Oil industry banker urges Houston to embrace clean energy

Houston, the epicentre of America’s oil industry, needs to embrace the shift to cleaner energy to secure its economic future, one of the city’s top oil bankers says.

“If Houston wants to continue to be the world’s leading energy capital, then it’s going to need to be a leader in the newer forms of energy,” Bobby Tudor, chair of the investment bank Tudor, Pickering, Holt & Co, told the Financial Times.

Houston, the country’s fourth-largest city, has been propelled by the oil and gas industry for more than a century, and saw its economy supercharged over the past decade as the shale industry took off.

Yet environmentalists and some city officials have long warned it needs to start planning for its post-oil future. Tudor is part of a growing chorus of industry insiders coming to the same conclusion as the oil boom starts to fade and growth and capital in the energy sector shifts to low-carbon technologies.

The oil industry is “highly unlikely to be contributing to Houston’s growth in the next decade or two in the way that it has in the last decade or two”, said Tudor. “We don’t think it’s going away, but it’s going to be a much slower growth profile.”

Tudor, a 30-plus year industry veteran, was a partner at Goldman Sachs before casting out on his own in Houston in 2004. Tudor, Pickering, Holt, & Co became a leading banker to America’s shale patch, giving him a front-row seat to the country’s oil boom and giving his comments significant weight in the Houston business community.

The city has had a preview of the risks of an energy transition after several years of financial stress in the US shale industry, which is now under immense shareholder pressure to rein in growth and focus on funnelling cash back to investors.

That newfound spending discipline has meant oil sector job growth has been slow to recover in the city this year even as US crude prices have topped $70 a barrel in recent weeks.

Twice weekly newsletter

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

The share of Houston’s gross domestic product generated by the oil and gas sector has fallen to less than 20 per cent from as much as 40 per cent in 2014, according to the Greater Houston Partnership, a business group.

Tudor argued that many in Houston, including the big oil companies that call it home, were now seeing opportunities in the energy transition where they once only saw risks — especially after the rapid rise of wind power in the state.

The city should focus not only on renewables, but also on emerging technologies such as hydrogen and carbon capture and storage, where Houston’s roots in the fossil fuel business and familiarity with large-scale energy infrastructure give it a head start, Tudor said.

“Imagine what it would be like to try to get a big new hydrogen pipeline built between New York City and Boston. It would be impossible. We have a lot of incumbent advantages here,” he said.

“One thing Houstonians and Texans in general are pretty good at is seeing a commercial opportunity for the grabbing and we do think there are really good commercial opportunities associated with the energy transition.”