Origins and early difficulties Pearson's entry into oil grew out of his work on the
Tehuantepec National Railway. In 1899 John Body, Pearson's senior representative in Mexico, found signs of oil while searching for stone for the harbour works at
Coatzacoalcos, the railway's Atlantic terminal, and was shown a local
chapopote, or natural oil spring. Pearson later recalled Body's report when, in April 1901, he was delayed at
Laredo, Texas, where the town was "wild with the oil craze" after the
Spindletop discovery in January that year. The immediate attraction was practical: oil could provide fuel for locomotives and construction plant on the Tehuantepec line, replacing timber that was expensive to cut and had caused complaints from landowners when sparks from trains damaged crops. Pearson quickly saw wider commercial possibilities, writing from Texas in 1901 that he was "strongly of the opinion a splendid business may be done". Pearson's move into oil differed from his earlier Mexican public works. The Gran Canal and Tehuantepec projects had been commissioned and financed as part of the Mexican government's infrastructure programme; oil required Pearson to commit his own capital and bear the main commercial risk. He sought legislation and concessions from the
Díaz government, whose ministers wanted foreign capital and technical expertise but had little firm evidence of the scale of Mexico's oil reserves. Garner argues that the early oil concessions appeared especially generous only with hindsight: before the major discoveries, the Porfirian authorities assumed that infrastructure investment by foreign entrepreneurs would bring greater national benefit than the profits those investors might later extract. Pearson commissioned geological surveys and brought in
Anthony Francis Lucas, who had drilled the Spindletop well, to examine his holdings on the Isthmus of Tehuantepec. The surveys produced mixed results but were encouraging enough for Pearson to press his representatives to lobby for the necessary legislation. From 1905 he invested ahead of production in refining and transport, including Mexico's first refinery at
Minatitlán, completed in 1906. The strategy exposed Pearson to heavy losses before he found sufficient crude. By 1909 he had spent large sums on exploration, refining and distribution without securing enough domestic production to supply a profitable operation. Pearson later reflected: "I entered lightly into the enterprise, not realising its many problems... Now I know that it would have been wise to surround myself with proved oil men." His frustration peaked after the Dos Bocas strike of July 1908, when a well in the San Diego field ignited and burned for fifty-seven days, consuming more than one million tons of crude before salt water killed the well. Despite the disaster, Dos Bocas confirmed the presence of large deposits and encouraged Pearson to formalise the business. On 31 August 1908 he created the
Compañía Mexicana de Petróleo "El Águila" to handle domestic sales and distribution, while the parent company retained exploration, production, refining and export interests. Pearson described the wider ambition as an enterprise to handle oil "from the well to the lamp", linking production, refining, transport and sales under his control.
Mexican Eagle Petroleum Company In 1909
El Águila absorbed S. Pearson & Son's oil properties and operating assets, consolidating lands, wells, refining and transport under a dedicated oil company. Pearson strengthened exploration by hiring the young American geologist
Everette Lee DeGolyer in 1909 to lead geological work for Mexican Eagle. Drilling moved to an area between
Veracruz and
Tampico, and the Potrero del Llano No. 4 well was completed in December 1910. It became one of the era's most publicised gushers, described by the DeGolyer Library as having run wild for three months while "flowing over 100,000 bbls. of oil a day into the air". Over its life the Potrero del Llano No. 4 well yielded more than 100 million barrels of oil. The discovery transformed the business just as the
Mexican Revolution began. Garner describes the timing as paradoxical: the oil strike encouraged Pearson to remain in Mexico despite political upheaval and economic disruption, while many other foreign businessmen left the country. Production expanded rapidly. According to Garner, El Águila's output rose from 210,000 barrels in 1910 to 3.8 million barrels in 1911, while Mexican national production increased from 3.6 million barrels to 12.5 million barrels in the same period. By 1914 the Pearson group held concessions over roughly 1.5 million acres, operated about 175 miles of pipeline, maintained storage for 7 million barrels and, with a new plant at
Tampico, ran two major refineries. The Revolution damaged domestic distribution but did not prevent the oil business from expanding. Rail disruption, official requisitioning of oil carriages and insecurity reduced Mexican sales: El Águila reported in January 1915 that domestic sales of oil products had fallen by between 48 and 75 per cent between December 1913 and December 1914. Exports, however, expanded sharply. Potrero del Llano continued to produce large volumes of crude, and wartime demand increased prices; Garner writes that El Águila "prospered in spectacular fashion" during this period despite revolutionary disruption. Pearson's ability to profit from the export boom rested partly on the integrated structure built before the Revolution: concessions, wells, pipelines, storage, refineries, export marketing and tankers were brought under related Pearson-controlled companies. He founded the Anglo-Mexican Petroleum Company in 1912 to market oil outside Mexico. The company later used the name
Eagle Oil and Shipping Company.
Management and operations in Mexico Pearson's own view of management was directive. One of his maxims was: "No business can be a permanent success unless its head be an autocrat—of course, the more disguised by the silken glove the better." Operating in revolutionary Mexico, however, also required political bargaining as well as engineering and logistics. Pearson's earlier Mexican businesses had relied on access to the
Díaz administration and on networks formed through public works contracts, but after 1910 managers had to deal with successive revolutionary authorities and military factions. Brown describes oil-company managers as "veritable diplomats" who worked to keep pipelines moving and refineries guarded, sometimes with assistance from the
Royal Navy. Labour relations periodically broke down, including around
Tampico in 1915–1916, when Pearson's companies faced strikes; demands reported at the time included a 25 per cent pay increase and protection from dismissal, and four strike leaders were subsequently jailed. For administrative and professional staff in the capital, the firm used the Edificios Condesa in
La Condesa,
Mexico City, a 216-apartment complex built in 1911 and later associated with foreign employees of El Águila. The Revolution ultimately weakened the political foundations of Pearson's Mexican empire. Garner argues that the fall of the Díaz regime and the subsequent years of revolution, counter-revolution and civil war severely tested Pearson's political adaptability and contributed to his decision to seek a way out of direct control of his Mexican interests.
Sale to Royal Dutch Shell Wartime controls under the
Defence of the Realm Acts blocked any transfer of Pearson's oil interests in 1917; talks resumed after the
Armistice. In October 1918
Calouste Gulbenkian proposed that the
Shell group should acquire a stake large enough to secure managerial control, while leaving Pearson with a residual holding "of small moment", which would "leave Lord Cowdray with a perfect peace of mind". A contract signed in March 1919 gave
Royal Dutch-Shell 35 per cent of the ordinary capital of
Mexican Eagle Petroleum Company and 50 per cent of Anglo-Mexican Petroleum Company for £7.7 million, together with the right to nominate sufficient directors to control both boards for twenty-one years. The transaction therefore transferred managerial control without an outright sale of all Pearson-held Mexican Eagle shares. An option to buy a further 125,000 Mexican Eagle shares was exercised in January 1920, after which Royal Dutch-Shell and
S. Pearson & Son each held about 600,000 shares. Pearson's private correspondence recorded regret at the sale. Writing to
Sir John Cadman on 27 March 1919, he expressed "great regret" at having "to dispose of the bulk of my interest in
El Águila", arguing that official policy had prevented an all-British solution. In explaining why the government refused to buy into an all-British solution, Cadman told Pearson that the proposal had been considered "very carefully and sympathetically", but that it would have been "most undesirable to invest a large sum of Government money in Mexico, primarily on account of the political conditions in that country but also because of the exception which would have been taken to such a step by the
United States". Contemporary American reporting described the transaction as a "$75,000,000 oil deal", while later scholarship distinguishes that headline valuation from Pearson's initial cash receipt and subsequent proceeds.
El Águila remained prominent until 18 March 1938, when President
Lázaro Cárdenas nationalised foreign oil assets to form
Pemex. ==War work and the Air Board (1916–1917)==