1.  INTRODUCTION

  The Halliburton Group of companies is headquartered in Dallas, Texas, USA. It has an annual turnover of US$16 billion (1997 figure) and has 100,000 employees in approximately 160 countries worldwide.

  In the UK the company employs some 6,000 people engaged in oil and gas industry services, and in providing a wide variety of non-oil related engineering and technical services. Halliburton Manufacturing and Services Ltd is the principal UK subsidiary of the company.

  This Memorandum has been prepared by Ian C Phillips, a British national with 20 years experience in the UK oil and gas industry. He holds a Masters degree in Petroleum Engineering (1983, Heriot Watt University, Edinburgh) and an MBA (1994, The Open University).

  Halliburton Manufacturing and Services Ltd is participating in a current applied research project to develop fibre-optic and photo-etching technologies to detect very low concentrations of oil-based pollutants in seawater. The resulting product will be commercialised by another project participant, Hook & Tucker Ltd. Halliburton is interested in taking the resulting sensor technology and packaging it for use within oil and gas wells.

  Mr Phillips was the initial sponsor of the project internally, and the first Project Manager. He has since transferred to another company subsidiary and been replaced as Project Manager.

2.  RESPONSES TO SPECIFIC QUESTIONS

2.1  How did Halliburton first learn about LINK?

  The LINK scheme was brought to our attention by a researcher at our local University, and was proposed as a possible source of funds if we were prepared to offer matching financial support.

2.2  The reasons Halliburton decided to participate

  Prime reason was an interest in the technology that was to be researched and developed. In our view the technology would be highly relevant to our business if successfully developed, but we perceived a significant risk that the proposed technical approach would fail to function in practice.

  Secondary reason was that the existence of Government funding reduced our level of financial investment to a point where the decision could be taken rapidly and locally (in the UK), rather than having to be referred to others in the USA. This generally increases the probability of the research work occurring in the UK.

2.3  How easy or otherwise did Halliburton find the initial process?

  The mechanics of the application process seemed unnecessarily complex. Specifically

—  The need to produce detailed company accounts for highly specific periods seems unnecessary. I understand the need to confirm the financial viability of the entities participating, but would have thought that the most recent annual reports plus a more general statement of current financial health from the companies auditor or accountant would be sufficient. As an alternative, why not simply use a commercial assessment agency such as Dun and Bradstreet, and charge the applicants for this "health check".

—  The forms make it difficult to communicate the relationships between participating organisations. Each applicant files a separate form, but these forms are not effectively drawn together to present a coherent picture. We spent an unacceptably long time explaining matters to civil servants when the issue was the poor quality of the forms we were required to complete.

2.4  Has our involvement in LINK met Halliburton's objectives

  Our desired outcome is the development of a particular technology and associated applications that have immediate value for the other commercial participant in the project. Our commercial interest is in taking the finished product and incorporating it as part of a wider system to be installed in oil and gas wells to enhance production and reduce maintenance costs.

  As the project is still in progress, the final outcome is not yet available for evaluation—although progress is satisfactory.

2.5  The impact that LINK has had on Halliburton

  As our investment is approximately £125,000, this project is not significant in the context of our company wide US$300 million R&D spend globally (1997 figure).

  The greatest impact that the LINK funds had was to enable UK based staff to justify undertaking collaborative research at a UK university. More commonly our company undertakes such work at US universities which have good connections with head office staff in Houston or Dallas.

2.6  What barriers prevent Halliburton from gaining more from LINK

  None related to this project.

  In general, our US ownership creates a perceived disadvantage in applying for UK government assistance. We had to carefully plan which legal entity to involve in this research.

  I perceive that the objective of LINK funding is to

—  Ensure the research is carried out in UK/EU research establishments

—  Ensure that any subsequent commercialisation of the research benefits UK employment

  I would therefore suggest that the onus should be on the project participants to demonstrate that this will be the case—rather than attempting to achieve this goal in some more oblique manner (eg insisting on UK domiciled participating companies).

2.7  Our overall assessment of the scheme

  Broadly favourable.

  Basic objective of encouraging practical, commercially relevant research within the UK is well met.

  Participation of industrial verifiers a good innovation—protects Government interest without forcing the participants to educate a technically ill-informed civil servant in the technical minutiae.

  Initial bureaucracy could do with greater clarity of aim and methodology, leading to simplification.

26 January 1999