Back from Abadan

Over the mud flats of the Isle of Grain, 40 miles down the Thames from London, rose a strange new smell. It was the acrid odor of distilling oil from the Anglo-Iranian Oil Co.'s Kent refinery, which went into operation last week. When it gets into full production late this year, the $112 million refinery will boost the company's output of gasoline and other petroleum products by 80,000 bbls. a day--1 1/2 times as much as all of Britain's prewar capacity.

For Anglo-Iranian, the Kent plant was the first big milestone on the road back from the catastrophe of expropriation in Iran. Anglo-Iranian lost 77% of its production of crude and 80% of its refinery capacity in the billion-dollar plant at Abadan, largest refinery in the world. Coming on top of damage in Europe during the war, the Abadan loss was such a blow to Anglo-Iranian--as well as to the oil supply of the free world--that the major U.S. oil companies hastily pooled their resources to try to make up the deficit.

But Anglo-Iranian was far from finished. A bitter blow, the loss of Iran nevertheless turned out to be a healthy spur to Anglo-Iranian, which had grown soft on its 42-year monopoly of one of the world's richest oilfields. Misfortune pumped new life into the company.

"Mr. British Petroleum." The man who bossed the pumps is Anglo-Iranian's chairman, Sir William Fraser, 64, a tough, aloof Scotsman. The son of an oilman, he started out in Scotland's hardscrabble oil-shale business. At 27, when his father died, he took over control of the family company, before long engineered a cooperative marketing deal of all the companies in the ailing industry. This feat so impressed Lord Greenway, head of the British government-controlled Anglo-Iranian (then called Anglo-Persian), that he invited Fraser, at 34, to join his board. Eight years later, as deputy chairman, Fraser planned the merger which combined Britain's two largest oil distributors into one company, Shell-Mex & BP (for "British Petroleum") Ltd., to market Anglo-Iranian and Shell Oil Co. products in Britain. When he became boss of Anglo-Iranian in 1941, oilmen began to think of him as "Mr. British Petroleum."

When the crisis came in Iran, Eraser's first impulse was to hop to Teheran and "have things out" with Prime Minister Mossadegh. Foreign Office diplomats persuaded him not to interfere. When negotiations bogged down, and it looked as if Iran might have to be written off, he began to rebuild Anglo-Iranian by rushing refinery expansion elsewhere--but not on foreign soil where it might be grabbed.

The Road Back. Instead of locating refineries close to production, Anglo-Iranian decided to build close to its market. And though it would cost more to ship crude to distant refineries than to refine it at the source, the savings in foreign expenditures outside the sterling area would more than make up for higher British wages.

To replace the 640,000 bbls. of crude a day lost in Iran, Anglo-Iranian quickly stepped up production in the fabulously rich fields in Kuwait on the Persian Gulf, which it operates in partnership with Gulf Oil Corp. Work was also speeded up on a 32-in., 556-mi. pipeline from the Kirkuk oilfields in Iraq, where Anglo-Iranian has a 30% interest in production, to the Mediterranean port of Banias, so Kirkuk production could be increased. By last week, Anglo-Iranian had recouped nearly 85% of the crude lost in Iran. While increasing his crude supply, Fraser sent geologists to look for oil in Sicily, Nigeria, Trinidad, Papua and through East and North Africa. To carry the crude, Anglo-Iranian's shipping subsidiary, British Tanker Co., which has 155 vessels of its own and 150-odd others on charter, has 27 more abuilding and another ten scheduled for charter.

To process the crude, Fraser broadened a postwar expansion program to build new refineries around the world and enlarge the capacity of the comparatively small ones it already owned, planned to spend $210 million in 1953 alone. Plans for the Kent refinery, already started, were revised to double its output, and refineries in Wales and Scotland were expanded so quickly that by last week production in the British Isles had already been increased to nearly 210,000 bbls. a day--six times the 1949 output. With a new plant at Antwerp, a reconstructed one at Dunkirk, and bigger capacity at L'Avera (in France), Porto Marghera (near Venice) and Hamburg, Anglo-Iranian's refining capacity has soared to about 400,000 bbls. a day--four times 1950's output outside Iran. By May, the company will have made up 60% of the refining capacity lost at Abadan.

Goal Ahead. Still abuilding are two big new refineries which will be finished sometime in 1955. One is at Aden, the other near Fremantle in southwestern Australia. The Aden refinery, which will cost more than $112 million, will process 100,000 bbls. of Kuwait and other Persian Gulf crude a day. It will fuel ships at Aden, serve the whole Red Sea area and supply East and South Africa. The $112 million Kwinana refinery in Australia will supply 40% of Australia's petroleum needs.

Despite its fast expansion, Anglo-Iranian has taken a bad beating. Its net, which had dropped 26% to -L-24.2 million ($67,852,540) in 1951 because of Iranian losses, fell even further last year. But the big payoff is still ahead. It will come when the Aden and Australian refineries "come on stream" in 1955. By then Fraser expects Anglo-Iranian to have made up its entire losses in Iran, and to be ready to cut into new markets.

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