Sir David Steel

BP chairman who triumphed over Tony Benn

Saturday 21 August 2004 00:00 BST

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Louise Thomas

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David Steel was chairman of British Petroleum from 1975 to 1981. During his 30-year career at BP, he witnessed - and was a key figure in - the company's transformation into a world force in the oil industry. During his chairmanship he had to fight for the company's independence from the British government, which for a time owned two-thirds of its shares.

David Edward Charles Steel, solicitor and businessman: born London 29 November 1916; DSO 1940; MC 1945; solicitor, Linklaters and Paines 1948-50; lawyer, Legal Dept, Anglo-Iranian Oil (later British Petroleum Co) 1950-56, president, BP (North America) 1959-61, managing director 1965-75, deputy chairman 1972-75, chairman 1975-81; Kt 1977; a director, Bank of England 1978-85; chairman, Wellcome Trust 1982-89; director, Kleinwort Benson Group 1985-92; married 1956 Ann Price (died 1997; one son, two daughters); died London 9 August 2004.

David Steel was chairman of British Petroleum from 1975 to 1981. During his 30-year career at BP, he witnessed - and was a key figure in - the company's transformation into a world force in the oil industry. During his chairmanship he had to fight for the company's independence from the British government, which for a time owned two-thirds of its shares.

Steel's father, Gerald Steel, had been secretary to successive First Lords of the Admiralty, including Winston Churchill. David Steel was educated at Rugby where he was a notably successful cricketer - and later became chairman of the governors - and at University College, Oxford, where he studied Law. In 1938 he became an articled clerk while continuing his athletic career - he played rugby for Harlequins and was tipped to be a possible international if the Second World War had not intervened.

Before the war, Steel had joined a London Territorial regiment and first showed his qualities of determination and courage as a young tank officer in the Battle for France in May 1940. He did not join the fighting until the end of May trying to prevent the Germans crossing the Somme river - a battle in which his brother was killed. His regiment had to fall back to the Seine where his tank - armed with a mere two-pounder gun - knocked out two more heavily armed German tanks. For this exploit he was awarded an immediate DSO. He went on to serve throughout the North African campaign where his tank was shot up on six occasions, though, miraculously, he was never wounded. He went on to win an MC while fighting with the 8th Armoured Division in Italy, and by the end of the war had been mentioned three times in dispatches

After the war he resumed his legal apprenticeship with the leading City solicitors Linklaters and Paines. In 1950, two years after qualifying, he was employed as one of a handful of lawyers by a company known until 1954 as Anglo-Iranian. He was immediately involved in coping with a major problem. The company was undergoing the biggest crisis in its history as the Iranian prime minister Mohammad Mossadegh had nationalised its Iranian oilfields, by far the company's biggest asset.

Seeing a previously hide-bound company being forced to change speedily and fundamentally proved immensely useful training for Steel's future career and as a way of demonstrating his negotiating talents to his superiors at an unusually early age. As he put it, the crisis did BP "a terrific amount of good, forcing it to become more responsive to change".

Steel was already clearly destined for the top and in 1959 he was put in charge of BP's fledgling interest in North America where his job was to help diversify its sources of oil away from its almost total dependence on the politically turbulent Middle East. During three years in the United States, he managed to establish a partnership with Sinclair Oil which was eventually to lead to BP's strong position in the exploitation of Alaskan oil, although he was naturally exasperated when dealing with the ramifications of American anti-trust law. "Certain provisions," he once exclaimed, "make it impossible for people to talk together."

He continued as chairman of Kuwait Oil for three years and was then put in charge of BP's exploration activities as a time when Alsaka and the North Sea promised to provide BP with its first major sources of crude oil outside the Middle East. In 1969 it was able to claim a major stake in Alaska's Prudhoe Bay field and in late 1970 BP had been one of the first to announce a major oil strike in the North Sea - the Forties Field.

Nevertheless BP had been particularly hard hit by the "oil shock" of October 1973 because it used to sell much of the oil it produced and was forced to renege on some of its contracts. During Steel's tenure of office there was continuing trouble in the world's major oil producers, especially the fall of the Shah of Iran which led to the second oil crisis of 1979. Not surprisingly Steel led BP into new ventures outside oil, in chemicals, coal and minerals.

But Steel's biggest contribution came within Britain itself during the late 1970s, when the Labour government was anxious to get as much control as possible over the increasing supplies of oil from the North Sea. It used as instruments the newly formed British National Oil Company (BNOC) which it felt should be entitled to half the exploration and production licenses in the North Sea. As for the privately owned companies, they should be heavily taxed.

The government obviously thought that it could rely on BP for help. This was not surprising: Churchill had bought a controlling 51 per cent interest in the fledgling company just before the First World War to guarantee supplies of oil for the Royal Navy, and an additional 17 per cent had fallen into government hands in 1974. This stake had been owned by Burmah Oil which had nearly collapsed and had been rescued when the Bank of England bought its shares in BP (at an advantageous price).

Steel was absolutely determined not to co-operate with the BNOC unless and until the government sold the Burmah shares. There was a major principle at stake - BP's independence from its major shareholder. For nearly two years Steel and his colleagues slogged it out against Tony Benn, then the minister responsible for Energy, but in the event BP won, largely thanks to Steel's quiet obstinacy and a legal training and experience that had accustomed him to long drawn-out negotiations. He was also helped by the fact that most of Benn's colleagues disapproved of his policies. In June 1977, 17 per cent of BP was sold to an eager investment community for £546m, a record at the time for any share offering. Steel had stuck out for BP's independence and had clearly won the battle - indeed he was knighted the same year.

He had been appointed a director of the Bank of England in 1978, and after his retirement Steel became a director of Kleinwort Benson. But his biggest success was as chairman of the Wellcome Trust, set up by Sir Henry Wellcome to own the pharmaceutical company he had created. Against much opposition Steel pushed through a change of status to a normal public company. In the event, a takeover ensured that the Wellcome Trust emerged with assets of £15bn, making it one of the richest charitable bodies in the world, and one able to fund as much research as the government's own Medical Research Council.

Nicholas Faith

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