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11 1 The Americanization of Shell Oil The red-and-yellow pecten shell is one of the most universally recognized corporate symbols in the world. It is the emblem of the Royal Dutch/Shell Group of companies, often referred to simply as “Shell” or “the Group,” the world’s third-largest industrial organization behind British Petroleum and Exxon-Mobil. In 2004, Royal Dutch/Shell operated in 140 countries, employed 120,000 people, owned 10.2 billion barrels of oil-equivalent reserves, operated 46,000 service stations, and owned an interest in 53 petroleum refineries worldwide. It had an annual net income of $18.2 billion and net assets of $84.2 billion.1 Formed by a unique merger in 1907 between Royal Dutch Petroleum and the English Shell Transport & Trading Company, Royal Dutch/Shell grew to become one of the towering giants in the petroleum industry, an industry whose prominence in the history of the twentieth century was virtually unrivaled. A key aspect of this growth was the emergence of the Group’s U.S. affiliate, Shell Oil Company, as a major oil company in its own right. During the 1940s and 1950s, Shell Oil asserted considerable autonomy from its majority shareholder. In expanding and consolidating the many parts of its business, it projected a new public image, downplaying its majority foreign ownership and declaring Shell to be an American company. The average American bought it. Even to this day, many Americans think that Shell companies around the world are subsidiaries of the Houston-headquartered Shell Oil. More than a public relations ploy, the Americanization of Shell Oil signified a real assertion of independence by the American company from the Group after the Second World War. Political, legal, and cultural constraints, in addition to industry structure, dictated a clear administrative and operational separation between the Group’s U.S. affiliate and the rest of its far-flung global empire. In an imperfectly integrated world economy consisting of many distinct national economies, and with a prospering and protected U.S. oil market, this separation suited the Group’s increasingly 12 The Offshore Imperative decentralized approach to international investment and management during the postwar period. This separation also stimulated and enabled Shell Oil’s ambitious search for oil and gas offshore and the cultivation of the technological capabilities to realize this ambition. Origin of Royal Dutch/Shell The alliance between Royal Dutch and Shell came about through an unlikely pairing of two strong personalities. Marcus Samuel, a timorous but tenacious Jewish trader from the East End of London, had inherited a small fortune from his father, who had imported from the Far East, among other things, seashells, which were used for decoration and jewelry. In the 1890s, Samuel expanded the business into kerosene, lighting fuel refined from oil. In alliance with the Paris Rothschild family of merchant bankers, who controlled oil refining at Batum on the Black Sea coast, Samuel organized a new system of distributing kerosene in the East by bulk tanker shipments. The tankers were named after seashells, thus the origin of the Shell trademark. In 1897, Samuel combined his growing Far East syndicate of businesses into the Shell Transport & Trading Company (Shell T&T). But Shell soon became locked in fierce competition with Standard Oil, the giant trust created by the legendary John D. Rockefeller, who was known for mercilessly undermining and swallowing competitors.2 Samuel and Rockefeller both coveted oil-producing properties in the Dutch East Indies, where the Royal Dutch Petroleum Company had established itself as a successful oil producer. Under the leadership of Henri Wilhelm August Deterding, Royal Dutch had grown into a substantial integrated oil company—combining oil exploration, production, and refining—halfway around the world from the other major oil-producing regions in the United States and Europe. Seeing mutual advantages in an alliance to resist the takeover maneuvers and price-cutting tactics of the formidable Standard Oil, Deterding and Samuel in 1906 agreed to combine their companies. Although Samuel pushed for a 50:50 deal, Deterding insisted on 60:40 and control over management. Brilliant but autocratic, with a mastery of accounting and finance, Deterding had risen to become a managing director of Royal Dutch by the young age of thirty-four. As he once wrote, “mine is a personality which does not readily submerge itself.”3 With Shell Transport & Trading’s fortunes declining in the early 1900s, Samuel had no choice but to accept the Dutchman’s...

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