The 'pipeline-ization' of Europe

 

By end of the 1950s, the petroleum industry came to be characterised by an overcapacity to produce. The most significant factor causing overproduction was the high number of global oil discoveries in the 1950s, but it was also a by-product of the coming of age of exploration geophysics. It ultimately caused a shift in many oil companies' commercial priorities from the upstream – exploration - to the midstream – transport - sector.

 

This was especially true of France and Italy, two countries that, by deploying different strategies in the 1950s and early 1960s, had managed to come into possession of considerable amounts of oil for their growing industrial networks. Early-1960s availability of cheap and abundant Soviet oil for Italy, and copious production from African oilfields that France controlled, reduced the immediate need for new exploration, and shifted national oil companies' main interests to the midstream.

 

By 1960 ENI was only extracting oil in Egypt. This country provided almost 2 Mt of crude oil per year out of ENI’s total production of 2.5 Mt. The lack of further oil findings prompted a reassessment of the company’s supplying strategy; immediate availability of oil was prioritised over long-run exploration programmes. This led first to the signing of contracts between ENI and the Soviet public monopoly, SNE, and later to agreements with American majors. By the same time French administrations had started exporting oil from the territories they controlled in Africa, notably in the Guinea Gulf and Algeria, where significant fields had been discovered mostly by the national agency, BRP, following over a decade of massive geological and geophysical campaigns.

 

For both countries, building pipelines became the main objective. For ENI, that amounted to connecting Italian terminals at which Italy received its Egyptian and Soviet oil, to the industrial areas of Central Europe. French companies also aimed at piping their African oil, once shipped across the Mediterranean, from Marseille to Central Europe. However ENI's plan was anathema to both the Anglo-American majors and French oil companies, as it would strip them of the European market. The Anglo-Americans and French therefore decided to counteract ENI's plan by laying their own pipeline, the South European Pipeline (SEPL), to connect France to Germany.

 

By 1960 the Italian company started working on the project for a pipeline from Genoa in northwest Italy to Switzerland, called the Central European Line (CEL). The pipeline was scheduled to be completed by the end of 1961, and supposed to branch to the industrial areas of northern Italy. An extension was also proposed to the south German Land of Bavaria. The pipeline was to be built by an association shared equally between ENI and a German banking consortium. As for SEPL, it was to begin in southern France and end in southwest Germany. Like ENI’s project, an extension was also planned to Bavaria. This second pipeline, however, and especially its Bavarian link, would inevitably deprive the port of Genoa of the traffic ENI’s pipe hoped to utilise.

 

Back to CEL, one considerable difficulty in implementing its project was of a legal and territorial kind. The pool of majors that was planning SEPL only needed the authorisation of France and West Germany for laying out their pipeline. French approval was taken for granted, considering CFP’s interest in the project. As for West German acquiescence, the presence of a number of small oil companies in the consortium seemed to guarantee it. ENI, on the other hand, not only needed the Germans, but also the Swiss and Austrians to approve. Getting authorisations from these countries implied a lengthy process, especially in the case of Switzerland, where federal administrative proceedings further complicated the situation.

 

In 1961, works started on the Genoa-Ingolstadt pipeline. Contrary to the original plan, however, which scheduled the opening of the pipeline by 1963, high costs, frequent conflicts with local and national authorities, and environmental problems postponed CEL’s completion to 1966, with a considerable delay on SEPL. The latter was laid out at a fantastic speed and became operative from 1962-63.

 

In conclusion, all of these initiatives regarding pipelines were a clear indication of the prominent role that the midstream acquired at the turn of the decade in Cold War Europe, with respect to the upstream. Did the majors sponsor SEPL because of the threat ENI’s projects posed to them? They probably did, prompted especially by French needs to convey their Algerian oil to industries in Central Europe. ENI’s projects greatly speeded up the majors’ project and the ‘pipeline-ization’ of Western Europe. Ultimately, in the battle for European pipelines, CFP’s proximity to the majors played a crucial role, enabling the French to count on the majors’ capital and political support to stem the Italian plan.

A final note of caution regards the concept of 'midstream shift': the shift was a temporary one, and only depended on the world's contingent political and economic oil situation. As the rush to the North Sea would prove by the mid-1960s, oil exploration geophysics was anything but dead.

 

 

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