Gulf Oil

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Gulf Oil was a major global oil company from the 1900s to the 1980s. The eighth-largest American manufacturing company in 1941 and the ninth-largest in 1979, Gulf Oil was one of the so-called Seven Sisters oil companies. Gulf was one of the chief instruments of the legendary Mellon family fortune; both Gulf and Mellon Bank had their headquarters in Pittsburgh, Pennsylvania.

Gulf's former headquarters, originally referred to as "the Gulf Building" (now the Gulf Tower office condos), is an art-deco skyscraper. The tallest building in Pittsburgh until 1970, when it was eclipsed by the U.S. Steel building, it is capped by a "step pyramid" structure several stories high. Until the late 1970s, the entire top was illuminated, changing color with changes in barometric pressure to provide a weather indicator that could be seen for many miles.

Gulf Oil Corporation (GOC) ceased to exist as an independent company in 1984, when it merged with Standard Oil of California (otherwise known as SOCAL or Chevron). However, the Gulf brand name and a number of the constituent business divisions of GOC survived. Gulf has experienced a significant revival since 1990, emerging as a flexible network of allied business interests based on partnerships, franchises and agencies. The network trades worldwide using the slogan "Your Local Global Brand."

Gulf, in its present incarnation, is a "New Economy" business. It employs very few people directly and its assets are mainly in the form of intellectual property: brands, product specifications and scientific expertise. The corporate vehicle at the center of the Gulf network outside North America is Gulf Oil International Ltd (GOI), a company registered in the Cayman Islands since 1985. The ultimate holding company of GOI is Amas Holding SA (Luxembourg), an investment trust. Gulf's research and product development base is in Mumbai, India. Its business development function is run from London, United Kingdom. The company's focus is primarily in the provision of downstream products and services to a mass market through joint ventures, strategic alliances, licensing agreements, and distribution arrangements.

The business that became Gulf Oil started in 1901 with the discovery of oil at Spindletop, Texas. A group of investors came together to promote the development of a modern refinery at nearby Port Arthur to process the oil. The largest investor was William Larimer Mellon of the Pittsburgh Mellon banking family, other investors included many of Mellon's Pennsylvania clients as well as some Texas wildcatters. Mellon Bank and Gulf Oil remained closely associated thereafter. The Gulf Oil Corporation itself was formed in 1907 through the amalgamation of a number of oil businesses, principally the J.M. Guffey Petroleum and Gulf Refining companies of Texas.

Output from Spindletop peaked at around 100,000 barrels per day (16,000 m³/d) just after it was discovered and then started to decline. Later discoveries made 1927 the peak year of Spindletop production, but Spindletop's early decline forced Gulf to seek alternative sources of supply to sustain its substantial investment in refining capacity. This was achieved by constructing the 400-mile (640-km) Glenn Pool pipeline connecting oilfields in Oklahoma with Gulf's refinery at Port Arthur. The pipeline opened in September 1907. Gulf later built a network of pipelines and refineries in the eastern and southern United States, requiring heavy capital investment. Thus, Gulf Oil provided Mellon Bank with a secure vehicle for investing in the oil sector.

Gulf promoted the concept of branded product sales by selling gasoline in containers and from pumps marked with a distinctive orange disc logo. A customer buying Gulf-branded gasoline could be assured of its quality and consistent standard.

Gulf Oil grew steadily in the inter-war years, with its activities mainly confined to the U.S. The company was characterised by its vertically integrated business activities, and was active across the whole spectrum of the oil industry: exploration, production, transport, refining and marketing. It also involved itself in associated industries such as petrochemicals and automobile component manufacturing. It introduced significant commercial and technical innovations, including the first drive-in service station (1911), complimentary road maps, drilling over water at Ferry Lake, and the catalytic cracking refining process (Gulf installed the world's first commercial catalytic cracking unit at its Port Arthur, Texas, refinery complex in 1951). Gulf also established the model for the integrated, international "oil major," which refers to one of a group of very large companies that assumed influential and sensitive positions in the countries in which they operated.

Gulf had extensive exploration and production operations in the Gulf of Mexico area and in Kuwait. The company played a major role in the early development of oil production in Kuwait, and through the 1950s and '60s apparently enjoyed a "special relationship" with the Kuwaiti government. This special relationship attracted unfavourable attention since it was associated with "political contributions" (see below) and support for anti-democratic politics, as evidenced by papers taken from the body of a Gulf executive killed in the crash of a TWA aircraft at Cairo in 1950.

In 1934, the Kuwait Oil Company was formed as a joint venture by British Petroleum (BP) and Gulf. Both BP and Gulf held equal shares in the venture. KOC pioneered the exploration for oil in Kuwait during the late 1930s. Oil was discovered at Burgan in 1938 but it was not until 1946 that the first crude oil was shipped. Oil production started from Rawdhatain in 1955 and Minagish in 1959. KOC started gas production in 1964. It was the cheap oil and gas being shipped from Kuwait that formed the economic basis for Gulf’s diverse petroleum sector operations in Europe, the Mediterranean, Africa, and the Indian subcontinent. These last operations were coordinated by Gulf Oil Corporation, Eastern Hemisphere (EH) from an office at Portman Street, London.

Gulf expanded on a worldwide basis from the end of the war until the mid-1970s. Much of the expansion was through the acquisition of privately-owned chains of filling stations in various countries, allowing Gulf outlets to sell product (sometimes through 'matching' arrangements) from the oil that it was "lifting" in the Gulf of Mexico and Kuwait. Some of these acquisitions were to prove less than resilient in the face of economic and political developments from the 1970s on. Gulf invested heavily in product technology and developed many speciality products, particularly for application in the maritime and aviation engineering sectors. It was particularly noted for its range of lubricants and greases.

Gulf Oil reached the peak of its development in around 1970. In that year, the company processed 1.3 million barrels (210,000 m3) of crude daily, held assets worth $6.5 billion, employed 58,000 employees worldwide, and was owned by 163,000 shareholders. In addition to its petroleum marketing interests, Gulf was a major producer of petrochemicals, plastics, and agricultural chemicals. Through its subsidiary, Gulf General Atomic Inc., it was also active in the nuclear energy sector. Gulf abandoned its involvement in the nuclear sector after a failed deal to build atomic power plants in Romania in the mid-1970s.

In 1974, the Kuwait National Assembly took a 60 percent stake in the equity of KOC with the remaining 40 percent divided equally between BP and Gulf. The Kuwaitis took over the rest of the equity in 1975, giving them full ownership of KOC. This meant that Gulf (EH) had to start supplying its downstream operations in Europe with crude bought on the world market at commercial prices. The whole GOC(EH) edifice now became highly marginal in an economic sense. Many of the marketing companies that Gulf had established in Europe were never truly viable on a stand-alone basis.

Gulf was at the forefront of various projects in the late 1960s intended to adjust the world oil industry to developments of the time including closure of the Suez canal after the 1967 war. In particular, Gulf undertook the construction of deep water terminals at Bantry Bay in Ireland and Okinawa in Japan capable of handling Ultra Large Crude Carrier (ULCC) vessels serving the European and Asian markets respectively. In 1968, the Universe Ireland was added to Gulf's tanker fleet. At 312,000 long tons deadweight (DWT), this was the largest vessel in the world and incapable of berthing at most normal ports.

Gulf also participated in a partnership with other majors, including Texaco, to build the Pembroke Catalytic Cracker refinery at Milford Haven and the associated Mainline Pipelines fuel distribution network. The eventual reopening of the Suez canal and upgrading of the older European oil terminals (Europoort and Marchwood) meant that the financial return from these projects was not all that had been hoped for. The Bantry terminal was devastated by the explosion of a Total tanker, the Betelgeuse, in January 1979 (the Betelgeuse incident) and it was never fully reopened. The Irish government took over ownership of the terminal in 1986 and held its strategic oil reserve there.

In the 1970s, Gulf participated in the development of new oilfields in the UK North Sea and in Cabinda, although these were high-cost operations that never compensated for the loss of Gulf's interest in Kuwait. A mercenary army had to be raised to protect the oil installations in Cabinda during the Angolan civil war. The Angolan connection was another "special relationship" that attracted comment. In the late 1970s, Gulf was effectively funding a Soviet bloc regime in Africa while the US government was attempting to overthrow that regime by supporting the UNITA rebels led by Jonas Savimbi.

In 1975, several senior Gulf executives, including Chairman Bob Dorsey, were implicated in the making of illegal "political contributions" and were forced to step down from their positions. This loss of senior personnel at a critical time in Gulf's fortunes may have had a bearing on the events that followed.

Gulf's operations worldwide were struggling financially in the recession of the early 1980s, so Gulf's management devised the "Big Jobber" strategic realignment in 1981 (along with a program of selective divestments) to maintain viability. The Big Jobber strategy recognized that the day of the integrated, multi-national oil major might be over, since it involved concentrating on those parts of the supply chain where Gulf had a competitive advantage.

 

External link


www.gulfoilltd.com