ran 3,000 or 4,000 feet deep, so if the bit twisted at around the halfway stage, then it laid maybe 1,500 or 2,000 feet underground. The drill bit was a large chunk of metal that was impossible to drill through. The drilling shaft was perhaps a couple of hand breadths wide.
Fortunately a solution existed to the problem. You could lower a so-called fishing tool down the shaft to fish for the bit and bring it to the surface. The work was delicate, skilled and chancy. After a couple of weeks’ work, Getty’s men had still not retrieved the bit. The problem was annoying but far from calamitous. ‘Twist-offs’ were a familiar irritation and any experienced drilling crew would have seen and dealt with plenty in their time.
All the same, two weeks wasted were two weeks wasted. Wages had to be paid and the capital costs of the rig and the lease were not yielding any return. Worse still, competing drilling crews on neighbouring leases would get to the oil sooner. Since neighbouring rigs generally tapped the same pool of oil, every barrel extracted by the guys next door meant one less barrel for you. Getty was already a millionaire by this point and hardly needed to fret about problems of this sort, but then again he was a millionaire precisely because he did fret about problems of this sort. On one occasion, he’d owned a lease too small for an oil rig, plus an access route too narrow to take a truck. Most owners would have turned their attention to other things, but not Getty. He commissioned and built a miniature derrick and brought the steelwork to site on a specially built miniature railway. The derrick struck oil and the well made money.
So, faced with this new problem – a jammed drill bit and a halted well – what did he do? You have all the details you need: a drilling shaft 1,500 feet deep and perhaps twelve inches wide; a heavy steel drill bit twisted off and jammed somewhere close to the bottom. You need to find a way to resume drilling as fast and as cheaply as you can.
I won’t give you the answer yet – you’ll have to wait till the end of the chapter for that – but I will tell you this. Getty was not an inventor. He had no more mechanical ingenuity than you do. Certainly there were countless people drilling for oil in the 1920s who had more drilling experience, a better knowledge of rigs and fishing tools, greater mechanical and technical dexterity. Yet back in 1927, it was not those people who solved the problem, it was Paul Getty.
For now, though, we’ll jump forwards in time and across the globe. It’s 1975. Bob Dylan has returned to form with Blood on the Tracks. Pink Floyd Wishing You Were Here. Bruce Springsteen is Born to Run. If your musical tastes are a little more Meryl Streep than that, then you’ll be remembering 1975 as the year of Abba’s ‘I Do, I Do, I Do, I Do, I Do’, the least lyrically inventive song title in the history of lyrically uninventive song titles.
But those artists and their concerns are a long way from here, a collection of rice paddies in Surabaya, East Java, Indonesia. What’s more the young man looking out at those rice paddies is probably not wishing he was here. But that young man – who was there on a $250 cut-price holiday – has a decision to make. His name is Lakshmi Niwas Mittal and he has been asked by his father to sell those paddy fields. His father was originally from Rajasthan and was not, to start with, by any means a wealthy man. Lakshmi himself had grown up with twenty others in a house with rope beds, no electricity and the only water coming from the hand pump in the yard outside. It wouldn’t be quite accurate to say that Mittal’s was a poor family. In India, especially then, poor means poor, and the Mittals were middle class by the standards of their place and time.
In due course, Mittal’s family moved to an unremarkable house in a poorish district of Calcutta. Young Lakshmi went to school then accountancy college. In the meantime, Lakshmi’s father had become partner in a company called the British India Rolling Mill. I’m not sure quite how the company had managed to stagger through a decade or two without noticing that the British had left India in 1947, but presumably its clients loved it anyway. Lakshmi’s uncles were involved in steel trading and, in 1963, the family won an important licence to build a steel rolling mill in southern India. Things, unquestionably, were on the up.
It was as part of this ferment of activity that Mittal’s father had come by those Indonesian paddy fields. His intent was to build a steel mill there, producing for the local market. Further investigation, however, proved that a small mountain of bureaucracy lay in the way. Paperwork, licences, permits, hassle. Mohan Lal Mittal decided this was too much. A hugely experienced, ambitious, and capable entrepreneur, he gave the challenge his careful consideration, and refused it. He asked his son to extract the family from the mess with as little financial damage as possible.
Here, you should for a moment put yourself into the young Mittal’s shoes. You are not a complete novice. You have taken a keen interest in your family’s steel operation and have been working in it now for a number of years. For what it’s worth, when you left St Xavier’s College in Calcutta, you did so with a BCom. and the highest marks ever achieved by a St Xavier’s student in accountancy and commercial mathematics. But you have no money of your own. You do not speak Indonesian. You do not possess influential connections in a country with an authoritarian and corrupt government. You have a young wife and are a very long way away from home. And it’s 1975, let’s remember, when the world seemed a lot larger than it does today, and when India marched with very much less swagger on the global stage.
How would you personally have proceeded if placed in this situation? For you, of course, these questions are purely theoretical, but for the young Mittal in 1975 they were nothing of the sort.
And we already know the answers. Most of us would have sold those paddy fields, probably getting ripped off in the process, then gone home to a comfortable future in Indian steelmaking. We’d have done well, congratulated ourselves for our wisdom and prudence. We’d never even have noticed the size of the opportunity that we had allowed to go by.
Lakshmi Mittal, however, didn’t sell the paddy fields. He decided to build a steel mill on them himself. No money? No problem! Back then the Indian government offered export loans equal to 85 per cent of the cost of the equipment and materials being exported. Mittal put together a deal where Indian export loans, plus some shares in the family company, plus some cash from a local partner, plus some more loans from an Indian bank in Singapore were somehow enough to make the whole thing float. He hadn’t quite separated himself from his family, but by starting out in an entirely different country, he was making the firmest possible statement of his independence.
He used the funds to build a mini-mill, a term which rather understates the scale of the enterprise involved. A modern integrated steel mill handles everything. It takes raw iron ore, melts it down in a blast furnace, extracts the now liquid iron, then starts to adjust the chemistry: removing impurities, controlling the carbon, adding alloying materials as required. Only then can the molten steel be formed into blooms, ingots, slabs and sheet. The scale of enterprise required to manage these things efficiently is colossal. A ‘small’ integrated mill will produce two million tonnes a year. A large one can produce as many as fifteen million.
Only when judged against these gargantuan standards is there anything ‘mini’ about a mini-mill, which are typically around one-tenth the size of their integrated cousins. The heart of the mini-mill’s method is to cut the raw iron ore out of the process altogether. Instead of the whole cumbersome process of melting metal out of rock, the mini-mill relies on the steel industry’s version of the ready-meal: a mixture of scrap metal and direct-reduced iron (a form of the metal which is about 90 per cent pure).
In mid-1970s Indonesia, this technology made perfect sense. Mittal couldn’t afford – and the market couldn’t sustain – a five million tonne monster plant. What’s more, at the time, the Indonesian market was dominated by Japanese companies importing steel from overseas. There was no domestic production at all and when Mittal did his sums, he realized that he could achieve a cost advantage of as much as 50 per cent.
Building the mill took two years. In its first year of operation, the plant made 26,000 tonnes of steel, which brought in revenues of $10 million. The plant made $1 million in profit. But profit and riches is not the same thing. Banks had to be paid. Further capital investment was scheduled. Mittal – by now a father – was paying himself just $250 a month. His car was second-hand and he worked all hours of the clock. But he had his steel