The British interest in oil, 1967

FCO, “The British interest in oil”, March 1967

“Oil is easily the largest single commodity moving in international trade. It supplies nearly 40 per cent of the world’s energy needs… British major interests in oil are twofold: (i) in common with all other industrialised nations dependent upon imported fuel supplies we have an interest in the continued and secure availability of imported oil at acceptable prices…(ii) through British Petroleum (BP)…and Shell… the United Kingdom has a stake in the international oil industry second only to that of the United States. The overseas assets of the British oil companies have a book value of £2,000 million without counting their rights to oil still in the ground. Because these companies supply nearly one half of the market, the United Kingdom obtains its own oil supplies at lower foreign exchange costs than would otherwise be the case: for example, in 1965, if the oil imported by Shell and BP had been imported by foreign companies, it would have cost £60 million more in balance of payments terms. Furthermore, remittance of money from their production, refining and marketing operations overseas makes an even more substantial direct contribution to the balance of payments; net foreign exchange earnings … from Shell’s and BP’s overseas operations in 1965 amounted to about £160 million; of that total, about £60 million was spent on equipment exports for those operations and about £100 million represented net earnings on investment”.

“In the United Nations and its associate bodies Her Majesty’s Government’s policy is to oppose, or at least attempt to moderate, resolutions which might: (a) encourage concessionary governments to expropriate or acquire too direct a control over Western oil investments; (b) give OPEC a status which could lead to its acceptance as a body with special competence or powers as regards the international oil industry as a whole; or (c) encourage direct links between consuming and producing countries or any form of commodity agreement for oil. The broad aim is to inhibit undue governmental interference in the international oil trade”.

“It seems likely (unwelcome though this is as regards the ‘profitability’ of the British investments in balance of payments terms) that unit payments to concessionary governments by the companies will continue to rise, it is hoped slowly, and that those governments will acquire an increasing direct stake in the development of oil resources in their countries… From our massive stake in the international oil industry, we enjoy two major advantages for the balance of payments: our oil costs a good deal less in overseas payments than it would if we bought it all from foreign companies; we get large invisible earnings from the business of producing and selling oil in other countries”.

Source: PRO / FCO 54/77