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1960s to the 1980s
The 1960s strengthened Shell’s presence in the Middle East. The Dutch Groningen gas field and North Sea gas were discovered and Shell Chemicals entered a golden period for research. The 1973 oil crisis brought cheap energy to an end and Shell adopted a policy of diversification. In 1976 Shell produced its General Business Principles.
Shell opened the 1960s by strengthening its presence in the Middle East through involvement in Oman. Ignoring early disappointments that saw its initial partners drift away, it was rewarded by discovering oil in Yibal in Oman’s most prolific field. It helped bring an entirely new oil country into production. The Groningen gas field in the Netherlands was also discovered at the start of the decade, closely followed by the discovery of gas in the North Sea.
This was a golden period for research by Shell Chemicals and it employed a number of distinguished scientists including Lord Rothschild and Professor Sir John Cornforth. Among many inventions and discoveries in its laboratories were epoxy resins, insecticides including Vapona fly spray, herbicides and liquid detergents.
Increasing reliance on local skills and talents
During the 1960s, Shell took the decision to internationalise the company. A policy of placing local people in top positions in a given country was adopted and the recruitment of Asians, Africans and South Americans was pursued, giving them as much independence as possible. This diversification of staff reflected the wider political changes of the end of Empire and its attitudes, and this far-sighted decision took Shell into the modern world.
The closure of the Suez Canal for eight years from 1967 confirmed the wisdom of the decision to invest in supertankers. The worldwide spread of its business and its operating flexibility enabled Shell to survive the disruption to supplies caused by the difficulty of transporting oil from the Middle East.
Another major development in shipping was the start of the transport of liquefied natural gas (LNG) by sea. The first commercial scheme by Conch International Methane, in which Shell held a 40 per cent interest, delivered LNG to the UK from Algeria for the first time in 1964. Further projects followed, in particular delivery from Brunei to Japan starting in 1972.
Political situation impacts supplies
The S.S. Methane Princess carried the first consignment of liquefied natural gas (LNG) in October 1964
Although the 1960s were years of remarkable growth for the oil industry and Shell, by the end of the decade, storm clouds were gathering. In late 1969, Colonel Gaddafi took power in Libya after a coup. Libya at that time was the source for a quarter of all the crude oil consumed in Europe but the new government cut production and increased prices. This was the breaching of the dam and every other producing nation threatened to follow suit.
The Yom Kippur war of 1973 brought the crisis to a head. Within a matter of weeks, the OPEC producing countries quadrupled the price of oil from $3 per barrel to $12 per barrel and for two months imposed a supply boycott. The effects on the Western world were economically catastrophic, driving inflation to unforeseen heights and plunging trade into recession. An era of cheap energy had come to an end and oil was no longer a buyer’s market.
To survive, Shell had adopted a policy of diversification – in particular into coal, nuclear power and metals. In 1970, it purchased Billiton, a metals mining company, an old-established Dutch company (later sold).
In 1973, Shell moved into nuclear energy by forming a partnership with Gulf Oil to manufacture gas-cooled reactors and their fuels. The initial cost was $200 million but Shell quickly discovered that the political problems of the oil industry were multiplied in the nuclear industry, particularly after the accident at Three Mile Island in the USA in 1979, which set the industry back by decades. The following year Shell sold its interests.
The third leg of the diversification policy was coal, but success was limited.
The 1970s were chiefly remarkable for Shell’s work in developing the oil fields in the North Sea. This was the most difficult offshore work the Group had ever undertaken. Although the water is not particularly deep, the weather conditions are adverse and the instability of the sea-bed necessitated a huge investment to extract the oil. Reduced supplies from the Middle East, however, and the size of the fields in the North Sea justified the cost.
General Business Principles
The Amoco Cadiz disaster ended the decade. This tanker ran aground the coast of France and broke up, spilling its entire crude oil cargo. Shell did not own the tanker but it did own the oil and it suffered the public backlash against oil companies as a result. The incident proved a catalyst for the industry to raise environmental standards.
In 1976, to ensure ethical business standards across Shell’s global operations, the Group drew up General Business Principles. These, regularly updated, still govern Shell’s conduct in all its countries of operation today.
The Iranian revolution in 1979 triggered the second oil price shock as the supply of oil from this critically important country dried up. The Iran-Iraq war which began later that year added to the supply problems: the price of oil doubled and carried on rising, reaching $7 a barrel. In response the Group sought cost saving, renewed its search for non-OPEC sources of oil and sought further diversification.
In production, the Group stepped up its development of subsea exploration both in the North Sea and the United States. The development of the Cognac platform was a huge technical achievement - at 335 metres (1,100 feet) tall it was a record-breaking height.
The Group’s early steps into renewable energy began with solar heating with the acquisition of a 50% interest in an Australian company Solarhart. It also moved into forestry, producing softwoods for paper, construction and fuel. Out of this came its interest in biomass integrated gasification, and eventually the new biofuels of which Shell is today the world’s leading distributor.