920s Deterding and
Teagle were grouse shooting together on the Dutchman's estates
in England.
The growth of co-operation between the large international oil
companies can be seen by briefly looking at developments in
South America, Russia and the Middle East.
During 1918 the Wilson Administration actively worked to
thwart European oil interests in South America, especially in the
vicinity of the Panama Canal. The State Department even
attempted to discourage American capital from entering joint
ventures under British leadership, instructing its agents abroad to
support only those companies incorporated in the United States
'and actually controlled by United States capital'. 95
This policy changed during 1921. A number of British and
American companies began to plan joint ventures, and the State
Department responded to these developments by changing its
policy. In August 1921 the United States Secretary of State
dispatched a circular to American agents in Latin America
requesting them not to infringe the open door rights of foreign
nationals. 96 The State Department began to lend support for
joint European and American oil ventures. An example of the
new policy came in Venezuela in 1923, when the Venezuelan
government threatened to cancel the Buchivacoa concession held
by the Shell Group, which Shell had agreed to share with Jersey
Standard. United States diplomats joined with their British
counterparts in obtaining a complete reaffirmation of the
concession. 97
There was a similar tendency towards co-operation by the
major oil companies, supported by their governments, in Soviet
Russia. The 1920s saw a series of attempts by the oil companies to
formulate a common policy towards Soviet oil. In the 'London
Memo' of July 1922 the leaders of Jersey Standard, Shell and the
Nobels agreed that they would not negotiate independently with
the Soviets, and that they would collectively demand complete
compensation for their sequestrated oil lands. Further con-
ferences were held in Paris in September 1922, with Deterding in
the chair. The original three companies were joined by thirteen
other Western enterprises whose properties had been exprop-
riated. This was the effective beginning of the Front Uni of oil
companies against the Soviets.
This kind of collective action by oil companies can be successful
against individual national governments. The oil companies
boycott of Iranian oil after the cancellation of A.P.O.C.'s
concession in 1951, eventually forced the Iranian Government to
agree to terms fairly acceptable to the companies. Such success,
however, depends on solidarity, and the Front Uni did not remain
united for long. It was the Shell Group which made the first
breach in the policy. In Aprill923 the company purchased a large
quantity of Russian kerosene. Deterding offered half of it to
Teagle, who refused. Rumours and counter-rumours of further
purchases continued until November 1924, when Jersey Standard
and Shell agreed to form a joint trading company, the
Construction and Development Company, to negotiate for a
long-term contract to buy all Russia's export petroleum. The
return of expropriated property, or just compensation, was still a
primary objective.
Negotiations were soon begun with the Soviets on these lines.
As neither Deterding nor Teagle wished to be directly involved,
the day-to-day negotiations were undertaken by Anglo-
American. Unfortunately, Deterding's attitude to the Soviets had
hardened considerably. He repeatedly prevented a conclusion of
the negotiations by his insistence on ever stifferterms. Meanwhile
he campaigned vigorously in Western newspapers against the
purchase of 'stolen oil'. The change in Deterding's policy was
not un-related to his recent marriage to Lydia Bagratouni, a

White Russian who encouraged him to adopt a policy of strong
opposition to the Soviets.
In November 1925 two American oil companies, Vacuum and
Standard Oil (New York), announced that they were going to
purchase Russian oil. Neither company had invested in Russia
before the Revolution, and both were eager to buy Russian oil to
supply their European and Asian markets. Deterding, however,
was extremely angry about their purchase, and when he learned
that the American companies were planning to market the Soviet
oil in India, where Shell had large markets, he launched a price
war in February 1928. 98
Deterding was eventually forced to compromise, and an
understanding was reached with the Soviets in February 1929.
One of the strongest areas of Russian competition had been the
United Kingdom. In 1924 the Soviet Union had established a
company, Russian Oil Products Ltd, to sell oil in Britain, and by
1928 this had become the fourth largest importer of oil (by
volume) in Britain. Under the terms of the 1929 agreement the
Soviets were given a substantial percentage of the British market
for three years. Deterding claimed that the compensation issue
had been settled to his satisfaction as the agreement provided for
a rebate on Russian Oil Product's deliveries to British oil
companies which was to be paid into an indemnity fund for the
former owners. The Soviet Government denied any such arrange-
ment. 99 An official at the Petroleum Department in Britain
reflected that there seemed to be 'a good deal of eyewash about
the whole of the proceedings'. 100
The British Government played only a minor role in this affair.
The purchasing departments of the Government refused to buy
Soviet oil throughout the 1920s, and this policy continued even
after the Second Labour Government officially removed the
embargo in 1929. The Government was not kept informed about
the Shell Group's negotiations with the Soviets. In 1923 Waley
Cohen refused to tell the Foreign Office what his company 'were
up to', and this led to a withdrawal of the Foreign Office's pledge,
negotiated by Colonel Boyle, to lend Shell support in its pursuit of
compensation for its Russian properties. 101 The Government
did, however, encourage the collective boycott by the oil compan-
ies of Russian oil. In November 1925 the fanatically anti-
Communist Home Secretary, Joynson Hicks, asked the Shell
Group and A.P.O.C. to do what they could to prevent the sale of

Russian oil outside Russia. Deterding 'more or less agreed' that
the Americans would take the same line. 102
The most important region to see the growth of co-operation
among the large British and American oil companies was the
Middle East. In late 1921 Cadman suggested an amalgamation of
British and American capital in the Middle East. By 1922 Jersey
Standard and A.P.O.C. had come to an agreement on co-
operation in northern Persia. This received the support of the
Foreign Office. The State Department supported Jersey
Standard, even though an independent American company, the
Sinclair Oil Corporation, was competing for the concession. 103
It was in Mesopotamia, however, that co-operation reached
new levels. Jersey Standard took the initiative in forming a group
of seven American oil companies interested in exploiting
Mesopotamian oil. In July 1922 Teagle began negotiations with
the Turkish Petroleum Company. 104 The Americans were offered
12 per cent of the T.P.C., and then 20 per cent. The State
Department supported the American consortium, even when it
became clear that the principle of the 'open door' was being
completely compromised. 105
Negotiations dragged on for several years. There were a
number of complications. Mosul was claimed by Turkey, and the
inclusion of the territory in the new state of Iraq (as Mesopotamia
became) was not agreed until 1926. After the doubts thrown on
the original T.P.C. concession a new concession had to be
negotiated with the Government of Iraq. An agreement was
reached in 1925, under which the Iraqis lost the share in the oil
company which they had been promised at San Remo. 106 It was
to the considerable discredit of the British Government that it
allowed its mandate, Iraq, to be deprived of the opportunity to
participate in the development of the oil wealth of its own
country. Further complications came through Calouste
Gulbenkian's determined battle against the oil companies, his
partners, to retain the 5 per cent share in the T.P.C. which had
been promised to him in the original agreement in 1914. 107
It was not until July 1928 that a final agreement, which was
known as the Red Line agreement, was reached on all the
outstanding issues. The American group (minus two of the
original companies who had lost interest), A.P.O.C., Shell and the
Compagnie Francaise des Petroles, were all given a 23.3/4 per
cent share in the T.P.C., and Gulbenkian retained his 5 per cent.
There was a private understanding that Gulbenkian's share of the
oil was to be purchased from him at market value. A.P.O.C.
received 10 per cent royalty on all crude oil produced. The
company's special position in Iraq had already been recognised
by the appointment of John Cadman as chairman of the T.P.C. in
1926.
The Red Line agreement also stipulated that each partner was
not to seek concessions in the territories of the former Ottoman
Empire except through the T.P.C. The agreement got its name
because at one of the final meetings, Gulbenkian drew on the map
in a red pencil an outline of this area, which included what were to
become all the major oil-producing regions of the Middle East
except Persia and Kuwait. The T.P.C. became the prototype for a
whole series of joint ventures to exploit Middle Eastern oil. 108
The 'open door' was firmly closed.
Meanwhile, after the years of fruitless diplomatic negotiations,
oil was finally discovered. Drilling began in April 1927, and on 15
October a gusher was struck at Baba Gurgur.
A.P.O.C. participated in this general process of cartelisation.
In the early 1920s some official committees and newspapers had
called for the Government to use A.P.O.C. to combat the oil
trusts. 109 These sentiments, as was seen in an earlier chapter, had
been a factor diminishing support in Government for the oil
company amalgamation schemes. By the later 1920s, however,
ministers and officials had become as sympathetic to rational-
isation in the oil industry as in other industries, and the State did
nothing to prevent A.P.O.C. 's co-operation with the other oil
companies.
In February 1928 A.P.O.C. asked the Government if it could
form a joint distribution company with the Asiatic Petroleum
Company in various North, East and South African markets. The
matter went to the Committee of Imperial Defence, and several
old arguments reared their heads. The Admiralty was still
determined that A.P.O.C. should not be allowed to merge
completely with the Shell Group. The Foreign Office character-
istically expressed the fear that the Asiatic-A.P.O.C. agreement
might annoy the Americans. Eventually, however, the
Government decided that A.P.O.C. could proceed with its
alliance with the Asiatic, provided that A.P.O.C. proceeded 'as
early as possible with their conversations regarding co-operation
with the Standard Oil Company in the China area', a move

designed to assuage any American resentment of the Asiatic-
A.P.O.C. agreement. 110 'The fact is,' a Treasury official wrote in
1928, 'that unrestricted competitive selling by the three big
companies would reduce their supply and distributing organ-
isation to chaos.' 1 1 1
The market for petroleum products in the United Kingdom
became one of the most controlled in the world. The three largest
companies, A.P.O.C., Shell and Anglo-American, were united in a
'combine' for the sale of motor spirit, kerosene, fuel and diesel
oils. The prices for dealers were fixed by agreement according to
different geographical zones. There were growing links between
the companies. During 1928 Burmah Oil purchased 1 million
ordinary shares in Shell Transport and Trading. In December
1931 A.P.O.C. merged its United Kingdom distribution interests
with those of Shell and Mexican Eagle to form Shell-Mex and B.P.
Ltd. This company had a close working relationship with Anglo-
American, and between them they controlled 80 per cent of the
market for the main oil products. Competition virtually disap-
peared in Britain in the 1930s.
It was appropriate that it was in the United Kingdom that the
leaders of A.P.O.C., Shell and Jersey Standard gathered to
consider plans for the further cartelisation of the industry. The
meeting took place at a Scottish castle, Achnacarry. The
Achnacarry agreement aimed at the regulation of the world oil
industry by the large companies. This was the climax of
Deterding's ambition to create a world cartel for the petroleum
industry, and there is little doubt that he was the main architect of
the scheme. The agreement covered the world outside Russia and
the United States. The market was to be frozen in its existing
mould, with the companies sharing each other's facilities. Oil-
fields were to supply their nearest markets. It was not an exclusive
cartel, its aim being to reach agreement with all the leading oil
companies in all the markets. The basis of the cartel was the
maintenance of the American prices. Under the Gulf-plus pricing
system the price of oil was to be the same in every export centre
throughout the world as it was in the United States p_arts along the
Gulf of Mexico. The final cost at the port of delivery was to vary
according to its distance from the Gulf of Mexico. 112
* * * * *
The Achnacarry agreement remained more a 'statement

of things hoped for than a practicable guide'. 1 13 The large com-
panies were unable to control all the sources of supply in the
world, and this led to the persistent disruption of this and sub-
sequent cartel schemes. The companies did, however, experience
some success in regulating prices within the United Kingdom, and
the Gulf-plus pricing system long remained dominant in the
world petroleum industry.
Nevertheless Achnacarry provides a fitting symbol for the oil
industry at the end of the 1920s. During the decade British oil
companies had continued to expand although attention was now
largely concentrated on the two international companies,
A.P.O.C. and the Shell Group. A.P.O.C.'s Persian production
grew substantially and the company successfully continued on its
path of vertical integration. It retained its substantial holding in
T.P.C. even though the French and the Americans were now also
shareholders. The Government had decided to retain the State
investment in A.P.O.C. and to abandon the attempt to secure
British 'control' of the Shell Group.
As the 1920s progressed both A.P.O.C. and the Shell Group
joined in the process of cartelisation. These companies increas-
ingly co-operated with each other and their American 'sisters' in
the marketing of oil products in Britain and overseas and in joint
production ventures. The British Government recognised the
growth of cartels and combines even in the oil industry as a fact of
life, and adopted a permissive attitude towards their
development.
Notes
I. M. Kent, Oil and Empire (London, 1976) pp. 178-82, provides a copy of
the slightly amended agreement as it was signed on 6/7 March 1919. It was
this agreement which was agreed by the Cabinet in May.
2. M. Pearton, Oil and the Romanian State (Oxford, 1971) p. 106.
3. H. Deterding to H. Loudon, 3 February 1919, SHELL.
4. R. H. Ullman, Ang/o-Soriet Relations /917-1921, vol. II (Princeton, 1968)
pp. 76-83.
5. Memorandum by R. Waley Cohen regarding the export of petroleum from
South Russia, 13 October 1919, W(ar) O(ffice), P.R.O., W.O. 32/10118.
6. H. Deterding to C. Gulbenkian, 28 September 1920, SHELL.
7. Ibid.
8. J. B. Aug. Kessler to J.E.F. de Kok, 18 November 1921, SHELL.
9. The record of the various meetings of the syndicate during 1919 is in
Pearson Papers, Box C 8, File: Russia 2.
10. G. S. Gibb and E. H. Knowlton, The Resurgent Years. The History of the
Standard Oil Company (New Jersey), 19JJ-1927 (New York, 1956) pp.
328-35.
II. H. Deterding to C. S. Gulbenkian, 17 September 1920, SHELL.
12. C. S. Gulbenkian to H. Colijn, 20 December 1920, SHELL.
13. H. Colijn to Sir Robert Horne, 22 December 1920, SHELL.
14. W. Rodney, Joe Boyle: King of the Klondike (Toronto, 1974) gives an
account of Boyle's career.
15. Colonel Boyle to Petroleum Department, 29 August 1921, F.O. 371 6930,
no. N 10250/10242/38.
16. Ibid., Minute by Mr Ormally, 31 October 1921, no. N 11913/10242/38.
17. H. Deterding to J. Cadman, 25 January 1919, SHELL.
18. C. Gerretson, Geschiedenis der 'Koninklijke ', vol. IV (Baarn, 1973) p. 230.
Note 220.
19. Ministre des Affairs Etrangers to Paul Cam bon, Ambassador in Britain, 17
December 1918, Archives Economiques et Financieres, Paris, F30 1402.
For a full examination of French oil policy in the immediate postwar
period, see A. Nouschi, 'La Francia, il petrolio e il Vicino Oriente (1918-
1919)', Studi storici, I (1966). There is also much useful information in H.
Berenger, Le Pi!trole et Ia France (Paris, 1920).
20. Memoirs of C. S. Gulbenkian, SHELL.
21. H. Deterding to Sir John Cowans, 26 February 1919, SHELL.
22. H. Deterding to J. Cadman, 3 May 1919, SHELL.
23. Mr Kidston to Sir George Clerk, 29 July 1919, E. L. Woodward and R.
Butler, Documents on British Foreign Policy 1919-1939, First Series, vol.
IV (London, 1952) pp. 244-7.
24. H. Deterding to J. Cadman, 3 May 1919, SHELL.
25. M. Kent, op. cit., p. 141; C. M. Andrew and A. S. Kanya-Forstner, 'The
French Colonial Party and French Colonial War Aims, 1914-1918'
Historical Journal, XVIII, I (1974) I 04.
26. E. L. Woodward and R. Butler, op. cit., pp. 1089-92.
27. Ibid., Sir George Clerk to Mr Kerr, 17 June 1919, p. 1092.
28. M. Kent, op. cit., pp. 172-8.
29. Meeting of a Conference of Ministers, 23 January 1920, F.O. 371 4231, no.
102161/174193.
30. M. Kent, op. cit., p. 152.
31. C. Davies, British Oil Policy in the Middle East 1919-32, (Edinburgh
Ph.D., 1973) pp. 115-6, 126.
33. C. Gulbenkian to H. Deterding, 28 April 1920, SHELL.
34. Memorandum of Agreement between M. Philippe Berthelot and
Professor Sir John Cadman, cmd 675 (1920).
35. H. Deterding to J. Cadman, 25 January 1919, SHELL.
36. H. Deterding to H. Colijn, 3 November 1919, SHELL.
37. S.F.L.P. to Ministre des Finances, 17 October 1921; H. Deterding to
Ministre de Commerce, December 1921, Archives Economiques,
F.30 1402.
38. Ibid., R. Poincare to Ernest Mercier, 20 September 1923, F.30 1403.
39. H. Deterding to H. Colijn, 5 January 1920, SHELL.
40. R. Henriques, Marcus Samuel (London, 1960) pp. 625-30.

41. Lord Cowdray to Lord Harcourt, 14 February 1919, Pearson Papers, Box
C 44; File: Negotiations with Royal Dutch Shell Group.
42. Ibid., Lord Cowdray to John Cadman, 8 May 1919.
43. J. B. Body to H. Deterding, 25 July 1919, SHELL.
44. A. J. C. Stuart to H. Deterding, 15 August 1919, SHELL.
45. G. D. Nash, United States Oil Policy 1890-1964 (Pittsburg, 1968) p. 46.
46. E. David Cronan, The Cabinet Diaries of Josephus Daniels 1913-1921
(Lincoln, 1963) p. 575, entry for 18 December 1920.
47. Ibid., p. 370, entry for 21 January 1919.
48. J. A. DeNovo, The Movement for An Aggressive American Oil Policy
Abroad 1918-1920', American Historical Reriew (1956) 859-60.
49. Secretary of State to Ambassador in Britain, 30 October )919, Papers
Relating to the Foreign Relations of the United States, 1919 (Washington,
1934) p. 259.
50. Ibid., Secretary of State to Diplomatic and Consular Offices, 16 August
1919, p. 167.
51. R. Butler and J. P. T. Bury, (eds) Documents on British Foreign Policy,
1919-1939, val. XIII (London, 1963), Sir A. Geddes to Earl Curzon, 21
May 1920, p. 273.
52. H. Colijn and A. J. C. Stuart to J. Cadman, 28 November 1919, SHELL.
53. For the importance of the 'underdog advantage' in the growth of
Continental European multinational enterprise, see L. Franko, The
European Multinationals (London, 1976) pp. 217-20.
54. C. Greenway to J. C. Clarke, 6 July 1921, POWE 33/92.
55. Memorandum on merger proposals by Managing Director of Burmah Oil
Company, 1921, POWE 33/92.
56. J. Aug Philipps to Waley Cohen, 22 December 1923, SHELL.
57. Waley Cohen to J. Aug Philipps, 27 December 1923, SHELL.
58. Deterding's evidence to Cabinet Committee on the proposed
Amalgamation of Royal Dutch, Shell, Burmah and Anglo-Persian
Company, 30 March 1922, Cab 27 jl80.
59. New York Erening Post, 10 May 1922.
60. H. Deterding toW. C. Teagle, 8 September 1925, SHELL.
61. R. J. Forbes and D. R. O'Beirne, The Technical Derelopment of the Royal
DutchjShell 1890-1940 (Leiden, 1957) p. 399.
62. Notes on 'Russian Oil Interests of Shell Group' F.O. 371 6930, no.
N I 0279jl0242;38.
63. Report of Interdepartmental meeting, 26 October 1921, comments by G.
Barstow, POWE 33/92.
64. C. Davies, op. cit., p. 149.
65. Minute by Alwyn Parker, 17 March 1916, F.O. 371 2721, no. 53167/36846.
66. Confidential and Secret Memorandum, 15 May 1923, Pearson Papers, Box
C44: File, British Imperial Oil Company.
67. R. W. Ferrier, The Early Management Organisation of British Petroleum
and Sir John Cadman', in L. Hannah (ed.) Management Strategy and
Business Derelopment (London, 1976) pp. 138-9.
68. Secret Memorandum by Lloyd-Graeme, 4 October 1922: S. Baldwin to C.
Greenway, 7 September 1922, POWE 33/96.
69. W. Churchill to J. Cargill, II August 1925, 19 August 1925, T(reasury

papers), P.R.O. T.160/25.
70. R. W. Ferrier, loc. cit., pp. 142-44.
71. Report oflnterdepartmental meeting, 26 October 1921, comments by Mr
Weakley, POWE 33/92.
72. M. Wilkins, 'Multinational Oil Companies in South America in the 1920s',
Business History Review (1974).
73. J. Marlowe, Late Victorian: The Life of Sir Arnold Talbot Wilson (London,
1967) p. 237.
74. Cabinet Committee on Proposed Amalgamation of the Royal Dutch,
Shell, Burmah and A.P.O.C. Statement by Charles Greenway, 17 March
1922, CAB 27/180.
75. L. Hannah, The Rise of the Corporate Economy (London, 1979) pp. 46-60.
76. Minute by Mr Weakley, 9 March 1922, F.O. 371 8288, no. 2119/873.
77. Minutes of a meeting held at the Board of Trade, 27 July 1921, POWE
33/92.
78. Memorandum by Director of Contracts, December 1923, ADM 116/3452
no. C.P. 4743.
79. Ibid., minute by Director of Contracts, 10 November 1923.
80. Ibid., minute from Director of Stores to Fourth Sea Lord. 12 November
1923.
81. Statement of Admiralty Views, II March 1922, O.S.C.5. Cabinet
Committee on the proposed Amalgamation of Royal Dutch, Shell,
Burmah and Anglo-Persian Company, CAB 27/180.
82. Petroleum Department note on Times article, 8 November 1921, POWE
33/93.
83. Director of Contracts to Secretary, 20 January 1925, ADM 116j2318C.
84. Confidential and Secret Memorandum, 15 May 1923, Pearson Papers. Box
C44: File, British Imperial Oil Company.
85. N. Chamberlain to Lord Curzon, 17 October 1923, F.O. 371/9029, no.
E10990jll9/34.
86. E. P. Elwell-Smith, Persian Oil: A Study in Power Politics (London, 1955)
p. 50.
87. P.H. Frankel, Essentials of Petroleum (London, 1969) p. 77.
88. M. A. Adelman, Natural Resources and International Development
(Baltimore, 1964) p. 32.
89. K. Beaton, Enterprise in Oil (New York, 1957) pp. 230-2.
90. The correspondence between the British and United States Governments
was printed in Correspondence between His Majesty's Government and the
United States Ambassador respecting economic rights in Mandated ter-
ritories, cmd 1226 (1921).
91. Foreign Office minute, 16 April1920, F.O. 371 5150, no. E3222/175/44.
92. Sir H. Deterding, An International Oilman (London, 1934) pp. 72-6.
93. H. Deterding to H. Colijn, 22 August 1917, SHELL.
94. H. Deterding to Dick Airey, 20 September 1920, SHELL.
95. M. J. Hogan, 'Informal Entente: Public Policy and Private Management in
Anglo-American Petroleum Affairs, 1918-1924', Business History. Review
(1974) 193.
96. Ibid., 195.
97. Ibid., 196.

98. H. Heymann, 'Oil in Soviet-Western Relations in the Inter War Years',
American Slavic and East European Review (1948); G. S. Gibb and E. H.
Knowlton, op. cit., pp. 335-58.
99. State Bank of the U.S.S.R., Moscow, 7 Aprill929. Copy in POWE 33(349.
100. Ibid., Mr. Haley to Foreign Office, 28 August 1929.
101. Minute on Relations between the Foreign Office and R.D. Shell Group,
1923, F.O. 371 9346, no. N4021/839(38.
102. Policy re: purchase of Russian oil, I August 1929, POWE 33/340.
103. M. J. Hogan, op. cit., pp. 196-200.
104. G. S. Gibb and E. H. Knowlton, op. cit., 291-5. The American group,
organised into the Near East Development Company, comprised the
Standard Oil Companies of New Jersey, New York and Indiana, plus the
Gulf Refining Company, Atlantic Refining Company, the Sinclair
Company and the Texas Company. The last two companies had dropped
out by 1928.
105. M. J. Hogan, op. cit., 202-4.
106. C. Davies, op. cit., ch. 7.
107. Ibid., ch. 8.
108. Ibid., ch. 9.
109. This was a fairly regular theme in, for example, the Daily and Sunday
Express in the early 1920s. The Sub-Committee of the Standing Committee
on the Investigation of Prices also called for the use of A.P.O.C. to fight the
trusts, Report on Motor Fuel, cmd 587, 1920.
110. C.I.D. Meeting, 16 February 1928, conclusions, Tl61(284, no. 33045/2.
Ill. Ibid., Handwritten note on Treasury draft to Lt Col. Vivian Henderson
(Home Office).
112. C. Tugendhat, Oil: The Biggest Business (London, 1968) pp. 98-107.
113. United States Federal Trade Commission Report, The International
Petroleum Cartel (Washington, 1952) p. 210.
Conclusion
The world oil industry had grown rapidly in the three decades
before the gathering at Achnacarry castle. Total production of
crude oil had expanded from 20 million metric tons in 1900 to
over 180 million metric tons in 1928. In the United States,
production had grown by some fourteen times; new oilfields had
been discovered in the Middle East and South America.
The British oil industry shared in this general expansion. The
British were the leading foreign investors in the world petroleum
industry. Although the search for oil within the United Kingdom
had proved fruitless, British capital and enterprise had pioneered
the oil industries of such countries as Persia, Burma, Mexico and
Trinidad. British investment played an important role in the
Russian oil industry before the Bolshevik Revolution. During the
1920s, the part-British Shell Group and, to a lesser extent, the
wholly British Anglo-Persian Oil Company, became established
as major international companies. In contrast, the United States
was a latecomer to the world oil industry: by 1914 American
companies were established only in Mexico and Rumania. It was
after 1918 that American investment in foreign oilfields became
substantial, and even then it was only in South America that
United States companies showed sustained enthusiasm. France
and Germany were mainly represented in the industry before
1914 by banking and financial groups, such as the Rothschilds
and the Deutsche Bank. It was the French Government which
secured for French interests a 25 per cent stake in Iraqi oil after
the War, and organised the company to exploit this opening.
This rapid growth had brought its own problems, particularly
in the British oil industry. The foundations of the industry had
been laid during the late ninteenth and early twentieth century as
individual entrepreneurs, such as Fred Lane, Marcus Samuel and
Weetman Pearson, planned and implemented a series of coups
and pioneering ventures. At this time too, William D' Arcy and
Charles Greenway established what was to become the largest
245
British oil company, British Petroleum. But by 1914, as the

industry and the companies expanded, the problems of securing
concessions and finding oil gave way to those of organisation,
marketing and research, problems which were exacerbated by
increasing concentration in the industry. Shell had merged with
the Royal Dutch Petroleum Company in 1907: the next decade
saw the acquisition by this Group of British oil companies in
various parts of the world. Two of the three large groups which
dominated the Russian oil industry in 1914, the Shell Group and
the Russian General Oil Corporation, were part British. The
trend towards concentration increased after the First World War.
Lord Cowdray's Mexican oil interests were acquired by the Shell
Group, and as the 1920s progressed, the Anglo-Persian Oil
Company, Burmah Oil and the Shell Group became increasingly
involved in joint ventures and marketing agreements.
The transition from the 'heroic' age to one of organisation-
building did not prove easy. Many British oil companies were
slow to recognise the obsolescence of traditional management
structures. They had emerged from shipping firms, East India
merchants, or building contractors, and their early structures
reflected the inherited traditions of these industries. The organi-
sation of Shell Transport and Trading in the early 1900s was
extremely haphazard given the scale of the company's operations.
This weakness, and the loss of interest in the company by its
chairman, Marcus Samuel, resulted in Shell being forced into a
minority position in a merger with the Royal Dutch Petroleum
Company. The management structures of the Anglo-Russian oil
companies, and A.P.O.C. and Burmah Oil before the 1920s, also
needed reorganising. Such managerial defects were a general
characteristic of the British economy. 1 Moreover, United States
oil companies set no example to their British counterparts.
Standard Oil's structure before its dissolution was simply the
product of ad hoc responses to past problems. Jersey Standard
retained this management structure after 1911 and it was not until
the mid-1920s that the company's executives were forced, first by
the slowing down in the demand for petroleum products after
1925, and then the glut in production after 1927, to undertake a
general re-organisation and the creation of a 'multi-divisional'
structure. 2 The petroleum industry of both the United States and
Britain contained many individualist enterpreneurs, whose pri-
mary interest was finding oil and not developing new organi-
CONCLUSION 247
sational forms. Lord Cowdray, for example, was always 'a

builder of empires rather than organisations'. 3
This emphasis was perhaps not too misplaced, for efficient
organisation was not a prerequisite for success in the oil industry
in the early twentieth century. Oil was a disaster-intensive
business. Successful entrepreneurship was characterised, to an
unusual degree, by good luck-by divine restraint from sending
plagues of wild spouters, angry Tartars or revolutionaries. Such
things were not susceptible to any conventional capitalistic
antidotes, but they could break capitalist fortunes. 'Pearson luck'
was an essential factor in Lord Cowdray's great success in the oil
business.
The British oil industry in the early twentieth century faced
problems other than those associated with its rapid growth. The
politicisation of the world oil industry increased the hazards faced
by British companies in their overseas operations. This politici-
sation was the product of a number of factors, but primarily, the
growth of the economic and strategic importance of oil products,
and the ownership by many governments of the lands on which oil
companies sought concessions. Thus the securing, or refusal, of
concessions frequently had a strong political dimension.
Cowdray secured large concessions in Mexico because of his
friendship with President Diaz. A.P.O.C. secured its concession in
Persia because of the support of British diplomats negotiating the
Persian government. In British India, the Shell Group and
Standard were prevented from obtaining concessions on the
grounds of their nationality, and American companies were
thwarted in the Dutch East Indies for the same reason.
Another aspect of this politicisation was the growth of 'host
country' controls over the operations of oil companies. The view
that there was an age before the formation of OPEC when
Western oil companies roamed the world like predatory vampires
is entirely misleading. Even in the heyday of private international
capitalism host governments in developing countries could
exercise controls over the development of their oil industries. 4
From 1907, the Rumanian government was tightening re-
strictions on foreign capital in the Rumanian oil industry. There
were similar moves in Mexico after the fall of Diaz. Even the
governments of British colonies engaged in negotiations with oil
companies about such matters as rate of depletion of reserves and
transfer payments, and discussed the advisability of allowing
multinational oil companies to invest in their territories. By the

early 1920s Persia was strongly disputing the terms of the D' Arcy
concession, a dispute which ten years later would end at the
League of Nations. 5
The ideas of government participation in private oil companies,
and even the formation of entirely state-owned companies, were
being aired in several different countries by the eve of the First
World War. At the end of 1913, the United States Secretary of
State for the Navy suggested that the United States should go into
business as an oil producer. 6 In the same year, the .British-
controlled Egyptian government acquired shares in the Shell
subsidiary operating in Egypt. In 1914, the new Republican
government of China joined in a partnership with Standard Oil
(New York) to explore for oil in north China. 7
The politicisation of the world petroleum industry, and the
hazards which accompanied it, make the series of requests from
British oil companies for a closer association with the State, and
the Anglo-Dutch Shell Group's willingness after 1916 to place
itself under British 'control', more understandable. These com-
panies were not lemmings committing ritual suicide at the altar of
an interventionist State. British governments were still primarily
laissez-faire. They asked little of companies, because they firmly
believed that State intervention in economic affairs was in-
efficient and ineffective. On the other hand, oil companies had
much to gain from a friendly relationship with the State.
Diplomatic support could be the prerequisite for securing a
concession, and an important means of reducing the risks of
operating it. The emergence of the Royal Navy as an important
market for fuel oil made the State doubly attractive to the
companies.
The British Government's response to the various requests for
assistance from oil companies was usually cool. Not only were
ministers and officials generally non-interventionist in outlook,
but there was never a coherent or dynamic State oil policy in the
period covered by this book. Oil was rarely discussed at Cabinet
level. There was thus little interdepartmental co-ordination, and
departmental views fluctuated according to the personalities
involved. Although indecisiveness and interdepartmental wrang-
ling are characteristics of most governments, the problem was
exacerbated in this case by the low priority given to petroleum
matters.
CONCLUSION 249
The decision to form an 'exceptional relationship' with the

Anglo-Persian Oil Company in 1914 was quite extraordinary, yet
it was characteristic of the government's oil 'policy' in being a
response to immediate conditions. Winston Churchill's decision
to convert the Royal Navy to fuel oil made the Admiralty
dependent on a commodity whose price was rising and availab-
ility possibly declining. A.P.O.C. offered the State a large supply
of fuel oil on a long-term basis at reasonable prices. The
company's oilfields were in an area where the Foreign Office
particularly desired to see British commercial influence main-
tained and expanded. A.P.O.C.s claim that it was on the verge of
being absorbed by an aggressive foreign rival prompted the
British Government to resort to extraordinary measures to
preserve its independence. The decision of 1914 was essentially an
ad hoc response to a temporary crisis.
During and after the War, there was an increased realisation of
the importance of petroleum products among ministers and
officials, few of whom needed to be told by Lord Curzon in 1918
that British had 'floated to victory on a wave of oil'. 8 Yet if oil
rose in the scale of official priorities, British oil policy remained
rather vague and vacillating. 9 During the First World War
different ministries, and sections within the same ministry,
pursued diametrically opposed policies towards the oil com-
panies. After the Armistice, it took the British Government four
years to decide whether or not to support the Mesopotamian
concession secured by the Turkish Petroleum Company in 1914.
The United States emerged as the clear winner in the postwar
Anglo-American 'oil war', as the Foreign Office demonstrated
that it was no more prepared to put oil interests in the Middle East
before general diplomatic considerations than it had been in
Mexico before 1914.
It is not surprising that the British Government, laissez-faire
and lacking a clear oil policy, was only a marginal influence on the
growth of the British oil industry before 1914. The original British
Shell company grew entirely without any State aid. Indeed, its
leadership complained bitterly about alleged governmental bias
against it. The company was excluded from oil exploration in
British India, and after the merger with Royal Dutch, nearly
excluded from Mesopotamia. British oil investment in Russia and
the United States did not depend on the British State, and Lord
Cowdray's success was also entirely his own. He was denied
diplomatic support when his venture was threatened by United

States hostility and the outbreak of the Mexican Revolution. The
Government did lend some assistance to oil companies in the
colonies in the shape of small grants and promises of Admiralty
fuel oil contracts, and in India Burmah Oil was given protection
against the Shell Group and Standard Oil.
The main area where the British Government influenced the
development of the British oil industry before 1914 was the
Middle East, though this was not the result of any consistent oil
policy. William D'Arcy secured his concession in Persia with the
help of British diplomacy, and the resulting enterprise was saved
for Britain in 1905 when the Admiralty arranged for Burmah Oil
to invest further capital in the company. In 1914, the Government
invested additional capital in A.P.O.C., gave the company a
guaranteed market for fuel oil, and placed it in a very favourable
position in Mesopotamia.
During the War the Government intervened more substantially
in the oil industry. A.P.O.C.s growth was supported by further
injections of capital and the transfer to it of requisitioned German
oil companies. The State promoted a series of merger schemes in
the industry, and became the arbiter of the fate of the large
anticipated oil reserves of Mesopotamia. This increase in the
extent of State involvement, however, was not matched by an
increase in its effectiveness. The oil company merger schemes
never came to fruition and were abandoned in 1924. By the
middle of the 1920s, the oil companies were agreeing amongst
themselves the fate of Middle Eastern oil.
No evidence has been found of a 'conspiracy' between the
British Government and the oil companies to exploit the oil-
producing countries, nor of the British Government acting as a
'tool' of the companies. There were clear instances of what would
now be described as economic imperialism in this period. The
joint British and German pressure on the Turkish Government in
1914 to grant the Turkish Petroleum Company an oil concession
was one instance of this. The British Government would some-
times act in support of British oil interests, but its policy was never
dictated by them. President Wilson's belief that the Foreign Office
was the puppet of Lord Cowdray was absurd.
British politicians and civil servants were, in the early twentieth
century, highly suspicious of the activities of oil companies. This
suspicion was particularly great in the case of the 'oil trusts' The
CONCLUSION 251
'Rockefeller inheritance', the evil reputation earned by Standard

Oil in the United States, had spread across the Atlantic to London
and to the British colonies, and was reinforced by small British oil
companies anxious to secure State support by stressing the
unpleasant nature of the large oil companies.
The objections of officials in Government departments to the
'trusts' were both political and economic. It was feared that
'monopolists' would raise prices, both to the State itself and
ordinary customers, and restrict production of the infant colonial
industries. As totally or partially foreign-owned companies,
Standard Oil and the Shell Group were also politically suspect.
The relative importance given to economic and political objec-
tions changed over time. The Admiralty was particularly con-
cerned with the security of its fuel oil supplies, especially in
wartime, and it was reluctant to depend solely on foreign oil
companies producing in foreign countries. Paradoxically, how-
ever, the desire to increase security of supplies prompted some
Admiralty officials to soften their attitude to Shell, for they began
to believe that a large integrated oil company would be a more
efficient developer of oilfields in the Empire than several small
competing ones. This line of thought spread to other ministries
during the First World War, and after 1916 it became the most
important theme in British government thinking. This was
demonstrated by the series of attempts to bring Shell under
British 'control'. Discussions on the economic defects of 'trusts'
were replaced by attempts to get one of them under British
'control'.
This attempt failed, but it did demonstrate the growing
divergence of British oil policy from that of the United States.
From 1918 the policy of the United States Government towards
the oil companies became decidedly schizophrenic. While the
State Department co-operated with American oil companies all
over the world, and frequently urged them to co-operate with
each other, other United States Government agencies, notably
the Justice Department and the Federal Trade Commission, took
the companies to court for co-operating with each other at home. 10
British policy towards the oil companies, if anaemic, had at least
acquired some consistency by the end of the 1920s. Any residual
anti-trust sentiments evaporated in the face of a general feeling
that the conditions of the industry required the oligopolisation of
the domestic market for petroleum products and the co-operation
of oil companies abroad. A.P.O.C., allegedly acquired by the

British Government in 1914 to thwart the evil designs of the oil
trusts, emerged as a fully-fledged trust acting in partnership with
its 'sisters' both in Britain and abroad. The British Government
and the large British oil companies were not to live completely
happily ever after; but neither partner has ever sued for divorce.
NOTES
I. L. Hannah, The Rise of the Corporate Economy (London, 1979) p. 25.

2. A. D. Chandler, Jr., Strategy and Structure: Chapters in the History of the
Industrial Enterprise (London, 1969) pp. 164, 216.
3. Ibid., p. 181. This was Professor Chandler's description of Walter Teagle.
4. This point has been enthusiastically argued by Maurice Pearton in the case
of Rumania in his May 1978 paper in the Proceedings of the Anglo-
Rumanian Colloquium 1976-1978 (Bucharest, 1980).
5. P. J. Beck, 'The Anglo-Persian Oil Dispute 1932-33', Journal of
Contemporary History (1974).
6. J. A. DeNovo, 'Petroleum and the United States Navy before World War
One', The Mississippi Valley Historical Review, XLI (1954-55) pp. 650-1.
Daniels revived these thoughts after the end of the War. See ch. 8.
7. N. H. Pugach, 'Standard Oil and Petroleum Development in Early
Republican China', Business History Review, 1971.
8. Lord Curzon's speech to the Inter-Allied Petroleum Council, 21 November
1918. Quoted in full in F. Delaisi, Oil: Its Influence on Politics (English
translation, London 1922).
9. For the alternative view that the British Government possessed a 'coherent
oil policy' by 1920, see M. Kent, Oil and Empire: British Policy and
Mesopotamian Oil1900-1920 (London, 1976) p. 157.
10. The general trend in United States oil policy after 1918, however, was
towards the growth of cooperation between government and the petroleum
industry. Federal and state conservation programmes were one instance of
this. See G. D. Nash, United States Oil Policy 1890-1964 (Pittsburgh, 1968),
esp. pp. 238-51.
Appendix: Petroleum
Statistics
World petroleum statistics present a considerable problem.
Quantities of oil can be measured in two ways, either by volume
or by weight. While weight is a constant, volume varies with
temperature, and thus the specific gravity of the product has to be
known before a reliable conversion can be made. Measurements
of specific gravity of petroleum products vary between countries,
within countries and over time. The conversion of measures in
weight to measurements in volume, therefore, presents a con-
siderable statistical problem.
There are also different units to measure weight and volume. In
the United States production is usually measured in terms of
volume, expressed in barrels of 42 U. S. Gallons. United
Kingdom statistics frequently measure production in terms of
weight, expressed in long tons, although marketing statistics are
frequently reported in terms of volume, expressed in Imperial
gallons. On the Continent production is measured in metric tons.
In Tsarist Russia, crude oil production was measured in terms of
weight, expressed in poods. I long ton equals 62 poods.
In summary, the main measurements of weight are: I long ton
equals I.OI605 metric tons equals O.OI6 Russian poods. The main
measurements of volume are: I barrel equals 35 Imperial or 42
U.S. gallons.
In most cases it has seemed appropriate to use the original
measures, and in no case has a conversion been made between
weight and volume. In the text, all tons are long tons and all
gallons are Imperial gallons unless otherwise specified.
253
Select Bibliography
I PRIMARY SOURCES
The author secured access to the archiv.es of only two of the oil
companies, but both of these proved indispensable for writing
this book. The splendid archives ofS. Pearson and Son have been
deposited at the Science Museum, London. The archives of the
Shell Group in London and The Hague were also consulted, and
they proved a rich source of information about all aspects of the
growth of the British oil industry. These archives are not available
for public consultation, and at the request of the company I have
avoided giving the exact archival location of documents to which
I refer in the text. A list providing precise archival information
can be obtained on application to the publisher.
The economic, technical and trade press provided useful
information on the British oil industry. The two major trade
journals, the Petroleum Review (which became the Petroleum
Times in 1919) and the Petroleum World were essential reading.
Skinner's Oil and Petroleum Manual, which has been published
under various names since 1910, also proved a great aid. The
Economist and Engineering were informative on several matters.
The archives of the British Government were extremely
valuable. The use of State papers has many dangers for the
historian. It is all too easy to be mesmerised by voluminous
departmental minutes into writing a history of what civil servants
said was happening rather than what happened. Yet State papers
are the major source of information about the political and
foreign policy issues of which oil was a part. Moreover, they are
the main source of data about the history of the Anglo-Persian Oil
Company as long as the archives of British Petroleum remain
closed.
In the Public Record Office, the papers of the Admiralty,
Colonial Office, Foreign Office and Ministry of Power proved the
most valuable. The latter contains the records of the wartime
254
SELECT BIBLIOGRAPHY 255
Petroleum Executive and the Petroleum Department. The papers

of the Cabinet, Ministry of Munitions, Ministry of Transport,
Treasury and War Office were also consulted. The records of the
India Office, housed in the India Office Library, were essential for
the study of the oil policy of the Government oflndia. The Naval
Historical Library contains the proceedings of several committees
of which no trace can be found in the rather chaotic collection of
pre-1914 Admiralty papers in the Public Record Office.
The archives of the French Government were found to be
informative about the interwar period. The F30 series in the
Archives Economiques et Financieres, Paris, contains a number
of files on the early history of the Compagnie Franc;aise des
Petroles and of French participation in Middle Eastern oil.
A number of private collections of papers contain material of
interest to the student of the British Government's oil policy. The
Grey and Lansdowne papers in the Public Record Office were
helpful, and the Hardinge MSS. in Cambridge University Library
were valuable for understanding the Government of India's oil
policy.
II SECONDARY SOURCES
This bibliography is intended as a guide to the most relevant

literature on the aspects of history of the petroleum industry
discussed in this book. It does not attempt to list all the source-,
used in the writing of t.l1e present work. The footnotes to each
chapter contain full references, including place and date of
publication, at the first mention of each book or article referred to
in that chapter.
M. Adelman, The World Petroleum Market (Baltimore, 1972).

K. Beaton, Enterprise in Oil: A History of Shell in the United
States (New York, 1957).
A. Beeby Thompson, The Oilfields of Russia (London, 1908)
A. Beeby Thompson, Oil Pioneer (London, 1961).
U. Brack, Deutsche Erdolpolitik vor 1914: eine Fallstudie zu den
Problemen der Marktbeherrschung und Staatsintervention im
wilhelminischen Deutschland (Hamburg Ph.D., 1976).
C. T. Brunner, The Problem of Oil (London, 1930).
P. Calvert, 'The Murray Contract: An Episode in International
Finance and Diplomacy', Pacific Historical Review (1966).
B. Dasgupta, The Oil Industry in India (London, 1971).

C. Davies, British Oil Policy in the Middle East 1919-1932
(Edinburgh Ph.D., 1973).
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Policy Abroad 1918-1920', American Historical Review, LXI
(1955/6).
J. A. DeNovo, 'Petroleum and the United States Navy before
World War I', Mississippi Valley Historical Review, (1954/5).
H. Deterding, An International Oilman (London, 1934).
L. Dunn, The World's Tankers (London, 1956).
R. E. Dunstan, The Science of Petroleum, vol. 1 (London, 1938).
J. L. Enos, Petroleum Progress and Profits (Cambridge, Mass.,
1962).
R. W. Ferrier, 'The early management organisation of British
Petroleum and Sir John Cadman', in L. Hannah (ed.) Manage-
ment Strategy and Business Development (London, 1976).
R. J. Forbes and D. R. O'Beirne, The Technical Development of
the Royal Dutch/ Shell 1890-1940 (Leiden, 1957).
F. Forster, Geschichte der Deutschen BP 1904-1979 (Hamburg,
1979).
P. H. Frankel, Essentials of-Petroleum (London, 1969).
A. A. Fursenko, Neftianye tresty i mirovaia politika (Moscow/
Leningrad, 1965).
M. Y. Gefter, A. M. Solov'eva and L. E. Shepelev, '0 pro-
niknovenii angliiskogo kapitala v neftianuiu promyshlennost'
Rossii, (1898-1902), Istoricheskii Arkhiv, 6, (1960).
F. C. Gerretson, Geschiedenis der 'Koninklijke', vols. 4 & 5
(Baarn, 1973).
F. C. Gerretson, History of the Royal Dutch, 4 vols (Lei den, 1958).
G. S. Gibb and E. H. Knowlton, The Resurgent Years: The
History of the Standard Oil Company (New Jersey), 1911-
1927 (New York, 1956).
B. Gille, 'Capitaux Franpais et Petroles Russes 1884-1894',
Histoire des Entreprises, 12 (1963).
J. E. Hartshorn, Oil Companies and Governments: An Account of
the International Oil Industry in its Political Environment, 2nd
ed. (London, 1967).
R. Henriques, Marcus Samuel, First Viscount Bearsted and
Founder of the 'Shell' Transport and Trading Company,1853-
1927 (London, 1960).
SELECT BIBLIOGRAPHY 257
R. Henriques, Sir Robert Waley Cohen, 1877-1952 (London,

1966).
J. D. Henry, Baku: An Eventual History (London, 1905).
J. D. Henry, Oil Fuel and the Empire (London, 1908).
R. W. and M. E. Hidy, Pioneering in Big Business. The History of
the Standard Oil Company (New Jersey), 1882-1911 (New
York, 1955).
M. J. Hogan, 'Informal Entente: Public Policy and Private
Management in Anglo-American Petroleum Affairs, 1918-
1924', Business History Review (1974).
M. Jack (now Kent), 'The Purchase of the British Government's
Shares in the British Petroleum Company 1912-1914', Past
and Present, 39 (1968).
N. H. Jacoby, Multinational Oil (New York, 1974).
G. G. Jones, 'The British Government and the Oil Companies
1912-1924: the Search for an Oil Policy', Historical Journal,
20, 3 (1977).
G. G. Jones, The Oil Companies and the British Government 1900-
1925 (Cambridge Ph.D., 1977).
G. G. Jones, 'The Oil Fuel Market in Britain 1900-1914: A Lost
Cause Revisited', Business History, XX, (1978).
G. G. Jones, 'The State and Economic Development in India
1890-1947: The Case of Oil', Modern Asian Studies, 13, 3
(1979).
W. J. Kelly and T. Kano, 'Crude Oil Production in the Russian
Empire 1818-1919', Journal of Europe(ln Economic History,
1977.
M. Kent, Oil and Empire: British Policy and Mesopotamian Oil
1900-1920 (London, 1976).
J. E. King, 'The New Broad Arrow: Origins of British Oil Policy',
Mariner's Mirror, 1953.
H. Longhurst, Adventures in Oil: The Story of British Petroleum
(London, 1969).
S. H. Longrigg, Oil in the Middle East (London, 1968).
C. Marvin, The Region of Eternal Fire (London, 1884).
H. Meijcher, Imperial Quest for Oil: Iraq 1910-1928 (London,
1976).
K. Middlemas, The Master Builders (London, 1963).
M. Mitzakis, The Oil Encyclopedia (London, 1922).
Monopolisticheskii Kapital v neftianoi promyshlennosti Rossii, 2
vols (Moscow and Leningrad, 1961 and 1973).

G. D. Nash, United States Oil Policy 1890-1964 (Pittsburgh,
1968).
A. Nouschi, 'La Francia, il petrolio e il Vicino Oriente' (1918-
1919), Studi storici, I (1966).
P. V. 01', lnostrannye Kapitaly v Rossii (Moscow, 1922).
E. W. Owen, The Trek of the Oil Finders (Tulsa, 1975).
D. J. Payton-Smith, Oil: A Study in War-time Policy and
Administration (London, 1971 ).
M. Pearton, Oil and the Romanian State (Oxford, 1971).
B. Redwood, A Treatise on Petroleum, 3 vols (London, 1922).
H. A. Romp, Oil Burning, (The Hague, 1937).
J. Rondot, La Compagnie Fran9aise des Pet roles du France-Or au
Petrole-France (Paris, 1962).
J. Rowland and B. Cadman, Ambassador for Oil (London, 1960).
A. Sampson, The Seven Sisters: The Great Oil Companies and the
World they Made (London, 1976).
J. A. Spender, Weetman Pearson, First Viscount Cowdray 1856-
1927, (London, 1930).
Ida M. Tarbell, History of the Standard Oil Company (New York,
1904).
R. W. Tolf, The Russian Rockefe//ers: The Saga of the Nobel
Family and the Russian Oil Industry (London, 1976).
R. C. Trebilcock, 'A Special Relationship-Government,
Rearmament and the Cordite Firms', Economic History
Review, 1966.
L. Turner, Oil Companies in the International System (London,
1978).
P. V. Volobuev, 'Iz istorii monopolizatsii neftianoi promyshlen-
nosti dorevoluzionnoi Rossii (1903-1914)', lstoricheskie
Zapiski, (1955).
H. F. Williamson, R. L. Andreano, A. R. Daum, G. C. Klose, The
American Petroleum Industry: The Age of Energy 1899-1959
(Evanston, 1963)
M. Wilkins, 'Multinational Oil Companies in South America in
the 1920s,' Business History Review, 1974.
D. Young, Member for Mexico (London, 1966).
Index
Achnacarry Agreement (1928) 239- relations with Shell Group 143-5,
40 151--4, 178, 181-2, 192-3,
Admiralty (see also Committees, 197-9, 223
Intelligence) Anglo-Saxon Petroleum Company
oil companies and, 18-19, 23-5, 23, Ill, 115, 184
26, 28,43-5,46 nl4, 73, 76, 86, Anglo-Swedish Oil Company 184,
97-9,101,106,108, Ill, 115- 187
17, 132--40, 140-1, 146-7, anti-semitism 96, 152, 182
155, 161, 165-72, 185-6, 189, armaments industry 18, 24, 26
193, 197-200, 227, 238, 251 Asiatic Petroleum Company 22-3,
oil consumption 7, 9-11, 14-16, 45, 93-5, 102-3, 143-5, 166,
27-8, 30 n37, 146 238
oil contracts 19, 23--4,69, 72, 100, Assam Oil Company 103, 109
102, 146, 155, 166-7, 192, Astra Romana Petroleum Company
227-8 183-4, 186-8, 209
oil supplies 11-14, 27-8, 86, !51, Austria-Hungary I, 52, 76, 116, 187
!58 n51, 163,166-7, 174,177-
8, 249 Bakhtyari Khans 135-8, 140, 157
Admiralty Commission to Persian n20
Oilfields (1913) 169-70 Bakhtyari Oil Company 140, I 79
Amerada Petroleum Corporation Baku Russian Petroleum Company
218 55
Anglo-American Oil Company 23, Baldwin, Stanley 224-6, 229
33-8, 92, 180, 188, 235, 239 Baluchistan 77, 91, 148
Anglo-Egyptian Oilfields 115-21 Barbados 105-6
Anglo-Mexican Petroleum Products Bataafsche Petroleum Maatschappij
Company (see also S. Pearson (B.P.M.) 23, 115,217
and Son, Mexican Eagle) 42, Berenger, Henri 213, 215
69, 166, 179, 217, 227 Bergheim, J. S. 115-16
Anglo-Persian Oil Company Black Sea Oilfields Ltd 59-60
(A.P.O.C.) Black, Sir Frederick 113, 189, 201
management 58, 135, 224-5, 229 Bnito (Societe Commerciale de
origins and growth 6, 50, 109, Naphte Caspienne et de Ia mer
128-56, 178-82, 196-9, 208, Noire) 20, 53, 55, 61
210-11, 222-6, 237-9 Board of Trade 164, 193
relations with H. M.G. 44, 63, 95, Body, J. B. 64-6, 71, 192, 218
112, 123, 144-55, 160-74, Bowring, Messrs C.T. and Company
200-1, 204, 224, 227-9, 249- 66, 69-70
50 Boyle, Lt Col J. W. 212, 236
259
260 INDEX
Bratianu, Vintila 101 Admiralty Oil Committee (1911-

British Creosote Company 37, 180 12) 167
British and Foreign Oil and Rubber Admiralty Standing Committee on
Trust 109-10, 112 Liquid Fuel 181, 183
British Government (see also individ- Cabinet Committee on Oil Com-
ual ministries, Committees, pany Amalgamation (1922)
Intelligence) 227-9
economic policies, 17-18, 200-1, Inter-departmental Oil Committee
226 112-13
oil policy 7-8, 19, 45-6, 62-3, Joint Oil Committee (1904-6) 16,
73--4, 78-9, 122, 150, 154-5, 107-8, 112
160, 174, 194, 201-2, 204, Restriction of Enemy Supplies
213-14, 218, 248-50 Committee 183, 205 n22
British Petroleum Company (B.P.) Compagnie Frans:aise des Petroles
23, 37, 41, 166, 180-1, 186 (C.F.P.) 6, 216, 237
Burma (see also India) I, 2, 7, 24, Concessions Syndicate Ltd 134--41
88-105 Consolidated Petroleum Company
Burmah Oil Company 36
management 58, I 05 Costa Rica 72
origins and growth 49-50, 88- Cowans, General Sir John 214
105, 109, 112, 133-5, 138--40, Cowdray, Lord (formerly Weetman
142-3, 148, 246 Pearson)
relations with Shell 93-7, 102-4, career 42, 63-77, 141, 179-80,
151, 161-2, 189-90, 193,222, 197, 202-3, 217-18
239 business policy 65, 190-1, 247
relations with H. M.G. II, 24, 91, and H.M.G. 44, 72, 74-6, 167,
96-7, 99-102, 134 190-2, 218, 224, 249-50
Burmah-Shell 103 Cox, Percy 137-8
cracking 3
Cadman, Sir John 113, 122, 139, Cunningham Craig, E. H. 104, 121,
169-70, 195-6, 199-202,214- 134, 139
16, 218, 223, 225, 237-8 Curzon, George, First Earl of
California Oilfields Ltd 63, 77, 109, Kedleston 93--4, 156 n6, 233,
168 249
Canada I, 85, 113,218
capital markets, British 59, 62, 148-9 Dalton, W. H. 68, 133
Cargill, David 88 Daniels, Josephus 219, 252 n6
Cargill, John 104-5, 133, 139, 144, D'Arcy, William K. 15, 128, 130--4,
148, 222 136-7, 245
Chamberlain, Neville 229 D' Arcy Concession (1901) 130, 248
China 73, 76, 248 Deterding, Sir Henri
Churchill, Winston S. 27-8, 117, career 20, 22, 37, 77, 154, 182,
119, 161, 164-5, 167-9, 171- 235--6
4,249 business policy 22, 30 n33, 45,
Colijn, H. 187, 211, 217, 221, 234 188, 209, 223, 234, 239
Columbia 73, 225 and Dutch Government 83 n79
Committees, Government Oil and French Government 187,
Admiralty Oil Committee (1903- 212-13, 216
6) 16, 99 and German Government 79
INDEX 261
and H.M.G. 45, 74, 96, 116-17, Geologists, and oil exploration 2,
165-8, 172--4, 176 n34, 187, 58, 68, 97, 104, 112, 115, 126
208-14, 216, 237 n77, 132, 134, 230-1
Deutsche Bank 23, 36, 74, 78, 149, Germany
152, 155, 164 government 74, 79, 152, 187, 201
Diaz, President Porfirio 65-6, 71, oil companies 14, 180-1,208,245
247 Great Eastern Railway 4, 40
diesel engines 4, 168 Greenway, Charles
Dorsetshire, oil in, 86, 208 ability and character 95-6, 195,
'double bottoms' 188 225
DutchEastindies 1,7,11,14,21-2, career 95, 109, 134, 167, 245
28, 33, 77, 91, 173--4 and H. M.G. 44, 96, 145-50, 154-
5, 160-1, 180-2, 196-7, 199,
Eagle Oil Transport Company 69, 222, 226
180 and Shell 110,143-5,151-3,179,
Ecuador 72 180-1
Egypt 77,112, 113-21,218,248 Grey, Sir Edward 74, 137, 163, 173
Egyptian Oil Trust 114-15 Grube, Ernest 61, 154
Erb, Dr J. Th. 115, 126 n77 Gulbenkian, Calouste 20, 76, 155,
European Petroleum Company 173, 182, 211-13, 215-17,
55 237-8
European Petroleum Union (E.P.U.)
36, 46 n4, 78 Hall, Admiral Sir R. 185-6, 198-9
exhaustion, of oil reserves 105, 219, Hankey, Sir Maurice 14, 198
230-1 Harcourt Committee (Petroleum
Imperial Policy Committee
Finlay, Fleming, and Company, 1918-19) 197, 199, 201-2
Messrs 105 Hardinge, Sir Arthur 130-3, 136
Fisher, Admiral Sir John 14-16, Hardinge, Lord (formerly Sir
27-8, 29 n17, 167-9 Charles) 161-2
Foreign Office 74-6,92, 113, 130-2, Hayes, C. W. 68, 70, 192
135-7, 140, 149-50, 155, 163- Homelight Oil Company 36, 180-1
5, 172, 180, 184-5, 193-5, Hopwood, Sir Francis 120, 172,
210-12, 214, 226, 233, 236, 190-1
238
France Inchcape of Strathnaver, Lord 199,
oil industry 62, 76-8, 93, 245 207 n81, 224
State oil policy 194-5, 212-13, India, British (see also Burma) 20,
214-16, 241 nl9 77,88-105,143,145-6,161-2
Front Uni 235 India, Government of 89-104, Ill,
fuel oil 136, 161-2, 169
civilian consumption 3-4, 38--43, India Office 89-101, 113, 161-2,
46 n7, 54 195, 214
naval consumption 9-11, 18, 102, 'Initialled agreement' ( 1919-20)
145-6, 166-7, 228 208-22
prices 13-14,40, 166, 227 Intelligence, British
military 189
gas oil 32, 37 naval 16, 170, 185-6, 194-5,
General Petroleum Company 36 197-9
262 INDEX
Iraq, see Mesopotamia 'monopolist menace', alleged 78-9,

95--6, 106, 123, 151-2, 162-3,
James, S. Lister 104, 134, 170 171, 251
motor industry 5, 37
kerosene (or paraffin) 3-4, 32-7,45, multinational enterprise 6-7, 88,
52-3, 88-9, 94, 102-3, 142-4, 92-3, 117-19, 186-7, 242
148, 152, 161-2 n53
Kerosene Company 33 Murray, Lord of Elibank 72, 76,
Kerosene Pool 222 190-1
Kitchener, Lord 116-17, 119-20
Kruisheer, P. 115 Newfoundland Oil Company 63
New Zealand 86, 112
laissez-faire 17, 160, 172, 186, 200, Nigerian Bitumen Corporation 63
226, 248-9 Nobels 23, 33-6, 51-4, 58, 77-8,
Lane, Frederick 19-21, 30 n34, 33, 180,210-11,235
35, 41, 53, 55, 110, 245
Latin America 2, 7, 76, 88,217,219, 'oil war', Anglo-American 219-21,
225, 234-5, 245 230-3, 249
Lloyd George, David 76, 198, 214-
16 Parker, Alwyn 165, 180, 184-5, 199,
Long, Walter 195--6, 200-1, 212, 224
214-15 Pearson, Weetman, see Lord
Lorimer, Captain 137, 140 Cowdray
Loudon, H. 45, 117, 153 Pearson, Messrs S. and Son (see also
Anglo-Mexican Petroleum
Macrorie, Basil I 04, 134 Company, Mexican Eagle Pet-
Maikop 59-62, 79 roleum Company) 63-5, 69,
management, of oil companies 21, 76-7, 103, 203, 210, 218
57-8, 70, 190-1, 224-5, 229, Persia
246-7 oil exports 2, 12, 33, 142-3, 167,
Mantashev 53, 61 203, 231
Mazout 53, 61 oil industry 128-56, 225--6, 235,
mergers, oil company 179-80, 189- 248, 250
93, 197-8, 203-4, 222-9 petrol 3-5, 37-8, 223
Mesopotamia(lraq) I, 149-51,155, Petroleum Executive 196, 200, 204,
164-5, 172, 181-2, 194-5, 210, 214
197-8, 200, 208, 212-16, 220, Petroleum Produkte Aktien Gesell-
237-8 schaft (P.P.A.G.) 36
Mexican Eagle Petroleum Company Petroleum Steamship Company 37,
(see also S. Pearson and Son, 180-1
Anglo-Mexican Petroleum Preece, J. R. 136, 139
Company) 44, 63, 69-71, Pretyman, Ernest 26, 30 n44, 99,
75-6, 180, 190-2, 217-18 133, 192, 199
Mexico 2, 7, 33, 42, 48,64-72, 74-5,
79, 192, 217-18, 231, 245, Red Line Agreement (1928) 237-8
247 Red Sea Oilfields Company 115-16
Middle East, oil in 48, 88, 193-5, Redwood, Boverton 4, 43, 68,97-9,
212-16, 233, 237-8, 250 104, 106, 109-10, 124 n31,
Mohammerah, Sheikh of 135, 138 132-3, 142, 203
INDEX 263
refining, oil 2-3, 32, 52, 108, 142, Shell Group

180-1 and A.P.O.C. 143-5, 150-3, 161,
Reynolds, G. B. 132, 135, 138-40 178-9, 182-4, 192, 197-8,
Rockefeller, J. D. 6, 22, 25 222-9, 239
Rothschilds, Paris 20, 22-3, 33, 35- in British Empire 77, 103-4, 112,
6,52-5,61, 77-8, 82 n44, 110, 115-21, 247
132, 211 in Dutch East Indies 77, 174, 189
Roxana Petroleum Company 77, formation 6, 22-3
231, 233 and H. M.G. 19, 24, 28, 74, 86,
Royal Commission on Fuel and 110-11, 122, 163-5, 171-3,
Engines 41, 44, 151-2, 160, 184-5, 187-90, 193-4, 196,
167-9 202, 208-22, 222-3, 227, 240,
Royal Dutch Petroleum Company 248-50
6, 22-3, 55, 58, 75, 209, 217 in Middle East 149-50, 155,212-
Rumania I, II, 14, 26, 28, 33, 42, 50, 17
55, 87, 91, 101, 183-4, 187-9, oil exploration 2
208-9, 221' 245, 247 in Russia 61, 74, 77-8, 153-4,
Russia 209-12, 235-6
Soviet 209-12, 223, 235-6, 239 in USA 77,217, 231-2
Tsarist 1-4, 6, 7, 20-1,33,35, 39, Shell-Mex and B.P. Ltd 239
48, 50-62, 69, 73-4, 77-9, 82 Shell- Mex Ltd 217, 222, 226
n43, 89, 130, 153-5, 245 Shell Transport and Trading Com-
Russian General Oil Corporation pany 6, 19-23, 36-7, 38-9,
61, 77-8, 246 42, 44, 55, 58, 73, 93-5, 114
Russian Oil Products Ltd 236 Slade, Admiral Sir Edmund 169-
Russian Petroleum and Liquid Fuel 70, 180-4, 186, 192-3, 196-
Company 55-9 201, 224-5
Societe Fran~aise pour !'Exploitation
Sakhalin 60, 62, 77, Ill des Petroles 213, 216
Samuel, Marcus Spies Petroleum Company 56, 61
career 19-22,29 nl7, 30 n29, 36, Standard Oil Company 6, 20, 25-6,
39, 45, 55, 89, 114, 190, 217, 28,33,35-9,53-4,56,67, 70-
245 2, 78-9, 91-4, 96, I 03, 110,
and H.M.G. 15, 44, 46 nl4, 73, 122, 125 n63, 142, 209, 221,
94-5, Ill, 116, 167, 173, 250-1
176 n34, 184-5, 196, 201-2, Standard Oil of New Jersey
216 (Exxon) 6, 75, 192,211,220-
ineptitude 21-2, 25, 41-2, 96, 1, 234-5, 237, 239, 244 n104,
173-4, 196, 246 246
San Remo Agreement (1920) 216, Standard Oil of New York
220 (Mobil) 6, 236, 244 nl04, 248
SchibaiefT Petroleum Company 55, Steaua Romana Company 23, 36
59, 154 Strathcona and Mount Royal,
Selwyn, Admiral J. S. 9, 28 n2, Lord 141, 152
54 Strick, Scott and Company 135,
shale oil industry, Scottish I, 7, II, 224, 226
24, 32-3, 48-9, 228 Suart, Alfred 54-6, 81 n 14
Shaw Wallace and Company 89, Sunbury Research Centre 153, 158
95-6, 135 n51
264 INDEX
Sykes-Picot Agreement (1916) 194- United States of America

5, 213-14 oil industry I --6, II, 39, 63, 77,
217-19, 230-1, 245
tankers, oil oil exports II, 32-7,53,89, 178,
Admiralty 16 201-2
commercial 14, 20-1, 40-1, 52, oil policy 12, 17,25,29nl0, 71-5,
54-5, 66, 69, 143, 171 78, 219-21,225, 231-2, 234-
Tarbell, Ida 25 5, 237, 248, 251-2, 252 niO
Teagle, W. C. 223, 234-5, 237, 252
n3 Venezuela 2, 77, 217, 221, 225, 231,
Texas Company (later Texaco) 6, 234-5
75, 244 nl04
Thompson, A. Beeby 56, 108, 121, Waley Cohen, Sir Robert 74, 86, 97,
219-20 110, 117-20, 143-4, 151, 153,
Treasury 223-4, 227, 239 184-5, 189-90, 210, 223,
Trinidad 85, 105-13, 121, 191, 193 236
Turkish Petroleum Company Wallace, C. M. 95, 133
(T.P.C.) 149, 152, 155, 164- Walters, Pierce Oil Company 67,
5, 181-2, 195, 212-16, 233, 70-1
237-8, 250 War, First World 177-8, 249
Twinzas 88, 103 WarOffice 17-18,177,189,210,214
Watson, Robert I. 222
United British West Indies Petroleum West Indian Petroleum Company
Syndicate 112 63, 105-6
United Kingdom (see also British Wilson, President Woodrow 71-2,
Government) 74-5, 220-1
domestic oil production 7, 48-9, Wilson, Sir Arnold T. 136-9, 141
86, 191, 202-3, 218 157 n24, 215, 226
oil imports 2, 20, 32-6, 178, Witte, CountS. 56-7, 93
231-2
oil market 5, 32-45, 236, 239-40 Young, James I, 48

The State and The Emergence of The British Oil Industry

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THESTATEANDTHEEMERGENCEOF

THE BRITISH OIL INDUSTRY

General Editors: Leslie Hannah, Director, Business History

This series aims to publish outstanding works in the field of

Further titles in preparation

in association with Palgrave Macmillan

© Geoffrey Jones 1981

All rights reserved. No part of this publication may be

First published 1981 by

British Library Cataloguing in Publication Data

ISBN 978-1-349-05033-8 ISBN 978-1-349-05031-4 (eBook)

V A.P.O.C. and the British Government 1912-14 144

regarded as the preserve of the economic, social and even political

London GEOFFREY JONES

It was, however, in the first three decades of the twentieth century

refining process is basically one of distillation. By means of

most valued petroleum product. In 1899 kerosene amounted to 64

led the way. The number of motor vehicles registered in the

established by the late 1920s. They were allied in joint ventures in

between oil companies of different nationalities were translated

Nevertheless, by the middle of the 1890s the staid officials at the

one of the Admiralty's main requirements for a fuel. Oil firing

II THE PROBLEM OF SUPPLY

Persian supplies were at the mercy of unruly tribesmen.

The price of the new fuel presented further problems to the

1906-7 1907-8 1908-9 1909-10 1910-11

Coal (per 28 cwts) 27.11 30.11 33.6 28.1 29.2

The fuel oil prices paid by the Admiralty remained relatively

increased demand and, after 1911, there was a short-term

III THE FISHER YEARS

The different aspects of the oil supply problem-availability, cost

appointment as First Sea Lord in October 1904 was followed by a

IV THE ADMIRALTY, THE OIL COMPANIES AND THE

their contractors depended on the type of commodity in question.

interests at the same time, was one of the most important

Lord Mayor, he was well on the way to becoming the inflated

situation of Shell was so bad that Deterding was able to impose

There was, in reality, no bias against Shell in the granting of

politicians and civil servants were well aware of the dubious

V CHURCHILL AND THE SWITCH TO OIL

Fisher resigned as First Sea Lord in January 1910. From then

coup that has sometimes been depicted. Churchill's contribution

43. Adm. Oil Committee 1912, Report by Director of Naval Contracts,

The position of the Admiralty in the rapidly expanding market

TABLE 2.1 British imports of petroleum products 1885 ~ 1913

Total Kerosene Fuel oil Petrol Lubricat- Gas

only marginal competition. Figure 2.1 shows the subsequent

when John Usmar, an Englishman, was chosen for that position.

some Russian oil in Britain. The United Kingdom became the

both the Rothschilds and Henri Deterding, a position which

II THE EMERGENCE OF NEW PRODUCTS

During the 1890s new petroleum products began to appear in

large surplus quantities of heavy residuals for which uses had to

1914 the fleets of most of Britain's major oil companies had

with its high price elasticity of demand, suffered especially.

Doubts about the security of supplies were enhanced by the

IV THE STATE AS A MARKET

The low level of commercial consumption of fuel oil in the United

involved in building a distribution network before large-scale

The relatively slow growth of the commercial consumption of fuel

most British foreign investment was portfolio, involving no

widely sold on the Continent. The industry subsequently suffered

II THE OILFIELDS OF RUSSIA