Texas gets Oxy and is looking for more
Rick Perry is coming back to town.
The Texas governor will be in Los Angeles next week to try to persuade local corporations to relocate to the Lone Star State. This is his third swing through the Southland since last year, and Texas this time around comes armed with a $300,000 advertising blitz.
He returns with a big victory under his belt: Occidental Petroleum Corp.
The Los Angeles oil giant, whose roots in the region go back nearly a century, announced last month it is relocating to Houston. Perry said Oxy joins some 60 other companies that have expanded or relocated to Texas since July 2012.
“Oxy’s a big deal,” Perry said in an interview. “It is pretty exciting when you think about what that says. I think it’s important to have these conversations about why … companies are relocating.”
As a warmup to his trip, ads will start airing Thursday on TV and radio touting Texas’ business-friendly ways and slamming California as an impediment to companies.
Los Angeles has to worry about more than just Texas. There is now a competition for what city will be home to Oxy’s operations that are still based here after a planned split of the company.
The Houston part of Oxy will include its operations in the Middle East and Colombia, as well as the chemical subsidiary OxyChem. The California assets will be spun off into a separate publicly traded company with about 8,000 employees and contractors in the state. The split is expected to be completed by early 2015.
Long Beach appears to be the biggest challenger to L.A. in trying to win the jobs and tax revenue that come with playing host to a big energy player.
Like L.A., Long Beach’s history with the oil company stretches back decades. Oxy drills around the Port of Long Beach and also controls four man-made islands off its coast to tap into Wilmington Field, one of the largest oil fields in the United States.
Long Beach Councilman Gary DeLong said officials are “looking at every avenue to bring Oxy’s headquarters” to the city.
“We are far more nimble than L.A.,” he said. “We can turn on a dime when necessary. If they need a building permit, that is something we can get very quickly.”
Meanwhile, Los Angeles Mayor Eric Garcetti has reached out to Occidental directors in hopes of keeping the new company in Los Angeles, a spokesman said.
No matter which city wins, California will be losing yet another Fortune 500 company.
By heading to Houston, Occidental is joining a stream of oil companies that have ramped up their presence in Houston, the U.S. oil and gas capital.
Chevron Corp., the San Ramon, Calif., energy giant, announced plans last year to build an office tower in Houston and transfer hundreds of employees from California to Texas. (Chevron later put its building plans on hold to focus resources elsewhere.) Exxon Mobil Corp. is building a vast campus north of Houston, and Phillips 66 is also pouring billions into projects in the area.
Many industry watchers say they were surprised that Occidental, which has large operations in the Permian Basin in Texas and New Mexico, did not move sooner.
“I have always scratched my head — Why would Oxy be comfortable in Los Angeles?” said John Hofmeister, the former president of Shell Oil Co. and now head of the advocacy group Citizens for Affordable Energy. “There is nobody else there.
“When all is said and done, the oil industry, believe it or not, is a people business. Where are the people and workers? The people are in Houston.”
Oxy’s move will position the company to hire workers with experience in the industry and talented graduates from the state’s universities. The company has sought to win goodwill among Houstonians by sponsoring salutes to the military at Astros home games.
But the move signals a huge shift for the long-running Los Angeles company, which had an outsized role in the global oil markets under the helm of Armand Hammer.
Hammer bought the nearly bankrupt company in the 1950s after settling in Los Angeles with the goal of retiring. The lifelong entrepreneur was already a mogul before he bought Occidental, making millions in a wide range of industries such as art and whiskey.
Under his guidance, the company won rich oil concessions in Libya and eventually grew into one of the world’s biggest players in the energy industry. He also founded the Hammer Museum, which showcased his extensive art collection.
“He ran Oxy like a little fiefdom,” one former Oxy executive said. “All the early generations of oil and gas companies had cowboys for chairman.”
Decades later, Oxy is just one oil company among many in the U.S. to focus on growing domestic production. The industry has been boosted by technologies such as hydraulic fracturing that have unlocked previously inaccessible reserves deep underground.
Oxy’s move is “a very dramatic symbol of the kind of major changes that are happening in the oil industry in the United States,” said Daniel Yergin, journalist and author of “The Quest: Energy, Security and the Remaking of the Modern World.”
Experts said that Oxy’s new California company will be able to focus on operations in the Golden State. That could be a boon for the newly formed firm.
“There isn’t anyone who can say today how it’s going to be in California” said Pavel Molchanov, an energy analyst with Raymond James. “ They can run the business as a cash cow and pay out large dividends, or they can be more aggressive and run it as a growth company and invest a great deal.”
Occidental has not given any further details of its plans in the state.
