Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside the ICE House. Our podcast from Intercontinental Exchange on markets, leadership and vision and global business. The dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism right here, right now at the NYSE and at ICE Exchanges and clearing houses around the world. And now welcome Inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
This episode is going to be released a day before the 122nd anniversary of the discovery of oil at Spindletop. That discovery simply a well spouting a hundred thousand barrels a day straight from the rocky tundra, launched the oil industry and led to the modern energy economy. It's a sector that our guest described perfectly in a speech back in 2020 when he said, "It's big, it's complicated. It sits the intersection of science, technology, economics, and geopolitics. It touches every single nook and cranny of the global economy in ways that most people take completely for granted."
Now, back in 1901, the hub of that vast network was only a small city situated on the railroad lines, but just 90 miles from those Spindletop gushers. In the century since Houston has grown from a sleeping transportation depot, moving cotton and other commodities into one of the largest cities in the country by any metric, including by the number of companies headquartered to there that are listed here on the New York Stock Exchange. The success is tied directly to the energy industry, which represents a third of the city's GDP and the focus of 85% of Houston's Fortune 500 companies.
With such a reliance on one industry, Houston is marshaling its troops to ensure that the innovation, infrastructure and planning needed to transition the global economy to a carbon zero economy is driven by local efforts. Let's set the scale of those efforts. We recently talked to Blackberry's CEO John Chen on how over the past decade he has pivoted his company from hardware firm into a leading cybersecurity and software securities company. It was a remarkable pivot for the 38-year-old company and a process in his own words that is still years from fruition.
Our guest today, Bobby Tudor, Chairman of the Houston Energy Transition Initiative, is tasked with pivoting an entire city with a GDP north of half a trillion dollars, and nearly 5,000 companies directly engaged in the oil and gas sector. Bobby forecasts that there are still decades remaining for traditional hydrocarbon industries, but considering the Herculean efforts that are going to be required, there's no time like the present to get to work on the transition. Our conversation with Bobby Tudor on the Houston Energy Transition Initiative, his career and how the city and its energy ecosystem are poised for whatever's going to happen next in the energy sector is coming up right after this.
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Sometimes the only thing standing between you and opportunity is someone who made the connection.
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Josh King:
Our guest today, Bobby Tudor is Chairman of the Houston Energy Transition Initiative and CEO of Artemis Energy Partners. Bobby was the founder and CEO of Tudor, Pickering, Holt & Company, a leading energy investment bank founded back in 2007 prior to forming TPH, who's a partner, Goldman Sachs and leader of its worldwide energy practice. Welcome, Bobby inside the ICE House.
Bobby Tudor:
Thanks, Josh. Great to be at the ICE House.
Josh King:
Your first visit to the exchange, I'm sure you've been here a couple times.
Bobby Tudor:
I've been in exchange a fair number of times. I spent several years at 85 Broad Street, just down the...
Josh King:
Down the street your old HQ.
Bobby Tudor:
Just down the street at GS, and it's always great to be back in New York.
Josh King:
First memory of being in this building or actually of just walking in Wall Street at around 85 Broad days.
Bobby Tudor:
I was a young banker working on the IPO of Newfield Exploration, and I remember being here to ring the bell. So that's a great old Houston company and happy memory for me.
Josh King:
The tradition hasn't changed much.
Bobby Tudor:
Not much.
Josh King:
So you've described Houston's dependence on the energy as being greater than Detroit's on automobiles, and this city's New York's on finance. I spoke to the city's dependence on the sector in the intro, but what is the potential impact of the town should the energy transition occur without Houston leading the way?
Bobby Tudor:
The energy business has been very, very good to Houston. Obviously, we would not be where we are without it, but in particular, just in the past decade or so, our region was the fastest growing major metro in America by a long shot as measured by GDP growth and job growth. And the source of that growth was primarily the shale revolution. US oil production went from five million barrels to 13 million barrels and US natural gas production doubled over that same period of time. And the part of the country that was the greatest beneficiary of all that was Greater Houston, Texas. So it was a boom town and it really benefited every part of our city, our philanthropic institutions, our cultural institutions, our universities, you name it. It was a great time for Houston, but we're in a different place today and our thesis is that the incumbent business will continue to be quite an important business for a long time.
The world needs it. We are good at providing it, and I think increasingly the world understands that we really need it, but it's unlikely to be the same engine for job growth in the next decade or two that it's been historically because global demand is flattening and the companies also get better at what they're doing, they do it more efficiently. So we're producing about the same amount of oil today that we were producing in 2018, but we're doing it with 20% less people. That's just efficiency. It happens in every industry, and it certainly happened in the oil and gas world.
So we need to look for other areas for growth. Perhaps the most important for us is all things energy. And by extension, all things energy transition. We really do believe energy systems are going to change and change pretty dramatically over the next several decades, and we intend to wake up three decades from now and still be the energy capital of the world. It's just going to be the world's energy systems are just going to look differently and we need to make sure we're doing today what we need to be doing to be in that spot three decades from now.
Josh King:
So Bobby, our friends at the Greater Houston Partnership help connect us with you and the Houston Energy Transition Initiative. So for our audience, can you describe who each group is and the role that both are playing in protecting the interests, not just the companies, but those hundreds of thousands of employees that are working for them that you're talking about over the next year.
Bobby Tudor:
So the Greater Houston Partnership is the primary business development economic development organization for the city of Houston. Think of it as the Chamber of Commerce on steroids. Almost all of our larger companies are members of the GHP, and we are an advocate for business, a friend of business and a voice for business. I was the chairman of the board of the Greater Houston Partnership in 2020, and the perk of being the chairman is you get to choose the area of emphasis for the year. The year before me, Scott McClellan, the chairman, focused on public education, the importance of public education to the business community and to Houston and what I call my Nixon to China moment. I decided to focus on the energy transition. I come from the traditional energy world. I was an investment banker to the traditional energy world, have been my whole career, but I felt that we weren't having the conversation that we needed to be having around the energy transition and that the Greater Houston Partnership was really the right forum to jumpstart that.
So I took that on with the speech that you read part of in 2020. The good news is I hit a nerve, but I hit a nerve in a good way because the broader community and the energy industry in general was clearly ready to have a very direct and open conversation about the challenges of the energy transition and the role that our companies in Houston play in that we formed something called HETI. The Houston Energy Transition Initiative. It's under the umbrella of the Greater Houston Partnership. We have a steering committee of about 25 companies representing everyone from the super major oil companies to the big services companies, to the power companies, to the solar companies, to the wind companies, et cetera. And we are working very collaboratively to drive all of this forward in Houston.
Josh King:
So we're going to talk about this a little bit more. You're a native Louisiana guy, more of a immigrant to Houston, but think about the Greater Houston Partnership and the people that you've met along the way. Do the folks and your colleagues point back to some real pioneers of bringing the business community together that you look back to as mentors and seek counsel from as you're leading it into the sort of middle of the 21st century?
Bobby Tudor:
Yeah, there's a great tradition of business leadership in Houston that goes back really to the days of Jesse Jones. And Jesse Jones was a very famous early figure in Houston and in the days of smoke fill rooms at the Rice Hotel, Jesse Jones would gather business leaders and big decisions would be made. The world has moved on from that, but the business community in Houston continues to be a really, really important voice. Houston's a commercial place if you've ever been there. It kind of feels that way when you're in Houston, Texas. And I would say business leaders in Houston feel a real responsibility to be engaged in the community in a way that's perhaps a little different from many places in this country, especially the very large metros. And to be leaders and to be engaged on not just on issues that affect business, but on issues that affect everyone in the community.
Josh King:
So mentioned that Houston is your adoptive home, but you and your wife, Phoebe grew up in Pineville, Central Louisiana. What brought the Tudor's and the future Tudor's to the area, and how did you guys meet?
Bobby Tudor:
I first came to Houston to go to college, so I went to Rice University on a basketball scholarship. That's what actually brought me there. My wife and I were high school sweethearts. She went off to the University of Virginia and we got married about a month after she graduated. She was one year behind me and moved to Europe where I was playing professionally. I went back to grad school and then after grad school joined Goldman Sachs in New York City. So moved here and then I raised my hand about four years into Goldman Sachs when they were looking for someone to move to Houston to open a banking business. And I felt like that's a place where I would have a competitive advantage. We knew we would love living there.
Like many young immigrants to New York. We had had our first child in New York City and we're starting to think about, "Oh, do we move to the suburbs? What do we do?" And Goldman Sachs said, "What about Houston?" And we said, "Let's go." So that's really what brought us to Houston. I spent 10 years there with Goldman. We then moved to London for five years, and then when I moved back from London is when I left to start TPH.
Josh King:
So I want to stick on that moment of some of these sort of life decision moments that you just sort of went through really fast that they're worth unpacking a little bit. So you're playing hoop in Pineville, people must expect that you would play for LSU, the hometown team. Why did you decide to go to Rice and across state lines?
Bobby Tudor:
Well, I came from a big LSU family actually, and my younger brother played at LSU. He was on their first final 14. My dad had been a tennis star at LSU. Both my parents went there. My mom was the homecoming queen, so I was the black sheep deciding to leave. I was looking for an elite level educational institution and one that paired that with high quality athletics. And as I looked around the country, I felt there were a very short list of institutions that kind of met those requirements, and I decided on Rice and had a great experience and love Rice and have continued to be involved.
Josh King:
So you played for four years for the Owls who now play on Autry Court in the Fieldhouse called the Tudor Fieldhouse, I think. And then while you were on a Fulbright scholarship, you played two more years at Turnerschaft Raiffeisen in Innsbruck. How did that experience prepare you for business playing in Austria and navigating both working on a team and also playing with international competitors?
Bobby Tudor:
Well, I'm not sure, it prepared me for business per se, but it helped me grow up. It's quite an experience to land in a foreign country, not knowing a word of the language and needing to make a life for yourself. And it was a great adventure, really glad I did it. Had a wonderful experience, made great friends, played basketball all over Europe and decided that two years of that was enough and went back to grad school. But it was a life-changing experience for me, and it was really kind of my basketball life that brought me there.
Josh King:
So you mentioned your ongoing connection to Rice just before we move on a little bit, a survey of the role to the educational institutions around Houston play now and are going to play in terms of turning out the talent that are going to be needed for the energy transition.
Bobby Tudor:
Our former president at Rice, David Leebron often quotes, I'm not sure who was the source of the quote, but he says, "The best way to build a world-class city is to start a great university and wait 300 years." And Rice is now about a 100 years old and has been a really, really important piece of the Houston scene for quite a long time, is one of the finest research universities in America.
And Rice's success or failure is highly tied to Houston's success or failure. And we at Rice really do recognize that Rice is an important part of the higher education scene in our region. Certainly, not the only part. University of Houston is a growing and dramatically improving public university. Texas A&M University, one of the largest research universities in the country is just about 80 miles or 90 miles or so up the road. University of Texas has a large presence in Houston, Texas Southern University, Prairie View A&M University, all important institutions to Houston.
And one of the goals of HETI is to get that group of institutions highly engaged and coordinated on all things energy transition. And we are having great success in doing that. They are enthusiastic partners and really important to what we're doing.
Josh King:
So continuing on unpacking some of these major life moments that you moved through pretty quickly. You returned after those two years playing hoops in Salzburg. You came back to Louisiana and got your law degree from Tulane. But to quote in an article that Pete dug up from 2012, it said by the time he graduated from law school, Bobby Tudor realized that he didn't want to spend the rest of his life as a lawyer. So why didn't the law suit you, and how did that get you up to 85 Broad Street?
Bobby Tudor:
Well, legal education suited me quite well actually and joined my law school experience. I just decided that I didn't want to be a practicing lawyer and I wanted to do something different. And I had the true story here is that my wife had supported us through those years. It was her turn to go to grad school, the best program in the country, and what she was interested in, which is architectural historic preservation, was at Columbia. And she said, "We're going to New York, you need to get a job." And I decided that I didn't want to be a lawyer and I was going to take a different path. I had a friend who had spent the summer the previous summer working in finance at Goldman Sachs and he's... I was talking to him about it, and he said, "You should take a look at this. It's actually a really fun industry."
And the more I dug into it, the more I thought it would suit me quite well. One of the jokes I often made when I was recruiting young people into investment banking is that it's really great for people with short attention spans because it's a very, very dynamic business where you're constantly juggling things. I also like the fact that it had a meaningful sales component to it in the sense that it's really advisory in nature. At least the part of the business that I was in is advisory in nature. And you have to convince people often people 30 years your senior that they need to take your advice and it's in their interest to take your advice. And so it was a wonderful career for me. I love doing it. Goldman Sachs was an amazing place to be. And then I had a whole second chapter with TPH and then subsequently Perella Weinberg after we merged TPH into Perella Weinberg.
So it was a wonderful professional experience to me. I say that I can count on one hand the number of mornings when I rolled over in bed and said, "Oh, I just don't want to do this." I never felt that way about my work and I feel very fortunate in that regard.
Josh King:
In terms of the agreement you, and your wife made to come up to Columbia, how have the architectural historic preservation opportunities been in Houston after she got the-
Bobby Tudor:
Well, actually, it's interesting. It's good. People don't think of Houston as friendly to preservation and friendly to Houston. We're very modern city-
Josh King:
Minute Maid Park looks like-
Bobby Tudor:
... a better forward-looking city.
Josh King:
... fits well into the neighborhood.
Bobby Tudor:
Well, it's funny, her current project is try to save the Astrodome, the eighth wonder of the world-
Josh King:
Absolutely worth saving.
Bobby Tudor:
... if you remember. And probably the one structure in Houston that people from outside of Texas would actually recognize as a Houston structure. She's the vice chairman of the National Trust for Historic Preservation in Washington DC and has been very active in that world.
Josh King:
What would she say is the best use of the Astrodome or method of preserving?
Bobby Tudor:
Something multipurpose that engages the public broadly. It's a public facility. It's owned by the citizens of Harris County. It's owned by Harris County, but it's a big expensive project. And so finding corporate partners or other partners to help make that happen is the challenge. But she's working it really hard and is confident that she'll get there.
Josh King:
That journey that you and she have been on around the turn of the century, 2000, takes you back to Europe to oversee all of Goldman's European business. Were you aware of the different factors affecting international markets prior to that time from your couple years in Austria, but looking forward to what eventually faces David Solomon and the firm today, the war in Ukraine, Brexit, EU policies really shaken the fundamentals of doing business in Europe.
Bobby Tudor:
Well, I had the advantage, if you will, of having worked in the oil industry, which is arguably the most global of any industrial sector in the modern economy. And so I understood why international markets mattered. All of my clients in Houston, Texas, virtually all of them did business outside of the United States and other places. And so I went into that experience in London probably with a better understanding than some are around that. That being said, there's nothing like going to a New York at a new market and having to learn it and understand it. And that's what that experience was for me, and it was a fantastic experience. I really feel like I learned a lot. It made me a better banker. It made me appreciate a whole set of business issues that I otherwise wouldn't have been exposed to. And I met a lot of wonderful, interesting people over that period of time. So it was a terrific experience. I was lucky to have had it.
Josh King:
So around the end of the '90s, Boris Yeltsin is giving way to this ex-KGB agent named Vladimir Putin, who in those kind of critical next 10 years is developing the Russian oil industry. Did you see the oligarchy developing? What was your impression of what you was seeing kind of in Eastern Europe as you're sitting in your perching line?
Bobby Tudor:
We did. Oligarchy was very much developing over that period of time. And in fact, my old colleague Peter Weinberg and I had a meeting with Mikhail Khodorkovsky in his office in Moscow days before he was actually arrested by Putin. I worked for the Russian consortium that sold a chunk of the company to BP was called TNK. And so worked on one of the bigger deals of that time in the energy business. And so it was a quick moving world. It also, when you live in London, you're much more exposed to the Middle East in general than you are when you live in the US. And so I had a better window into what was going on in Saudi Arabia and the UAE and Kuwait and Qatar and all of those places. So it was a very, very informative and important time for me. I really, really learned a lot and it served me well since.
Josh King:
I mean, you're learning so much in that situation. And then there's the opportunity that you and some fellow Goldman alums at the same time, I think probably that Hank Paulson is deciding he's going to go work for President Bush in Washington to start Tudor, Pickering, and Holt. How did you set out to do things differently?
Bobby Tudor:
Well, I'd always felt that I wanted a second professional chapter after Goldman Sachs. I was there 20 years. It was wonderful. I learned a lot. I spent the last five in London, and if you decide you're going to repatriate, which my wife and I decided we wanted to do really for personal reasons, then that comes, you decide. "Well, I want to repatriate back into my old world, or I want to start something fresh and new." And so I felt that it was kind of the right time. If I was going to have a second chapter, I was the right age to have a second chapter. And I'd always felt that there was room for a boutique energy focused investment bank. That market wasn't being particularly well served. There was one called Petrie Parkman & Co, you may remember Petrie Parkman that sold a Merrill Lynch. There was another long-standing competitor in Houston called Simmons and Company now part of Piper Jaffray. But generally speaking, there weren't people doing it the way that I felt it should be done.
Josh King:
What was that way? What was it?
Bobby Tudor:
Well, I felt-
Josh King:
The business plan.
Bobby Tudor:
The business plan involved, number one, the importance of research. And so the energy business is a highly technical business and it evolved to a place where if you wanted to be successful as an advisor, you really did need team members who had a fundamental technical understanding of the business. And so a big part of the first wave of my hires at when we started TPH were people who had actually worked in the industry before as geologists or geophysicists or engineers.
I teamed up with Dan Pickering who had started a very successful research franchise, and then I built an advisory business kind of around that and then ultimately an asset management business around that. So it was a little bit of a different strategy. There was nothing crazy about it necessarily, but our timing better lucky than good. We got that going just as the shale revolution was taking off and just as the financial crisis of 2008 appeared, and that turned out to be actually really good luck for us because the confluence of those two things allowed us to get out in front of the shale revolution as it regarded our knowledge base and to be focused on our business during a period where most of our competitors were in the bunker.
Because if you worked at Lehman Brothers or Credit Suisse or Morgan Stanley or Merrill Lynch, you weren't sure if your institution was going to be around in the next few weeks.
Josh King:
Now I've had a conversation on this show with Steve Schwarzman talking about the moment that he left Lehman Brothers and with Pete Peterson started Blackstone and with a big empty office and wondering if he's ever going to have any clients. And this again, you're leaving the womb of Goldman Sachs and where you've been for 20 years, you're repatriating to Houston, you think you've got a different better model. Maybe you see what the shale boom is going to do for you or question whether it's going to blow you up, but what's your level of confidence at this point? Do you sort of go back and track to your days as a captain of basketball team, I know how to lead this group or saying, "This may blow up in our face."
Bobby Tudor:
Well, sometimes it's great to be young and naive, and I was probably a bit naive, but I was confident around the business model and in some sense, I wasn't totally breaking new ground. As I mentioned, there were other firms that had success and there were certainly firms in the technology world for example, that were focused on kind of single sector investment banking was also true in the financial services world. So I had a lot of confidence about my ability to do it. I had some staying power. I was very lucky because I was a partner at Goldman Sachs before the IPO at Goldman Sachs.
And so I had a balance sheet, I had the ability to take some risk around that, and I was confident that I could attract good people. Investment banking's a team sport. Yeah, no one does that individually and we went from me on the investment banking side to 40 or 50 people in a year. Dan already had the research business up and running. It was a very successful, well-regarded sort of research franchise. And so we were able to leverage that. I hired Maynard Holt who had been a Goldman colleague who I felt was kind of the best young upstream banker in the market and off we went.
Josh King:
So TPH is at the center of a bunch of deals that really shaped the shale boom in the past couple decades. Your work in 2021 to create Coterra Energy, NYSE ticker symbol C-T-R-A, I believe was the biggest of those deals. How did the firm's business change over your 14 years there, including that merger that you mentioned earlier in 2016 with Perella Weinberg?
Bobby Tudor:
Well, there were waves and the waves had to do with the way that the underlying business was changing. And so if you'll remember, the concern when we started the firm was that there wasn't enough natural gas or economic natural gas in America to feed our industrial base, and we needed to import. That flipped on its head to, we have abundant natural gas, in fact, enough. So to export it, the shale revolution fundamentally changed the game in the energy world. It attracted an incredible amount of capital. As it turned out, it attracted too much capital, but it led to a ton of new company formation. And when you're in investment banking business, you tend to benefit when you're in one of those cycles. Infrastructure had to be built out to service all of that. So there was a ton of activity in the infrastructure world, et cetera, et cetera.
So we kind of followed the waves of the business good and bad. Part of the reason we merged with Perella Weinberg in 2016 is that we felt that we needed to be more prepared for a big energy downturn. And the advisory business that comes with that tends to be in restructuring and the workout world, it's hard to build that sort of business in a single sector investment bank. But Perella Weinberg had a very good one, and that turned out to be a really kind of propitious move for us because when the bottom fell out of the energy world in 2018, the M&A business turned into a big massive restructuring business. And we captured a lot of market share associated with that because we were combining our energy expertise with PWPs restructuring expertise. So the energy business goes in waves. It's never the same. We're in a new one now.
Josh King:
Yeah, I was going to ask that.
Bobby Tudor:
Yeah.
Josh King:
I mean, it's not 2018 anymore. It's 2022, a slow year in the public markets. What are you seeing with M&A in the energy space, and do you have a projection of what 23 might bring?
Bobby Tudor:
It's actually a very healthy time in the incumbent energy space. And the M&A market reflects that sometimes in the energy space M&A slows down when you have really quick high volatility in the underlying commodity price. Because what ultimately drives value is your perception of the tail, which is to say the value of the reserves that are still in the ground when you sell the company. And the value of those reserves is highly tied to your expectation around price at the end of that period. And so when you have a lot of volatility, sometimes it's hard for the two sides to come together. I would say there's consensus around the notion that we're in a fundamentally healthy commodity price environment here for a while, and that leads to decreasing bid as spread and high levels of M&A. What is a little different is that there's just less new company formation in the business these days.
And so the old model of 2006 to 2015, which is that a private equity fund backs a management team, they go out and put together a big acreage position, drill tin wells, and then sell the whole thing to pioneer or to Coterra or to Devon. That model is a bit different because there are just fewer buyers, number one, and there's less true new company formation associated with it. So we're in a consolidation phase in the US business, both in the upstream as well as in the infrastructure space and the oilfield services space. We would expect that there will be fewer companies in the incumbent business, not more five years from now, 10 years from now and 20 years from now. And that ties very much to HETI and how we're thinking about the future of the industry because the question becomes. Well, where will the new companies be formed? What will they be doing? And what is the next engine of growth for us in the energy business in Houston?
Josh King:
I mean, shortly after that Coterra deal was announced, you and Maynard Holt announced that you're both retiring from TPH and in an article at the time you were asked about your future plans, you said, I'm going to quote you here. "I find the energy transition to be fascinating, spending more time in that debate and trying to make it better and more civil could be very fun." So no surprise that you're here today on behalf of HETI, but how did you first decide that at that moment there's going to be a retirement gig?
Bobby Tudor:
We merged the company. We were no longer in control. Yeah, we were committed to staying through the IPO of the business, which happened, and then we had to make to the decision were. Well, do we want to slow ramp off or do we want to clean, or do we want to clean break? And for a lot of reasons, we decided that the better thing was a clean break. It was better for the new management team at TPH, and it was better for us because it would also give us more flexibility to do other things. We decided to make a clean break. We gave the firm about a year's notice, and then at the end of last year left in many of these cases, we have a non-compete that runs through this year.
And so we were fairly limited in what we could do, but one of the things I could do is be really, really engaged with the partnership and with HETI on this. And so it's been a fantastic way for me to spend what I call my sabbatical year. As I said in that article, it is fascinating, it is interesting, it is fun. It's very intellectually stimulating, and I feel I have something to add and can make a difference.
Josh King:
Something to add can make a difference. After the break, Bobby Tudor, Chairman of the Houston Energy Transition Initiative and I are going to talk about the work that the initiative is doing to prepare the city and its most important industry for the future. And that is all coming up right after this.
Speaker 15:
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Josh King:
Welcome back. Before the break I was talking to Bobby Tudor, Chairman of the Houston Energy Transition Initiative about his career. So Bobby Houston's companies filled with some of the brightest minds that have long focused on innovations in the extraction and use of hydrocarbons. Does that give the region an advantage for building the infrastructure that's going to be needed for renewables, carbon capture and other energy transition technologies?
Bobby Tudor:
Yes, we think undoubtedly it does for a handful of reasons. One is where the talent is. So we have more engineers per capita, particularly chemical engineers per capita. We have more chemists, we have more project managers. We have a critical mass of talent that's relevant not just to the old energy world, but to the new energy world that we think gives us a big advantage. We also are well located for it. We have by tonnage, depending how you measure it, the first or second largest port in the United States at this point. We have great geology to do carbon sequestration. We have tremendous infrastructure already in place. Over 60% of all the hydrogen pipelines in America are in Greater Houston, Texas. Pause on that for a moment. You hear a lot about the hydrogen economy and the importance of the hydrogen economy. Well, we produce 44% of the nation's hydrogen is produced in Houston, Texas today.
We also have a very business friendly ecosystem. We're good at permitting projects. Texas is the largest wind power producer in the country, currently the second largest solar power producer. We think we'll be the leader by the end of 2023. So we have access to relatively inexpensive renewable power for a lot of reasons. We're very well positioned here and honestly, we just need to make sure we don't blow it.
And look, we're not well positioned in every single part of the new energy economy. There are areas where Silicon Valley or Boston or others may be a bit ahead of us. But when you put together our intellectual capital both within the companies, within our universities, within our philanthropic community, within our policy community, we like what we bring to the table and part of the challenges to make the rest of the country understand that.
Because I think to some degree, not only do a lot of people on both coasts not see Houston as a partner in the energy transition, they really see it as an impediment to the energy transition. And that's just not true. If you look at where true R&D is happening related to the energy transition as much or not, if not more of that happens in our market as any other place in the world. And it needs to, it has to. This energy transition is not going to happen, at least not on the pace that we need it to happen without the enthusiastic partnership of our incumbent industry. And we are here to say that's what we have, and we're going to turn that into money, but we're also going to turn it into much, much lower CO2 emissions, not just in Houston and not just in Texas, but globally, because our business really does have reach around the world.
Josh King:
Former Governor Perry, Governor Abbott, Senator Cruz, Senator Cornyn, have they been effective advocates and ambassadors for this in Washington? Could we do more on a bipartisan basis to create a better awareness of Houston's positive role?
Bobby Tudor:
Yeah, I think, we can do better on a whole range of fronts. I think our political leadership are good advocates for our business community, and the proof is in the pudding. There's a reason we have more wind power than any other state in the country. There are multiple reasons for that. One of it is the wind blows a lot in West Texas in particular, but another is we're really good at permitting and we can get projects built in a way that many parts of the country cannot get projects built. And so I think exporting some of that to the rest of America would be a healthy thing for the energy transition. But we certainly need all hands-on deck when it comes to making this happen. And we feel that that's moving very much in that direction in our market anyway.
Josh King:
In the private sector, we talked about the public sector for a second, but in the private sector, Jerry Jones has been a guest in this program, and as you can imagine, we probably talked a lot about football and the Cowboys, but we also talked a lot about natural gas. And speaking of infrastructure, what role does the Houston expect LNG to play in the transition considering the investment into pipelines over the past decade that you mentioned?
Bobby Tudor:
Well, a huge role. The lowest cost natural gas source in America is in the Haynesville. In some places, the Marcellus as well. But in the Haynesville, the Haynesville shale trend is immediately adjacent to the Gulf Coast. We have good infrastructure built out and we can get that gas to LNG export terminals as cheaply and efficiently as anywhere in the world. So there's been an explosion of LNG activity. There continues to be more. We saw new announcements this morning from Sempra actually regarding two very large new kind of offtake contracts that they've signed in Europe.
So the LNG business is a big important business, will continue to be, we think, for a very long time. And it is a critical part of the energy transition story, particularly in emerging economies in Asia. You have to remember that there are big parts of the world that just don't have fossil fuels. I was recently in Japan, and you're reminded of that when you're there. The same is true in South Korea. And so they are dependent on imports and the development of renewables and nuclear, all of those things to power their economies. And so the export capability of the US and natural gas is a really, really important piece of the puzzle. And once again, the world capital of that is Greater Houston, Texas.
Josh King:
Decarbonization, we throw that term around a lot used to describe both a move away from energy that uses carbon as a source and things like offsets capture other methods of aimed at reducing the amount of free carbon in the air are both part of your plans, and how do you view their relationship?
Bobby Tudor:
Yeah, the way we see it is that there are sort of three buckets in Houston. One is the traditional incumbent oil and gas world who are addressing the first part of the dual challenge. The dual challenge is we have to supply reliable, affordable, and secure energy to the world today. The second part of the challenge is we have to drive down CO2 emissions and other emissions, methane, other emissions aggressively while we're providing the world of affordable, reliable energy. It is a tough task and it's going to take a whole range of companies to make that happen. So some of our companies in Houston are just focused on the first, and they're going to keep doing what they're doing, which is to produce oil and gas and provide to a world that needs it. They're focused on doing that more cleanly and driving down their scope one and scope two emissions.
There's then a second bucket of companies who were doing both, which is to say they're participating in the incumbent business, but they're also pivoting their business models to invest in newer technologies, whether it's CCUS or hydrogen or battery technology or biofuels or you name it. Those are mostly the major oil companies and major services companies. So BP, Shell, ExxonMobil, Chevron, Total, Eni, et cetera, Schlumberger, Baker Hughes, I put in that same bucket. The big petrochemical players, Dow, Lyondell, Westlake, many of whom I'm sure, or New York Stock Exchange listed companies. And then there's a third bucket of companies that they tend to be earlier stage companies, innovators focused on just the new thing. And the truth is we need all three of those and we have all three of those in Houston, and we're continuing to build that ecosystem.
Josh King:
So let's talk about another bucket of those companies that you may be referring to. In November, you published an op-ed where you lay out the state's head start on implementing a hydrogen economy titled of your piece was Texas has the chance to become a hydrogen energy hub. So why is Texas poised for this and what role do you think hydrogen is going to play as both part of the transition and a long-term carbon zero goal?
Bobby Tudor:
Well, with regard to the first part of your question, we're going to be a hydrogen hub because we already are a hydrogen hub. 44% of the nation's hydrogen is produced in Houston, Texas today because of the Houston ship channel. As I mentioned before, it's the largest contiguous industrial complex in America. We have a lot of hydrogens that's produced basically in the same place that it's consumed. That's a big advantage because you don't have to build a bunch of new infrastructure to move it. We do have hydrogen-based infrastructure in Houston, as 60% of all hydrogen pipelines in the country are in our region, and we have a massive network of natural gas pipelines, many of which can handle up to about 20% hydrogen in those pipes. So we're already well positioned for that. However, to be a clean hydrogen hub, we're ultimately going to need to be able to produce that hydrogen via renewable power as opposed to via natural gas.
We think the intermediate term will be more blue hydrogen with natural gas. But we think as infrastructure gets built out, and as new projects kick in over time, more will be green hydrogen, which is to say the hydrogen created with power from renewable energy. So when you have a massive industrial complex that can use it, when you are in a place that has the lowest cost renewable power and the lowest cost natural gas in America, you are advantaged. We also have access to export. So products that can be created via hydrogen include ammonia, for example. And we think there's going to be a very large market for ammonia export around the world, and we're very well positioned for that. So we like where we are in hydrogen, but-
Josh King:
We're forecasting about 180,000 jobs in hydrogen by 2050.
Bobby Tudor:
We think it could be a really, really large market.
Josh King:
We've talked explicitly about three of the four working groups of the initiative, but not the one closest to your career experience. Bobby, the Houston Energy Transition Initiative released a plan around position in Houston as the financial hub of the energy transition. What's it going to take to unlock the capital needed to make this happen?
Bobby Tudor:
The IEA says, to meet Paris climate goals, we need to be spending something like three and a half to $4 trillion a year globally to retool the world's energy systems. We're currently spending about one trillion, so we're two and a half to three and a half trillion per year short. So it is going to take a lot of capital to make this happen, and the capital is going to need to come from many different sources. It's going to need to come from governments, but it's also going to need to come from markets and to be able to access the kind of capital we need from markets, we need to continue to drive down the cost and improve the fundamental underlying economics of many of these technologies. Houston, interestingly, really did become the financial center of the shale revolution. If you were a private equity firm or venture capital firm looking to invest in that space, you felt like you really needed to be in Houston, Texas.
We think the same is true with regard to energy transition related companies, and we're making sure that the financial community sees that and understands that because we want to make sure that, as I say, we continue to have that sort of leadership position when it comes to financing the energy transition. It's going to take everybody. It's certainly going to take New York in a really, really big way, but it's also going to take London and it's going to take the UAE and the inconvenient truth is that it's also going to take consumers. And one of the parts of the conversation that needs to be had more explicitly is that if we're going to make the progress, we need to make on the pace we need to make it's going to cost more. And the question is there ultimately appetite for that? We see right now the disruption that higher cost energy has around the world. We know that there's no one issue that unites politicians like high-cost gasoline. And so we're wrestling with all of that, and Houston's going to be right in the middle of that.
Josh King:
So we've been so focused on Houston itself. Just want to expand the geographic aperture just a little bit. A lot of us were glued to our televisions in 2017 as Hurricane Harvey decimated the seacoast area making its way into Houston. We've seen the Astrodome, as we talked about earlier, used not only as a place where great sporting events happened, but as a refuge in some of these great disasters that same year, Bobby, 2017 you came back to Louisiana to address the energy transition at the Alexandria Downtown Rotary Club. You told the crowd that global demand for hydrocarbon fuels like oil and gas will grow for another 25 years, but not forever. How can Houston and the work that you're doing help ensure that the hundreds of small towns along the Gulf Coast aren't left behind?
Bobby Tudor:
It's interesting, there's good precedent here to look at what happens to the smaller energy focused communities around the world when we have big periods of price volatility, and typically it's ugly, right? Because what happens is companies, when they go through big periods of price volatility tend to consolidate to home office. And so Midland sufferers, Odessa sufferers, Tulsa sufferers, Oklahoma sufferers, Lafayette suffers, Corpus Christi suffers. And similarly, when we have an expansive period, all those people gain, we are in active dialogue with those communities and talking with them about how they can participate and should participate in this energy transition. And there are all sorts of ways to do that. So if you're Midland-Odessa, for example, there's no reason you shouldn't be a major player in the wind business because West Texas generally is a big center for that. If you are a Corpus Christi or Beaumont or for that matter, Houma of Louisiana or Morgan City, the offshore wind industry is going to be a very big growth space.
And in the same way that those towns have been important bases for the offshore oil and gas industry, they can be for the offshore wind industry as well. The challenges here are immense on many, many levels, and there's human cost associated with those challenges. And one of the things we're focused on in HETI is wrestling with all of those issues. They get kind of broadly lumped under something called climate justice. And climate justice can mean a lot of different things to a lot of people. It ranges from, well, I'm building a new big electrolyzer or ammonia plant immediately adjacent to a disadvantaged community. What are the cost to them? How do we mitigate the cost to them? That's one piece of it. Another piece of it is, well, global oil demand is going down. We're going to need fewer drilling rigs, we're going to need fewer track frat crews.
Those are guys with a pickup truck in Odessa. How do we get them retooled to participate in the new energy economy? Another piece of it is price, right? Higher energy costs are effectively a highly regressive tax. And for people at the bottom end of the socioeconomic spectrum, it hurts them a lot worse to be paying more for electricity or natural gas or gasoline or diesel. And so thinking about that and the context of the pace of the energy transition is also relevant. So part of the reason I said this is fascinating and fun and interesting and challenging and difficult and maddening, is that you're trying to solve for a lot of things at one time in energy systems that by definition are very slow to change because it's the physical world. It has to do with moving things. So for example, part of the reason I'm very bullish on CCUS is that I just think completely the world's energy systems is just too expensive and will take too long.
And we have to find ways to leverage our excellent infrastructure. The hydrogen economy is a good way to do that. CCUS is another good way to do that, and they're more examples as well. So a lot of moving pieces, and we need everyone leaning in to help. And at the same time, we need to provide affordable, reliable, and secure energy today. And that means we need oil and gas production and we need to be supportive of those companies, and we need to have them understand that what they're doing is critical, not just to people's economic kind of wellbeing today, but to the future, and that they too are partners in meeting this dual challenge of providing that reliable, affordable, and secure energy today, while at the same time dramatically driving down CO2 emissions.
Josh King:
In this sort of broader rubric of climate justice on an international scale, changing climate impacts every corner of the globe. In September, Bobby, you spoke at the Houston African Energy Summit, Chevron that's NYSE, ticker symbol CVX was the title sponsor of the meeting of government officials and energy executives from across Africa. Are there other plans for Houston to directly engage with your international stakeholders?
Bobby Tudor:
Yes, very much. And we are engaged with international stakeholders. Houston is one of the most diverse cities in the country, arguably the most diverse in a balanced way. It's also heavily connected internationally because of the energy business. I mean, the number of people that you come across in Houston who have lived outside of this country is very high, and the reason it's high I is because of the oil and gas business. Because Houston is the intellectual capital of all that, we are connected. We're connected to West Africa and Sub-Saharan Africa, we're connected to Malaysia and Indonesia, we're connected to Australia, we're connected to the North Sea, we're connected to the Eastern Mediterranean, et cetera.
And so, one of the things we hope to do at HETI is be an inspiration for and share kind of best practices and knowledge with people around the world who are wrestling with these issues. The issues in Africa are many ways different from our issues. They account for about 3% of global emissions on the entire continent, yet they suffer the negative effects of climate change in an outsized way. And so helping them navigate all that is a really important part of the energy transition.
Josh King:
And inspiration for best practices around the world. Bobby, it's been an inspiration just to talk to you for an hour here inside the SS. Thanks so much for joining us.
Bobby Tudor:
It's been my great pleasure, Josh. Thank you.
Josh King:
And that is our conversation for this week. Our guest was Bobby Tudor, Chairman of the Houston Energy Transition Initiative and CEO of Artemis Energy Partners. If you like what you heard, please rate us on iTunes, so other folks know where to find us. And if you've got a comment or question you'd like one of our experts to tackle on a future show or guests to have on the show like Bobby Tudor, which came in from a loyal listener of ours, email us at [email protected] or tweet us @ICEHousePodcast. Our show is produced by Pete Ash with production assistance from Ian Wolff. I'm Josh King, your host, signing off from the library of the New York Stock Exchange. Thanks for listening. Talk to you next week.
Speaker 1:
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