Global Policy Forum

By David Ivanovich

A foreign subsidiary of Halliburton Co. is poised to help develop a huge natural gas field off Iran.

Despite a Houston grand jury probe into Halliburton's business dealings in the rogue state, the company's Cayman Islands-registered Halliburton Products & Services Ltd. is in line to begin oil-field service work in the South Pars field, believed to be the world's largest natural gas field. Halliburton Products & Services is a subcontractor working for Oriental Kish Co. "Halliburton and Oriental Kish are the final winners of the tender for drilling South Pars phases 9 and 10," Pars Oil and Gas Co. managing director Akbar Torkan told Iranian state television, Agence France Press reported from Tehran.

An unnamed Pars board member told Agence France Press that the Halliburton subsidiary "had not directly signed the contract but that it had offered its services via Oriental Kish." Halliburton spokeswoman Wendy Hall said Oriental actually won the contract. "We have not signed a contract for this," she said. The Pars board member valued the deal at $310 million, Agence France-Press reported. Halliburton officials believe the value of the contract is "significantly less" than that number, Hall said. She did not provide another estimate.

The South Pars field is believed to hold anywhere from 280 trillion to 500 trillion cubic feet of gas, as well as 17 billion barrels of liquids, according to the U.S. Energy Information Administration. Halliburton Products & Services has worked on other phases of the huge offshore project, Dow Jones reported from Tehran.

Federal law prohibits U.S. companies from trading directly with Iran because of its ties to terrorist organizations. President Bush has branded Iran part of the "Axis of Evil." But foreign subsidiaries are permitted to do business with Iran, as long as the foreign entity is truly independent of the U.S. business. Halliburton Products & Services has its headquarters in Dubai, United Arab Emirates, and historically has been selling $30 million to $40 million worth of oil-field services and equipment to customers in Iran annually. "Halliburton's business is clearly permissible under applicable U.S. laws and regulations," Hall said. "These entities and activities are staffed and managed by non-U.S. personnel."

Sen. Frank Lautenberg, D-N.J., a longtime critic of Houston-based Halliburton, said the reports out of the region make Oriental Kish sound like a front company for it. "Should this be true, it only justifies more scrutiny of our questionable business activity in this terrorist nation," Lautenberg wrote in a letter to Halliburton Chief Executive Officer Dave Lesar.

Hall said Halliburton has no ownership stake in Oriental Kish. "And we certainly did not form it," she said. Six months ago, in a filing with the U.S. Securities and Exchange Commission, Halliburton revealed that a federal grand jury for the Southern District of Texas had subpoenaed documents related to Iran. Officials in U.S. Attorney Michael Shelby's office declined to comment.

Halliburton has been fielding official questions about Halliburton Products & Services since at least 2001, when the Treasury Department's Office of Foreign Assets Control made inquiries but took no further action. Then CBS News' 60 Minutes visited Halliburton Products & Services' address in the Caymans and questioned whether any business was actually being conducted there. That prompted more questions.

Treasury officials referred the matter to the Justice Department, while the Senate Finance Committee launched its own probe.

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