Business & Economy:
Oil company’s consolidation supported city’s claim as world’s energy capital
Shell Oil’s decision to move from New York to Houston helped spur growth downtown.
In 1965, Shell Oil Co. decided to open a new office in Houston, a 30-story building where executives would run operations for the western United States.
But over the next six years, Shell’s ambitions for Houston grew, and so did the scale of its project. By the early 1970s, Shell Oil, the U.S. subsidiary of the international energy company Royal Dutch Shell, supported building not one but two skyscrapers in Houston and moved its headquarters from New York into the 50-story building known today as One Shell Plaza.
That move not only vindicated Houston’s claim as the world’s oil capital, but also touched off a building boom that would transform the city’s skyline as war and revolution in the Middle East launched oil prices and the industry to new heights. One Shell stood as the tallest building in Texas for more than a decade, surpassed in the 1980s by InterFirst (now Enterprise) Plaza and the Texas Commerce (now JPMorgan Chase) Tower.
Today, One Shell is just a small part of Houston’s downtown, the 10th-tallest building. But when the final touches were completed in 1971, it was something that Houston had never seen before, capturing the city’s aspirations — as the energy historian Tyler Priest described it — in “gleaming white, Italian Travertine marble quarried from the same region as the marble in Rome’s Colosseum.”
“Houston had already become the booming hub of the petroleum industry by the 1960s, but all the biggest companies’ headquarters were somewhere else,” said Priest, a University of Iowa professor who has written extensively on Shell’s history. “Shell’s decision kind of validated Houston’s reputation as the center of the oil industry, and other companies followed.”
In the 1960s, with industry mired in low oil prices, Shell and other companies were looking to cut costs. Operations were scattered all over the country, wherever there might be oil. Administrative, support, and research functions were duplicated many times over.
In Houston, for example, Shell already had the Bellaire Technology Center and offices in several buildings scattered around the city. But Shell was outgrowing these facilities and started working on an expansion with real estate brokers, one of whom put in a good word for a young, go-getter who would become the city’s most prominent developer.
Gerald Hines said he told Shell that he could build an office tower in downtown Houston that was 50 percent more energy efficient than the industry standard and brought on Chicago architects from Skidmore, Owings & Merrill firm to design it. With Shell moving to consolidate its U.S. offices, the company and the developer decided to erect a building that was 50 stories, rather than 30, to accommodate local workers as well as those who would be transferred from New York, Midland, Oklahoma, Colorado and other locations.
Shell decided in 1968 to consolidate its many U.S. offices with two major operational hubs: the western region in Houston and the southern region in New Orleans. Shell, however, planned to maintain the New York headquarters with just top executives because of the proximity to financial markets and easier air travel to the Netherlands, where Royal Dutch Shell is headquartered.
Jack Little, who would eventually become chief executive of Shell Oil was then a young engineer for Shell in Houston. Energy companies were looking to cut costs and improve communication between different divisions in the time before email, smartphones and cloud-based software made it possible to efficiently manage scattered operations .
“You had a (land-line) telephone and that was about it,” Little said.
At the time, it was considered revolutionary to move researchers and engineers away from the oil fields and consolidate them in a centralized locations like Houston because conventional wisdom in the industry held that these specialists would lose their feel for the oilfield. Instead, consolidation allowed for far greater collaboration among workers as they tried to find better ways to discover and exploit oil reserves.
“It was a very high-risk decision,” Little recalled. Other companies eventually followed Shell’s lead.
The news of Shell’s plans to consolidate operations in Houston became public in August 1969. “Shell to Move 1,000 Workers Here,” the Houston Chronicle’s banner headline blared. The final number was closer to 1,400.
New York, meanwhile, had become increasingly expensive and Shell’s president, Dick McCurdy, wanted to shrink the company’s footprint there.
Shell started relocating people from New York in 1970 as One Shell neared completion. Shell moved people in shifts: after they finished work on a Thursday in New York, and they’d start on Tuesday in Houston. Only one day of work was lost each week.
Shell also had to hire a lot of new people. Roughly 700 of the New York workers refused to move.
“Let’s face it: It was a little bit of a culture shock,” Little said. “Most who made the move were pleasantly surprised.”
By 1971, only the uppermost Shell Oil executives remained in New York. That soon changed. The new president, Harry Bridges, decided to move the corporate headquarters to Houston and One Shell Plaza.
Shell didn’t stop there. Again working with Hines, it developed a 28-story Two Shell Plaza, which became the hub for western operations. It moved all of its data processing to Houston in 1973, giving Shell the city’s second-most computing power after NASA. Shell then opened the Westhollow Technology Center in West Houston in 1975.
The next major oil company to make the plunge was Pennzoil, which moved its headquarters from Pennsylvania to downtown Houston with the opening of Pennzoil Place in 1975.
The banking industry, wanting to do more business with oil companies, soon started erecting their own skyscrapers downtown.
Little said he loved seeing his employer make such a splash in Houston, where Shell today employs about 11,000 people.
“It’s a gross exaggeration to say Shell caused Houston’s growth,” Little said, “but Shell certainly helped to establish Houston and to amplify its significant role in oil and gas. Other companies followed in short order.”