Halliburton to move headquarters to Dubai

CEO Dave Lesar says the oil giant will maintain a Houston corporate office


By BRETT CLANTON
Copyright 2007 Houston Chronicle


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 — at least for the moment — 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 U.S. troops.

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."

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