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In 1833, shopkeeper Marcus Samuel decided to expand his London business. He sold antiques, but now added oriental shells. He aimed to capitalise on a fashion for using them in interior design. His instinct was right - such was the demand that Samuel quickly began importing shells from the Far East, laying the foundations for his import/export business.
The market for oil remained confined to lighting and lubricants until, in 1886, the internal combustion engine and demand for gasoline arrived with Karl Benz and the first Mercedes. By now the Samuel business had passed to Marcus Samuel junior and his brother Sam. They exported British machinery, textiles and tools to newly industrialising Japan and the Far East and on return imported rice, silk, china and copperware to the Middle East and Europe. In London, they traded in commodities such as sugar, flour and wheat worldwide.
It was during a trip to Japan that Marcus became interested in the oil exporting business based in Baku, Azerbaijan, which was part of Russia at that time. The Rothschilds had invested heavily in the 1880s in rail and tunnels to overcome the transport difficulties of getting oil from this landlocked base to the Black Sea and from there to overseas markets. Shipping still posed a problem as the oil was carried in barrels, which could leak and took up much space in the ship’s hold.
Revolutionising oil transportation
Painting of the first bulk tanker, the 'Murex'
Marcus and Sam commissioned a fleet of steamers to carry oil in bulk, using for the first time the Suez Canal. They also set up bulk oil storage at ports in the Far East and contracted with Bnito, a Russian group of producers controlled by the Rothschilds, for the long-term supply of kerosene.
Their strategy was high-risk: if news of their operations got out they would be squeezed out by Rockefeller’s dominant Standard Oil. With the maiden voyage of the first bulk tanker, the “Murex”, through the Suez Canal in 1892 the Samuels had achieved a revolution in oil transportation. Bulk transport substantially cut the cost of oil by enormously increasing the volume that could be carried. The Samuel brothers initially called their company The Tank Syndicate but in 1897 renamed it the Shell Transport and Trading Company.
Petroleum was also being produced in the East Indies, a Dutch colony, and in 1890 a company had been formed to develop an oilfield in Sumatra. This was the origins of what was to become the Royal Dutch Petroleum Company.
Under the management of J.B. August Kessler, they built a pipeline and refinery at Pankalan Brandan. Kessler was joined in 1896 by a dynamic young marketing director, Henry Deterding, who was to become a dominant figure in the company until the outbreak of the Second World War. Faced with the competition from the Samuels’ low bulk transport costs, Royal Dutch began the construction of tankers and bulk storage installations and set up its own sales organisation.
Seeking new oil sources
By the turn of the century, Marcus Samuel had become the model of an Edwardian plutocrat with a grand house in London and a country mansion, which had been bought lock, stock and barrel with furniture, pictures and parkland from Lord Romney. He kept horses and carriage and was active in public life in the City of London. He was knighted in 1898, became Lord Mayor of London and was a leading figure in the London business community. But Marcus Samuel’s dependence on Russian producers left him vulnerable and he decided to seek other sources of oil.
The Far East was the obvious place to look – and his first venture into Borneo brought him up against Royal Dutch Petroleum, one of the region’s biggest competitors. The two companies joined forces to protect themselves against the might of Standard Oil, forming a sales organisation in 1903, the Asiatic Petroleum Company. The discovery of oil in Texas offset a series of troubles which had affected both companies.
In 1904, the scallop shell or pecten replaced Shell Transport’s first marketing logo, a mussel shell. In various forms it has remained in use ever since, becoming one of the best known corporate symbols in the world.
Merger into the Royal Dutch Shell Group
The full merger of the two companies into the Royal Dutch Shell Group came in 1907. There were two separate holding companies with Royal Dutch taking 60% of earnings and Shell Transport taking 40%. The business was run by a variety of operating companies. The merger transformed the fortunes of both companies. Under the management of Henry Deterding they turned from struggling entities to successful enterprises within twelve months.
The Group rapidly expanded across the world. Marketing companies were formed throughout Europe and in many parts of Asia. Exploration and production began in Russia, Romania, Venezuela, Mexico and the United States.
The first twelve years also provided many exciting opportunities to demonstrate the quality of the products in the new, fast-developing market for gasoline. These included record-breaking races, flights and journeys of exploration. In 1907, Prince Borghese won the Peking to Paris motor rally on Shell motor spirit. The same fuel was used at the Brooklands racing track in the UK. In the Antarctic, Shackleton and Captain Scott used Shell fuel, while Bleriot’s inaugural cross-Channel flight was made on Shell spirit.