COVER STORY, AUGUST 2012

FUELING GROWTH
Energy companies absorb large blocks of office space, expand Texas operations.
John Nelson

A rendering of ExxonMobil’s new office campus in The Woodlands, which is scheduled for first occupation in early 2014. The campus will be expanded even further to accommodate transplanted employees from Virginia and Ohio.

The Lone Star State has been at the epicenter of the energy industry since January 1901, when drillers struck oil at Spindletop near Beaumont. To this day, the oil and gas industry is inextricably linked to job growth and real estate activity across Texas.

Texas has a net job creation of 140,500 jobs year-to-date as of June 30, according to Newmark Grubb Knight Frank and the Bureau of Labor Statistics, and CNBC selected Texas as the No. 1 Top State for Business in 2012 due in part to the state’s healthy job market. The energy sector played a big role in the distinction, with the Lone Star State adding 7,800 mining and logging jobs, including oil and gas extraction, which represents a 12.6 percent growth compared to this time last year.

Industry giants such as ConocoPhillips, ExxonMobil and Halliburton call Texas home, and their local operations have expanded into more office space. Several firms have either consolidated regional offices in Texas or have hired more employees, necessitating additional office space to accommodate the influx.

“Texas has long been the hub of energy resources and the companies that develop them, so it is natural that many of our operations are located here,” says Susie McMichael, spokeswoman for Houston-based Halliburton, a global provider of products and services to the energy industry.

The Eagle Ford Shale play, an area in south Texas with deposits of natural gas harbored in shale formations, has been a major attraction for development corporations. Eagle Ford is the most active shale play in the world, with more than 250 rigs operating on the play. Last year, the play had an approximate $25 billion impact on the South Texas economy.

To serve its clients in the Eagle Ford Shale play, Halliburton is developing its South Texas Operations Hub in San Antonio. The 400,000-square-foot facility will support eight or more of Halliburton’s business lines and house 1,500 employees.

Halliburton’s 1 million-square-foot Houston headquarters is undergoing an expansion, which includes the addition of a cafeteria and child care center.

“Halliburton’s geographical footprint and growth are primarily driven by our customers’ activity,” explains McMichael. Thus, the company wanted a San Antonio operation to cater to those businesses. In choosing San Antonio, the city’s labor market was appealing for the positions Halliburton needed to fill, ranging from management to chemists to truck drivers.

“We were attracted by a strong workforce. It has a diverse pool of talent, including the veteran population and their transferable skills, as well as the graduates from some of the top Texas universities in the surrounding areas. There’s also the local support and infrastructure that are already in place,” says McMichael. Halliburton is also developing a new facility in Zanesville, Ohio, to support activity in the Utica Shale play and expanding its North Dakota facilities to support activity in the Bakken Shale play.

In one of the most massive office developments in recent memory, Houston-based ExxonMobil recently announced its intention to expand its office campus under construction in The Woodlands to house employees consolidated from its Fairfax, Virginia, and Akron, Ohio, offices. The Woodlands office campus has been under construction since 2011 and is expected to accommodate approximately 10,000 employees upon completion.

“[The new campus] will enable ExxonMobil to continue to provide an innovative and collaborative work environment and attract the best talent for the future,” says David Eglinton, media relations manager for Exxon Mobil Corp. The firm also plans to develop a new chemical plant in Baytown that will employ up to 350 people. Halliburton, like ExxonMobil, is making changes to its existing headquarters in Houston.

“We are expanding our U.S. headquarters. The 1 million-square-foot facility located on 116 acres in North Houston houses approximately 2,200 employees and includes four new buildings and two new parking garages,” explains McMichael. The facility will add a new technology center, cafeteria, fitness center and child care center.

One of the main factors leading to strong job growth in the industry is the high oil prices in 2011 and 2012, despite some recent drops. In March, the NYMEX Crude Future was above $105 per barrel, and the price is currently $89.90 per barrel as of this writing. The high prices have given oil and gas companies the incentive to expand their operations due to a more lucrative revenue stream.

Houston, which is leading the state in job growth, is widely regarded as the energy capital of the world. The industry’s impact on the local economy cannot be overstated. There are reportedly 5,000 energy firms doing business in Houston year-round. The energy sector made up 27 percent — or approximately $108 billion — of Houston’s total gross regional product in 2011, more than any of Houston’s other core industries.

Houston’s office market is indicative of the impact that the energy sector is having on the city. Oil and gas companies have led the way in the 2.4 million square feet of positive absorption in Houston’s office market so far this year, according to Colliers International.

Phillips 66, Murphy Oil, Worley Parsons, Mustang Engineering, Chevron, Rosetta Resources, Atwood Oceanics, Halcon Resources, Empyrean and Talisman Energy have all signed new leases or renewed leases for office space in the city in the past few months.


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