Halliburton Co. surprised the energy world, members of Congress and the city of Houston on Sunday 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 oil-field 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.
On Sunday, 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.
Eyes on the East
"I think it's really just emblematic of how the oil-field 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 Sunday 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.
Big revenue source
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 other support services for U.S. troops.
While Halliburton is splitting off its KBR operation into a separate entity, Lesar's relocation prompted questions among policymakers in Washington.
"This is a surprising development," House Oversight and Government Reform Committee Chairman Henry Waxman, D-Calif., said in a statement Sunday. "I want to understand the ramifications for the U.S. taxpayer and national security."
Waxman's panel is expected to 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 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 Sept. 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 Sunday about Lesar's relocation plans.
Glimpse of the future
"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 on Sunday to discuss a report the Baker Institute has just completed on the changing role of these national oil companies.
Going to the source
Rep. Gene Green, D-Houston, said while he understands the attractiveness of Dubai, the move still runs counter to a long-standing 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. 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." Chron
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