312. Memorandum of Conversation0
SUBJECT
- Shell Views on Various Matters
PARTICIPANTS
- Mr. H. Wilkinson, Managing Director, Shell Petroleum Company, Ltd.
- Mr. J.H. Loudon, President and Managing Director, Royal Dutch Petroleum Company
- Under Secretary Douglas Dillon
Mr. Wilkinson spoke for Shell and said that he and Mr. Loudon wished to mention their general concern with the problem posed by the development of OPEC in the Middle East. Since I was undoubtedly familiar with the problem, Mr. Wilkinson said he would move immediately to what might be done about it. In essence, his view was that it would be useful for the U.S. Government to convey to the appropriate governments concerned the thought that it would not be in their interest to unilaterally force private companies to act against their will. He said it could be pointed out that this would affect the [Page 653] whole climate of private investment. He felt that such an approach could be particularly effective in Venezuela and should also be effective in Iran. He said the Shell Company had today delivered a letter to Venezuela couched in very polite terms indicating that they were reserving all their legal rights. Speaking for Shell, both Mr. Wilkinson and Mr. Loudon said they felt the oil companies must continue to be flexible and find ways to meet legitimate fears of the Arab countries. They thought this could be done if the Arab states did not push on too rapidly with unilateral action.
It was clear that Shell’s greatest concern in this matter at the moment is with Venezuela. They pointed out that the Venezuelan action to force an increase in prices could well lead to the construction of the trans-Canada pipeline and the loss of the Canadian markets for Venezuelan oil.
I asked Mr. Wilkinson and Mr. Loudon their opinion regarding the Soviet oil offensive and observed that I understood that the Shell Company had been in contact with the Soviets. Both Mr. Wilkinson and Mr. Loudon seemed surprised at my observation but made no attempt to deny or hide this fact. They said the Soviets had indirectly approached them in London some six or nine months ago and there had been one meeting between their people and the Soviet oil authorities at a relatively high level. At this time the Soviets had suggested an arrangement whereby Shell would market Soviet oil in Europe and would supply the Soviets in the Far East. Mr. Wilkinson and Mr. Loudon said they had made no reply to this Soviet overture and intended to make none. They did not think this was appropriate business for the Shell company and would not undertake it unless requested by their government, and only then after full consultation with the American oil companies. In short, they did not think anything could come of this.
Regarding the incursions of Soviet oil into Europe, while they felt the recent increase had caused some problems they thought they could live with it. However, they were concerned about a report they had recently received regarding Mr. Mattei’s talks in Moscow. They understood that at these talks, in addition to the arrangement for the importation of 12 million tons of Soviet oil over the next four years, there also had been some informal discussion of the purchase by ENI of an additional 40 million tons of Soviet oil over an indefinite period to be paid for by Italian industrial production. Any such amount would be far beyond Italian needs and would in effect mean that ENI would become the marketing agent for Soviet oil throughout Europe. They did not think that this proposal would be accepted but saw some danger in it because of its appeal to Italian export interests in view of the large amount of Italian industrial exports that would be involved in paying for this oil. They felt that the French would certainly object [Page 654] very strenuously to any such arrangement and could stop it. They also said they understood there was strong objection to this within the Italian Government even in circles which had previously supported Mattei. Mr. Wilkinson then handed me a brief memorandum on this subject which is attached.1
In closing, I asked Mr. Wilkinson and Mr. Loudon when they thought the oil supply and demand picture might be righted. In their estimation this should take place sometime between 1965 and 1970, which is similar to the view currently expressed by the large American oil companies. In this connection, they informed me they had recently found substantial quantities of oil in Nigeria. Nine out of their last ten wildcats in this region had been producers. While the Nigerian oil discovery was not in anything like Middle Eastern quantities they felt that they had upwards of 1 billion barrels of oil, which after usual development efforts should produce 300 or 400 thousand barrels a day.