Smart businessmen, like good drivers, keep their eyes on the road ahead but from time to time take a look into the rear view mirror.
This column looks ahead to the future of Big Oil in Asia but starts with a look back at the 1985 takeover battle that preceded ChevronTexaco’s pending buy of Unocal.
T. Boone Pickens, the legendary Texas smash and grab wildcatter quietly had accumulated enough of Unocal’s shares to make a bid for the rest.
Fred Hartley, the crusty boss of Unocal fought back like a tiger, but he never would have succeeded in fending off Pickens’ bid if it had not been for the foresight and toughness of his Chief Executive Richard J. Stegemeier.
Stegemeier is a friend of mine. He invited me to lunch in Unocal’s boardroom at a moment when its hopes of survival were at a low ebb. Security Pacific Bank, whose success in greater Los Angeles at one time was largely due to its biggest account, Unocal, had sold out to Pickens.
Pickens still was defeated. Unocal survived, though it paid a heavy price in the range of assets it had to sell or mortgage to stay in business.
And here comes the second,until now unrevealed,story of our look into the rear mirror.
British Petroleum was on the prowl.
Having switched the center of its operations from the Middle East to the North Sea and North America, the British oil giant not only had become the biggest producer of oil and gas in Alaska, but also had used the profits from its Alaska crude to buy up Sohio, then by far the largest distributor of gasoline in the Great Lakes region.
But Sohio was not enough. Required by U.S. law, specifically the Jones Act, to land all the oil it produced in Alaska in American ports, BP’s tanker fleets were ferrying huge quantities of Alaska crude along the Western coasts of Canada, the U.S. and Mexico so as to transit the Panama Canal and unload it at BP’s refineries in the Gulf ports and on the East Coast.
The extra costs were substantial, the solution obvious: Buy Unocal.
The attractions for BP were Unocal’s 76 gas stations and its Southern California refineries.
Wounded as it had been by the fight against Pickens, Unocal also would have been,forgive me,easy pickings for BP, which was five times its size.
A former British prime minister, Sir Edward Heath, was in Orange County at that time.
I introduced him to Dick Stegemeier at whose home in Yorba Linda the prime minister stayed. Heath’s advice to BP,like mine at a lower level,was not to bid for Unocal.
First because its management would fight like hell to stay independent.
Second because nearly all British investment in California, unlike the Japanese, had been well-received, and this happy situation could be damaged by a knock-down, drag-out fight between BP and Unocal.
And third, George Bush Sr., a newly elected U.S. president with a background in oil, would be caught in the middle, and most likely would be pressured by Congress to side with Unocal against the Brits.
Wise advice, which BP heeded. And all concerned ended up winners. Unocal again survived, though before long Stegemeier’s successors chose to sell off its 76 gas stations. (A sale overseen for Unocal by another OCer, Larry Higby.)
BP 10 years later bought Amoco in the Midwest and Arco in Los Angeles, becoming in the process the largest single distributor of gasoline in the U.S.
The Road Ahead
And so, to the road ahead. The name on the signpost is Asia.
Thanks to Stegemeier, who had managed its operations in southeast Asia before he took over from Hartley as chairman, Unocal became the most enterprising,and most successful,American exploration company in the oil and gas provinces offshore of Indonesia, the Gulf of Thailand and Myanamar.
That’s why it was so attractive to ChevronTexaco which, flush with profits from recent high gasoline prices, wants to add to its oil reserves. Unocal’s stockholders therefore have received a fat premium on their shares, up 70% in the past 12 months. Let’s hope,and pray,that its employees at El Segundo and Brea receive the same generous treatment.
I’ll be sorry to see the great name of Unocal disappear from the billboards, but that’s progress in a globalized world. Think, too, of the road ahead, when China and India become the principal markets for tomorrow’s southeast Asian energy producers.
Oilmen, when I was a youngster, dreamed of supplying oil for the lamps of China. ChevronTexaco, before long, will be selling it to fuel the heavy industries and scores of millions of cars in China, India, Singapore, Malaysia and South Korea. And so will BP, already a major player in the Pacific oil fields that it’s developing north of Japan.
So Unocal’s name will vanish but the melody will linger. Its pioneers and workers,and oldtimers like Stegemeier,always will be able to look back in the knowledge that when their hands were on the pumps, Southern California’s most famous oil company kept its eyes on the road ahead.
Griffiths, a resident of Laguna Niguel, is an author, journalist, former member of the House of Commons and under secretary of state in the U.K.
