1968-1989 – Years of retrenchment

Moving into its fourth decade of operations, Caltex thrived by focusing on the area east of Suez where it had its origins. For the years 1968 through 1972, the company consistently surpassed its previous best results in sales volume, crude utilization, refinery runs and revenue.

The strongest contributors during this period were Japan, with roughly one-third of the company’s system-wide sales as of 1970, as well as India, the Philippines, South Africa, Taiwan and South Korea.

Caltex seized an opportunity to enter the South Korean market just as the country was emerging as an economic power following its war with North Korea. Recognising South Korea’s growing demand for petroleum products, Caltex entered a joint venture with Lucky Chemical Goldstar Group in 1968. Together, the partners formed the Honam Oil Refinery Co. Ltd., which constructed the nation’s second refinery at Yosu, set in close proximity to the mauve and brown terraced farmlands and vivid purple mountains of Cholla-namdo Province. Doing so was not an easy task. One challenge was posed by the refinery’s harbour, which was too shallow to accommodate supertankers. This prompted the partners to build an underwater pipeline to a single-point mooring buoy in deep water a mile offshore. Honam Oil, Caltex’s partner, then provided a loan to the provincial government for the construction of a 23-km. paved road linking Yosu to a pumping station at the town of Isachon. Overcoming these obstacles was a small price to pay, for the Yosa Refinery became the largest plant in the Caltex system as it eventually grew from 76,000 to 350,000 barrels a day by 1977. Through its joint venture with Honam Oil, Caltex also operated a network of 200 service stations, which garnered a 30 per cent market share.

Throughout its marketing area, the company had always been identified with the name ‘Caltex’ in the mind of consumers. Accordingly, the company officially became Caltex Petroleum Corp., effective January 1, 1968. In announcing the name change from California Texas Oil Corp. to Caltex, Chairman of the Board A.N. Lilley said, ‘Adoption of this new corporate name gives recognition to public acceptance of the long-established Caltex trademark in over 60 countries of the Eastern Hemisphere.’

Its new name notwithstanding, the company faced dramatic changes in its business as it entered the early 1970s. Until that time, Caltex’s historic connections with Bahrain and Saudi Arabia had provided the company with secure and plentiful sources of oil. But Caltex was deprived of these traditional crude sources as a result of the Arab oil embargos and the general nationalisation of company-owned assets during the 1970s. Its own exploration and producing subsidiary, American Overseas Petroleum Ltd. (Amoseas), which had been established in 1952 and had made several discoveries, alone could not make up the deficit.

For the first time in 1977, Caltex began to use oil that was not produced by either the company or one of its parents. With this change, Caltex essentially became a trading company dealing on the open market. The company opened its first trading office in Singapore in 1980. By 1983, when it moved its headquarters from New York to Dallas, Texas, the Caltex Group’s logistics and trading staffs in Dallas and Singapore used high-speed communications equipment to buy, sell and exchange crude and product cargoes to meet the needs of affiliated companies and customers on a 24-hour-a-day worldwide basis.

During this same period, Caltex strengthened its refining operations by expanding the capacity of its Yosu, Cape Town (South Africa) and Kurnell (Australia) plants and by entering into a joint venture in Singapore that gave it a 30 per cent interest in the 70,000-barrel-a-day Palau Merlimau Refinery. By 1980, Caltex had 17 refineries with a total capacity of about 1.4 million barrels a day.

The company also made several significant moves to strengthen its retail marketing operations to accommodate rapid economic growth in the Asia-Pacific region. In 1981, Caltex purchased Golden Fleece Petroleum and its 1,100 retail outlets, making it Australia’s second largest marketer of petroleum products. Also in Australia, Caltex entered into an agreement with a U.S. retailing and warehousing firm to operate a chain of franchised convenience stores in conjunction with self-service petrol stations. The first such ‘Majik Market’ was formally opened in November 1981 in Melbourne. In another innovative development, Caltex began developing retail outlets on New Zealand’s North Island to market compressed natural gas (CNG) for automotive use. This move was responsive to the New Zealand Government’s goal of converting 150,000 motor vehicles to CNG or dual operation by the end of 1985.

Caltex continued its targeted growth when it acquired the Summit Oil Co. and its 120 outlets in Thailand in 1982. The following year, the company purchased Mobil Oil’s operations in the Philippines, adding 500 service stations to its already strong retail presence in that country. Also in 1983, Caltex entered a joint venture to build eight service stations in the Special Economic Zone in the Peoples Republic of China, marking the company’s return to a nation that was just beginning to demonstrate its vast economic potential.

That same year, the company launched a New Image campaign to increase consumer recognition of and identification with the Caltex brand. The campaign featured new signs, modernised stations, and bolder colour schemes for stations and trucks. Station canopies displayed a white star on a red background with white stripes – or ‘energy lines’, as Caltex called them -- running diagonally across one corner. The word ‘Caltex’ was imprinted in black on the red background. The star, new graphics and colour scheme combined to communicate the traditional values of the Caltex trademark.

 

The new image suited a company that had weathered the difficult industry climate of the 1970s and by 1986, was entering its second half-century with forward-looking plans and an enduring commitment to the people of the 56 countries in which it operated. The company’s actions in South Africa demonstrated, perhaps better than any other, its commitment to all of the people in its operational sphere. In 1977, Caltex became a founder signatory of the Sullivan Principles in South Africa. Caltex backed up this position by providing support for education, programmes to promote black South Africans to higher positions, housing developments for subsidized home mortgages and other programmes. [For more on Caltex in South Africa, see story on ‘Community’] Caltex earned praise from Newsweek in its March 11, 1985 issue for the company’s progressive role in South Africa. As a company with deep roots in South Africa, this expression of fairness was natural to Caltex. It was the Caltex way.