Texaco, Incorporated, known for many years as the Texas Company, was founded in 1902 at Sour Lake by oilman Joseph S. Cullinan and New York investor Arnold Schlaet. In March 1901 Cullinan, with two other promoters, incorporated the Texas Fuel Company at Beaumont. Prominent investors included the Hogg-Swayne Syndicate, John W. Gates, and the Laphams of New York. The company primarily purchased and transported oil from Beaumont's Spindletop oilfield. In April 1902 the Texas Fuel Company's major investors obtained a new charter for a corporation-to be known as the Texas Company-which authorized the company to engage in storage and transportation of mineral solutions. On May 1 the Texas Fuel Company conveyed its assets to the new company and was dissolved shortly afterward. The Texas Company was initially capitalized at $3 million and almost immediately began expanding operations. It used subsidiary companies for oil production and began acquiring barges and rail tank cars. It quickly covered new fields with leases. High production levels at two fields just outside Houston, the Sour Lake oilfield (1903) and the Humble oilfield (1905), provided the company with a secure financial base. In 1905 the Texas Company linked these two fields by pipelines to Port Arthur, ninety miles away, and built its first refinery there. That same year the company acquired an asphalt refinery at nearby Port Neches. In 1908 the company completed the ambitious venture of a pipeline from the Glenn Pool, in the Indian Territory (now Oklahoma), to its Southeast Texas refineries.
As early as 1905 the Texas Company had established marketing facilities not only throughout the United States, but also in Belgium, Luxembourg, and Panama. By 1911 the company had a presence in Mexico and Africa. In 1908 it moved its general offices from Beaumont to Houston, where they remained until autumn 1913. That year Cullinan was succeeded by Elgood C. Lufkin as president, and top-level management relocated to its New York offices, established at the company's founding by financier Arnold Schlaet. After World War I, the Texas Company developed and patented the Holmes-Manley refining process, the first continuous process for refining crude oil, which significantly increased the yield of gasoline from each barrel. The company expanded operations by establishing a refinery and two topping (or distillation) plants at Tanpilo, building three asphalt plants on the East Coast, and acquiring a refinery in Casper, Wyoming. On August 26, 1926, the company chartered a holding company in Delaware, the Texas Corporation, with capital of $250 million. In January 1927 the Texas Company also was chartered in Delaware as an operating company. At this time the Texas Company operated refineries in six Texas cities. Within a few years the company had added operating plants in Illinois, Wyoming, Colorado, Kentucky, California, and Montana and refineries in Bordeaux, France; Terdonck, Belgium; and Lethbridge, Alberta, Canada. In 1926 the pipeline system in the United States had reached 1,800 miles. With the acquisition of California Petroleum Corporation in 1928, the Texas Company became the first oil company to market refined products in then all forty-eight states. From 1929 to 1934, during the Great Depression, the company was operating at a loss and shut down some refineries. But its recovery was rapid as it expanded its international activities. In 1936 the Texas Company established exploration and production interests in the Middle East through a joint venture with Standard Oil Company of California (now Chevron). Other joint ventures consummated in 1936 included Caltex Petroleum Corporation, founded through consolidation of the Texas Company's marketing facilities east of Suez with the producing and refining interests of Chevron on Bahrain Island in the Middle East, and P. T. Caltex Pacific Indonesia, a company holding concessions in Sumatra and Java. Today, both CPC and CPI remain among the world's most successful joint ventures. In 1941 the Texas Corporation was dissolved, and thereafter all business was conducted by the Texas Company.
During World War II the company significantly aided the American war effort. It constructed defense installations for the United States government valued at nearly $100 million, including 100-octane tanks at Port Arthur and Lockport, Illinois; butylene catalytic plants at Port Arthur and Los Angeles; and a toluene plant in Illinois. It also aided in the construction of the Big Inch and Little Big Inch pipelines to provide a secure means of transporting oil to the East Coast. The Big Inch brought petroleum products to New York; the Little Big Inch brought the valuable commodity to Philadelphia-both over land from the Gulf of Mexico, thereby avoiding submarine-infested waters. All of Texaco's ocean-going tankers were used in the war effort. In August 1942 a Texas Company tanker, the S.S. Ohio, brought much-needed aviation fuel to the British garrison at Malta. The company continued to grow worldwide throughout the postwar era, diversifying its production and marketing areas throughout the world and expanding its product lines in petroleum-based fuels and lubricants. Capitalizing on its strong brand identity, in May 1959 the Texas Company changed its name to Texaco, Incorporated. The brand-name Texaco-a shortened cable-address for the Texas Company-had been used as a lubricant product name as early as 1902. In the years after the war Texaco concentrated not only on finding oil but on innovative ways to bring it to the surface. Nowhere was this more apparent than in the Duri field of Sumatra, where by 1965 production had peaked at 65,000 barrels per day. Geologists realized that the nature of Duri's reserves-shallow formations of molasses-like heavy oil-was causing a drop in production. By 1975 the joint venture company began a pilot program at Duri using an enhanced oil recovery process called steamflooding that had been perfected in various California fields. By 1987 production levels reached 320,000 barrels per day.
Over the years Texaco has employed a forward-looking, focused investment strategy to support ongoing projects as well as acquisitions to spur its growth. Texaco completed its largest acquisition in 1984, when it purchased the Los Angeles-based Getty Oil Company. Texaco's reserves position nearly doubled with its $10 billion purchase of the nation's sixteenth largest oil and gas company, since the assets acquired through Getty were an estimated worldwide net proved reserves of 1.6 billion barrels of crude oil, condensate and natural gas liquids, along with 2.5 trillion cubic feet of natural gas. The Getty acquisition also spawned a lawsuit by Houston-based Pennzoil, charging that Texaco had interfered with an agreement Pennzoil claimed it had to buy a piece of Getty. The 1985 jury verdict and subsequent court judgment against Texaco were widely criticized by legal experts, numerous state attorneys general, and dozens of newspaper editorial boards. Nevertheless, in order to protect its assets and its shareholders from the risks of continuing the litigation, Texaco settled the case in April 1988, following 361 days of protection under Chapter 11. Texaco immediately launched an aggressive and far-reaching restructuring program that streamlined the organization, pared down debt, bolstered Texaco's financial strength and thrust it into a strong competitive position. But Texaco's corporate battles had not ended with the settlement of the litigation and its major restructuring program. With Texaco's stock price low during the Pennzoil litigation and Chapter 11, New York investor Carl Icahn had accumulated some 17 percent of the company's stock and launched an ultimately unsuccessful proxy contest against Texaco's management team in 1989. Included in its strategies for a $7 billion restructuring program in the late 1980s was the sale of assets such as Texaco A.G. in Germany and Texaco Canada and the formation of an innovative partnership called Star Enterprise. The joint venture, owned 50 percent by a Texaco subsidiary and 50 percent by a subsidiary of the Saudi Arabian Oil Company, began operating on January 1, 1989. The twenty-year partnership commitment provides for 600,000 barrels a day of market-priced Saudi Arabian crude oil to feed three Star Enterprise refineries in Delaware City, Delaware; Convent, Louisiana; and Port Arthur, Texas. Star Enterprise also distributes and markets Texaco-branded petroleum products in twenty-six Eastern and Gulf Coast states and the District of Columbia.
In the early 1990s Texaco's management team developed a series of highly focused strategic initiatives to find and produce oil and natural gas and develop products for a global market. Key to this strategy was to identify and develop new opportunities for both upstream and downstream activities in emerging markets in the Pacific Rim, Latin America, and Eastern Europe. For example, Texaco researchers developed System3 gasolines in 1989 and Clean System3 gasolines in 1993 to bolster the company's competitive position as a leader in fuels technology. On the marketing side of the business, the company began to forge franchise partnerships with major fast food chains in quick-service restaurants located right at the company's StarMart convenience stores. Research and technology applications have been critical to Texaco's growth in recent years. The development and utilization of 3-D seismic surveys and imaging technologies have allowed Texaco engineers and geologists to identify new areas of potential reserves. Technology application also has aided the company in bringing more oil to the surface. Engineers and scientists continue to evolve enhanced oil recovery technologies with the use of horizontal, directional, and quadrilateral drilling-hardly imagined by founders Cullinan and Schlaet. These types of strategic initiatives formed the cornerstone of the plan for enhanced growth, announced in July 1994. The management team committed to achieving top-quartile performance among petroleum industry competitors by taking a number of bold steps. Building on the company's demonstrated successes as a fully cost-competitive finder of oil and natural gas resources, the aggressive growth plan focused on asset redeployment, overhead reduction, and operating efficiencies through elimination of layers of supervision, cost control, and strengthened core business for greater return on shareholder investment and top performance among primary competitors. In 1995 Texaco had 25,000 employees and assets of $25 billion.