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| Pic: Daily Telegraph |
There won't be many readers who have heard of James Allcock (died at the age of 90, obit here, which you should maybe read first). De mortuis nil nisi bonum, obviously; and I'll immediately say, he was a very nice guy who commanded tremendous loyalty, which (generally) speaks well for a man. But he was also, how shall we say, a tough customer. Being, as he was, the head buyer for the old British Gas when it was a monopoly. I shall explain. At length.
BG took on the form we most associate with it when North Sea gas hove into view in the late '60s. The late (and not very lamented) Dennis Rooke was given responsibility for converting the nation rapidly from town gas to natural gas, in which he succeeded, using methods that left a lasting and very equivocal legacy - a story for another day. It seems from the above-referenced obit, Allcock (I never knew this) had a hand in it, too.
However, it was in his prime as BG's head buyer of gas from upstream producers that I first met him. Did I say 'buyer'? BG enjoyed, not only a statutory monopoly, but also a monopsony, which it enforced zealously. So if your company had discovered gas in the North Sea (and later, off the west coast, too), you had nowhere to go but to headmaster Allcock's study. The only question was, how painful the experience was going to be. He had only two forces providing a weak form of discipline on his rapacity: (a) some customers (particularly industrials)[1] still had the ability to use alternative fuels, mostly oil of one grade or another; and (b) the Norwegians, at least, had alternative outlets for their gas. Otherwise, he could generally have his wicked way with you; and he & his opposite numbers in equally monopsonistic European utilities used to swap notes gleefully on how roughly they'd rogered their victims.
That said, he was a perfect gentleman, and built a department consisting of three teams of negotiators to carry out his purchasing policy. You need to know that these negotiations were for astonishing amounts of gas, since Allcock insisted on buying the entire quantity of gas in a given field, which might be producing the stuff for as many as 50 years[2]. So the amounts of money on the table were correspondingly stupendous; the sellers were very big companies themselves (basically, the '7 sisters' plus the Norwegians, and various hangers-on); and the negotiations were interminable. Two years for the sale of a single large field's gas was par for the course.
Each of his teams was led by another perfect gentleman[3] and some extremely courteous juniors, whose conduct was extremely stylised in the oriental fashion. There were three juniors to a team, and each had their allotted role. #2 would occasionally get to speak out loud in the meetings; #3 might get to whisper something to #2; and #4 was silent, taking notes. There would also always be one or more of BG's exceptionally proprietorial external lawyers, who did all the drafting. Indeed, all the meetings were held at the offices of BG's lawyers, the then firm of Denton Hall Burgin & Warren. This was to the advantage of all the participating negotiators, since lunch came in the form of a Fortnum's hamper, and the fridge was well stocked too.
Thus, it was possible to be thoroughly rogered by Allcock and his teams, and enjoy the whole process greatly. One or two of the junior might have been redbrick, but inevitably the main players on all sides (whichever oil company was selling) were Oxbridge: even the US and Norwegian sellers made sure to field the "right people" for this arcane negotiation ritual. Literary references (which would sometimes find their way into the drafting) and Latin jokes were prized currency.
This splendid abuse of BG's statutory powers lasted from the late '60s to the early 90's. Allcock had to weather a couple of storms before eventually competition started developing for real, as I'll describe in part 2. I'll also give some examples of the outrageous abuse of its monopoly BG perpetrated when this regime still had the power to do so.
And, to cut to the chase for part 1, Allcock - in his urbane manner - fought the onset of competition all the way. When, in the early 90's, it was almost over for his way of doing business, I had a drink with him one day and asked him: why this stubborn rearguard defence, when the end-point was clear? I drew the analogy with Germany's losses on the Eastern front: if they'd called it quits after Kursk, say, and fallen back in good order to the German border, Berlin may never have fallen to Russia[4]. As it was, they lost countless men for arguably a much worse result. Likewise, BG was (at the time I posed the question) mulishly refusing to concede market share, and using its enduring natural monopoly on the pipeline system to make life as difficult as possible for its new competitors, once they arrived on the scene, knowing that there was every intention on the part of government to make sure the new entrants succeeded. If BG had fallen back on its de facto monopoly of the residential gas market - devilishly difficult for competitors to make inroads into, and not nearly as profitable as the infinitely more accessible industrial & commercial sectors - it could have held that till kingdom come.
He smiled, poured us another drink, and said: "Every day's delay is another monopoly pound in our pockets."
More to follow. In the meantime: RIP, James, you old rogue.
ND
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[1] For a sustained period until the late 1980s it was illegal in the UK, and in most of Europe and the USA, too, to use natural gas for power generation . Bizarre, but true.
[2] The largest North Sea gas field, Leman, started production in 1969 and is still producing to this day
[3] In the early years, at least - things changed towards the end, but, no names, no packdrill
[4] A counterfactual for the historians, obviously. But it served my illustrative purpose.
