Houston, the nation’s fourth largest city and one that built its fortune in oil, natural gas and petrochemicals, is now a mecca for entrepreneurs out to make the next great no-carbon technology.
The city remains the place to forge oil and gas deals, as thousands of energy companies, large and small, have their headquarters in the region. With oil and gas operators working to cut emissions and improve efficiencies, Houston also has become the epicenter for the new energy world, according to Artemis Energy Partners CEO Bobby Tudor.
“We continue to have great momentum,” he told NGI in an interview at CERAWeek by S&P Global. Tudor chairs the Greater Houston Partnership’s Houston Energy Transition Initiative, (HETI), which he helped to launch in 2021. The consortium is composed of Houston’s leading energy companies working to shape the region’s energy transition strategy.
Three years in, “we’re not on the slow growth at all,” Tudor said. The HETI-based ventures are not out to extinguish the old-line oil and gas companies.
Incumbent industries have powered Houston for decades, from natural gas and oil, to refining and petrochemicals. Many are aiming now to achieve net-zero carbon by 2050.
“Our view is that the ‘incumbent industries’ are going to continue to be critical and vital and really important, not just to Houston, but to the world as far as the eye can see.”
BOBBY TUDOR, ARTEMIS ENERGY PARTNERS CEO
Decarb Hiccup
Still, the work to decarbonize “is not likely to have the same growth characteristics that we had through this whole shale revolution,” Tudor said. During that period, Tudor was at the center of it as CEO of energy investment firm Tudor, Pickering, Holt & Co. (TPH). In early 2022, he and his fellow TPH co-founder, Maynard Holt, retired from the firm.
The growth in new decarbonization ventures hiccupped following the 2022 invasion of Ukraine by Russia, formerly Western Europe’s main natural gas supplier. That was understandable, though, Tudor told NGI.
The war “reminded the world that we still need oil and gas. It didn’t fundamentally change the view of the companies, or I think of consumers, that we have a dual challenge here. We need both secure and affordable energy today and to keep the lights on. And we need to be transitioning our system to one that is dramatically lower in carbon emissions.”
The dual effort is “going to require a long time and a lot of money. And it’s going to require improvement in a million different little ways. It’s not just one thing. It’s not as if we can give up on natural gas-fired power plants.”
Overall, though, the effort has to center on the “drive to much lower carbon emissions system.”
HETI is “touching all of those little places,” Tudor said. “We do want more renewable power sources. But at the same time, we have to have enough baseload to keep the lights on. And we’ve got a dramatically growing economy here.”
Data, Data, Data
The new technology also is likely to be tied to the increasing power demands from artificial intelligence (AI) data centers, he said. In fact, the growth of data centers – and its impact on future gas demand – was the focus of many discussions during CERAWeek.
Williams’ Chad Zaramin, executive vice president (EVP) of Corporate Strategic Development for the midstream giant, said in an interview, “I don’t think any of us appreciated the true scale of demand” that will be required to supply resources to the AI centers.
Likewise, EQT Corp.’s Rob Wingo, EVP of Corporate Ventures, told NGI that the No. 1 natural gas producer was venturing into the AI market to gain a slice of the data center power market.
The surge in power demand means the country has to add more baseload, Tudor said. “And that’s probably going to come from natural gas,” he told NGI. Expanding the use of natural gas is not “inconsistent” with the transition, he explained. “Good news is good news.” Power load expansions translate into “tons of new companies,” Tudor said. And HETI would be working to attract an array of tech-oriented industries. Many of them are companies finding solutions to greenhouse gas emissions.
Houston-based Syzygy Plasmonics is an example of the type of company that Houston is attracting, Tudor explained. The company’s strategy is focused on decarbonizing chemical processes. Notably, CEO Trevor Best formerly worked for the oilfield services giant Baker Hughes Co.
“There’s a lot of that happening,” Tudor said of the integration of old energy with new. Houston has research and development (R&D) underway across the city’s university systems, national labs and the incumbent energy companies. R&D is the lifeblood of energy companies, he noted. ExxonMobil, Baker Hughes, BP plc and Shell plc, among dozens of others, have R&D programs across the region. “And a lot of that is oriented toward really new stuff, whether it’s biofuels, carbon capture utilization and sequestration, or hydrogen,” Tudor said. “We see only progress.”
The energy industry consolidation wave that began in 2023 and continued this year has led to some job losses at many of the incumbent companies. However, people with energy skills may be able to transfer them to the new technologies.
“When you are in your consolidation phase, that needs to be offset with new company formation,” Tudor said. “The challenge right now is that there is almost no new company formation. It’s not just energy, but there is none in the pipeline of the incumbent system…”
“We had an incredible amount of company formation that happened with the shale revolution,” he said. There were “crazy amounts of really sizable new companies, lots of employees, lots of health care for people, lots of philanthropic dollars, lots for the arts… We don’t have that now.” The turn to decarbonize has allowed HETI to attract “a lot of this new stuff.”
IRA Cutting Risks
Tudor credited the Biden administration’s Inflation Reduction Act (IRA) in helping to bring companies to Houston, “because it takes a lot of the risk out of projects for the equity capital. “It makes them much more inclined to try things that are effectively de-risked by the government,” Tudor noted. “I mean, the number of projects that have been announced since the IRA, including a lot where we’ve broken ground, is really substantial.” To remain a leading energy center, though, “we’re going to need to build sizable new companies,” Tudor said. “And we need to make sure that the intellectual capital uses the energy capital. It’s not just that the companies are headquartered here or that we have the Houston Ship Channel. It’s because of the intellectual capital…”
“So if you’re looking to do a big, complicated offshore thing in Kazakhstan, the real intellectual capital that figures out how to do this is here. That’s a big part of the reason for HETI.” ExxonMobil recently moved its headquarters from the Dallas area to a Houston suburb. Chevron Corp. may be headquartered in San Ramon, CA, “but all of its people are here.”
Tudor credited the Port of Houston and the Houston Ship Channel’s industrial complex, which houses the nation’s biggest petrochemical complex. The port and the ship channel “will become more and more important to us” over the next five years, according to Tudor.
Houston? Really?
Houston also has to be a city where people want to not only work but where they enjoy living, the energy executive said. “Things have changed in the last couple of years,” Tudor noted, referring to the Covid pandemic. “I’m actually very confident, in part because Houston continues to be a real international magnet that pulls people from all over the world because it continues to be a place of great opportunities. And people are attracted to the diversity of it.”
Admittedly, Houston “could lose its status” as a global energy mecca. The world is quickly evolving.
“If we’re not right at the center of all things,” particularly for carbon capture and hydrogen technology, “then shame on us,” Tudor said. The region has every geological advantage, along with support from city leaders, and a skilled workforce. There are concerns, Tudor admitted, about Houston’s ability “to attract young people into the industry. Here’s what I tell them. If you want to work on the next great dating app, you should probably just move to Austin. But if you want to work on the most vexing problem in the history of the world, you should move to Houston and work on helping us remake our energy system.”