Houston Uncaps A High-Tech Gusher

Dec. 21, 2004
Oil remains important, but no longer dominates the MSA's economy.

There's a town in Western Pennsylvania named Oil City -- appropriately so because that's where the oil industry started. But everyone knows that the real oil city is Houston. Ever since the fabled oil strike atop Spindletop hill outside town in 1901, Houston has been the oil capital of the world. The maze of refineries and petrochemical complexes along Galveston Bay and the Houston Ship Channel, and the gleaming downtown skyscrapers housing energy-company headquarters, make that readily apparent. Yet, it no longer is accurate to call Houston just an oil city. As it changed from a cow town to an oil town at the onset of the 20th century, it now is converting from an oil-based economy to a diversified industrial hub -- one focusing on high technology -- at the dawn of the 21st. One statistic says it all: In 1981 oil accounted for fully 86% of Houston's economy. Today, that dependence is only 52% -- and dropping. That's not to say that oil's role is shrinking in the Houston MSA. Despite the industry's current consolidation, petroleum and related energy activity have continued to expand. "That is one reason why we have enjoyed 14 consecutive years of job growth, and also partly why we are projecting further growth of 61,200 jobs this year," says Pamela Lovett, director of economic development for the Greater Houston Partnership. Manufacturing employment, she indicates, is expected to rise by 1.3% in 2000, with energy firms contributing a part. "Accelerating worldwide demand for crude oil will provide the basis for expanded exploration and production," she explains, adding that the Asian recovery likely will boost demand for power plants and other energy projects that will bring new business to Houston-based engineering and construction firms. Houston began to shed its image as an oil town a generation ago with the arrival of NASA's Johnson Space Center. A wave of contractors and subcontractors followed, launching an aerospace boom and an incipient high-tech presence in the MSA. Now, high tech in Houston has become a gusher. NASA's spending of $2 billion in R&D funds last year has given fresh stimulus to the aerospace sector. Yet that growth is far overshadowed by the explosion of two other industries -- life sciences and information technology. The presence of the world's largest medical facility -- the 55,000-employee Texas Medical Center -- has spawned some 200 biotechnology and medical-related firms in the last five years. Similarly, Compaq Computer Corp.'s establishment of its headquarters and major manufacturing in Houston has triggered an influx of more than 1,000 computer-related companies. "When I came to Houston 25 years ago, I thought I'd be hit by tumbleweed and that there'd be an oil well in my back yard," admits Paul Frison, president of the nonprofit Houston Technology Center, the focus of Houston's aggressive campaign to help high-tech start-ups. "Many people still have that perception of Houston. Boy, they're wrong!"

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