Montague Mattinson Pennell, 20 March 1916 - 30...

1916 - 30 December 1981Montague Mattinson Pennell, 20 March

Sir Peter Kent, F. R. S.

1982, 413-429, published 1 November281982 Biogr. Mems Fell. R. Soc.

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M O N T A G U E M A T T IN S O N P E N N E L L

20 M arch 1916 — 30 D ecem b er 1981

Elected F .R .S . 1980

By S ir P e t e r K e n t , F .R .S .

M o n t a g u e M a t t i n s o n P e n n e l l spent his career in the oil industry with a single com pany , British Pe tro leum , a com pany to w hich he had the deepest loyalty. He jo ined the A ng lo -Iran ian Oil C o m p an y — as B P then was— as Petro leum E ngineer in 1945; he passed th rough various stages of m anagem en t to the Board of the com pany and was appo in ted D epu ty C ha irm an in 1975, the position from which he retired in 1979.

H e was a private person; m any people enjoyed his dry h u m our, wit and keen m ind , bu t had little knowledge of his extra-professional interests. N o t m any knew that he had a keen appreciation of classical music, with M ozart perhaps his favourite com poser; he was an avid and om nivorous reader of serious literature and had a very extensive knowledge of Shakespeare. He was a keen gardener , and his coun try place was full of animals, including uncom m on breeds of sheep.

H e earned universal respect and adm iration , and from those who knew him well, deep affection. He enjoyed life to the full on the rugger field; with his family; on the drilling rig; playing backgam m on on the floor with I ran ian friends; doing The Times crossword; as a m em b er of the M .C .C . or in a f te r-hours socializing.

At conferences, or on overseas visits, Pennell had the stam ina to con tinue discussions and his social life well into the early hours of the m orn ing , fuelled by Scotch w hich left his faculties completely u n d im m ed, to wake a few hours later to a hearty breakfast followed by an entirely norm al intensive day in the office; this constitu tional ability was envied by m any lesser m en, both in Britain and in the U .S .A .

H e had little tim e for excessive verbiage, and faced with this would retire beh ind a screen of inscrutability before m aking some brief bu t extrem ely trenchan t com m ent.

Pennell was always willing to accept criticism bu t on the o ther hand was never able to ‘suffer fools g lad ly’, and on occasion could be extremely abrasive, particularly in his younger days. Less obviously he was an

413



extremely kind person, who would go to considerable lengths to help jun io rs in trouble.

Public recognition of Pennell’s em inence as a technologist in the petro leum industry and his skills in m anagem ent and international negotiation came with the award of the C .B .E. in 1970, his election to the Fellowship of Engineering in 1978 and to the Fellowship of the Royal Society in 1980, and with the award of an honorary D .Sc. by Liverpool University in 1980.

It is a m atter of great regret that his death at the age of 65 robbed us of a man who had still m uch to give.

A major part of his career is represented by the achievements of his com pany rather than by published records, a fact which has made compilation of this m em oir less than easy. But his friends have been keen to help and the follow ing pages owe a great deal to their willing assistance.

414 Biographical Memoirs

E a r l y h i s t o r y

M. M. Pennell was the son of M ajor Follett M ontague Scott Pennell and Lilian M attinson, who had m et in South Africa. His m other had been m arried previously and b rough t from her first marriage three older sons. M ontague and Follett were the twin progeny of the second union. U nfortunately this marriage broke up when the twins were four years old, leaving M rs Pennell in extremely reduced circumstances, bu t she and the twin boys were supported financially by her second son Vincent. It says a great deal for M rs Pennell’s indom itable character that she retained her resiliance and very strong sense of h u m o u r th rough this difficult period. The father subsequently had another child, Hope Pennell, who was

united with the rest of the family in later years.T h e Pennell family came from Devon. T h ey included in their fore

bears a First Secretary at the Adm iralty , an Admiral, and Sir Charles H enry Pennell who in 1853 in troduced continuous naval service to replace the press-gang system. A cousin, C om m ander H. L. L. Pennell, R .N ., captained Sco tt’s vessel Terra Nova on the South Pole expedition in 1912 and was killed in the Battle of Jutland.

Impelled by the strong personality and en thusiasm of their m other, the twin boys both obtained scholarships to K ing George V G ra m m a r School in Southport , Lancashire, where they were living in the 1920s. K ing George V School was a small bu t excellent g ram m ar school of the kind which produced many ou ts tanding m en in the 1920s and 1930s including in this case two Fellows of this Society. T h e boys were of different types a lthough very strongly attached to one another; Follett was an extrovert and flamboyant; M onty was an intellectual with a scorn of showing off. Both were instrum entalis ts in the School Orchestra. Both also were



Montague MattinsPennell 415

o u ts tan d in g ath letes Follett as a sw im m er approach ing the in te r national level, M o n ty as C ap ta in of the school R ugby X V for two years d u r in g w hich his team held an unbea ten record and included two m en w ho were subsequen tly aw arded E ngland caps. H e was captain of his H ouse and Sen ior Prefect, already recognized as a natural leader.

A fu r th e r scholarship took M o n ty in 1935 to L iverpool University , initially for a B.Sc. in physics and m athem atics , followed in 1938 by an hon o u rs degree in physics u nde r Sir Jam es C hadw ick, F .R .S . Chadw ick w rote that Pennell achieved the honours course in eight m onths , em erg ing w ith ‘a high second class . . . su rpris ing ly good w hen one takes into account tha t he has been playing in the R ugby X V for the whole of his th ree years in the U n iv e rs i ty ’.

In 1938 M o n ty en tered the Research D e p a r tm en t of British Insulated Cables, b u t this career was cut short in S ep tem b er 1939 by the outbreak of war. Folle tt en te red the R .A .F . and was killed early in the war, a blow from w hich M o n ty never com pletely recovered. M on ty had been c o m m issioned as a Second L ieu tenan t in the Royal Signals, T err i to r ia l A rm y, w hich was incorpora ted in the 4 th L ine of C om m un ica tion Signals. In Ju ly 1940 he was despatched from G reenock to the M idd le East by convoy rou ted via C apetow n.

T h e 9-week voyage was far from uneventful for M onty , for in C apetow n he m et his fu tu re wife Helen (an in teresting parallel to the m eeting of his parents) and when in M adagascan waters had an attack of acute appendic itis w hich was inoperable un d e r convoy conditions. (T h e troub le subsided after four days bu t a year later recurred and the appendix was rem oved in Greece.)

P en n e ll ’s unit was broken up in Palestine and he was assigned to signals opera tions in connection with R .A .F . airfields and installations, gaining rapid p rom otion to C apta in , then M ajor, in charge of the In d ep en d en t Airfield S u p p o r t Com pany . He was later based in Cairo and saw service in the W este rn D esert, and subsequen tly in C yprus, G reece, M alta and Italy.

He re tu rned to the U .K . in 1945 and there m arried the girl he had m et in Cape T o w n , Helen, daugh te r of the Very Reverend C anon B. W illiams, fo rm er D ean of G raham stow n , South Africa and Dean and Provost of P o r tsm ou th . 'They had three ch ild ren— Im ogen (b. 1946) a medical sociologist and jo in t a u tho r of a book The political economy of ;Folle tt (b. 1952) em ployed with the British S tandards Insti tu tion and a m usician; and M iranda (b. 1963).

On dem obilization Pennell had p lanned to join the Colonial Civil Service but, discouraged by long delays there he applied for an overseas post with the A ng lo -Iran ian Oil C om pany and was appointed. T h e long awaited invitation to jo in the Civil Service arrived the following day. (I t was an odd quirk of fate that when he visited Mafia Island in Tanzan ia as B P ’s local m anager he found the British C om m issioner there had




applied to A .I .O .C . for a post b u t being unsuccessful had gone into the Colonial Civil Service instead.)

T h e A .I .O .C . appo in tm ent provided Pennell w ith his career and gave him his opportun ity to make a m ajor con tr ibu tion to one of the w o r ld ’s great industries.

Initially he was posted to the C o m p a n y ’s research laboratories at S unbury , there to have his first taste of pe tro leum engineering. Shortly afterwards he was despatched to Iran. His contacts with S u nbu ry continued th rough his career, and in 1982 a m ajor new laboratory/services block was nam ed the Pennell Building in his m em ory.

I r a n : p r e - n a t i o n a l i z a t i o n

T h e Iranian oilfields had been discovered and developed by the Anglo- Persian, later A nglo-Iran ian Oil C om pany, whose concessional holding continued to the time of nationalization in 1951. Pennell was posted to Iran in 1946 as a pe tro leum engineer and located in the M asjid-i- Sulaim an technical centre. T h e Petro leum Engineering D epa r tm en t in Iran developed under the direction of D. C. Com ins was responsible for m onitoring the control and allocation of the production from existing fields and their individual wells, and for predicting their fu ture potential and for exploiting their available oil reserves in the m ost efficient way. C om ins’s approach to these p roblem s had a considerable influence on Pennell’s th inking and developm ent. T h e main function of the D e p a r t m ent was the collection and analysis of the necessary data, including pressures, tem pera tures , flow rates, and fluid levels, and the physical properties of reservoir fluids and of the reservoir rock. T h is work com prised laboratory investigation of rock cores recovered for the purpose under pressure with the reservoir fluids intact, the runn ing of pressure bom bs in producing wells together with the physics of high pressure gas separators and pipelines. At that time the original M asjid-i- Sulaim an (M -i-S ) field was in a state of decline, having been on p roduction since the early years of the century , and the rem aining main p roduction was from the Haft Kel oilfield with its newly defined northw estw ard extension at Naft Safid.

After only two years in Iran, Pennell’s abilities were recognized by his p rom otion over m any of his seniors as Field Super in tenden t of the N aft Safid oilfield an actively developing area at that time. T h e re he won his first spurs as a manager, although the prom otion was a d isappo in tm ent to his technical associates who felt the loss of an outstandingly able reservoir scientist. He was very m uch at hom e in this a tm osphere of the small com pany settlement, greatly enjoying the social life after hours and establishing a reputation as a brilliant rugby player, becom ing captain of the Fields Areas team.

In 1950 his final m onths in the post at Naft Safid were enlivened by a



Montague Mattinson Pennell 417

m ajor gas b low -ou t o f a dril ling well, N af t Safid 20. Escaping gas caught fire and reduced the derrick to a mass o f c ru m p led steel across the wellhead, which was inconveniently s itua ted in a narrow valley whose bare sides reflected the heat like a baffle furnace. T h e fire fighter M yron K inley was flown in from the U .S .A . and by progressively dragging away the incandescent rem ains of the derrick, b low ing off the ru ined well head to ex tinguish the fire, and fitting a new wellhead valve over the high p itched scream ing gas jet, succeeded in shu tt ing dow n the flow.

T h e greatest pa rt of the cred it of course goes to Kinley, w ho carried out the h ighly hazardous and ex trem ely uncom fortab le operations at the b lazing well head, often single handed and always d renched in con tinuous w ater jets to m ake his position tenable. But control of the wild well owed m u ch also to the efficiency of the Fields staff in which Pennell part ic ipated , w ho organised the overall logistic su p p o rt of the operation inc lud ing the construc tion of a 22 mile (35 km) long 6 inch (15 cm) w ater line from the nearest river across very b roken coun try in little m ore than two weeks.

(T h e occasion is com m em ora ted in a docum en tary film Rig 20 taken by a news reel p h o tog raphe r w ho was fo rtu itously in the area— a film to see if at all possible.)

By the sp ring of 1951 however, the A ng lo -Iran ian Oil C om pany faced disaster. A strong deve lopm en t of nationalism headed by the eccentric D r M ossadek led to im m edia te expropria t ion of the oilfields and their assets, developed by the com pany over m any years. Fo r tuna te ly the wild well had by then been b ro u g h t unde r control. T h e takeover was a pro trac ted affair taking some m o n ths before the staff finally left. In the m eantim e, a lthough p roduction was shu t down, the pe tro leum engineering staff con tinued to do w hat work was possible and took advantage of the un ique o p p o r tu n i ty to observe the recovery in p ressures and fluid levels in M -i-S and Haft Kel, and the physical effects on the reservoir of the b low out in N aft Safid, work in which Pennell assisted. T h e nationalization process was fortunate ly a peaceful and locally courteous operation , b u t it left the C om pany with a considerable p rob lem of excess m anpow er. M any people were inevitably red u n d an t and a special d ep a r tm en t was set up in L ondon to help with their resettlem ent, although the core of the technical staffs was retained.

As a m atte r of policy the C om pany had m inim ized its exploration activities in o ther regions the U n ited K ingdom was almost the only exception— to avoid the accusation of d iverting effort that should have been spent in the Iranian concession, and in consequence was suddenly left w ith its highly qualified field personnel bu t alm ost bereft of sources of crude oil. It was decided after the C om pany had left Iran, that its experience in the oilfields should be recorded for the benefit of whoever m igh t take over their fu ture operation. W . J. Baker, a m eticu lous worker w ith an ou ts tand ing detailed knowledge of the history and characteristics



of the fields, was given the job of writing up the petro leum engineering side. He decided that the best way to do this would be to produce a com pendium which would make reference to individual reports and files as far as possible unnecessary. T h is required ten volumes, the first two being of a general na ture and the rem aining eight devoted to individual fields, including for the first time field and well perform ance data as well as studies of fluid properties. He had to find a helper in this form idable task and finally enlisted Pennell. T h e two worked intensively bu t even so the com pendium took two years to complete.* Pennell was an exceptionally quick worker and was also very accurate; he had clear th ree- dimensional concepts of the relations betw een pressures, gas, oil and water d istr ibu tion in complex limestone reservoirs and also an exceptional appreciation of the fourth d im ension the tim e factor and the history of changes in fluid d istr ibu tion and p roduction . T h e concepts in the com pendium crystallized the experience of the early pe tro leum engineers into basic unders tand ing of the recovery m echanism s in fractured limestone fields - a m atte r of great enonom ic importance. T h is work rounded off Pennell’s previous experience as a pe tro leum engineer and proved very useful in his later career. T h e com pend ium rem ained directly valuable for reference until the u ltim ate w ithdrawal of expatriates from Iran in 1979, and some of the concepts are still being applied in the N o r th Sea and o ther regions.


U n i t e d K i n g d o m e x p l o r a t i o n

Pennell’s direct involvement in U n ited K ingdom land exploration followed the enforced w ithdrawal from Iran.

Com m ercial oilfields had been found in two areas in Britain a few m onths before the war started in 1939— at Eakring in N ottingham shire , and near Fo rm by in Lancashire. A lthough the ou tpu t was small by world standards the production had been a valuable indigenous alternative to the hazardous wartim e im portation of pe tro leum by sea. In 1952 on completion of the Iranian compilation Pennell was drafted to Eakring as Site Petroleum Engineer, and set up the first core analysis laboratory there organized on m odern standards, m easuring the physical param eters of the sandstone reservoir rock and its fluid contents. His routine of laboratory m easurem ents alternated with field exercises in testing fluid flow from reservoir beds in exploration wells, and working on the oil production problem s of the four oilfields established up to that time.

M ost of the drilling activity was then near Eakring, bu t where necessary petroleum engineers and geologists also operated away from base in mobile laboratories. Pennell served at F o rm by w here deep holes were being drilled into the C arboniferous rocks in an a ttem pt to locate the

Baker, W. J. & Pennell, M. M. 1953. Petroleum engineering compendium of the Iranian oilfields.




p rim ary source of oil in the shallow oilfield (a K eu p e r reservoir there p roduced for 20 years from only 80-150 feet (24-45 m) below surface). T h e deep oil source was not found— th ir ty years afterw ards it is still elusive— and the chief recollection of a fellow pe tro leum engineer is a ra the r b ibu lous occasion w hen Pennell and he took over the runn ing of a local pub on the n igh t of a G eneral Election.

D u r in g this period P enne ll’s career could have come to an untim ely end in the Isle of W igh t in 1952. T h e well site there (A rreton) included a s tandard m obile labora tory tra iler accom m odating the geologist and the pe tro leum engineer w ith the ir equ ipm en t, linked to water supply and electric mains. It was a converted a rm y unit, the wooden floor p ro tec ted w ith steel strips. Pennell was the first to en te r after it had been installed and connected to the services, to find tha t a b lunder ing electrician had transposed 240 volt term inals and earth so tha t the floor was at a m ost uncom fortab ly high potential relative to the laboratory water taps. His reactions were unders tandab ly quick and he vaulted onto a bench, to shou t for help and, in due course, to m ake suitably poin ted com m ents to the engineers concerned.

T h e A rre ton well— like o thers a round that t im e— failed to encoun ter hydrocarbons , for a lthough excellent reservoir beds were found at dep th the h istory of deve lopm en t of the s tru c tu re — only recently unders tood had p rec luded accum ulation of oil at the tim e when m igration was taking place. N evertheless P enne ll’s tem porary involvem ent with British exploration was useful background w hen he later had to deal with partnersh ip negotiations.

'The spell of du ty in the U n ited K ingdom was followed by short postings to exploration operations in Sicily and East Africa— the form er as a pe tro leum engineer, the latter as local m anager. T h e Sicily well was an exploration success in that it encoun tered a large oil body at depth , b u t was an econom ic failure in that the oil was too heavy to flow into the borehole at economic rates. T h is experience prejudiced Pennell against potential prospects with com parable expectations of heavy oil discovery, and in later years he tu rn e d dow n opportun ities for BP involvem ent in offshore Spain and offshore M alta. Such oil accum ulations will eventually be exploited, bu t a generation later there is still little need to consider p roduction from such difficult fields, large-scale though some of them are.

D u t y i n N e w Y o r k

In 1957 Pennell was assigned to B P ’s N ew York office which served as a base for liaison with A m erican com panies over the whole spectrum of oil industry activities. P enne ll’s responsibilities were on the technical side and he took full oppo rtun ity of developing contacts th roughou t the U .S .A ., in fact covering the field ex tending from T r in id a d to Canada. He becam e familiar with Am erican activities in relation to such problem s as




engineering construction, exploration, enhanced oil recovery, refinery, in tra-com pany relations and world oil politics.

He m ade m any friends; m any of his acquaintances he was able to renew in later years in cooperative ventures in Iran and elsewhere.

L i b y a n a f f a i r s

In 1959-60 Pennell had a spell as M anager of B P ’s Libya operation. In the early 1950s clearance of the debris of war had m ade m ovem ent and exploration reasonably safe in the W estern D esert and international oil companies took out licences over the greater part of Libya. Success was very patchy. In 1960 BP acquired a half interest in Concession 65 deep in the L ibyan desert from Bunker H un t , an independen t oil m an from Texas. BP was to operate the Concession and the agreem ent betw een the parties provided for the developm ent of any oilfields discovered, with BP financing the operation until oil was produced . T h e Sarir field was discovered in the early sixties and large scale production was established under difficult conditions of terrain, involving a 320 mile (510 km) pipeline across the sand desert to the coast, and construction of a tanker loading terminal at T ob ru k .

Late in 1971 however Iran forcibly seized certain small G u lf islands which had been under British protection. T h e Libyan G overnm en t blam ed the British G overnm en t for failing to hold the islands on behalf of the G u lf States and as a reprisal expropria ted B P ’s half share of Concession 65. Subsequently in 1973 H u n t ’s interest in the Concession was also expropriated. T hese events which had the effect of pu tting an end to, first, BP operations in Libya, and, subsequently , H u n t ’s, led to litigation between BP and H un t . T h e dispute between H u n t and BP was only finally settled (in B P ’s favour) ten years later after a series of lengthy and extremely expensive court cases.

D uring these troubled times, from 1966 onwards, Pennell was able to exercise a great deal of influence in calming feelings on both sides because of his obvious integrity and his clear grasp of the technical p roblem s that were in dispute. As in o ther operations, he was able by his personal characteristics to m aintain a tolerable working relationship while at the same time abandoning none of B P ’s vital interests. T h u s Pennell and Bunker H u n t were able to meet and discuss rationally their ou tstanding problem s and it is a pity that these discussions did not lead to an amicable settlem ent of the dispute. It was largely due to Pennell’s influence that, no tw ithstanding problem s in Libya, H u n t did not close his m ind to, and on occasion, actively sought, cooperation with B.P. in o ther areas.

I r a n : t h e l a t e r p e r i o d

F rom 1951 to 1955 following nationalization, the Iranian oilfields produced at a minimal rate. T h e British staff had been expelled, and




a lthough the small n u m b e r of qualified Iran ians were capable of c o n t in u ing p roduction legal inh ib itions p reven ted export. T h e impasse was resolved in 1954 by the es tab lishm en t of a C o n so r tium of O pera ting C om panies ,* w hich was to finance and operate the fields on behalf of the I ran ian G o v e rn m e n t and resum e the process of exploration with a defined ‘A greem en t A rea ’ (broadly speaking, the main p roducing belt along the Zagros M o u n ta in s foothills and G u lf coastal plain).

W ith his background of Iran ian pe tro leum engineering , p roduction and adm instra tion , Pennell was in 1955 m ade a m em b e r of the first C o n so r tiu m com m ittee to visit the oilfield area after four years and to p lan the res t itu tion of the fields, the resum ption of p roduction and the renewal of developm ent. He re tu rn ed again to Iran for the second time as resident —in 1960, first as Assistant Fields M anager M asjid-i- Su la im an and subsequen tly as D ep u ty M anag ing D irec tor. T h is was a period of discovery of very large new fields and the ir developm ent. G eneral Fields M anagem en t involved a whole series of operational m atte rs including planning , construc tion and ru n n in g of pipelines, p u m p in g stations, roads and oilfield cam ps, and P enne ll’s previous experience at M -i -S and N aft Safid with his alm ost un ique knowledge of fields p roduction p rob lem s were invaluable. H e was, in consequence, m oved to T e h ra n as D e p u ty M anag ing D irec to r of the opera ting com pan ies— a move w hich exposed h im additionally to a different phase of operations, includ ing dealing w ith the National Iran ian Oil C om pany and G o v e rn m e n t officials at the h ighest level. M ajor decisions included all aspects of oilfield deve lopm en t and offtake, the policy and p rogram m e for m ajor pipelines, and the a rrangem en ts for sh ipp ing greatly increased volum es of oil to E urope and the U .S .A . N o t only were the C onsortium activities subject to scru tiny by the National Oil C om pany (since the S tate was now the ti tu la r ow ner of bo th fields and equ ipm en t) b u t the opera to rs were also open to m on ito ring and criticism from the head offices of C onso rtium com panies who often had differing views on policy.

D u r in g this period crude oil p roduction was increased from 1.2 to 3.5 million barrels per day; a new tw in 42 inch (106 cm) d iam eter pipeline w as laid across coun try to the coast and thence offshore to a newr term inal on K harg Island. At K harg loading facilities were construc ted (against some opposition) for the first 100 000 ton tankers, w ith 2 million barrel storage tanks on the island. T h e old refinery at A badan was largely m odern ized and thence forw ard p rovided for m ost of I ra n ’s internal needs. In this situation Pennell earned the confidence not only of senior Iran ians bu t also of the A m erican partners in the C onsortium ; both apprecia ted his clear th inking on the job as well as his relaxed approach after hours.

* The Consortium consisted of BP (40%), Shell (14%), C.P.F. (6%), Gulf (7%), Esso (7%), Mobil (7%), Texaco (7%) and Socal (7%) plus a unit comprised of a group of minor U.S. Companies known as Iricon (5%).



D uring this period also Pennell detected a large-scale corrup tion racket in connection with allocation of foreign contracts; in consequence several m em bers of senior staff and the contractor concerned were disposed of. It is known that Pennell and his G eneral M anaging D irec tor were for a time held on a gang-land ‘hit list’ as a result.

(It is an interesting fact that from about 1964 to 1972 at least one, som etim es two, ‘billion ba rre l’ oilfields were found every year, bu t that after 1972 despite increasingly intensive and sophisticated exploration m ethods no more ‘m o n s te r ’ discoveries were made. Deep drilling located very large gas reserves, bu t the scope for fu rthe r large scale expansion in oil reserves had ended. Pennell had been involved in the m ost active phase of developm ent in the region.)

Pennell’s posting to Iran was ended by his p rom otion to be M anaging D irector of BP Exploration C om pany in L ondon in 1967. Over the next five years he was therefore also concerned with new developm ents in Alaska, Libya and the N orth Sea, bu t he m aintained a close interest in Iran as a BP m em ber of the L ondon-based board of the C onsortium . At that time Iran was still the major source of oil for BP, providing the C om pany with over \ j million barrels a day in 1971. W ith an en titlem ent of 40% of south Iranian oil (com pared with 7% shares for the Am erican m em bers, most of whose major interests were in Saudi Arabia) BP depended very directly on political stability in Iran and a sound relationship with the authorities there. P ennell’s long service in Iran , his acquaintance with its language and custom s and his reciprocated ability to get on with Iranians were a m ajor asset to BP and the C onsortium .

D uring the late 1960s the oil p roducing countries of the Persian G u lf area were pressing for higher prices th rough the agency of O .P .E .C . (Organisation of Petro leum E xporting Countries). In 1971 and 1972 higher prices and escalation formulas were agreed betw een the govern m ents and the oil companies. Following this, in 1972 the Am erican companies holding the m ajor concession in Saudi Arabia (A R A M C O ) signed a General A greem ent w ith the governm ent which provided for the progressive transfer of financial and operational control to the State by m eans of a phased buy-ou t over several years of the com panies’ investment. Fu tu re investm ent was to be m ade by the Arabian governm ent. T h e companies would continue to be responsible for the construction, m aintenance and operation of installations and were assured of the right to export oil, except for certain quantities reserved for direct sales by the governm ent.

Iran naturally insisted on equal trea tm ent, bu t the achievement of this objective was m ade complicated by the fact that State ow nership had already been imposed in 1951 and accepted in 1954 under the agreem ent which provided for the oil companies in the C onsortium to explore for, produce, refine, and transport oil for export on behalf of Iran and to purchase oil from N .I .O .C . (the National Iranian Oil Com pany).




423

Pennell, now a M anag ing D irec to r of BP, was chosen by the C o n so r t iu m to lead in the renegotia tion of the 1954 agreem ent w ith the aim of realising the same financial effect for I ran as the General A greem en t in Saudi Arabia. T h o u g h sim ple in concept the negotia tions tu rn e d out to be com plex and pro longed . Pennell spent four m o n ths in T e h ra n , from M arch till Ju ly 1973, head ing a team of up to 40 lawyers, accoun tan ts and tax experts. His task was form idable.

T h e Shah, then at the peak of his au tho rity in Iran and of his prestige abroad , was de te rm ined not to accept a worse deal than had been conc luded elsewhere and if possible to exact a be tte r one. T h e officials of the I ran ian governm en t and N .I .O .C . were by now knowledgeable in oil m atte rs and the techn iques of negotia tion with oil com panies, backed by 60 yea rs ’ experience as a p roducing coun try . T h e A m erican m em bers of the C o n so r t iu m were unders tandab ly anxious to p ro tec t the position in the ir m ajor area of p roduction by not conceding be tte r te rm s to Iran. O n the o ther hand , BP and the o ther E uropean com panies needed to m ain ta in supply from Iran , m ore especially in the next few years while sources outside the M idd le East were being developed. T h e negotiations w ere concluded in Ju ly 1973 with the signature of the 20-year Sale and P urchase A greem ent.

P e n n e ll ’s con tr ibu tions were his relaxed bu t firm leadership of a team of m ultip le skills from several oil com panies and consultancies, patience and fairness w ith bo th sides, long personal acquain tance with the leading Iran ians and, as the only technical m anager in the C onsortium team, his ow n detailed inside knowledge of the Iranian oil industry .

T h e 1973 negotia tions were the final po in t in P enne ll’s professional association w ith Iran b u t he kept up his personal friendships w ith Iranian oilm en. In the years w hich followed, the 1973 A greem ent was under con tinuous p ressure as Iran sought to m aximise its advantage as prices increased and national financial needs, particularly for defence expend itu re , rose steeply, b u t it survived w ithou t significant change until the revolution of 1978-79.

Montague M a t t i n P e n n e l l

A l a s k a

A m ajor e lem ent in P enne ll’s responsibilities in the L ondon D irec to r ate related to the developm ent of and p roduction from the P rudhoe field in Alaska, the largest oilfield in the U .S .A . in the discovery of which BP had played a large part.

In the late 1950s, BP had tu rned its a tten tion to the possibility of developing p roduction in the U .S .A ., as the biggest single o il-consum ing area in the world. Particu lar a tten tion was paid to sed im entary basins where there was scope for new exploration and of these the Alaskan basins received early consideration. U n i ted States oil exploration activity was there concentra ted in the south a round the open water of the Pacific coast,




while the major basin underly ing the Arctic Slope (north of the Arctic Circle and beyond the barriers of the Yukon River and the Brooks M ounta in Range) had not received atten tion from larger com panies for a n u m b er of years. Licences were therefore taken out by BP in the Arctic basin, initially to cover a foothills region of large whale-back anticlines developed on the Persian scale. In these only traces of hydrocarbons were found.

B P ’s attention then m oved to the less strongly d is tu rbed m ore northerly part of the Arctic Slope basin, in which there was already surface evidence of oil and gas. T w o very large s tructures were found by seismic survey. T h e first (Colville River) was drilled bu t proved ba rren and B P ’s earlier A m erican associate (Sinclair Oil) w ithdrew . BP however successfully bid alone for licences on the o ther s truc tu re and drilling there proved the very large P rudhoe Bay oil and gas field. A com petitor (Atlantic Richfield) had secured rights over the central area which subsequently proved to be mainly gas-bearing, and BP found itself holding the greater part of the s truc tura l periphery which covered the largest single oil accum ulation in N o r th America.

Exploration and discovery had presented major difficulties in an extremely inhospitable Arctic terrain, bu t greater p roblem s still lay ahead, in developing the field and conveying the very large scale p roduction to m arket. T h e P rudhoe field had been found in an area where perm afrost (perm anently frozen ground) extended to a dep th in excess of a thousand feet with all that that implied in term s of potential g round instability for bo th build ings and p roducing wells. T h e re was no road across Alaska no r th of the Yukon River and access for bulk materials to P rudhoe depended on sh ipping in the very brief annual interval when the Arctic Ocean ice gave way, with final m ovem ent across coun try from the Arctic coast. W heeled vehicles could only travel across the tund ra in w inter since the area became a vast bog in the sum m er. A port had to be built on the Arctic Ocean; the rig sites and roadways had to be constructed on artificial gravel pads two m etres thick to prevent surface subsidence. Elaborate a rrangem ents had to be m ade to safeguard the local fauna (particularly the caribou) and— not least— there was the enorm ous problem of transporting nearly \ \ million barrels ( .2 0 0 000 tons) of oilper day to the southern tidewater across tundra , a major m oun ta in range, hundreds of miles of swam p and one of the w orld ’s largest rivers.

It was fortunate that at this point, in 1967, Pennell became M anaging D irec tor of BP Exploration C om pany in L o ndon with a broad responsibility which included the Alaskan operation. BP did not face these problem s alone; it was necessary to unitize the field, to have a single airfield, port and headquarters for the whole P rudhoe complex, and the pipeline when built, would be a com m on carrier.

It would have been easy to have sold a m ajor interest in P rudhoe to an oil-hungry U .S . company, and bowed out of the direct responsibility for




developm en t, b u t BP decided to stay w ith it and take a lead in the opera tions . P en n e ll ’s leadership , energy and pe tro leum engineering background were invaluable in dealing w ith the very severe technical p rob lem s involved in Arctic deve lopm ent. In add it ion he was able to cope w ith the detailed and p ro trac ted negotia tions for unitization of the oilfield w ith the sharing com panies, and to deal w ith a w ider g roup concerned w ith financing and bu ild ing the 800 miles (1300 km) long 48 inch (120 cm) d iam eter pipeline to the Pacific coast at Valdez.

It is a m a t te r of record tha t there was na tion-w ide opposition in U .S .A . to the bu ild ing of the p ipeline th rough ‘the last great w ilderness’, a route w hich necessarily crossed m ajor fault lines liable to give rise to the hazard of severe earthquakes. T h e delays and redesigns cost tens of m illions of dollars b u t unders tandab ly U n i ted States opinion had to be convinced of the feasibility, safety and env ironm enta l acceptability of the pipeline project. T h e financial d ilem m a, successfully overcom e, was to avoid by over rapid field deve lopm en t a heavy capital c o m m itm en t with a long delayed re tu rn . W ith o u t de trac ting from the great con tr ibu tions m ade by m any o ther people and d ep a r tm en ts in Exxon, A tlantic Richfield and BP, an im por tan t pa rt of the cred it for w hat is now the b r igh test jewel in the crow n of BP and its A m erican affiliate, Sohio, m u s t go to Pennell. It was appropria te that in 1970 the Q ueen honou red him with the C .B .E. for his work in Alaska and o ther areas.

In the later stages of the P rudhoe oilfield deve lopm ent BP negotia ted a m erger with the m ed ium -sized U .S . com pany Sohio. Pennell was not involved in the negotia tions for BP b u t his position in relation to the field deve lopm ent soon b ro u g h t h im into close contact with the Sohio Board which he jo ined in 1970. Sohio was p redom inan tly an oil refining and m arke ting o rganization— com plem en tary to BP— and it was a m ark of P enne ll’s long rappo rt w ith U .S . o ilm en that he achieved the respect, trust , and friendship of such a contras ting group. He always regretted the law yers’ tendency to draft the final agreem ent as betw een antagonists. W hen he retired from BP in 1979 the U .S . directors insisted that he should rem ain on their board . T o the end he rem ained eager to a ttend their m eetings despite his increasing illness.

D i r e c t o r s h i p s i n L o n d o n 1967-79

Pennell re tu rned to BP L o n d o n in 1967, initially to the post of M anag ing D irector, Exploration and P roduction Division, subsequen tly (in 1972) to the m ain Board. T h is pu t h im in the position of m aking the m ajor decisions on the C o m p a n y ’s w orld-w ide operations in the crude oil sphere, in the engineering and research fields. His activities with relation to Alaska, L ibya and Iran have been detailed above, bu t BP was exploring and p roducing also in o ther countries each with special p rob lem s and differing political backgrounds.



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A m ong the range of activities, the N or th Sea came within his jurisdiction, initially at a time when en thusiasm had declined because of controlled low prices for gas in the southern area, and results of a sequence of dry holes in the north . In terest finally began to recover with an oil discovery by an Am erican C om pany in N orw egian waters (Ekofisk, the forty-fifth test well in the no r the rn N or th Sea) bu t B P ’s next trials in the north were dry. One of P enne ll’s earliest decisions was to endorse a technical recom m endation to drill the Forties prospect— a critical decision when hope was not very high. T h e test was successful in finding a field with a long oil colum n, and BP was fortunate in being able to undertake the large scale capital expenditure required to develop the field before the main period of currency inflation. T h e cost of developm ent— £400 million of risk capital— was one of the largest fund-ra is ing exercises ever m ounted in London , and was only possible because of B P ’s great technical reputation. Forties was the first m ajor oil discovery in the British N orth Sea; Pennell was p roud of the fact that it supplied m ore than half B rita in’s crude oil requ irem ent and has con tr ibu ted over £2000 million per annum to the national balance of payments.

T h e Forties oilfield in the N o r th Sea and P rudhoe in Alaska went a long way to restoring the damage done to B P ’s interests by the progressive nationalization of M iddle East oil p roduction , and Pennell had been m uch involved with developing both of them .

In 1976 Pennell was appointed D eputy C hairm an to D. E. C. (later Sir David) Steel, a post he retained until his retirem ent. Steel was in origin a lawyer; Pennell a physicist, and as the Press remarked, it was an unlikely pair to head the British Petro leum Com pany. It was a very happy relationship for both of them , and an encouraging period also for the Com pany staff for they shared a s trong interest in the welfare of their employees and in m inim izing the distance between the B oardroom and the office desk.

At board level, one of Pennell’s a ttr ibu tes was the ability to unders tand the fundam entals of technical submissions and to restate them for his colleagues in language which the non-technical could readily unders tand . His prowess was, however, not limited to technicalities for he could on occasion produce an analysis of the financing or the perform ance of a project or field of activity outside his own and criticize it with devastating accuracy to the acute d iscom fort of its p roponents .

Pennell was the BP representative on the board of S tandard Oil (Sohio) L td , and as com m ented above he was asked to stay on the Sohio board after his retirem ent from BP. Similarly he was parent com pany representative on the board of BP Canada, and there also he was requested to stay on after retirem ent -although it had never been custom ary for BP personnel to continue as directors of subsidiary companies under these c ircumstances a spontaneous gesture u n p ro m p ted bu t fully supported by BP London in both cases.

Biographical Memoirs



Montague Mattinson Pennell 427

F ro m the tim e of his first visit to Calgary in the 1950s Pennell had always enjoyed visiting there , b r ing ing h im self up to date with the explora tion activity in C anada generally, and in particu lar, m eeting the m any C anad ian friends which he m ade over the years. At any cocktail pa rty in Calgary following BP Canada Board m eetings there would be a concen tra tion of people g rouped round Pennell discussing with h im the deve lopm en ts in the oil w orld from an explora tion poin t of view, and in pa rt icu la r w hat was going on in Canada.

T h e N o r th A m erican d irec to rsh ips involved crossing the A tlantic some twelve tim es a year. Pennell norm ally travelled with fellow d irec tor R. W . A dam who com m en ted that he was able to enjoy conversation with h im divorced from m atte rs dealing w ith BP, or a lternatively to be able to sit in silence w ithou t feeling the need to m ake conversation. As he said ‘T h e re was always an op p o r tu n ity to have games of cribbage either on a ’p lane or w hile waiting. After a n u m b e r of years it becam e clear that there was a m uch h igher e lem ent of skill in the game than one antic ipated . If you lost five tim es out of six you began to realize that it was not ju s t chance b u t the fact that M o n ty devoted his full tim e a tten tion to any subject w hich in terested h im — and the subjects which in terested were leg ion .’

’These visits becam e increasingly onerous in the later stages as his leukaemia developed, and they would have becom e impractical w ithou t the kindly physical su p p o rt and help prov ided by Robin Adam .

An area of concern in w hich there were m ajor p rob lem s after 1975 lay in British governm en t relationships- particularly in policy relevant to deve lopm en t of the newly discovered indigenous oil resources. Initially there were suggestions that BP should be the governm en t oil com pany, b u t this would have involved d ivestm ent of overseas assets— particularly the riches of the Alaskan field. After this there was pressure for BP to lead in a degree of governm en t collaboration which was quite foreign to the established procedures in the industry— particularly since m anoeuvres of U .S . com panies were (and still are) closely constra ined by an ti- tru s t legislation. Pennell, with his C hairm an , was involved in d iscussions on these m atte rs at the h ighest governm en t level and subsequen tly in negotiations with the newly form ed British National Oil C om pany in which was autom atically vested an interest in newly granted licences and all oil discoveries. BP found B .N .O .C . extrem ely difficult to deal with, bu t it m igh t be com m ented that they (B .N .O .C .) were being conditioned by some foreign com panies whose prim e objective was to f rustra te the effect of the new political developm ents.

O th e r m ajor changes were however in train for the in ternational oil industry . It becam e clear in the late seventies that if oil offtake continued to escalate at any th ing like its historic rate very serious crude oil shortages would develop in the m iddle 1980s and that alternative fuels m ust increase greatly in im portance. ’This led BP— in com m on with m ost of




the o ther major com panies— to invest heavily in coal production , and subsequently to diversify into the minerals industry: both were developm ents in which P ennell’s analytical judgem en t was needed.

In 1978 illness struck. Pennell developed leukaemia and became subject to progressive deterioration and weakness. A fter a spell in hospital he re tu rned to BP for a fu rthe r year after norm al re tirem ent age, and finally retired at C hristm as 1979. He survived for two m ore years, fully active when at all possible.

T h e W e l d i n g I n s t i t u t e

As Pennell h imself stressed, the petro leum industry depends in m any of its aspects on welded construction -for pipelines, for high pressure vessels in oilfields and refineries, for all kinds of conventional s tructural engineering and for the far-from -conventional p roblem s involved in the construction of offshore drilling platforms. T h is link led to his direct involvement with welding aspects of engineering.

His interest first arose following the 1965 ‘Sea G e m ’ disaster when a m ulti-legged drilling platform in the N o r th Sea overtu rned du ring jacking-dow n operations with the loss of 25 men. T h e resulting enquiry was particularly concerned with the m etallurgy and fabrication of the welded structure . As a BP D irec tor, Pennell had responsibilities for offshore operations and for the BP Engineering D e p a r tm en t concerned with the design, construction, structural m onito ring and m aintenance of platforms in the N o r th Sea and o ther places— all of them of welded construction.

T h e large scale d im ensions of the m em bers— steel tubes scores of m etres long with d iam eters m easuring up to ten m etres— involve a high degree of sophistication in fabrication and stress relief to resolve constructional problem s which progressively increase with the size of the platforms. Operational conditions of seas and tem pera tures are extreme: fatigue is a constant concern as it may be ten or twenty times as severe in a rig as in a vessel.

Pennell’s concern with these and o ther problem s led to his jo in ing the Institu te of W elding, of which he was Council M em b er for 1972—76, Council Chairm an for 1976—79 and its President for 1979-81. T h is was a critical period for the Insti tu te involving retirem ent of senior staff and the need to appoint new m em bers of the Institu te, a time when firm guidance was particularly appreciated. He relinquished the Presidency only a short time before his death.

In his final speech to the Institu te as President in N ovem ber 1980, he spoke of his concern about the fu ture of British industry in term s which say a good deal about his a ttitudes to jun io r staff and his general philosophy. It is appropriate to quote from it in conclusion of thism em oir.




. I w orry abou t the innate conservatism of m any of the decision m akers in this coun try . I th ink tha t this part icu la r audience can only agree that if this coun try is no t p repared to em brace new technology, even though it m ay add to the short te rm un em p lo y m en t p roblem s, we will ensure increasing un em p lo y m en t in the long term . I th ink tha t one of the dangerous illusions of the m idd le-aged and even of the old is tha t they still possess the vigour and the inventiveness of young m en , somehow’ enhanced by the ir experience.'. . . A m ajor pa rt of the h u m an record has been w ritten by young m en scarcely o lder than the millions now in universities in this co u n try and elsewhere. W h e n these m illions leave the ir universities they will find tha t experience, age and seniority are the m ajor and often the only qualifications for advancem en t in w hatever career they choose to follow'.

. . It m ust be of benefit to society if some way can be found of ensu ring that the best of ou r young are given the o p po r tun ity to make use of their powers before those powers lapse .’

It was an appropria te co m m en t from a m an who was a leading figure in an industry which depends on innovation and, m ore particularly , on innovation s tem m ing very frequen tly from its younger technical staff.

O t h e r a c t i v i t i e s

In add it ion to his D irec to rsh ip for BP, Pennell was a m em b e r of the A dvisory Council for Research and D eve lopm en t in Fuel and Pow er from 1972 to 1978, and of the Advisory Council for Applied Research and D eve lopm en t (A .C .A .R .D .) from 1976.

O n his re t irem en t from BP in 1979 he rem ained on the Board of S tandard Oil (Ohio) Inc. and of BP Canada, and accepted non-executive D irec to rsh ips of C adbu ry Schw eppes L td and Brown Brothers C orpora tion .

In the com pila tion of this m em oir generous help has been prov ided by M o n ty P enne ll’s w ife, Helen, and by a n u m b e r of his friends and form er colleagues who gave willing assistance to ensure that the record was as com plete as practicable. T h e y include am ong others, R. W. A dam , W . J. Baker, Roger Bexon, Eric B retherton , Eric Cox, D enis Hessling, G. F. Skelton, M iss Sheila S tarforth , Sir David Steel, G. G. Stockwell, John W arder , and the W eld ing Institu te . For their help I am m ost grateful.

T h e p ho tog raph accom panying this m em oir is by Studio Cole, 1264 H igh Road, W hets tone , N.20.



Montague Mattinson Pennell, 20 March 1916 - 30...

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