BP in Alaska: BP’s early history

Company’s origins go back 100 years

Frank Baker

For Petroleum News

The first commercial oil discovery in the Middle East in 1908 brought about the birth of British Petroleum a year later, and it quickly grew into one of the world’s largest oil companies.

In the years that followed, BP became well-established in the Middle East, with subsequent discoveries of large fields — some super giant in size. By the 1950s BP produced about 5.5 million barrels a day of oil, more than most members of the Organization of Petroleum Exporting Countries produce today.

Starting in the 1950s, however, a tide of nationalism swept across the Middle East. This sentiment eventually led to the formation of the Organization of Petroleum Exporting Countries (OPEC) and the takeover of Middle East production by national producing countries.

Even before BP’s expulsion from Iran (formerly Persia) in 1951, the company’s management in London had decided it was time to search elsewhere in the world for oil and gas reserves. The company was also looking to find new markets for its vast Middle East reserves.

British government ownership in BP began in 1914 during the company’s infancy. This was driven by the company’s need for a fuel oil outlet and new capital, and a desire by the British Admiralty to obtain secure supplies of fuel oil. In exchange for 2 million pounds sterling, the government received a majority stake in the company. By the mid-1980s the government held nearly 32 percent of the company’s stock. Three key events in 1987-88 however, would ensure BP’s privatization and a major course change in the company’s history:

• sale of British government holdings in BP;

• BP’s $7.7 billion buyout of America’s Standard Oil Co. outstanding stock shares;

• acquisition of Britoil, doubling BP’s exploration acreage in the North Sea and reinforcing BP’s position as the largest oil and gas producer in the area.

Through divestitures beginning in the late 1980s, the company focused on its core businesses, petroleum and chemicals, and began the quest to find new sources of oil and gas in areas that for political or technical reasons had remained relatively unexplored — such as Colombia, republics of the former Soviet Union and deepwater areas of the Gulf of Mexico.

Major acquisitions and mergers announced in 1998 and 1999 — Amoco, ARCO, Castrol, Solarex — vaulted BP into the top three integrated, super-major energy and chemicals companies, which include ExxonMobil and Shell.