Late century – 1971-1999
For BP, the lessons of the 1970s would powerfully influence its strategy for the remainder of the 20th century
AirBP refuelling a Boeing 747 carrying the prototype spaceshuttle 'Enterprise'
The oil world is turned inside out
The sudden sweep of changes in the Middle East from 1971 onwards caught the industry by surprise.
It started with Muammar al-Ghaddafi’s rise to power in Libya in a military coup. In 1971 he announced that Libya would be taking a higher cut on all oil that left the country. Soon after that, the British military withdrew from Iran after a presence there for more than a century. Then Iran seized some small Arab Islands near the Strait of Hormuz, and Ghaddafi – angered by what he saw as a British failure to prevent the siege – punished BP. Ghaddafi nationalized BP’s share of an oil production operation in Libya.
One by one after that, almost every oil-rich nation in the region – Iran, Iraq, Saudi Arabia, Abu Dhabi, Qatar – announced that if they weren’t nationalizing their resources immediately they would within the next 10 years.
The effect on BP was profound. In 1975 BP Shipping transported 140 million tonnes of oil from the Middle East. By 1983 that number would shrink to 500,000 tonnes. Over roughly the same period, Middle Eastern oil would go from 80% of BP’s supply down to a meagre 10%.
As a company that had once staked its entire strategy on Middle Eastern oil, BP found that its world had now been fully turned inside out.
BP discovered a major oil field in Prudhoe Bay, Alaska
Engineering feats and an environmental awakening
Fortunately BP had recently discovered major oil fields in other parts of the world, including Prudhoe Bay in Alaska and the Forties field off the coast of Scotland.
Now the company had to figure out how to get that remote oil to the sites where it could be stored, shipped or refined into gasoline. And that would test the company’s engineering prowess as well as its environmental commitment.
The Forties field was 160 kilometres from the nearest shore, with over 100 metres of water flowing over it. BP’s engineers had to design production platforms with legs tall enough to perch above the North Sea’s notoriously rough waters and robust enough to stay standing even through harsh winters. The pipeline to a terminal at Firth of Forth would be the largest deepwater pipeline ever constructed. It needed the built-in security and agility to survive intense currents and corrosion.
Queen Elizabeth II pressed a symbolic button to start the flow of oil from Forties field in 1975, while oil wouldn’t flow from Alaska for another two years.
BP’s discovery there had sparked a national discussion about the environmental implications of extracting oil from an ecological frontier, and the project had needed U.S. government approval to proceed.
At 1,200 kilometres long, the Trans-Alaska pipeline system was the largest civil engineering project ever attempted in North America, and one of the most carefully watched.
The Forties pipeline was opened by Queen Elizabeth II in November 1975
BP and Atlantic Richfield compiled extensive reports examining every potential environmental risk.
The final designs for the pipeline included long aboveground stretches so that the warm oil passing through wouldn’t melt the permafrost. Raised areas at caribou crossings ensured that migration habits wouldn’t be disturbed.
From the protracted Alaskan debate BP took away a lesson about the value of dealing with potentially contentious environmental considerations at the very start of major projects.
More importantly, BP found within itself a passion for confronting environmental challenges with ingenuity and determination.
Re-focusing on core strengths
When the oil started to flow from Alaska, no BP refineries or stations in the United States were there to take it. Instead a 25% stake in Standard Oil of Ohio (Sohio) ensured that Sohio facilities were standing by to bring the first Alaskan gasoline to market.
BP’s stake in Sohio grew over the years, and in 1987 BP bought the company outright, incorporating it into a new national business, BP America.
That same year the British government sold the last of the shares it held in BP. Fully privatized and in a period of intense self-scrutiny, BP accelerated its sell-off of businesses – minerals, nutrition – that weren’t core to what the company had always done well: find, refine, transport and sell fuel.
Refuelling at a BP service station in Truong Dong, Vietnam, 1994
In the early 1990s, the company faced a deep financial crisis caused by a combination of low oil prices and heavy debt that led to a collapse in its share price. Under the stewardship of David Simon, the company was restored to financial health by 1995.
From this position of strength, BP sought to transform its reach and scale as a first mover in a wave of consolidation that swept through the oil and gas sector in the late 1990s.
Low-angled shot of a drilling derrick next to a small palm tree at the Cusiana oil field in Colombia, 1994
New chief executive John Browne led a series of mergers and acquisitions that created a global ‘supermajor’. BP and Amoco joined to form BP Amoco. Then ARCO, BP’s old rival on the North Slope of Alaska, joined the portfolio. Later, Castrol’s motor oils and Aral’s distinctive European operation would also join the group.
BP had found a new momentum.
The Castrol-sponsored Ford Escort MKII competing in the 1978 Swedish Rally. Throughout the race, the driver had to navigate steep, icy and snowy slopes
The Finnish driver Mika Hakkinen racing the Castrol-sponsored Lotus 107 Formula One car, in the 1992 German Grand Prix
The Castrol-Jaguar team sped to victory in the 24-hour Daytona race in 1988, seen here on the racetrack
Key dates
1971
Colonel Ghaddafi, Libya’s leader since 1969, nationalises BP’s share of its joint venture and by 1972 other Middle Eastern countries force the oil companies to hand over 25% of their concessions, rising to 51% over 10 years.
1973
Oil companies agree to hand over control of the Iranian oil fields to the state, while in Egypt, the Yom Kippur war begins. Prices rise and production is cut.
1974
Oil-producing countries raise their stakes in the oil companies – BP’s production of crude falls to 10% of its output five years earlier.
1975
First oil arrives from BP’s Forties field – discovered in 1970 – in the North Sea in November, and by 1978 is supplying 20% of the UK’s requirements.
1977
Following repeated attempts to nationalise BP, the British government sells 66 million of its shares –17% of its holding – in the company for £564m. The government sold its remaining 31.5% stake in October 1987.
In Alaska, the Trans-Atlantic Pipeline System begins transporting crude oil and by 1979 is shifting 1.2 million barrels per day.
1981
BP reveals a new ‘matrix’ management structure, designed to balance national companies with international business streams. New chairman Peter Walters strives for profitability over size and begins to slim down the company.
1987
In the US, BP buys the remaining 45% share in Standard Oil it did not already own. It later buys Britoil in the UK. At the same year it was listed on the Tokyo Stock Exchange where its shares were traded until delisting in 2008.
1989
BP introduces its ‘frontier’ exploration strategy, which would lead to major discoveries in countries such as Colombia, Angola, and Azerbaijan.
1990
Robert Horton replaces Walters and carries out a major corporate down-sizing exercise removing various tiers of management at the company's head office.
BP enters the Russian market and opens its first service station in Moscow in 1996.
1992
Robert Horton steps down and is replaced by David Simon, who instills a performance culture across the company based on setting and meeting rigorous targets in debt reduction, profit generation and capital expenditure.
1995
John Browne, the architect of BP’s frontier exploration strategy, is appointed group chief executive.
1997
BP acquires a 10% stake in Russian oil company Sidanco, which later becomes a part of TNK-BP.
