The Offshore Imperative: Shell Oil's Search for Petroleum in Postwar America

The Offshore Imperative: Shell Oil's Search for Petroleum in Postwar America

The Offshore Imperative: Shell Oil's Search for Petroleum in Postwar America

The Offshore Imperative: Shell Oil's Search for Petroleum in Postwar America

Synopsis

After World War II, the discovery and production of onshore oil in the United States faced decline. As a result, offshore prospects in the Gulf of Mexico took on new strategic value. Shell Oil Company pioneered many of the early moves offshore and continues to lead the way into "deepwater."

Tyler Priest's study is the first time the modern history of Shell Oil has been told in any detail. Drawing on interviews with Shell retirees and many other sources, Priest relates how the imagination, talent, and hard work of personnel at all levels shaped the evolution of the company. The narrative also covers important aspects of Shell Oil's corporate evolution, but the company's pioneering steps into the deepwater fields of the Gulf of Mexico are its signature achievement. Priest's study demonstrates that engineers did not suddenly create methods for finding and producing oil and gas from astounding water depths. Rather, they built on a half-century of accumulated knowledge and improvements to technical systems.

Shell Oil's story is unique, but it also illuminates the modern history of the petroleum industry. As Priest demonstrates, this company's experiences offer a starting point for examining the understudied topics of strategic decision-making, scientific research, management of technology, and corporate organization and culture within modern oil companies, as well as how these activities applied to offshore development.

Excerpt

In 1956, Shell Oil geologist M. King Hubbert made a startling prediction. In a presentation before a regional meeting of the American Petroleum Institute in San Antonio, Hubbert estimated that U.S. oil production would peak in 1970. Plotting historical production statistics and his calculations of future production on a bell curve, based on ultimate discoveries of two hundred billion barrels of oil, he warned that oil output in the United States would drop at the same rate it had risen. Henceforth, companies would drill for dwindling supplies that were harder to find. Critics ridiculed and dismissed “Hubbert’s peak” at the time, citing the erroneous warnings of oil shortages by earlier forecasters. But when it became clear U.S. oil production had indeed peaked in 1970, Hubbert became a prophet. “This time the wolf is here,” wrote State Department oil expert James Akins in acknowledgment of this fact.

The confirmation of Hubbert’s prediction, however, was soon overshadowed by the continuing transition of the U.S. oil market from a domestic to an international one. Industry commentators shifted their attention from the United States to the Organization of Petroleum Exporting Countries (OPEC) and the Middle East, especially Saudi Arabia, which seized control of world oil production and prices through an OPEC embargo in 1973. Similarly, historical studies of petroleum in the United States during the post-1945 period have largely been subsumed by a predominant focus on the Middle East. M. King Hubbert’s famous 1956 prediction and his 1969 forecast that world oil production (based on a total endowment of 2.1 trillion barrels) would peak in 2000 have received renewed attention in recent years as economists and geologists have debated the timing of the impending peak in world production and speculated about the extent of Middle Eastern reserves. But little effort has been made to assess the implications of Hubbert’s accurate 1956 prediction for the historical evolution of the U.S. oil industry in the late twentieth century. This evolution revolved around the efforts of U.S. oil firms to stave off . . .

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