Chevron

During the 1860s there were numerous attempts in California to repeat Edwin Drake's 1859 discovery of oil in Pennsylvania, which gave rise to the U.S. petroleum industry. Although widespread drilling failed to yield dramatic results, a hardy band of entrepreneurs kept the faith while fighting among each other over leases and deeds. Among these were San Francisco businessman Charles N. Felton and oil prospector Frederick Taylor, who in 1879 formed the Pacific Coast Oil Company (PCO).

PCO's drilling began to achieve some success, and within a few years it had built pipelines from producing areas such as Moody Gulch in California’s Santa Clara County to a refinery it constructed in Alameda, across the bay from San Francisco. The refinery was the largest facility of its kind west of Cleveland. PCO also built the first steel tanker in order to carry crude from the town of Ventura, near the Pico Canyon fields north of Los Angeles, to the Alameda refinery.

During the 1880s PCO faced increased competition, most notably from the Standard Oil empire, which was shipping oil from the east via ships traveling around Cape Horn. Using its Iowa subsidiary, Standard moved to capture much of the market for kerosene, gasoline, naphtha, and other products. Then in the 1890s, as oil was discovered underneath Los Angeles, Standard entered the production end of the business in the West, buying existing operations and creating new ones. In 1900 PCO gave up the battle and sold out to Standard. Six years later the Rockefeller empire consolidated its West Coast holdings as Standard Oil Company (California).

California Standard got itself into a long-running battle with the federal government over its right to drill on federal land—a dispute that ended in compromise. A more profound legal confrontation for the company and the rest of the Standard empire came in 1906, when the federal government brought an antitrust suit against the group. After five years of legal proceedings the Supreme Court ordered the breakup of the Rockefeller trust into some 30 separate companies, including Standard Oil (California).

Once independent, California Standard stepped up its exploration activities, sending drilling parties to such countries as Argentina, Colombia, Ecuador, Mexico, and the Philippines. In 1926 the company merged with Pacific Oil Co., a subsidiary of the Southern Pacific Railway, and through the resulting reorganization took the parentheses out of its name and began calling itself Standard Oil of California, or Socal for short. The following year it supplied the fuel used by Charles Lindbergh in his historic trans-Atlantic flight.

During the 1930s Socal focused its exploration efforts on the Middle East, first by obtaining a concession in Bahrain. The effort paid off, but the company already had its eye on a much larger territory: the nearby kingdom of Saudi Arabia. Socal's more powerful competitors, Standard Oil of New Jersey and Royal Dutch/Shell, had shown little interest in the Saudi territory, which was part of the region covered by the 1928 Red Line Agreement. That pact committed the leading producers to cooperate with one another on any projects within the confines of the old Ottoman Empire.

Socal was not part of the Red Line arrangement, so it was free to explore in Saudi Arabia on its own. In 1933 it was granted a concession by King Ibn Saud that turned out to contain the largest oil reserves in the world. The oil was so plentiful that Socal brought in Texaco to form a joint marketing company they dubbed Caltex. Even that was not sufficient, so in 1944 the two companies formed the Arabian American Oil Company, or Aramco, which soon took on Jersey Standard and Socony as partners.

After the Second World War the company grew along with the development of the West Coast, but it also expanded its refining and marketing operations to the Eastern Seaboard. In 1961 Socal merged with Standard Oil Company (Kentucky), the leading marketer in five Southern states. The company continued its foreign exploration and production in places such as Indochina, Libya, Nigeria, and the North Sea, but it remained highly dependent on the output from Saudi Arabia. Control of the Saudi operations was taken over by the government of that country in 1980.

The California company was slow in joining the diversification trend among the oil majors. It finally made its move in 1979 with a takeover bid for the mining giant AMAX. When the board of AMAX rebuffed Socal it backed off. The same thing happened two years later when Socal came courting again with a higher bid.

Socal next assumed the industry spotlight in 1984, amid the challenges posed by maverick oilman T. Boone Pickens, Jr. to the petroleum giants. When Pickens turned his sights on Gulf Oil, the Pittsburgh company turn to Socal as a white knight. Socal, which changed its name to Chevron during this period, ended up acquiring Gulf for some $13.2 billion.

Gulf had its beginnings in the discovery of oil in Texas in the first years of the century. The Mellon family of Pittsburgh helped finance the pioneering J.M. Guffey Petroleum Co. and built a refining operation at Port Arthur on the Gulf of Mexico. In 1907 the two operations were combined as Gulf Oil, which became a formidable competitor to the Standard Oil trust. Gulf later was among the U.S. companies to participate in the Iraq Petroleum Company and was a party to the Red Line Agreement. It won a concession in Kuwait in partnership with Anglo-Iranian. In the 1970s Gulf was rocked by revelations that it had made large amounts of illegal campaign contributions in the United States and payoffs to government officials abroad. The scandal resulted in the resignations of several top executives.

Chevron's purchase of Gulf was hailed for greatly expanding the company's production capacity and its marketing network, but it also created a huge debt load. To help relieve the burden Chevron sold just under half of Gulf's Canadian operations to the Reichmann family of Toronto for $2.5 billion.

Chevron came under fire from the Right in the late 1980s for maintaining its investment in Angola (which it inherited from Gulf) and from the Left for its operations in South Africa. In 1988 Chevron purchased Tenneco's oil and gas reserves in the Gulf of Mexico. The following year Chevron found itself the subject of a possible takeover after Pennzoil used much of the $3 billion it won in its legal battle with Texaco to buy a block of Chevron stock. The California company rebuffed Pennzoil by getting a large portion of its stock into friendly hands through an employee stock ownership plan.

Faced with continuing financial problems, Chevron launched an aggressive cost-cutting effort in the early 1990s that included a reduction in its refining capacity and the elimination of several thousand jobs. Yet it also decided to spend some $10 billion to develop vast oil reserves in Kazakhstan and build a pipeline from the Caspian Sea to the Black Sea.

During the late 1990s Chevron made unsuccessful bids for Atlantic Richfield and Amoco, but things turned out differently when it made an offer to acquire Texaco in 1999. In October 2000 Chevron was able to announce that it would purchase Texaco in a deal worth $36 billion; the deal took effect in 2001. The combined company, the world’s fourth largest oil major, would be called ChevronTexaco.

Texaco began as the Texas Company, one of the most successful producers in the early years of the oil industry in the Southwest. It joined with Socal to exploit the vast reserves of Saudi Arabia in the 1930s and had controversial dealings with Franco and Hitler. After World War II Texaco spread across the country and came to be regarded as one of the Seven Sisters. During the 1980s the company was hit with a multi-billion-dollar verdict in connection with its acquisition of Getty Oil. It declared Chapter 11 bankruptcy and then faced pressure from corporate raider Carl Icahn (who had acquired more than 12 percent of its stock) to liquidate assets.

In 2005 ChevronTexaco boosted its size once again by agreeing to pay $17 billion for Unocal, a large independent with oil reserves in Azerbaijan, Indonesia and the Gulf of Mexico. It beat out a competing bid from China’s CNOOC Limited in part by whipping up fears of foreign ownership. That same year the company changed its name back to Chevron.

Chevron’s anti-Chinese stance in the battle for Unocal did not prevent it from making a deal with PetroChina in 2007 to develop a major natural gas field in Sichuan Province. It also moved ahead with numerous other foreign ventures such as a natural gas project in the Gulf of Thailand and drilling off the shore of Newfoundland.

In 2008 Chevron was chosen to become one of the 30 stocks making up the Dow Jones Industrial Average.