Halliburton Moving Headquarters to Dubai
Halliburton CEO Dave Lesar is moving to Dubai and taking much of the company’s operations with him. Clifford Kraus of the NYT reports:
Halliburton, the big energy services company, said today that it would open a corporate headquarters in the United Arab Emirates city of Dubai and move its chairman and chief executive, David J. Lesar, there. The company will maintain its existing corporate office here as well as its incorporation in the United States.
Although the announcement of the new Dubai arrangement took many by surprise, Halliburton said the move was part of a plan announced in mid-2006 to concentrate its efforts in the Middle East and surrounding areas, where state-owned oil companies represent a growing source of business. Halliburton, which was led by Vice President Dick Cheney from 1995 to 2000, is currently in the process of spinning off KBR, its military-contracting unit, to focus on its business of drilling wells and maintaining fields for oil companies. The company did not say what implications the Dubai development might have for its Pentagon contracts.
The announcement about the Dubai move, which Halliburton made at a regional energy conference in Bahrain, comes at a time when the company is being investigated by the Justice Department and the Securities and Exchange Commission for allegations of improper dealings in Iraq, Kuwait and Nigeria. Halliburton has also paid out billions in settlements in asbestos litigation.
Halliburton officials did not elaborate today on what the shift of its top executive might mean. The move seemed to raise questions about whether Halliburton might gain tax advantages or other benefits from shifting into a foreign country with pro-business regulations.
On the face of it, the decision to move Mr. Lesar abroad appeared to have less to do with unwelcome headlines than with shifting epicenters for big energy construction projects and exploration from mature fields in North America toward the Middle East and Africa. The move especially underscores the arrival of Dubai as a center for energy deal-making and commerce, a role once solidly filled by Houston.
David Wighton and Simeon Kerr elaborate in the Financial Times:
The decision comes amid concern about Wall Street’s declining share in global capital markets activity and the growth of other financial centres to rival New York. Chuck Prince, chief executive of Citigroup, recently forecast continued “diffusion away from New York” towards centres such as London and Dubai. Goldman Sachs, which generates almost half its revenues outside the Americas, has just moved its chief administrative officer to London, reflecting the growth of its overseas operations.
Halliburton’s move is another boost to Dubai’s growing status as an international business and financial centre. Western companies have invested heavily in the booming emirate as a base from which to exploit opportunities in a region flush with cash thanks to the high oil price. Dubai has long positioned itself as a regional business hub, with a laisser faire attitude to business regulation.
The meteoric rise of Dubai’s Emirates Airline and the airport have made the city popular for companies with executives who fly around the Middle East, the Indian subcontinent, central Asia or Africa. Located amid conservative and sometimes troubled neighbours, Dubai’s political stability and tolerance of western lifestyles have made it a magnet for foreigners setting up in the largely tax-free Gulf. The government has launched several zones allowing foreign firms to circumvent laws barring foreigners owning businesses.
Sean Hackbarth figures we can’t blame Halliburton, given the negative attention the company has gotten from everyone from Rep. Henry Waxman to the Fantastic Four‘s Reed Richards. Given that so many other companies are making similar moves, though, that’s likely quite low on the list of reasons.
While I won’t pretend that I understand the precise tax implications of moving part of its operations center offshore, Halliburton will still be registered as a U.S. corporation and will continue to pay huge sums in federal taxes. Most major companies are multi-national these days and, while tax laws are undoubtedly continuing to evolve to cope with that fact, it’s simply a natural outgrowth of a truly global economy.