By Jim Kennett
Houston: Halliburton Co., the world’s second- largest oilfield-services provider, will open a technology centre in India in July, drawing from a deep well of overseas engineers as it expands in the Eastern Hemisphere.
The centre and another such facility in Singapore are part of a drive by Halliburton to reduce its reliance on North America. The Singapore facility is scheduled to open in December or January,chief operating officer Andrew Lane said on 11 May in an interview at the company’s headquarters in Houston.
Halliburton is trying to expand Eastern Hemisphere operations to the point where they drive half of sales, up from 35% now. To win more business in a stronghold of Schlumberger Ltd, the largest oilfield contractor, chiefexecutive officer David Lesar is moving his office to the United Arab Emirates, making Dubai a second corporate headquarters.
“You pick up a map and you look at were the reserves are, the reserves are in the Eastern Hemisphere,” Lesar said in the interview.
The Dubai move, announced in March, drew criticism from Democrats in Congress, who suggested the company is looking for a tax haven or fleeing federal scrutiny. Some of the same critics repeatedly accused the company’s former KBR Inc. subsidiary of getting preferential treatment on U.S. government contracts in Iraq. US vice president Dick Cheney was Lesar’s predecessor as Halliburton CEO.
Positioning for Growth
Halliburton said it won’t get any legal, tax or market- access advantages with the move. For Lesar, who will remain a U.S. citizen, it is a question of winning contracts and deciding where to place the company’s top salesman.
“We have to position ourselves to grow in the Eastern Hemisphere,” Lesar said. “I thought of a lot of ways to do that, and at the end of the day, the conclusion I came down to is, I have to lead by example.”
The East, it turns out, is fertile ground for a company reliant on engineers and scientists to advance energy technologies. Lane said that when Halliburton advertised 20 positions in India for people with master’s or doctoral degrees in chemistry or chemical engineering, it got 2,300 applications. When the company sought 100 entry-level Indian engineers willing to work anywhere in the hemisphere, it received 24,000 resumes.
“Those kinds of numbers don’t exist in Western Europe and the U.S. in the current graduates which used to be the basis for a lot of our hiring,” Lane said. “So it really is, not only Halliburton, but the industry moving to where the talent is.”
Of the 14,000 or so employees Halliburton plans to hire this year, half will come from the Eastern Hemisphere. The company has 45,000 workers now.
The technology centre in Pune, India, will research fluids and chemicals, while the one in Singapore will focus on drilling and logging. A log is a device sent into a well to collect data.
Halliburton also is building four manufacturing centres, including one in Mexico that is set to open this month and plants in Brazil, Singapore and Malaysia. Company spokeswoman Cathy Mann said Halliburton will employ “several thousand” workers in the facilities.
The contractor announced on 12 May the opening of its first employee training centre in Russia. For Halliburton and other oilfield-services providers, it’s imperative to have more than just a local flavor, said Dan Pickering, an analyst at Pickering Energy Partners in Houston.
Slowdown in Canada
“Ultimately, people perform best in their home market, and it’s a critical difference when you’re trying to gain business that people speak the language, not because you took a course, but because you lived it,” Pickering said. “The ability to identify and develop local executives” is vital.
Investors wary of Halliburton’s reliance on mature North American natural-gas fields, have punished the company’s stock, which trades at about 14 times estimated 2007 earnings, compared with 19 times for Schlumberger.
When Halliburton reported first-quarter earnings last month, the fastest-growing regions by sales were Europe, Africa and the former Soviet Union, followed by the Middle East and Asia. The slowest-growing region was North America.
Much of the weakness was in Canada, where the number of active drilling rigs fell 21% from a year earlier. In response, Halliburton said it would shed some Canadian workers and move equipment to other markets.
Ties to Cheney
“It’s sort of a real disaster for everybody, just in terms of the overcapacity and the lack of demand,” Lesar said.
Creating a headwind for Halliburton’s push to the east is a perception that its strength is North America, reinforced by the connection to Cheney, Pickering said. Cheney, once a name that opened doors overseas, was tainted by the Iraq war, he said.
“Cheney was useful in terms of gaining international exposure, but that asset over the past five or six years became a liability,” Pickering said.
Lesar acknowledged the image issue and insisted that the perception of Halliburton as a U.S.-centric company is inaccurate. He noted that Halliburton hires the vast majority of its overseas employees locally. Senior Vice President Ahmed Lotfy, an Egyptian, heads the company’s Middle East operations.
“Yes, we are viewed as a U.S. company, and a lot of it has to do with the fact that my predecessor is the VP,” Lesar said. “That keeps us in the news in the U.S., that keeps us tied to the administration, but we just have to deal with that.”