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Transcript of BP TANKER COMPANY · PDF file51 Page 49: British Vigilance – 16,000 dwt tanker –...

  • 2 BP TANKER COMPANYNEW WORLD ORDER: 1946-197950 A NEW WORLD ORDER

    52 A GREAT NEW FLEET

    58 THE FIRST IRANIAN CRISIS

    60 THE BRITISH PETROLEUM TANKER COMPANY

    64 THE SUEZ CRISIS

    71 BIGGER, FEWER SHIPS

    77 NAGASAKI: PHOENIX FROM THE ASHES

    79 SUEZ OR CAPE?

    83 BRITISH CROWN AND TORREY CANYON

    87 OILING THE GEARS

    88 NORTH SEA AND ALASKA

    92 INTO THE OPEC STORM

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  • 49

  • 50 NEW WORLD ORDER

    The war was over but planning for a new world order had begun four years earlier on board USS Augusta in Placentia Bay, Newfoundland. US President Franklin

    D. Roosevelt met British Prime Minister Winston Churchill, under conditions of great secrecy. Their discussions led to what became known as the Atlantic Charter declaration, which set out a range of common ideas to further the cause of international security in a post-war world. Each of its sponsors had very different motivations. Roosevelt wished to tie Britain to a number of concrete war aims that would loosen its imperial grip in the interests of self-determination and open trade. Churchill escaping briefly across the Atlantic from a Britain under enemy siege was desperate to bring the US into the war.

    The Allied countries pledged adherence to the Charters principles and it was to be a touchstone for a number of the international agreements that shaped the world after 1945, including the foundation of the United Nations, the General Agreement on Tariffs and Trade, and the post-war independence of Europes many colonies. Each would have an important influence on the evolution of the oil industry and its shipping activities.

    The post-war ascendancy of the US as the leading Western power was coupled with Americas growing interest in the Middle East. The region was important for two reasons. It formed a geographical

    barrier to the spread of communism as the Cold War began to identify new ideological battlefronts around the globe. Just as importantly, the region was set to play a leading role in the geopolitics of the Oil Age. Middle Eastern oil reserves had transformed the world energy outlook. Everett DeGolyer, an American geologist advising the US Government, remarked in 1944: The centre of gravity of world oil production is shifting from the Caribbean area to the Persian Gulf area. He had good reason to believe it. Anglo-Iranians giant discoveries in Kuwait and Qatar just before the outbreak of war had been matched by the immense potential of a 1938 discovery in Saudi Arabia by Standard Oil of California and the Texas Company.

    During the war, the US and UK governments attempted to formulate a joint approach to secure the orderly development of international oil industry production, but without success. In the event, much of the responsibility for post-war international oil arrangements fell upon the major oil companies and with concession-granting governments. Host governments with oil resources soon stepped up their demands for increased revenues, guaranteed payments or production levels, greater training and employment of the local populace, more employee welfare, more open accounting procedures, and greater appreciation of local conditions. For the oil companies, the issue was how to meet these aspirations while balancing

    interests in production between several different Middle East resources in which they had interests. Saudi Arabias King Ibn Sauds primary interest was to bring Saudi reserves into production as quickly as possible. Yet the world was only slowly emerging from a terrible war; the great economies of Europe lay shattered; infrastructure such as refineries and ports, had to be rebuilt. Re-establishing existing markets for oil and developing new ones was one of many priorities in a time of scarce resources.

    The US led the way and its post-war boom soon overran its own oil production capacity, forcing it to become a net importer. For Europe, this meant turning towards the Middle East to meet its needs. In the UK, acute shortages of coal immediately after the war forced the Government to rely on oil as it grappled with its own domestic energy crisis. This was the new world in which the Anglo-Iranian Oil Company found itself in the years after 1945. The company now had access to four major sources of crude oil Iran, Iraq, Kuwait and Qatar. Iran remained the jewel in this crown and Anglo-Iranian was concerned at securing markets and shipping for the rapid step up in post-war production that the Shah and the company both desired.

    The task fell to two men: the new chairman of AIOC, Sir William Fraser, and BTC managing director Robert Gillespie.

    A new world order

  • 51

    Page 49: British Vigilance 16,000 dwt tanker launched from the yard of Sir James Laing, Sunderland, England in 1956. Unloading a cargo of gas oil in a temperature of -36C (-4F) at Gavle, Sweden.

    Above: President Roosevelt and Prime Minister Churchill on the quarterdeck of HMS Prince of Wales after Sunday morning service on 10th August 1941. The vessel brought Britains wartime leader across the dangerous waters of the Atlantic to discuss a post war settlement.

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  • 52 NEW WORLD ORDER

    In the post-war years, Sir William Fraser committed BP to the slow and difficult task of building up its own markets and customers having been unable to extend an existing

    marketing cooperation with Shell to a global deal.A marketing push saw sales double to nearly

    40 million tons by 1950. Much of this growth was attributable to crude and fuel oil sales, which were relatively low in value in comparison with the margins for refined products. Forty per cent of Anglo Iranians volumes was sold to third parties and not end customers. The company was becoming a bulk supplier of raw material for processing and marketing by other oil companies. Despite that, marine bunkers and product sales grew strongly.

    These changes brought the companys refining strategy under scrutiny. In the past, industry practice was to locate base-load refineries such as Abadan at or near the source of crude production for economic reasons. With markets set to grow to considerable scale, the economics of locating new refining capacity close by was re-evaluated. Factors such as local labour costs and especially the size of ship and the cost of shipping were becoming highly influential on the decision-making. The attractiveness of not having all eggs in one basket inside a single country was just as important a factor, as the company was to discover.

    Subsequently, a series of refinery expansions was begun at Grangemouth, Llandarcy, Lavera in France, Hamburg in Germany and Antwerp in Belgium. Plans were put in place for new refineries at the Isle of Grain, near London, as well as Dunkirk in France.

    The immediate priority for BTC in this period was making good the shortfall in shipping capacity following the war. However, expansion and modernisation of the fleet was limited by tight capacity at the UK shipyards, a shortage of materials, such as steel, and a sharply rising delivery price. Robert Gillespie tackled the problem in three ways. The retirement of existing ships was put off; new ships were ordered; and second-hand ships with war service were acquired. New ship orders had been placed by BTC during the war years, with the intention of replacing half of the tonnage lost to enemy action. These orders had to be licensed by the Government and agreement reached on a simpler standard of ship design to recognise war constraints. In practice, only one-third of the ships lost was replaced by new-build orders during the war. Instead, they were supplemented by the purchase from the Government of demobbed ships in 1945/46, which had served in the war with the Empire prefix.

    In February 1947, Gillespie travelled to New York and secured the purchase of the US T2 tankers that had performed so well for the allies. For the first time since 1919, BTC departed from its practice of renaming acquisitions with a British prefix and the fleet was distinguished by the addition to its numbers of the exotically named Cottonwood Creek, Smoky Hill and Mesa Verde among others. Despite these orders and acquisitions which brought the fleet up to 102 ships and over one million dwt, the projected production growth from Iran and the new sources coming on stream in the Middle East required further ships.

    BTC began to advance the economic case for larger vessels by arguing that economies of scale

    A great new fleet

    British Adventure 30,000 dwt was BPs first supertanker and the largest in the world when launched in 1950. She was almost twice the capacity of other ships in the fleet. Seen here loading at Mina-al-Ahmadi, Kuwait, which had been developed as the largest port in the world at the time.

  • FIRST SUPERTANKER:

    BRITISH ADVENTUREService entry 1951

    30,218 190 15deadweight tons metres in length knots cruising speed

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  • 54 NEW WORLD ORDER

    1945

    1955

    1965

    Number of ships: 69Million dwt: 0.75

    Number of ships: 159Million dwt: 2

    Number of ships: 120Million dwt: 3

    BTC/BPTC owned/managed fleet 1945-1965

    BP Tanker Company apprentices heading for shore leave in Kuwait.

    The post-war period saw rapid rebuilding and growth of the fleet as economies recovered and BP oil production surged in response.

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    would cover the additional costs incurred, such as shore tankage and port improvements. In contrast, the distribution department of Anglo-Iranian had serious reservations about such scale on the grounds that it felt larger ships would impede the flexibility of its supply activities. This was a debate that was to recur within the parent company time and again over t