Dubai replacing Houston as the world's energy capital?Halliburton's statement that they're moving their "headquarters" (really just the CEO) to Dubai seems to have sparked some concerns about Houston's role as the global headquarters for energy. If you haven't caught the stories, here's one from the NY Times, the Chronicle's, and a Chronicle profile of Dubai. Almost all other employees will be staying in Houston, including the COO and CFO. From the NY Times:
From the Chronicle:
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.
“My office will be in Dubai, and I will run our entire worldwide operations from that office,” Mr. Lesar, who holds the titles of chairman, chief executive and president, said at the conference in Manama, Bahrain. “The eastern hemisphere is a market that is more heavily weighted toward oil exploration and production opportunities. Growing our business here will bring more balance to Halliburton’s overall portfolio.”
Halliburton is incorporated in Delaware and its stock is traded on the New York Stock Exchange. Mr. Lesar did say that the company was exploring the possibility of listing its shares on markets in the Middle East.
Mayor Bill White of Houston learned of Halliburton’s move only shortly before the company’s announcement this morning, said Frank Michel, the mayor’s communications director. He said he knew of no negotiations to keep Halliburton’s headquarters in Houston.
“It is such an international business; the most senior guys are always on the airplanes,” Mr. Michel said. “Having a corporate group located in the city is different than it used to be.” He noted that Schlumberger had offices in both Houston and Paris.
He said the mayor did not expect Halliburton move to “have a big impact on employment here.”
Then the hand-wringing begins:
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."
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.
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."
Texas is the can-do state. But there's no denying that Dubai has become the can-do sheikdom and a potent rival to Houston's supremacy as the center of the oil business.Time to take a deep breath folks. This is pretty clearly a business development PR stunt: give the sheiks a proud accomplishment of landing a "corporate headquarters", and get a whole lot more business thrown your way as a services company. The thin veneer of the stunt can be seen in the fact that pretty much only the CEO is "moving", and it sounds like he will still spend plenty of time in the U.S. His top executive team (the COO and CFO) are staying here.
The move of Halliburton's corporate base from Houston to Dubai is a stark example of the industry's shift in power from North America. The company is moving closer to the oil fields of the Middle East and Africa, and its big national oil firms that control financing, exploration and production.
"The business is changing,'' said Amy Myers Jaffe, a fellow for energy studies at the James A. Baker III Institute for Public Policy at Rice University. "Will Houston remain the center of the energy business? I don't know.''
Remember that energy is a talent-constrained industry right now, especially when it comes to the more advanced approaches (like deepwater and alternatives). There will be no wholesale moving of jobs from here to abroad - the talent doesn't exist over there, and most of it here is not going to be willing to move. One interesting analogy in technology is the rise of Bangalore in India vs. Silicon Valley here, but they have developed a very synergistic relationship - far from replacing the Valley as a tech and innovation capital. And this is nowhere near that level.
Dubai will be an energy hub, just like London, Paris, and The Netherlands - but it will not be "replacing" Houston as "Energy Capital". There are still vast reserves of energy in North America to be tapped: Mexico, Canadian tar sands, Rocky Mountain oil shale, and both shallow and deep water, not to mention alternative energy sources like ethanol, wind, and solar (WSJ had a recent article on Houston and alternative energy which I hope to post on soon). Houston has the talent and the technology concentration to manage large-scale energy projects here and abroad - and that won't change for the forseeable future.
If you're an "insider" in the energy industry, I'd be happy to hear your perspective in the comments.