final thoughts on halliburton

["michael parrott" <michaelparrott@hotmail.com>]

In the past companies were vertically integrated such that they controlled
“production, transport, refining, and retail of oil” (Prindle).  After the
breakup of the seven sisters and the nationalization of oil and oil 
production
by several oil rich nations the oil industry was no longer controlled by 
fully
integrated companies.  Now that companies and countries are forced to 
specialize
certain service gaps have arisen in the oil industry.  Halliburton has 
become a
company that fills in the gaps of whatever is lacking in the major parts of 
the
oil industry.  This paper intends to address exactly what is lacking amongst 
oil
companies, oil transport, and oil producing countries in order to illustrate 
how
Halliburton operates in the real world.  In light of the way Halliburton
provides service in the real world this paper will address how likely 
certain
events of our sim-game were or were not realistic.

	Oil companies need crude oil to sell in various markets around the world.  
If
they win concessions and are allowed to produce crude oil in certain 
countries
then many of them will use Halliburton as their service provider.  A product 
of
specialization is that you will probably have higher profit margins if you 
stick
to one thing as opposed to spreading your capital with no hopes of gaining a
monopoly.  Instead of spreading themselves to thin and loosing profitability 
oil
companies will contract Halliburton to provide oil service for them at a 
cheaper
cost than producing it themselves and with less financial risk.  For 
example,
Royal Deutsch Shell “entered into a new venture with Halliburton in
manufacturing and marketing expandable casing, a move that reflects sharply
rising costs of services” (Edward Morse, Oxford Energy Forum pg 7).  In the
sim-game as in real life Halliburton proposed a deal to provide service for
Chevron that would allow Chevron to gain in profit margin and Halliburton to
profit from services rendered.

	“Governments and companies of the producing countries will increasingly 
develop
separate roles” (Giacomo Luciani, Reintegration in the International 
Petroleum
Industry, pg. 50).  Oil producing countries vary in the services they need
depending upon their economic and technological needs.  If they cannot 
afford to
pay for the production of their own oil then they will contract out oil 
service
companies like Halliburton to produce for them.  An example of a country 
that
has taken this stance is Algeria.  They had a “constantly growing need for
external resources to meet internal demands created by a growing population 
and
to defray the increasing budgetary deficit in the public sector” (Addi, Oil 
in
the New World Order pg 89).  In order to meet their economic needs they 
called
for external resources.  However, other oil producing countries have 
different
needs like technology.  “Mexico is an example of a country that produced all 
its
own oil but needed better technology in order to do deep water drilling”
(Anthill, Oxford Energy Forum pg 24).  Instead of filling this gap by 
committing
themselves to years of research, they hired Halliburton and Halliburton 
“drilled
off their coast faster and deeper than anyone in history” 
(www.halliburton.com).
It should be noted that Mexico’s state oil monopoly, Pemex, is now pushing 
the
Mexican law by “inviting foreign companies to bid on $8.8 billion worth of
multiple service contracts” (Sara Silver, Financial Times pg. 207 in course
packet).  In the sim-game the same life like scenario came up with 
Venezuela.
They signed a contract with Halliburton to use their superior technology in
order to do off shore drilling in the Orinoco belt.

	Most of the aspects of oil transport are established by individual oil
companies or oil producing countries.   However a major factor in which 
extra
service is needed is the engineering, development, and service of transport
parts and specially trained workers in order to more efficiently establish 
and
run pipelines.  An example of Halliburton’s influence of services for oil
transport would be their help in creating a pipeline in Burma.  One of
Halliburton's projects was undertaken during Dick Cheney's tenure
as CEO.  He signed a deal to build a gas pipeline from Burma to
India (www.earthrights.org).  Burma leads me to consider the main problem 
that
Halliburton has had in the real world: American sanctions.

	The U. S. Has imposed sanctions on “rogue states” like Libya, Iran, and 
Iraq.
These sanctions prevent U.S. companies from providing services in those
countries.  Because these countries hold significant oil interests U. S.
sanctions have prevented Halliburton from prospering in these markets.  
However,
in the sim-game Halliburton ignored the sanctions and went as far as 
creating
explicit contracts with these “rogue states”.  Though Halliburton would 
probably
not ignore U. S. sanctions in reality, Dick Cheaney’s former contracts in 
Iraq,
Iran, and Libya, before his inauguration as vice president, surely 
illustrate
Halliburton’s want for the release of U. S. sanctions

	 “Through complex interactions, the oil price influences the cost of 
energy,
the intensity of energy use, the viability of substitutes, long-run supply 
and
demand patterns-all of which in turn affect economic performance and 
government
policy options” (Kevin Rosser, Oxford Energy Forum, Dec 1999, pg. 177). The
beauty of a company like Halliburton is that it is not anywhere near as
susceptible to the change in the prices of oil as oil companies and oil
producers.  Halliburton can play off of whatever scenario’s these countries 
and
companies find necessary due to price.

	In the new world of oil after the age of the vertically integrated company
Halliburton has filled the void of service that these parts of the oil 
industry
have needed.  It has done this by helping oil companies that have become 
more
specialized by providing effective services like oil production, part
production, and shared technology.  Halliburton has helped oil producing
countries by producing for those that can’t do it themselves do to economic
reasons and by sharing technology with those countries that wish to do deep
water drilling.





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