U.S. oil services firm Halliburton Co. is relocating its headquarters and chief executive to Dubai, a move that immediately drew criticism from some U.S. politicians.
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Texas-based Halliburton, formerly led by Vice President Dick Cheney from 1995-2000, did not disclose potential tax implications of the move. The company plans to list on a stock exchange in the Middle East after relocating to Dubai, a rapidly growing commercial hub in the Gulf. Halliburton stated that the relocation aims to better position itself for contracts in the oil-rich Middle East.
"This is an insult to the U.S. soldiers and taxpayers who paid the tab for their no-bid contracts and endured their overcharges for all these years," said Judiciary Committee Chairman Sen. Patrick Leahy, a Vermont Democrat.
Rep. Henry Waxman, Chairman of the House Oversight and Government Reform Committee, may hold a hearing on the implications, according to an aide to Waxman.
Halliburton has faced scrutiny from auditors, congressional Democrats, and the Justice Department over the quality and pricing of its KBR Inc. unit’s work for the U.S. Army in Iraq.
"My office will be in Dubai, and I will run our entire worldwide operations from that office," Chief Executive David Lesar said at an energy conference in Bahrain on Sunday. "Dubai is a great business center."
Halliburton, long active in the Middle East, generated over 38 percent of its $13 billion in oil-services revenue from the eastern hemisphere last year.
Middle East Growth
"The company as a whole has continued to diversify internationally, and the Middle East is a point that they have targeted," said William Sanchez, a U.S.-based analyst at Howard Weil Inc. "They are being opportunistic in putting the CEO in the middle of the action."
Sanchez believes Halliburton’s move to Dubai is not tax-related but a strategic decision.
Alan Laws, an analyst at Merrill Lynch, said the move would likely strengthen Halliburton’s position in negotiating large contracts.
Halliburton stated it would maintain its legal registration in the United States and is not leaving Houston, its current base.
However, Lesar told reporters, "At this point in time we clearly see there are greater opportunities in the eastern hemisphere than the western hemisphere."
KBR, the engineering and military-services contractor unit that Halliburton is in the process of spinning off, is the Pentagon’s largest contractor in Iraq. KBR has booked more than $20 billion in revenues from its work in Iraq and has been the target of several investigations into its billing practices. It has also faced complaints from some U.S. lawmakers about its close ties to the Bush administration.
Oil and gas service companies have increased prices for their services over the past two years as the sector struggles to bring enough capacity online to meet rapidly rising oil demand. Many new supply projects are in the oil-producing countries of the Middle East, while Asia accounts for most of the rising demand.
Conversely, a decline in natural gas prices in the United States has raised investor concerns that oil and gas companies might cut back spending in North America.
Lesar also said he expects the price of oil to remain above $40 a barrel, creating favorable conditions for future investment in the oil and gas industry.
Published at Dubaitowa.