Stegemeier fields questions on air quality, taste in paint at Unocal's annual meeting.

Stegemeier fields questions on air quality, taste in paint at Unocal's annual meeting

Richard J. Stegemeier took center stage at the Unocal Corp. annual meeting last week for the first time since succeeding Fred L. Hartley at the helm of $11.3 billion (1989 revenues) oil company.

Stegemeier, chairman, president and chief executive officer of Los Angeles-based Unocal, told about 1,500 shareholders at the Pasadena Civic Auditorium that a reformulated fuel is not in the immediate offing, but that environmental issues may dominate Unocal's agenda for the 1990s.

"We live in changing times," said Stegemeier. "Unocal is moving quickly to keep abreast - and where possible, ahead - of these changes."

Unocal has announced a series of environmental programs for the Los Angeles basin, including the SCRAP program, free smog tuneups for pre-1975 cars and freeway road service, Stegemeier told the shareholders.

Though Unocal switched completely to unleaded fuels in 1986, it has not yet introduced a reformulated, less-polluting gasoline. Atlantic Richfield Co. and Shell Oil Co. have both done so.

Stegemeier said that Unocal is "waiting for the results of a joint study" among the three major domestic automakers and 14 oil companies, to be completed late in 1990 or early in 1991, before deciding how and when to reformulate its gasolines. The study examines engine performance, emissions systems and gasoline mixtures, according to Joseph Lastelic, a spokesman for the Washington-based American Petroleum Institute.

"The end product of that study should point the way," said Stegemeier. "We want to address the problem by improving the entire system, rather than just reformulating a gasoline.

The wait-and-see attitude is typical of Unocal's conservative bent, according to one oil industry analyst.

"Unocal is basically an integrated oil company on the conservative side, very studied in what they do and what they undertake," said Craig Schwerdt, an analyst with Los Angeles-based Seidler Amdec Securities Inc. "They've taken a much more conservative viewpoint than Arco and Shell in the reformulated gasolines, waiting on the sidelines to see if consumers will demand the reformulated gasolines before jumping in."

In a meeting dominated by shareholders' questions about the environment, Stegemeier also announced that Unocal has pledged $500,000 during the next five years to the new Center for Air Quality Analysis at the California Institute of Technology in Pasadena.

"This center will conduct vitally needed research concerning a number of complex air quality issues, including global warming and alternative fuels," said Stegemeier.

The total cost of Unocal's environmental push could be as high as $10 million, according to company estimates. But the company also stands to gain some green from the greening of the United States, as Unocal's 1.2 billion barrel equivalent of natural gas reserves could fetch higher prices in an environmentally minded energy market. With 28 percent of its reserves in domestic natural gas and 26 percent of its reserves in U.S. oil, Unocal is the only domestic oil company dependent on gas than oil, according to Kurt Wulff, an analyst with New York-based McDep Associates Inc.

"Natural gas is a fuel of the future," said Stegemeier to shareholders. "We believe we are in the catbird seat."

A major player in Unocal's expansion into Indonesia, Stegemeier said the acquisition of "prime license blocks in several underexplored regions of the world" may put Unocal in "the best exploratory land position in the company's 100-year history."

License block agreements with Angola, Burma, South Yemen and Syria could yield major finds, Stegemeier said at a press conference after the meeting.

"With peace breaking out all over the world, we are entering a time of negotiation," he said. "These countries need help. They need outside technology. We believe we can negotiate with them."

While Unocal has extensive foreign holdings, it had often feared to tread in countries where no other oil company had gone before, according to analysts. The agreements, with the four "bird sanctuary" countries - underexplored by the U.S. oil industry because of political uncertainty - could signal an agressive new Unocal attitude toward foreign investment in uncertain countries, analysts said.

"The lifeblood of an oil company is finding new sources," said Schwerdt. "Unocal is making a political assessment that the political climate justifies the moves into new areas. The political risks in these and other countries appear to be easing."

Continued improvements in Unocal's balance sheet make the company less vulnerable to hostile takeover, said Stegemeier. Unocal management's successful defense of T. Boone Picken's hostile 1985 takeover attempt increased its debt to $6.1 billion. Since then, management has steadily whittled its debt to the present level of $4.1 billion, with a $550 million debt reduction in fiscal 1989.

But not all was serious at the meeting. Ilene Sterling, a retired Unocal employee, made an impassioned plea to Stegemeier during the question-and-answer segment.

"President Stegemeier," Sterling said. "Unocal service stations have always been painted a beautiful white, a thing to behold...Lately, they've been painted brown. Can you change it?"

Stegemeier blamed local municipalities for the switch, saying that, wherever possible, brown would be avoided.