Travel Ban Frays Big Oil Ties In Middle East
January 31, 2017
Source: Houston Chronicle
Houston companies fear payback against U.S. drillers, suppliers.
The U.S. travel ban on citizens of seven predominantly Muslim nations could backfire on American energy companies - many with headquarters or large operations in Houston - as they try to forge delicate ties with countries like Iraq for a share of the bountiful oil fields.
President Donald Trump's executive order on Friday restricted travelers from three major oil-producing nations, Iraq, Iran and Libya, sparking international controversy and stoking industry fears that these countries could seek payback against U.S. drillers and oil-equipment suppliers.
In Iraq, some lawmakers have already called for a reciprocal ban against visa-holding U.S. travelers including contractors, a move that, like the Trump administration's ban, would stem the free flow of energy workers between the two nations and possibly slow American investment into one of the world's last big oil developments.
"It's a slap in the face and it deteriorates a lot of good will that's been built over the years between the two countries," said Subhi Khudairi, founding partner and president of Khudairi Group, a Houston-based contractor that supplies equipment and services to oil companies in Iraq. "This is just another potential barrier to progress that frankly Americans should have a piece of."
Few industries are as directly connected to the Muslim world as energy. As a result, few cities face as great a potential disruption as Houston from Trump's order, which bans visa holders from the seven nations - Iraq, Iran, Libya, Syria, Sudan, Somalia and Yemen - from entry into the United States for at least 90 days. Two major industry conferences that attract tens of thousands of participants from all over world, including the Middle East, are scheduled in Houston over the few months.
IHS CERA Week is set for early March, the Offshore Technology Conference for early May; organizers for both declined comment on the potential impact of the executive order on attendance.
Many of the region's biggest employers have operations in nations affected by the travel ban. Exxon Mobil, Chevron, Royal Dutch Shell and Marathon Oil, as well as energy services companies Schlumberger, Halliburton and Weatherford operate in Iraq. Marathon Oil and ConocoPhillips, both of Houston, have operations in Libya. Exxon also has operations in Yemen.
Unlike automakers, technology companies and financial services firms that sharply criticized Trump's order Monday, energy companies were largely silent. Nearly all declined comment or did not respond to requests for comment; the industry trade group, American Petroleum Institute, also declined comment.
Market share at stake
Kent Robertson, a spokesman for Chevron, said the travel ban hasn't yet had a discernible impact on the company, but it is reviewing the executive order to understand the implications for employees.
"Chevron is a global company that values the contributions of all employees and partners regardless of their country of origin, religion, race, sexual orientation or gender," Robertson said.
It's likely the U.S. travel ban would create a hostile working environment for American workers and companies helping Iraq's economy recover from more than a decade of war and civil strife, analysts said.
It also could give competitors from other nations, a chance to move in on the U.S. share of the market. Iraq and other oil-rich Muslim countries, for example, could retaliate against at U.S. drillers by awarding oil and gas development contracts to European rivals such as Royal Dutch Shell, BP and the French oil company Total.
"It could be a backhanded way to get back at the U.S.," said Rob Desai, an energy analyst at Edward Jones in St. Louis.
The major oil companies have largely suspended operations in Sudan, Iran and Syria. But Chevron operates and holds an 80 percent contractor interests in the Sarta and Qara Dagh blocks of the Kurdish-controlled region of Iraq. By the start of last year, Exxon Mobil controlled more than a half-million acres in Kurdistan and 10,000 acres in the Republic of Yemen.
Most of the biggest U.S. oil field services companies also have sizable footprints nations covered by the travel ban. Houston-based Halliburton has offices in Basra, Iraq, while Schlumberger had offices in Baghdad and Kurdistan. Weatherford International lists Iraqi offices in Baghdad, Basra and Erbil. Weatherford and Schlumberger also operate in Libya and Yemen.
For U.S. oil field service companies, the travel ban may not bring too strong a headwind, because many firms hire local talent overseas and typically don't send them to the United States, said Matt Marietta, an analyst at investment group Stephens. Likewise, U.S. companies don't import much blue-collar talent for the oil fields, and the only overlap is for some white-collar engineers and other workers brought over, he added.
"I don't really see a crackdown on open borders as having a big impact on the energy labor force," Marietta said. "Energy companies were already risking the lives of their employees putting people in war-torn countries. It's not going to change too much."
But Geoffrey Hoffman, director of the immigration clinic at the University of Houston Law Center, said Trump's orders could affect higher-level employees who work in the United States under H-1B visas granted to those with specialized skills. "They need managers to travel all over the world," Hoffman said of energy firms.
Immigration attorney Sarah Monty said her firm, Monty & Ramirez of Houston, helps more than 100 clients a year land work visas and work-related green cards. And Trump's freeze has them worried, she said.
"They're scared right now. Freaked out," Monty said. "My phone has been going crazy."
The freeze threatens at least two types of business-related visas: Work visas, which are temporary, and green cards, which provide for permanent residency. The process for both is grueling, Monty said.
Each company has to prove that the worker has expertise they can't find in the United States. Companies have to pay the worker above-market wages. The Department of Homeland Security and the State Department have to vet each candidate. The government application fees alone cost the companies about $3,000 per person, and take about eight months.
Monty said perhaps a dozen of her clients this year come from the seven countries outlined by Trump.
"It's a problem for Houston," she continued. "It's already so hard to get a visa. This is going to really cool the markets."