Halliburton Co. surprised the energy world, members of Congress and
the city of Houston today by announcing it will open a new corporate
headquarters in the United Arab Emirates and relocate its chief
executive officer there.
The world's second-largest oilfield services company and biggest
U.S. contractor operating in Iraq, said the new office in Dubai will
help strengthen its presence in the Middle East, Africa and the Far
East, where its business is growing.
The move raised questions about Halliburton's future in Houston, the
company's corporate home since relocating from Dallas four years ago.
And it sparked concerns on Capitol Hill about the national security
implications of such a change.
Today, the company posted a press release
on its Web site saying its chairman and CEO, Dave Lesar, had announced
that he would be relocating to Dubai to open a "corporate headquarters
office." Lesar made the announcement at a regional energy conference
being held in the Kingdom of Bahrain.
Halliburton, however, will still maintain a corporate office in
Houston, company spokeswoman Melissa Norcross said. And several top
executives, including the company's chief operating officer and chief
financial officer, will remain here.
When asked if there would be layoffs among the firm's roughly 4,000 Houston employees, Norcross said, "absolutely not."
Halliburton officials skipped some of the corporate courtesies that
would usually attend such an announcement, failing to notify Houston
Mayor Bill White and other community leaders in advance.
White said Sunday he was not concerned about the move because he
believed it would have little impact on Halliburton's local employment.
"Where a particular CEO chooses to spend his time is not something I think I would get involved with," White said.
The move comes as some of the largest oil-field services firms are
eyeing growth in the Eastern Hemisphere, where state-owned oil
companies are paying top dollar for western expertise that will allow
them to unlock oil and natural gas reserves.
"I think it's really just emblematic of how the oilfield services
business is moving West to East," said Bill Herbert, industry analyst
with Simmons and Company International in Houston.
Halliburton said the move to Dubai is part of a previously-announced
strategic plan that calls for expanded relations with state-owned oil
companies and direct more resources and investments in growing the
company's business in the Eastern Hemisphere.
"The Eastern Hemisphere is a market that is more heavily weighted
toward oil exploration and production opportunities and growing our
business here will bring more balance to Halliburton's overall
portfolio," Lesar said today in a statement.
Moving Lesar to Dubai highlights the region's contribution thus far
and potential to the company going forward, said Dan Pickering,
president of Houston-based Pickering Energy Partners.
"My gut reaction is that Halliburton is telling you that the Middle East is important to us," he said.
More than 38 percent of Halliburton's $13 billion oil field services
revenue last year came from sources in the eastern hemisphere, where
the firm has 16,000 of its 45,000 employees.
Pickering cautioned from viewing the opening of the Dubai office as
a first step in moving the entire company out of the United States.
That would be a large distraction and wouldn't make sense, given that
more than 50 percent of the company's business still comes from North
America, he said.
And Ã¢â¬" at least for the moment Ã¢â¬" Halliburton is not just an oil-field services firm.
Through its KBR subsidiary, Halliburton also is the Pentagon's
largest private contractor operating in Iraq. Under a logistics
contract with the Army valued at more than $25 billion, KBR serves up
meals, builds bases and provides a host of other support services for
While Halliburton is in the process of splitting off its KBR
operation into a separate entity, Lesar's relocation prompted questions
among policy makers in Washington.
"This is a surprising development," House Oversight and Government
Reform Committee Chairman Henry Waxman, D-Calif., said in a statement
today. "I want to understand the ramifications for the U.S. taxpayer
and national security."
Waxman's panel may hold a hearing on the decision.
U.S. lawmakers remain openly suspicious of the United Arab Emirates,
despite the growing prominence of its bustling financial center, Dubai.
A political firestorm erupted last year when a Dubai-based marine
terminal operator tried to take over operations at six major U.S.
ports. Lawmakers repeatedly recalled that much of the money used to
fund the Sep. 11 terrorist attacks was funneled through the United Arab
Emirates' banking system.
From 1995 to 2000, Halliburton was headed by Vice President Dick
Cheney. A spokeswoman for Cheney declined to comment today about
Lesar's relocation plans.
Political concerns aside, Dubai represents a convenient location for
an oil services company trying to win business from the national oil
companies in the Middle East.
"When you look into the future, it's really going to be these
(national oil companies) that are going to control the future
production," noted Amy Myers Jaffe, a fellow for energy studies at Rice
University's James A. Baker III Institute for Public Policy. "Who do
the oil service companies work for? They are working for the companies
that are producing the oil and gas."
Jaffe was in Dubai today to discuss a report the Baker Institute has
just completed on the changing role of these national oil companies.
That report points out that national oil companies controlled some
77 percent of the world's proved oil reserves in 1995. In contrast,
Western international oil companies hold less than 10 percent of the
global oil and gas resource base.
Rep. Gene Green, D-Houston, said while he understands the
attractiveness of Dubai, the move still runs counter to a longstanding
trend in which the energy industry has consolidated more and more
operations in Houston.
Rep. Kevin Brady, R-The Woodlands, said the news "is not surprising."
"It would make sense," Brady said, for an oil and gas company to "go
where oil and gas is," Brady said. "America these days essentially
vilifies our own energy companies."
While Halliburton officials were quick to point out that many other
top executives would remain in Houston, Brady noted: "If I were a CEO,
I'd want my top team with me."
- 104 Globalization
- 107 Energy