THE MAN WHO TAUGHT ME ABOUT THE “OIL PATCH”

In 1975, RJR sent me to New York City far from Tobacco Road. An anticipated short assignment became a 14-month project, working with Aminoil, our oil company at Rockefeller Center. I knew nothing about the oil business and little about New York.

It was my good fortune to work with Aminoil’s manager of business planning, Frank Power. He had worked in the oil industry for 10 years. His background both personal and professional could not have been more different than mine.

I grew up in a farming community. I had traveled little in the U.S. and had never been abroad. Frank, on the other hand, was a New Yorker. He grew up in an apartment in the Bronx. He had a B.S. in engineering from Manhattan College, a Masters from Cornell, and a law degree from NYU. Later, in 1982 he completed the Executive Management Program at Columbia University. He had worked for three years in Japan and had traveled to Aminoil’s production operations in Kuwait.

He had a keen intellect and a great sense of humor. So different were our backgrounds that every conversation was a learning experience. He had an encyclopedic knowledge of the oil industry, its history, and countless other subjects.

We worked long hours on a potential oil acquisition, and some evenings we would have dinner before Frank went home to Connecticut. We ate often at the Chalet Swiss. Frank suggested a great dinner I had never experienced - Veal a la Suisse with cream sauce with sides of creamed spinach and potato pancake. Dessert was chocolate fondue. Another special place was Giambelli 50^th, one of the finest Italian restaurants in the city. I won’t admit how many pounds I gained that summer.

January 1976, management decided that I would stay in New York and Frank would go to RJR in Winston-Salem for 6 months. If this switch went well, Frank would work in the RJR business planning department, and I would go to Aminoil’s Houston field office.

However, because of an unexpected reorganization, that July I had to return to Winston-Salem, and Frank transferred to Houston with Aminoil USA for 7 years.

Frank’s work caught the attention of RJR’s CFO, Joe Abley, to whom Aminoil reported. In 1984, RJR spun off SeaLand, and Abley became its CEO. Frank went to SeaLand as the vice president of corporate planning.

I wish that Frank and I could have had more time together. I learned so much from him, and maybe he picked up a little tobacco culture from me.

Frank passed in 2014, but I recently located his wife and daughter and shared some memories from decades ago. They are understandably proud of him.

Frank entertained me with interesting stories. One was “Mr. Five Percent,” a major player in oil in the 1920s.

MR. FIVE PERCENT

Calouste Gulbenkian, an Armenian, was born in 1869 in what is now Istanbul. He studied petroleum engineering at King’s College London. In his twenties, he was doing oil deals.  He was involved in the 1907 merger that created Royal Dutch/Shell, becoming a major shareholder.

In 1912 he helped create, and controlled, the Turkish Petroleum Company (TPC), a consortium of the largest European oil companies. It got oil exploration and development rights in Iraq, However, World War I delayed TPC’s work in Iraq.

After World War I, with the prospect of oil in Iraq, TPC was officially granted exclusive oil exploration rights in 1925. A large oil discovery encouraged TPC to develop the Iraqi reserves.

TPC partners then signed the Red Line Agreement in 1928, creating an oil monopoly. To reach this agreement, Calouste Gulbenkian reportedly laid a large map on the table and drew, with a thick red pencil, the boundary of lands where the agreement would be in force. This included the former Ottoman Empire with the Arabian Peninsula  and Turkey. His partners did not object because they had anticipated such a boundary. They would become the super-major oil companies of today.

Originally Gulbenkian had been given the entire Iraqi oil concession, but he lacked the resources to develop the oil field, so he grudgingly gave up 95% to his partners, earning the nickname “Mr. 5%.” He reputedly said, "Better a small piece of a big pie, than a big piece of a small one." He never forgave the major oil companies for leaving him “only” 5%. He said, “Oil companies are like cats; you can never tell by the sounds they make whether they’re fighting or making love.” 

He was right. That same year, the CEOs of Standard Oil of NJ, Royal Dutch/Shell, and British Petroleum met at Achnacarry Castle in Scotland along with huge staffs. They claimed they had come to “shoot grouse.”  When asked if they discussed “oil,” they said it had been a hunting vacation and they couldn’t recall that oil ever came up in their conversations.

Years later the three oil giants admitted that they had met to form a cartel to set the price of oil as they pleased. But they began to cheat on their market share quotas, and by 1939 their cartel fell apart.

Gulbenkian had an unconventional lifestyle. He operated as a dealmaker and financier, moving from country to country, always operating in the shadows. Most of his life, he traveled with a series of teenage mistresses. He had his doctor write a letter a letter explaining that this was necessary for his good health. Presumably, he needed this letter to convince Mrs. Gulbenkian about the medical benefits of these travel companions.

In the late 1930s, Mr. 5% had weekly income estimated at $50,000 ($1.1 million - 2024). At his death in 1955, his worth was perhaps $840 million ($10 billion - 2024).