The slow dismantling the house of oil – The Gulbenkian Foundation divests

18 Mar 2018 james
Calouste Gulbenkian at the height of his powers as an oil titan

Quite unexpected comes remarkable news! Lucy Neal, a long-term part of the Platform family, e-mails out of the blue, forwarding an article from the Algarve Daily News, published on 1st February in southern Portugal. The headline reads:

‘Gulbenkian Foundation gets out of the oil business’

That truly is unexpected. Lucy had not foreseen this coming and most certainly neither had we. It is a potent symbol of the extraordinary shift away from oil that is taking place at least in parts of Europe and North America. It is as significant as the Rockefeller Brothers Foundation being publicly critical of the board of ExxonMobil, the corporate remains of the empire built by John D. Rockefeller.

It takes some explaining. The Gulbenkian Foundation is a private fund that supports the Gulbenkian art museum in Lisbon, Portuguese culture internationally, and science, education and the arts around the world. Its base is in Lisbon, but it has an office in London, and for a long time the Arts Director of the UK branch was the inspiring Sian Ede. Under her guidance a host of powerful arts projects were financed, many of them with a strong ecological or social theme.

Platform received funds from the Gulbenkian in 1983 for our Homeland project, a performance piece, commissioned by LIFT and produced by ArtsAdmin. The work uncovered the reality of the ecological footprint of trade across Europe by tracing the origins of the light bulbs, copper and coal that came together to make light in a London home.

We were aware at the time that the Foundation bore the name of Calouste Gulbenkian, who was a titan of the early oil industry, but we did not choose to look too closely at the current holdings of the fund’s capital. Of course inertia played a part in that failure, but those were days before we had thought about the connections between foundations and the financing of climate change. By the 2000s – at which time we were immersed in the politics of oil – whenever the name of the Gulbenkian Foundation came up in a fundraising conversation, we put it to one side, deciding that it was not a source of funding to which we could apply.

Then in the winter of 2016, Lucy Neal got in touch. She was caught in a conundrum, that she wanted to talk through – what to do about the Gulbenkian Foundation? Lucy had been co-director of LIFT from 1981 to 2006, and had seen the Gulbenkian fund a number of their productions and indeed publish the book The Turning World – Stories from the London International Festival of Theatre’ co-written by Lucy and Rose Fenton.

Now Lucy, and her collaborator Hillary Jennings, had put their hats in the ring to be project managers of the Inquiry into the Civic Role of the Arts, which aimed to assist the Gulbenkian in rethinking their direction. They were excited by the prospect of the enquiry, and the opportunity to bring their own civic engagement practice to the frame – a practice that engages the arts and culture wholeheartedly with global issues such as climate change. However as they researched the organisation and its role, a personal challenge arose: much of the funds of the Foundation came from its’ holding of a 100% stake in Partex, an oil & gas exploration company.

Here was a cultural foundation that wasn’t just the holder of equities in Shell, or BP or ExxonMobil, but actually owned it’s own oil & gas corporation that was busy drilling for oil from Algeria and Angola to Brazil and Kazakhstan, and threatening to do so off the coast of the Portuguese Algarve. There was strong local opposition to the latter exploration, and the Foundation had been challenged over the contradiction between their support for projects to defend ocean ecosystems and the oil company’s extraction plans. Partex was producing, and still produces, around 6.4 million barrels of oil equivalent per year, most of it in Oman.

The oil & gas assets of Partex around the world

Lucy and I met and discussed possible ways forward. It was clear that most of the Foundation trustees were resistant to raising questions over the Partex holding. We crafted a letter to Martin Essayan, one of the Trustees of the Foundation, great grandson of Calouste Gulbenkian, who was based in London. But in the event Lucy and her partner were not selected by the Foundation to undertake the consultancy contract. Once again, inertia and the distractions of the rest of life took over, the letter was not sent and we let the matter drop.

Quite suddenly, a full two years later, comes the article in the Algarve Daily News that   reads:

‘In a seismic shift in policy, the Calouste Gulbenkian Foundation is selling its Partex oil and gas interests and is to invest in sustainable energy,  “in line with the international movement followed by other foundations.”’

What has happened in the intervening months to push the Foundation to undertake this step, which in 2016 looked so unlikely? We don’t know exactly, for the deliberations of the Trustees are private. Perhaps it was the pressure of local opposition to the drilling off the Algarve? Or perhaps it was the impact of an initiative to push foundations to divest from fossil fuel equities? Certainly the climate around climate change is changing.

The pioneer of the divestment campaign has been the indefatigable Ellen Dorsey who, as director of the Wallace Global Fund in Washington, has charmed and cajoled the staff and trustees of other foundations to drop their holdings in oil & gas corporations. She, and those who’ve struggled alongside her, have been remarkably successful. Many foundations have followed Wallace Global Fund’s lead, including the Ashden Trust, the Joseph Rowntree Charitable Trust, and most notably the Rockefeller Brothers Fund. When this latter body decided to divest, some of the trustees spoke out about their great, great grandfather:

“We are quite convinced that if he were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy.”

Now the Gulbenkian Foundation has joined this movement and has announced its intention to sell the entirety of its’ holding in Partex.

The Algarve Daily News writes:

‘The Foundation soon will be able to hold its head high in this much-changed world, no longer tainted by its funding of ecological projects from the proceeds of an industry that spends much of its time destroying land and marine ecosystems.’

Being in the unique position of owning an entire oil & gas company, as opposed to owning shares in one, gives the Foundation a unique opportunity. They could simply shut down the corporation, handing back the oil concessions to states such as Oman, and destroying its capital value. This would, of course, destroyed the major source of the Foundation’s income. Instead they will sell on Partex to the private conglomerate CEFC China Energy and will reinvest the €500 million generated into renewable energy projects and the like. CEFC China Energy will, of course, not cease to exploit the hydrocarbons that they’ve purchased from the Foundation. The carbon from those oil & gas fields will be emitted into the atmosphere.

However, the Gulbenkian’s move is not just about the shifting of capital from China Energy to the Foundation, for it holds a far more symbolic position than that. This can be understood by exploring the origins of the Foundation’s wealth.

Calouste Gulbenkian was an Armenian born in 1869 in Contantinople (now Istanbul) the capital of Ottoman Empire, which then encompassed most of the Middle East. His father, Sarkis, was an oil trader who owned interests in the Baku oil fields in the Tsarist Russian province of Transcaucasia, now Azerbaijan. (We described the history of those oil fields in our book ‘The Oil Road – Journeys from the Caspian Sea to the City of London’) Calouste was sent to study petroleum engineering at Kings College, on The Strand in London.

Calouste Gulbenkian, aged 20, graduating from Kings College, London 1889

At the age of 26, after having conducted a survey for oil in the Province of Mestpotamia for the Ottoman government, he set up his own oil business. He helped establish the Turkish Petroleum Company, which eventually gained the concession to explore for oil across Iraq, then occupied by the British after World War 1. For sixteen years Calouste was locked in a bitter battle with the major oil corporations Standard Oil (the father of today’s ExxonMobil), Royal Dutch Shell, Compagnie Francaise des Petroles (today’s Total) and the Anglo-Persian Oil Company (now BP) who were all determined to oust him from the business scene and acquire his concession. However through extraordinary skill and tenacity, Calouste cut a deal in 1928 and retained a 5% stake the Iraq Petroleum Company, profiting from all the oil fields that were subsequently exploited. Consequently he became know as ‘Mr Five Percent’ and amassed a vast personal wealth.

Calouste had played a key role in the establishment of the French, British and American empires of oil. But he spent the last years of his life in Lisbon, building his art collection and being a philanthropist, particularly towards the Armenian diaspora. Upon his death in 1955, much of this wealth and 6,000 artworks were left to the Gulbenkian Foundation, to which he also bequeathed the company Partex. This latter, which came to own 2% of Abu Dhabi National Oil Company, was registered in the Cayman Islands and remitted all its dividend to its sole shareholder, the Gulbenkian Foundation.

Writing about the decision to sell Partex, the trustee Martin Essayan said:

“We believe that Calouste Gulbenkian would have wanted us to do the best for the Foundation in a rational way, balancing the risks and the rewards …Calouste is often quoted as saying he was not an “oil man” but a “business architect.”

Essayan added that the board had discussed the issue of Partex over many years wanting to:

“avoid an excessive concentration of our investments in a single industry and in one company … and the issue of fossil fuels which also has been worrying me for reasons of sustainability.”

What strikes me about this tale is that it took four decades for Gulbenkian to secure the capital holding that enabled him to become an immensely significant player in Middle Eastern oil. This pattern echoed other companies. Anglo-Persian, for example, struggled to gain the backing of banks and other financiers for its exploration projects in its first decade.

It was a struggle to draw capital into oil. It took skill and extraordinary persistence to acquire the funds that built the house of oil. Now there is a struggle to draw capital out of oil. It is requiring skill and extraordinary persistence to undermine the foundations of the house of oil.

But that battle is being won, slowly but surely the house is crumbling. And the decision by the Gulbenkian Trustees, including Martin Essayan the great grandson, to sell its stake in Partex is another sign of this steady collapse. We salute the Trustees in making this important move!

Thanks to Mika Minio, Lucy Neal & Hillary Jennings


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