Houston Refining

To take advantage of this, Arco invested in a major expansion of the refinery that was completed in 1976, and that enabled it to process heavy sour crude to produce refined products and chemical plant feeds.

In addition, Arco's strategic planning group in Los Angeles, headed by Dr. Bob Gower, developed a long-range forecast calling for a decline in the price of crude oil.

Bob Gower's planning group was then tasked with the job of finding a way to either sell, spin off or shut down the Houston assets, which were losing on the order of $100 million per year by 1984.

Instead Gower proposed a radical plan to combine the chemical plant and refinery into a single business unit that would take advantage of operational synergies and other opportunities to return to break-even performance.

To ensure that the offering was fully subscribed, Arco also promised that Lyondell would pay out all cash flow in excess of capital needs in the form of special dividends to the shareholders.

However the Iraqi invasion of Kuwait in August 1990, and the subsequent uncertainty in the global petroleum markets damped interest in the refinery and Lyondell was forced to end discussions regarding its sale.

Prior to the IPO, Lyondell's refinery evaluations team had been engaged in a project to negotiate a long-term crude supply agreement (CSA) with a major oil producer.

Initially estimated to cost $500 million, the refinery expansion project would eventually top $1.2 billion and lead to some acrimonious relationships between Lyondell and Citgo.