August 20 - 26, 2007 Myanmar's first international weekly © Volume 19, No. 380
 
 
 

The coloured history of the Burmah Oil Company

File Photo of a team of well diggers in 1910. Pic: "A History of the Burmah Oil Company"

Originally known as The Burmah [Myanmar] Oil Company Ltd, Burmah [Myanmar] Castrol PLC is the oldest oil enterprise in the United Kingdom. It is best remembered for having survived in 1975 the most serious crash hitherto in the business history of the United Kingdom and for achieving what was termed by John Davis of Money Observer, November 1988, “one of the greatest corporate comebacks of all time”.

While it once aimed to be a multinational integrated petroleum concern, Burmah [Myanmar] Castrol transformed itself in the late 20th century into a firm focusing exclusively on marketing lubricants and specialty chemicals. Through the Castrol brand, the company is the world’s leading supplier of automobile and motorcycle lubricants, including engine oils, transmission fluids, and brake fluids.

The company has more than 150 subsidiaries operating in about 55 countries. Approximately 10 percent of the company’s revenues are derived within the United Kingdom, 27pc within the remainder of Europe, 31pc within the Americas, 17.5pc within Asia, 12pc within Australasia, and 2.5pc within Africa.
The company derives its name from the centuries-old oil works in Myanmar(Burma) – spelled with an “h” in the Victorian era – which in 1886 became a province of the Indian empire. Founded that year in Glasgow by David Cargill, a Scottish-born merchant with lucrative trading interests in Ceylon, The Burmah [Myanmar] Oil Company Ltd. introduced new technology into the Burmese operations, such as mechanical drilling at the oilfields and continuous distillation in the Yangon refinery.

A file photo of a team clearing out an oil bore in Yenangyaung in 1905. Pic: "A History of the Burmah Oil Company"

The oilfields and refinery were connected by a 275-mile pipeline in 1909. Initially all the oil was sold in Myanmar, apart from some wax for the United Kingdom, but the company was soon shipping products to mainland India, using its own tankers after 1899.

Following its entry into the subcontinent, Burmah [Myanmar] Oil came to the attention of the Committee of Imperial Defence, the United Kingdom’s top strategic policy-making body, which alerted the appropriate government departments to the company’s vital importance as the only oil company of any size in the British Empire.

In 1905 the Admiralty concluded a long-term contract to purchase Myanmar fuel oil, as it was beginning to convert its warships to run on oil. Admiralty officials also sought to interest Burmah [Myanmar] Oil in acquiring a 500,000-square-mile oil concession in Persia, granted in 1901 to William K D’Arcy. Since D’Arcy was short of money, the concessions might well have had to be sold into non-British hands. Burmah [Myanmar] Oil agreed to the purchase, and in 1908 its drillers struck oil in Persia.

The following year it established the Anglo-Persian Oil Company (renamed Anglo-Iranian in 1935 and British Petroleum in 1954), an almost wholly owned subsidiary. Difficulties over refining and transporting the Persian oil proved costly for Burmah [Myanmar] Oil, and in 1912 the chairman, Sir John Cargill, son of the founder David Cargill, refused to finance Anglo-Persian any further.
Winston Churchill had recently been appointed first lord of the Admiralty, and was seeking reliable sources of naval fuel oil to supplement those from Rangoon. In 1914 the UK authorities and Burmah [Myanmar] Oil concluded an agreement which overcame their respective problems. The government acquired from the company a majority share in Anglo-Persian, while in turn the Admiralty obtained long-term fuel oil supplies from Anglo-Persian. During World War I, Burmah [Myanmar] Oil concentrated on keeping India supplied with kerosene.

After 1918 it became more widely known through its newly appointed managing director, Robert I Watson. Energetic and highly respected throughout the oil world, Watson helped to devise the market-sharing international agreements that supported oil prices during the Depression between the wars and rationalised distribution methods throughout much of the world.

In particular, he negotiated the Burmah [Myanmar]-Shell agreement of 1928 that created a common distribution system for the subcontinent of India, and acquired for Burmah [Myanmar] Oil a four percent shareholding in Shell, of which he became a director in 1929.

Burmah [Myanmar] Oil came to the attention of the world in 1942 when Japanese forces overran a poorly defended Myanmar. To prevent its strategically crucial assets from falling into enemy hands, Watson authorised the destruction of the Yangon refinery and all the installations at the oilfields.
The Allies’ reconquest of Myanmar in 1945 permitted the company to start work again on its devastated properties there. The scale of its efforts was modified, however, by the declared intention of the newly independent republic of Burma to work toward taking over all oil assets. After a short-lived joint venture arrangement, Burmah [Myanmar] Oil agreed to an outright sale of its interests in Burma in 1963, obtaining relatively generous compensation since mutual goodwill was maintained to the end.

Its progressive withdrawal from Myanmar, although not from India or Pakistan, effectively turned the company into an oil investment trust. By the mid-1950s less than a third of its income was derived from trading, the rest coming from its 25pc stake in British Petroleum (BP) and its 4pc stake in Shell, both earning buoyant profits from their worldwide activities.

Consequently in 1957 the chairman, William E Eadie, launched a policy of diversification, notably in the western hemisphere. Attempts to secure fair compensation from Whitehall for the Myanmar assets destroyed in 1942, over and above a nominal ex gratia payment, failed, when in 1965 the government of Harold Wilson, by a War Damage Act, blocked the Burmah [Myanmar] Oil claim that had been successfully upheld in UK courts.

Society of Petroleum Engineers International

   
         
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