Billion-Dollar Chip

In the global gamble for oil, everyone knows that U.S. companies are cashing in the biggest jackpot in their history. But few realize the staggering size of the bets required to back up a winning hand. Last week Gulf Oil Corp., fifth biggest in the industry, provided a prime example. It announced that it will spend another $200 million to expand its refining and manufacturing operations, bringing its total expansion since war's end to $1 billion, one-twelfth of the whole U.S. industry's postwar investments. With such huge costs for hunting and producing oil, not even the giants can afford many mistakes. Says Gulf's 51-year-old President Sidney A. Swensrud: "A man used to be a good executive if he guessed right three out of five times. Now, you can't stay in business on executive hunches."

No hunches, but the cold facts of the world demand for oil are behind Gulf's expansion. Swensrud, who has already built the world's largest "cat" (catalytic) cracker at Gulf's main refinery at Port Arthur, Texas, will now build a still bigger one (63,000 bbls. a day) at Gulf's Philadelphia refinery. He will also build the world's biggest (125,000 bbls. per day) atmospheric and vacuum crude-oil "topping" unit (which skims off the lighter components of crude). The result will boost the military's supply of high-octane gasoline by 42,000 gals, daily. But Swensrud also has his eye on a longer-range peacetime market: the high-compression auto engine.

Answer Man. Swensrud has been exploring new oil markets ever since he finished Harvard Business School in 1927, went to work as an assistant to W. T. Holliday, president of Standard Oil of Ohio. While riding Standard's tank trucks and dropping in at filling stations, Swensrud always asked the "Why" for everything, jotted down the answers in a little notebook. He found out so many things that executives who played by ear couldn't answer that he rose swiftly to vice president. He was marked for the top job at Sohio when Gulf hired him away in 1947 as successor to aging President J. F. Drake, who stepped up to chairman when Founder William L. Mellon, now dead, retired.

Bill Mellon had started the business in 1901, simply to rescue a $5,000,000 loan which Cousin Andrew Mellon had made on some Texas oil leases. He salvaged the money so well that when he retired at 80 his empire (still 41% owned by the Mellon family) stretched from Venezuela, where only Standard's (NJ.) Creole and Royal Dutch Shell outrank Gulf's Mene Grande, to Kuwait on the Persian Gulf, where Gulf and Britain's Anglo-Iranian share more than 11 billion bbls. of oil reserves. Under him, Gulf got the prospecting rights to all of Denmark, and his global marketing and producing apparatus embraced subsidiaries through most of Europe, Africa and Brazil, plus proven U.S. reserves of 1.3 billion bbls.

Despite the empire's size, Swensrud soon knew it inside & out, traveling its reaches in Gulf planes, asking questions, jotting down answers in his notebook. In Swensrud's first year, Gulf's sales passed the $1 billion mark for the first time in history.

High Stakes. Swensrud, calculating that U.S. oil demand would rise at least 3% a year for the next decade, decided that Gulf's only limit was the amount of new oil that could be found. The company wangled new concessions in Tunisia, Mozambique, launched extensive drilling in Canada's new fields, where Gulf has one of the world's biggest gas fields, in Alberta. He built new refineries in Venezuela and Kuwait, in three years boosted Gulf's Kuwait production from 23 million to 66 million bbls. annually. He boosted Gulf's world output from 160.1 million bbls. to 193.4 million, found new markets by buying up new retail outlets (Pure Oil in Pennsylvania, Sohio in Michigan, Missouri State in the Mississippi Valley). In spite of the tremendous costs, Gulf's profits have gone on rising, in 1951's first half ($63 million), passed 1950's by 25%.

As Gulf's market has expanded, so have its hazards. Gulf's partner, Anglo-Iranian, has already lost its great Abadan refinery (see FOREIGN NEWS), and the two are boosting their Kuwait production as rapidly as possible to help meet Europe's oil deficit. Political upheavals are not the only changes. Soaring costs have made the hunt for oil enormously expensive. Recently, Swensrud launched Gulf on the biggest wildcat hunt in the U.S., exploring 800,000 acres leased from the State of Mississippi.* Gulf may well sink millions without result. But Swensrud is not perturbed. Gulf, a pioneer in the science of petroleum geophysics, has helped trim the odds against finding oil from 15-to-1 to a mere 5-to-1. To an oilman, that's a good bet.

* In 50-50 partnership with Texas' famed Wildcat King Mike Benedum.

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