Hal l ibur ton 2002 HSE Annual Repor t

B E YO N D T H E R E D Z O N E

In 2002, we at Halliburton set an

ambitious goal for ourselves: To make the

oil and gas and the engineering and

construction industries healthier, safer

and cleaner because we’re a part of them.

We have successfully integrated safety

and concern for the environment into the

Halliburton values system and culture,

and we have begun to address health

issues in meaningful and proactive

ways. Our safety results, in particular,

demonstrate our success. In 2002, for the

fifth consecutive year, Halliburton posted

improved safety performance. It was also

our second consecutive year with no work-

related driving fatalities, despite putting

approximately one-quarter of a billion

miles on Company vehicles.

Exemplary performance in health,

safety and the environment (HSE)

complements our global commitment to

service quality – knowing what customers

expect and delivering it right the first

time. Our stakeholders expect us to

support their business and sustainability

goals by working without incident, com-

plying with regulations and contributing

to the quality of life in our communities,

while also creating value and achieving

profitability.

We continue to develop products and

technologies that meet these expectations

and reduce the impact of Halliburton,

our clients and our industries have on the

environment. Accolade™, Geo-Tap™ and

HYDRO-GUARD™ are examples of

products from our Energy Services Group

(ESG) that have environmentally friendly

formulations, reduce time on location and

lower resource usage and waste.

Real-Time Asset Management from

Landmark Graphics Corporation provides

remote monitoring and remote control

technology that eliminate the need for

some personnel to travel to a wellsite –

reducing the emissions from travel and the

risk of accidents. KBR, our engineering

and construction group, is a world leader

in developing processing technologies that

enable refiners and other manufacturers

to create less pollution.

Through the work we perform for our

customers, Halliburton touches the lives of

people around the world. Our employees

seek out and enjoy making personal

connections in their communities. As a

result, Halliburton employees have a

better understanding of and appreciation

for local cultures, traditions and needs.

These connections also strengthen our

commitment to conducting business with

honesty and integrity and with the highest

regard for human health, safety and the

environment. This, in turn, allows us to

do a better job for our customers.

Halliburton has room for improvement

in all areas of HSE – and plans are in

place to do better. We experienced a tragic

and senseless death last year when an

employee in Canada was attacked by a

bear on location. From this, we resolved

that Halliburton will not depend solely on

others to manage on-the-job risks.

Primarily as the result of improvements

in our reporting methods, we recorded

about 50 percent more environmental

incidents in 2002 compared to 2001. We

took appropriate action on every one of

these incidents, and none caused signifi-

cant or lasting effects. We expect the num-

ber of reported incidents to continue to

increase – not because we have more inci-

dents, but because we’re more diligent in

our reporting.

When I review Halliburton’s progress in

HSE and our community activities

around the world, I’m confident we can

achieve our goal of making our industries

healthier, safer and cleaner. Toward this

end, we’re expanding many of our HSE

efforts beyond the immediate work area

we call the “red zone.” We train our

employees and subcontractors to be vigi-

lant and safe, and now we’re starting to

share what we know with our families

and communities to reduce risks beyond

the red zone. You’ll read about some of

these efforts in this report of our HSE and

community relations activities in 2002.

On behalf of John Gibson, president

and CEO of the Energy Services Group,

and Randy Harl, president and CEO of

KBR, thank you for your interest in

Halliburton’s efforts to achieve HSE

excellence.

Dave Lesar,

Chairman, President and CEO

Halliburton

C H A I R M A N ’ S L E T T E R

H A L L I B U RT O N 2 0 0 2 H S E A N N U A L R E P O RT

A B O U T H A L L I B U RT O N

B E YO N D T H E R E D Z O N E 1

Halliburton is one of the world’s

largest providers of products and

services to the petroleum and energy

industries. At the end of 2002, we

employed a global workforce of 85,000

culturally, racially and ethnically diverse

people to provide these products and

services.

Through the work we perform for

our customers in about 100 countries,

Halliburton touches the lives of people

around the world. We help our

customers find, develop and deliver oil

and gas to power communities, indus-

tries and economies. We also build

roads, railroads, airports and other

infrastructure that connect the people of

the world. We strengthen these connec-

tions through community relations

activities in locations where we have

operations.

The Energy Services Group (ESG)

provides the broadest array of products

and services to the upstream petroleum

industry worldwide. These include

decision support services for locating

hydrocarbons and managing digital

data; creation and evaluation of the

wellbore; creation of infrastructure to

move hydrocarbons; and optimization

of hydrocarbon production.

KBR, the Engineering and

Construction Group, serves the energy

industry by designing, building and pro-

viding operations and maintenance

services for liquefied natural gas plants,

refining and processing plants, produc-

tion facilities and pipelines, both

onshore and offshore. The non-energy

business of the group meets the

engineering and construction needs of

governments and civil infrastructure

companies.

Our goal is to generate revenues

and profits that create value for our

stakeholders and provide Halliburton

with financial stability and growth

opportunities. In 2002, 67 percent

of Halliburton’s total revenues of

approximately $12.6 billion came from

international operations, compared to

62 percent in 2001.

HEALTH, SAFETY AND ENVIRONMENTCODE OF BUSINESS CONDUCT

Protection of health, safety and the

environment (HSE) is a primary goal of

the Company. The Company is dedicat-

ed to continuous efforts to make its

operations compatible with protecting

people, property and the environment.

The Company is committed to working

with its employees, clients, contractors,

suppliers, partners and customers and

with the communities in which it oper-

ates in order to achieve this goal.

All employees must conduct their

duties and responsibilities in compliance

with applicable law and industry

standards related to health and safety in

the workplace and to protection of the

environment.

The Chief Health, Safety and

Environment Officer of the Company

oversees the administration of the HSE

policy. Implementation is subject to the

oversight of the Health, Safety and

Environment Committee of the

Company’s Board of Directors. (Policy

#03-0014)

Halliburton maintains health, safety

and the environment as a core value. It

is a value that we believe is integral to all

of our business objectives, and to the

objectives of our customers. Further,

Halliburton aspires to making the oil

and gas and engineering and construc-

tion industries healthier, safer and

cleaner because we’re a part of them.

To achieve our goal of HSE excellence,

we are committed to the following:

• creating an incident-free workplace

• conducting business with no adverse

environmental impact

• integrating HSE into all of our busi-

ness activities

• defining HSE value

• demonstrating industry leadership in

HSE performance.

Defining, establishing and incorporat-

ing HSE responsibility and accountabili-

ty throughout the organization also

creates value for our customers. Just as

they rely on our expertise to make the

most efficient use of their assets, our

customers also depend on Halliburton

to help them meet their objectives of

financial performance, worker safety,

environmental protection and

sustainability.

At Halliburton, we believe that respect

for natural and human resources not

only is compatible with the economic

development of the Company, it also

can provide the foundation to cope with

the challenges of doing business today

and in the future.

2 H A L L I B U RT O N 2 0 0 2 H S E A N N U A L R E P O RT

� Launched a global “Zero

Distractions” campaign to promote

driving safety. This campaign supports

our ban on using cell phones while

conducting Halliburton business – not

just in Company vehicles, but in all

vehicles.

� Forged a corporate partnership

with the Juvenile Diabetes Research

Foundation (JDRF) that brings our

resources to bear on the global health

problem of diabetes. In Houston alone,

the Company has donated more than

$1 million in pledges and sponsorships

to JDRF in the last seven years. In 2002,

we underwrote the production of a

JDRF video for U.K. audiences.

� Initiated a program to pay

college student dues for prominent

geosciences associations. The three

organizations – the Society for

Exploration Geophysicists, the Society

of Petroleum Engineers and the

American Association of Petroleum

Geologists – have a combined global

membership of 8,700 students.

� Reduced the volume of obsolete

chemicals in ESG operations by 70 per-

cent worldwide. With fewer chemicals

stored at our facilities, there is signifi-

cantly less risk to employees and the

environment from these chemicals.

� Achieved ISO 14001 certification

in Norway for Operations and the

Production Enhancement product

service line for both onshore and off-

shore operations. Norway’s operations

join various product service lines and

projects in Brazil, Alaska, Belgium and

Algeria that are ISO 14001 certified. In

addition, the KBR Offshore product

line is ISO 14001 certified around the

Villahermosa, Mexico –Community defensive driving

West Venezuela – PDVSA safety award

Houston – Zero Distractions

Oklahoma – Marathon Oil Company award

Rio de Janeiro, Brazil – Flood disaster relief

England – British Safety Council award

Norway - ISO 14001 certification

Egypt – Computer donations

Algeria – FastQ field trials

Chad – AIDS/HIV education

Pointe-Noire, Congo –Medical center construction

Kuwait – Smokelessflaring

Qatar – Journey management

Dubai, UAE – Dune beautification

Kazakhstan – Mountainclean-up

2 0 0 2 A C C O M P L I S H M E N T S A N D A C T I V I T I E S

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B E YO N D T H E R E D Z O N E 3

world. Our goal is to achieve ISO 14001

compliance for all ESG and KBR opera-

tions worldwide by 2005.

� Received OHSAS 18001 accredita-

tion for BRAMA, the KBR joint venture

with Marshall Aerospace. BRAMA is the

first defense contractor in the U.K. to

achieve OHSAS accreditation.

� Performed first data acquisition

using the Acoustic Telemetry System

(ATS™), a method that enhances safety,

reduces rig time and improves opera-

tional efficiency. ATS transmits acoustic

signals through production tubing,

allowing surface monitoring of bottom-

hole reservoir data without the use of

electrical cables.

� Released the INSITE AnywhereSM

service, a delivery system that provides

real-time access to well data. INSITE

Anywhere improves wellsite safety

because it reduces the need for person-

nel to travel to and be on location

during drilling operations.

� Completed Halliburton Energy

Services (HES) field trials in Algeria of

the FastQ™ non-radioactive multiphase

flow meter system. FastQ measures flow

rates of oil, water and gas continuously

without mixing or separating fluids.

Totally free of radioactive sources, it is

environmentally friendly and safe to use.

� Completed the first real-time deep-

water field test of the Geo-Tap™ forma-

tion tester tool. Geo-Tap measures sub-

surface formation pressure on demand

during drilling, improving the operator’s

ability to control the well and eliminat-

ing wireline runs that increase the risk of

accidents.

� The Gas Processors Suppliers

Association’s inaugural safety award

went to KBR for safety performance

over the last three years and for HSE

programs implemented on onshore

hydrocarbons and petrochemical proj-

ects around the world.

� Petroleos de Venezuela S.A.

(PDVSA) honored Servicios Halliburton

de Venezuela for achieving more than

1 million work hours without an injury.

Halliburton’s West Venezuela operation

employs about 600 people representing

all HES product service lines.

� The Occupational Safety & Health

Division of the Department of Labor &

Employment, Republic of the

Philippines, presented KBR the Gawad

Kaligtasan at Kalusugan Award in the

Institutional Category. The award recog-

nizes companies operating in the

Philippines with excellent occupational

safety and health programs and

performance.

� Marathon Oil Company recognized

the U.S. mid-continent HES team with

its award for Partner in Safety for Large

Contractors for superior HSE perform-

ance at Marathon locations.

� The British Safety Council awarded

the Sperry-Sun facility in Tewkesbury,

U.K., its five-star rating in an audit of 82

separate safety elements in five sections.

Sperry-Sun was one of only 20 compa-

nies to achieve this rating in the U.K.

in 2002.

� The Health Promotion Board of

Singapore’s Ministry of Health gave its

Singapore H.E.A.L.T.H. (Helping

Employees Achieve Life-Time Health)

Silver Award to the HES Singapore

Manufacturing facility for the second

consecutive year. The award gives

national recognition for commendable

workplace health promotion programs.

� The Institution of Engineers,

Australia (South Australia Division) pre-

sented its Engineering Excellence award

in the innovation category to KBR’s

South Australia office and its project

partners for rejuvenating the

Patawalonga Lake and catchment.

� The Industrial Foundation for

Accident Prevention honored KBR

Water Services in Western Australia with

its 2002 Gold Safe Way Achiever Award.

Western Australia –Industrial Foundationfor AccidentPrevention award

Perth, Australia – Support to Clean UpAustralia Day

Brunei – Turtle conservation

Philippines – Occupational Safety & Health award

Niigata, Japan – Clean beach initiative

IMPROVEMENTS START IN THE GULF OF MEXICO

The less time our customers spend

drilling wells, the less risk is posed to

human health, safety and the environ-

ment. Halliburton develops time-saving,

risk-reducing products and services and

often tests them in the U.S. Gulf of

Mexico, where the push to deeper waters

is prompting our oil and gas customers

to look for ways to improve their per-

formance, comply with strict environ-

mental regulations and lower costs.

Sperry-Sun’s Geo-Tap™ formation

tester tool is one of many Halliburton

offerings that allows our customers to

spend less time on location. By provid-

ing real-time pore pressure readings

without a wireline run, Geo-Tap spots

hazards and helps prevent blowouts.

This increases well control, reduces the

potential for accidents and injuries, saves

time and lessens the overall impact of

drilling operations on the environment.

In the first tests of Geo-Tap in the Gulf

of Mexico in 2002, the tool exceeded

performance expectations.

Baroid’s Accolade™ synthetic drilling

fluid is specifically designed to help our

customers comply with Environmental

Protection Agency (EPA) regulations

restricting the content of drill cuttings

discharged in the Gulf of Mexico. Made

with a 50 percent base of palm oil, a sus-

tainable source, Accolade meets strict

EPA standards for biodegradability and

low toxicity. Because it requires less

packaging, Accolade minimizes the

amount of waste that goes into landfills.

And moving the product into place for

mixing on offshore facilities takes about

38 percent fewer crane lifts, a major

cause of accidents.

REFINING PROCESSES HELP CLEAR THE AIR

While many Energy Services cus-

tomers need products that prevent water

pollution, KBR refining customers in the

U.S. must comply with regulations

designed to improve air quality. For

example, the EPA has mandated a dras-

tic cut in the sulfur level in gasoline to

30 parts per million by 2006. While it

will lead to less ozone and smog in the

atmosphere, refiners must make exten-

sive, expensive modifications to their

facilities that they can’t recoup at the

gasoline pump.

KBR is at the forefront of helping

refiners meet the tough new standard.

Through our alliance with the

ExxonMobil Research and Engineering

Company (EMRE), we are able to offer

some of the most advanced process

technologies available to the refining

industry. The SCANfining™ process,

developed and commercialized by

EMRE, is a case in point. SCANfining

allows refiners to selectively remove

sulfur from cracked naphthas, a major

gasoline component, while retaining a

higher octane level for more efficient

combustion. A second generation tech-

nology, SCANfining II, is available for

the most demanding applications.

EMRE and Akzo Nobel developed and

commercialized the proprietary catalyst

used in SCANfining. KBR applies our

engineering know-how and procure-

ment and construction skills to this

environmentally friendly technology.

Today, refiners producing roughly 30

percent of U.S. gasoline plan to use

SCANfining to help reduce pollution.

4 H A L L I B U RT O N 2 0 0 2 H S E A N N U A L R E P O RT

N O RT H A M E R I C A

Geo-Tap lessens the overall impact of drilling

on the environment.

Halliburton products help our oil and gas customers comply with strict environmental regulations in the Gulf of Mexico.

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HALLIBURTON SHARES SAFE DRIVING SKILLS IN MEXICO

At one time or another, we are all a

driver or a passenger in a vehicle on

busy roads. That fact led Armando

Galan, HSE manager in Mexico, to the

realization that promoting defensive

driving among Halliburton Energy

Services employees isn’t enough. For the

roads to be safe, the entire community

must drive defensively.

All Halliburton employees in Mexico

are required to take defensive driving

training every year, alternating compre-

hensive and refresher courses. In 2002,

the Company offered defensive driving

to employees’ family members, and 200

people in four cities took advantage of

the opportunity.

The families’ enthusiasm for the

course encouraged Halliburton to

expand the training to 120 high school

students and five teachers in order to

heighten their awareness of the potential

dangers of driving. “We’re trying to

reach out to the community, starting

with helping young people develop safe

driving habits,” Galan said. The course

was an eye-opener for the students, he

added, many of whom were surprised to

learn that letting their younger siblings

ride in the front seat of the car could be

a deadly mistake.

With the success of the initial

outreach, HES plans to offer defensive

driving to 500 students, 20-25 teachers

and 500 family members in four

Mexican cities in 2003. To Galan, safer

drivers make the roads safer, not only

for Halliburton employees, but also for

their families and neighbors.

BRAZIL IAN FLOOD PUTS HOLIDAYS IN PERSPECTIVE

Holiday plans for Company employ-

ees in Brazil changed abruptly when

severe flooding and landslides killed at

least 40 people and left thousands

homeless. Halliburton employees living

and working in Angra dos Reis were

among those displaced by the disaster.

Angra dos Reis is the site of the shipyard

for Petrobras’ Barracuda & Caratinga

project.

Halliburton workers quickly mobi-

lized to help the entire community. One

employee – Johnny Clowers, the KBR

site materials manager for Barracuda &

Caratinga – personally paid for furniture

to help a pregnant woman who lost her

family and possessions in the flood.

Employees in nearby Rio de Janeiro

raised money for the flood victims and

provided daily supplies and support to

100 people who took refuge in a school.

After the floods in early December,

local employees elected to cancel the

Company holiday party. Instead, they

allocated money earmarked for the

celebration to continue their assistance

in Angra dos Reis.

B E YO N D T H E R E D Z O N E 5

L AT I N A M E R I C A

“We’re trying to reach outto the community, startingwith helping young people

develop safe driving habits.”

Safer drivers mean safer roads for Halliburtonemployees and their families and neighbors.

Halliburton continues to make progress in ourefforts to safeguard the environment.

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HALLIBURTON BRINGS MEDICAL CARE CLOSER TO REPUBLIC OF CONGO VILLAGE

By teaming up with international

organizations dedicated to community

development, education and health,

Halliburton is working to make a posi-

tive and sustainable impact on people in

developing nations in Africa.

One example of this approach is our

work with the Red Cross in the village

of Louvoulou, Congo. The Red Cross

sought Halliburton’s help to build or

rebuild medical centers near Pointe-

Noire, the nation’s capital and site of

a Halliburton base. We funded the

construction of a medical center in

Louvoulou, while the Red Cross trained

and paid nurses to staff the facility.

The main objective of the medical center

is to identify serious diseases in an early

stage. Without this facility, Louvoulou

villagers would have to travel 40 kilome-

ters to receive treatment at a medical

center.

HOBBY TURNS INTO FUNDRAISER FOR CHILDREN IN CHAD

It’s not unusual for our employees –

and their family members – to take a

highly personal interest in helping

communities where Halliburton has

operations. This was the case with Karen

Morgan, whose husband, Jim, is KBR

project director for the Chad/Cameroon

Development Project. After visiting a vil-

lage in Chad, Karen Morgan published

her trip photos in a calendar and sold

the calendar to raise funds for educa-

tion. KBR, its joint venture partners and

the project operator underwrote the

printing costs. Calendar sales in 2002

and 2003 brought in more than $13,000

to buy books and school supplies for

children living near the Chad/Cameroon

Development Project.

Through KBR’s role in the project, the

Company is involved in landmark work

to create a new model for implementing

projects in developing countries.

AIDS/HIV education and prevention,

hiring and training of local people and

other social programs that are being

implemented are designed to lift living

standards long after the Chad/Cameroon

project is completed.

6 H A L L I B U RT O N 2 0 0 2 H S E A N N U A L R E P O RT

A F R I C A

Halliburton funded construction of a Congolesemedical center dedicated to

early disease detection.

Education is a community relations focus area for Halliburton around the world. KarenMorgan, the wife of a KBR employee, publishesher photographs of the people of Chad in calendars. Proceeds from calendar sales help local school children.

ESG and KBR maintain a large operationsbase in Luanda, Angola. Through our manyprojects in Africa, Halliburton is involved insocio-economic efforts to improve health,education and job training.

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NORTH SEA COUNTRIES SET THE PACE FOR COMPLIANCE

For Halliburton Energy Services,

meeting the high environmental stan-

dards in the North Sea is a benchmark

of our service quality performance.

OSPAR regulations that apply in the

North Sea continue to tighten, requiring

Halliburton and other service companies

to test every chemical component in our

blends to ensure compliance with envi-

ronmental regulations. Previously, only

the blends themselves required testing.

Our North Sea customers want the

most environmentally acceptable prod-

ucts available and they choose their

service providers accordingly. And many

elect to use these products in other parts

of the world, in effect adopting the

world’s most exacting rules in all their

operations.

To meet our customers’ environmen-

tal and performance requirements, the

Global Chemical Compliance Group,

Duncan Technology Center in

Oklahoma and Houston Technology

Center work closely with our suppliers

to develop compliant products. So far,

we have replaced several products used

in our stimulation and cementing oper-

ations. We continue our active research

efforts so we can offer the most environ-

mentally acceptable product formulas in

the North Sea and around the world.

KBR AND ABERDEEN UNIVERSITY COLLABORATE FOR HSE EXCELLENCE

With five product lines supporting

thousands of project sites in 100 coun-

tries, KBR operations experience wide

variations in HSE performance. While

KBR’s overall HSE results are excellent,

management felt performance had

reached a plateau and needed renewed

focus.

The KBR HSE Excellence group in

Leatherhead, England, is working to cre-

ate a set of business unit-specific global

standards for health, safety and the

environment that will lead to consistent

global expectations and performance

across KBR product lines.

KBR and the Industrial Psychology

Research Centre (IPRC) at Aberdeen

University designed a survey to identify

and assess aspects of HSE culture,

management systems and performance

management throughout the organiza-

tion. KBR’s HSE Excellence team will

use the survey results to identify areas of

good practice; develop highly targeted

initiatives aimed at improvement; and to

use as the basis for global HSE perform-

ance standards. In addition, the team is

developing a KBR HSE Management

System that will comply with ISO 14001

and OHSAS 18001 standards.

B E YO N D T H E R E D Z O N E 7

E U R O P E

Our customers want environmentally acceptableproducts and choose their

providers accordingly.

Landmark Graphics Corporation employees fromAberdeen, London and Houston competed in the2002 BG Energy Challenge that netted $1 millionfor CARE International, U.K.

Our Global Chemical Compliance Group andtechnology centers in Oklahoma and Texaswork with suppliers to develop products thatcomply with environmental regulations.

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JOURNEY MANAGEMENT DRIVES SAFETY IMPROVEMENTS

Minimizing risk is a philosophy that

has become deeply ingrained in

Halliburton. This philosophy has led us

to take a comprehensive approach to

improving the safety and security of our

employees who drive in the Middle East.

Since 2000, our journey management

practices in this region have minimized

our staff ’s driving time, which reduces

their exposure to the hazards of the

roads.

It's more than just defensive driving,

which is required training for all our

employees who drive Company vehicles.

Our strict controls start with determin-

ing if driving is needed at all, or whether

the business can be accomplished in

some other way. For necessary trips,

Company and contractor vehicle move-

ments in the Middle East are subject to a

pre-trip inspection and hazard assess-

ment, management authorization and

detailed planning. Night driving is

severely restricted and mobile phone

usage is forbidden, in accordance with

Halliburton policy.

Journey management, and particularly

the decrease in night driving, has had a

positive effect on the safety and security

of Company drivers in the Middle East.

Kuwait operations eliminated lost-time

incidents related to motor vehicle

accidents (MVAs) altogether and record-

ed one less MVA in 2002 compared to

2001, even though employees drove

about 20,000 more miles in 2002.

In November 2002, Kuwait employees

surpassed 4 million miles without a

recordable MVA and Halliburton Energy

Services Qatar reached 1 million miles

without a motor vehicle accident. On

some of the most dangerous roads in the

world, driving millions of miles without

incident is a major achievement.

KUWAIT ADOPTS SMOKELESS FLARING FOR WELL TESTING

When Kuwait Oil Company (KOC)

expressed concern about the telltale

plumes of black smoke rising from its

wells during testing, we put our Sea

Emerald Well Test Burners to work.

The burners are used primarily offshore

to help our customers comply with envi-

ronmental regulations, but we applied

them to KOC’s onshore operations in

2002 to virtually eliminate air pollution

from the common practice of flaring.

Utilizing improved burner technology,

this equipment significantly reduces the

amount of smoke and hydrocarbon fall-

out from well testing. Using Sea Emerald

burners quickly became a standard prac-

tice incorporated into all of the well test

programs for KOC’s Exploration Deep

Drilling Teams.

ENVIRONMENTAL EFFORTS MOVE INTO THE COMMUNITY

Big Red, a landmark sand dune about

60 kilometers from Dubai, suffered from

its own popularity until Halliburton

organized a major clean-up. The HES

Middle East Operations Performance

Improvement Initiative (PII)

Environment Team partnered with the

Emirates Environmental Group to spon-

sor the beautification of Big Red. About

1,000 people, including 130 Halliburton

employees and their family members,

helped collect several tons of trash left

by tourists, motorcyclists and others

who picnic and camp near Big Red.

The Kuwait team co-sponsored a

World Environment Day celebration to

generate awareness for environmental

protection among the general public

and organized Environmental Awareness

Week at a local school to help the stu-

dents understand their role in safeguard-

ing the environment. Kuwait employees

also planted trees at a rig to promote

environmental responsibility among

contractors for Kuwait Oil Company.

8 H A L L I B U RT O N 2 0 0 2 H S E A N N U A L R E P O RT

M I D D L E E A S T

Kuwait employeessurpassed 4 million miles

without a recordable motorvehicle accident.

We developed smokeless burners for offshore, butthey also reduce air pollution in Kuwait and otheronshore areas.

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AUSTRALIAN RAILWAY CONSERVATIONEFFORTS ARE ON TRACK

Traversing 882 miles, the Alice

Springs-Darwin Railway Project will

create vital transportation and economic

links between Australia and Asia. KBR’s

Infrastructure group is playing a major

role in the design and construction of

the railway, which moves through

diverse terrains and climatic zones, habi-

tats for rare and endangered wildlife

species, Australian Aboriginal archaeo-

logical and sacred sites, and European

heritage sites.

As a partner in ADrail, the integrated

joint venture developing this major

project, KBR adheres to the Design &

Construction Environmental

Management Plan (EMP) to help pre-

serve and protect sensitive environmen-

tal resources and heritage sites during

construction. The EMP contains 259

environmental objectives, management

tasks and guidelines that meet ISO

14001:1996 and ISO 9001:2000 require-

ments for environmental management

and quality management systems,

respectively. Specific management plans

in the EMP address conservation of

habitats and feeding areas for rare mam-

mal and bird species and other issues.

KBR training programs for Aboriginal

people hired to work on the project pro-

vide marketable skills they can use in the

future. And ADrail’s work in remote

Australian construction sites has led to

innovations in waste disposal, bore

water treatment and sewage treatment.

HANDS-ON TRAINING BOOSTS REF INERY SAFETY RESULTS

At the Pilipinas Shell Petroleum Corp.

refinery in Tabangao, Batangas City,

Republic of the Philippines, health,

safety, security and environment (HSSE)

results were impressive. Yet, Shell and its

contractors, including KBR, knew they

needed to push for improvements.

Together, they established the Shell

HSSE Learning and Training Center

(SHELTER) to deliver hands-on

training to roughly 1,400 workers.

Satisfactory completion of the eight-

hour program is also a prerequisite

for hiring.

With an operations and maintenance

crew that peaks at 500 people during

turnarounds, KBR developed the cur-

riculum and supplied materials for 10 of

the 22 training modules. KBR Senior

Site Manager James Crawford and his

team turned to their skilled craftspeople

for help in developing the curriculum.

For the hand and finger safety module,

for instance, KBR employees suggested

tasks that had actually caused injuries. If

trainees perform the hand and finger

exercises incorrectly in the training

module, a laser indicates the site of the

injury they would sustain on the job.

“Classroom activities aren’t always

effective for teaching tasks and process-

es,” Crawford explained. “Doing hands-

on training allows employees to learn

the consequences of their actions in a

controlled and safe environment.”

Since the SHELTER opened in

October 2002, Shell and the refinery

contractors have been pleased with the

results. With 100 percent of the refinery

workers trained, there have been no

recordable injuries since October. KBR

employees have had no recordable

injuries in almost a year and no medical

treatment cases since October. In addi-

tion, formal and informal HSE audits

make it clear that the new training beats

classroom training hands down.

B E YO N D T H E R E D Z O N E 9

A U S T R A L I A / A S I A PA C I F I C

Doing hands-on trainingallows employees to learnthe consequences of their

actions in a controlled andsafe environment.

Turtle conservation programs and employee beachclean-ups started in our Brunei operations andspread to Malaysia and Japan. Niigata workers andtheir families, left, sponsored two beach clean-ups in 2002.

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WASTE MINIMIZATION PLAN AIDSISO 14001 EFFORT IN BRUNEI

When Brunei Shell Petroleum Sdn.

Bhd. decided to seek ISO 14001 certifi-

cation for its drilling operations in

Brunei, it contracted Baroid Surface

Solutions to recommend and assist with

documenting procedures to minimize

drilling-related waste streams. The

Surface Solutions group, working closely

with Baroid Fluids Division, helps cus-

tomers minimize the impact of drilling

fluids, especially cuttings and fluids

waste streams.

Surface Solutions provided engineer-

ing services and implemented practices

and processes for Shell, such as setting

up and managing a dewatering plant

that treats drilling mud from rig opera-

tions and recaptures about one-third of

the water for reuse. It’s part of Baroid’s

overall management of the waste man-

agement process at Shell’s Brunei opera-

tions, including dedicated supervision,

monitoring, onsite engineering and

support.

Baroid is one of three HES product

lines operating in Brunei. In April 2002,

employees from the three product lines

combined achieved 12 years without

recording a lost-time incident in Brunei,

a remarkable safety record.

1 0 H A L L I B U RT O N 2 0 0 2 H S E A N N U A L R E P O RT

HES Brunei completed 12 years without an

LTI in 2002.

A hike in the mountains for theseAlmaty, Kazakhstan, employeesyielded 35 large bags of rubbishleft by tourists. Halliburton’sHSE strategy and PerformanceImprovement Initiative programencourage our locations to seekout opportunities to improvetheir communities and the environment.

C E N T R A L A S I A

BAROID PRODUCT SAFEGUARDS CASPIAN SEA ENVIRONMENT

Producing oil offshore in the Caspian

Sea is a key to Central Asia’s energy

strategy, but poses environmental

challenges. Faced with one of these

challenges – removing hydrogen sulfide

(H2S) from cuttings without using

heavy metals – Baroid developed a

product with a different chemistry.

H2S, a highly irritating and potentially

dangerous gas, is present in high levels

in parts of the Caspian region.

Traditional scavenger products used

to remove H2S from drill cuttings

contain zinc, a heavy metal that cannot

be disposed of safely in land contain-

ment cells.

Baroid’s SOURSCAV™ eliminates

the zinc from the H2S scavenger.

SOURSCAV is a water-soluble product

that contains iron gluconate, a

compound used to treat anemia.

Compared to other iron-based

scavengers, SOURSCAV is faster and

more efficient. In its first use in a well

with a high likelihood of encountering

H2S, SOURSCAV controlled the H2S

downhole, improving safety at the

wellsite and eliminating disposal of

contaminated materials in an environ-

mentally sensitive area.

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To measure our health, safety

and environmental performance,

Halliburton uses U.S.-based indicators

that are generally accepted as industry

standards. We apply them globally to

our operations in the oilfield extraction

(O&G) and heavy construction (E&C)

industry sectors.

Based on these indicators, Halliburton

has posted steady improvement in our

key safety measures for the past five

years. The rates for reportable injuries,

lost-time incidents and reportable vehi-

cle incidents in our global operations

Company-wide were lower in 2002 than

in 2001. During this five year time

period, manhours worked have

increased 36 percent and vehicle miles

have almost doubled.

These lagging indicators track our

global HSE performance over time.

Some of our operations are using lead-

ing indicators to drive further improve-

ments. KBR, for instance, has adopted

forward actions designed to concentrate

its worldwide HSE practices on activities

and behaviors that will have a positive

effect on HSE performance outcomes.

As we pursue healthier, safer and

cleaner operations worldwide, we will

continue to refine our existing measures

and adopt new ones to improve upon

our performance.

H S E M E A S U R E S

600

500

400

300

200

100

01996 1997 1998 1999 2000 2001 2002

548

365

234

1161267088

Reported EnvironmentalIncidents

Reported EnvironmentalIncidents

400

300

200

100

01999 2000 2001 2002

140

215

325

399

Average Daysto C lose Audi tsAverage Days

to C lose Audi ts

3.0

2.5

2.0

1.5

1.0

0.5

01996 1997 1998 1999 2000 2001 2002 2001

O&G2001E&C

100 Million Hours Worked/Year

0.97 1.02 0.9

0.650.53 0.52

0.38

2.8

1.4

Lost Time Incident Rates(Per 200 ,000 Work Hours)

Lost Time Incident Rates(Per 200 ,000 Work Hours)

3.0

2.5

2.0

1.5

1.0

0.5

01996 1997 1998 1999 2000 2001 2002 2001

NSC*

100 Million Miles Traveled/Year 2.52

*National Safety Council Data - “Trucks-Other Industries”

0.841.211.391.38

1.741.87

1.47

Recordable Vehic le Incident Rates(Per 100 ,000 ,000 Mi les Traveled)

Recordable Vehic le Incident Rates(Per 100 ,000 ,000 Mi les Traveled)

8

6

4

2

01996 1997 1998 1999 2000 2001 2002 2001

O&G2001E&C

100 Million Hours Worked/Year3.80

7.80

1.001.501.632.28

3.122.93

1.77

Recordable Incident Rates(Per 200 ,000 Work Hours)

Recordable Incident Rates(Per 200 ,000 Work Hours)

60

50

40

30

20

10

01996 1997 1998 1999 2000 2001 2002

6

28

5649

272625

HSE Not ices ofVio lat ion/Ci tat ions

HSE Not ices ofVio lat ion/Ci tat ions

50

40

30

20

10

01999 2000 2001 2002

44

32

19

11

Tota l CorporateHSE Audi ts

Tota l CorporateHSE Audi ts

B E YO N D T H E R E D Z O N E 1 1

Steady increase in the number of reported environ-mental incidents since 1999 is due to improved global reporting criteria and compliance. None ofthe 2002 incidents caused lasting or significant harm.Halliburton defines an incident as, “any event thatcauses or has the potential to cause environmentaldamage or any non-routine regulatory inspection,citation or notice of violation.”

Based on U.S. Occupational Safety and HealthAssociation (OSHA) criteria and recorded globally forHalliburton. Industry sector comparisons are U.S.-based only, using most current data available. BothLTIR and RIR have declined for the fifth consecutiveyear and are over 60 percent lower than 1997 rates.

Compared to National Safety Council (NSC) datafor the category of “Trucks-Other Industries,”Halliburton’s global RVIR is 67 percent lower thanthe U.S.-based NSC data and a 30 percent improve-ment over 2001 results. 2001 NSC data is the mostcurrent data available.

Halliburton maintains an active audit programaimed at continuous improvement. These are risk-based corporate HSE audits conducted by theCorporate Audit Group that supplement ongoing site self-assessments.

HSE Notices of Violation/Citations from regulatoryagencies in 2002 declined 78 percent from 2001.

Business Unit Operations have shown a 35 percentimprovement in the time it takes to close out auditfindings in the last three years. This reflectsHalliburton’s increased focus on and commitment to the HSE audit process.

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Working to improve the quality of life

in communities where Halliburton has

operations goes hand-in-hand with our

formal programs to expand our HSE

efforts beyond the red zone. In assisting

our neighbors around the world, we

gain insights that help us minimize the

impact of our products and services on

people and communities, as well as

on the environment.

Halliburton employees used their

energy to help thousands of people in

2002 – from walking for the Cancer

Council in Australia and hammering for

Habitat for Humanity in Bolivia to

bowling for the United Negro College

Fund and Junior Achievement in

Houston. Employees came to the aid of

flood victims in Brazil, volunteer forest

fire fighters in Colorado and a Mexican

community devastated by a hurricane.

They donated food, toys, clothes, shoes

and books for orphans, families and the

elderly. They mentored, tutored and

chaperoned school children.

The following are just a few examples

of the breadth of Halliburton’s commu-

nity relations activities in 2002:

• Company-sponsored blood drives in

locations around the world – such as

Adelaide, Northwest Territories,

Australia; Lima, Peru; and Kuala

Lumpur, Malaysia – allowed

Halliburton and our employees to

support community health in a

meaningful way.

• Halliburton charity golf tournaments

in Houston and Carrollton, Texas;

Calgary, Alberta, Canada; and St.

John’s, Newfoundland, Canada, raised

more than $170,000 from employees,

customers and suppliers in 2002.

Since 1993, the Houston Halliburton

Charity Golf Tournament has raised

more than $725,000 for local and

national charities.

• Aberdeen employees demonstrated

their generosity and ingenuity by col-

lecting more than £80,000 for the

ARCHIE Foundation. As a result of

employees’ year-long campaign, young

patients at the new Aberdeen

Children’s Hospital can enjoy a play-

room during their stay.

• The Halliburton Foundation

Volunteer Incentive Program (VIP)

awarded cash contributions to 107

nonprofit organizations for which

our employees volunteer. The annual

VIP enables Halliburton to impact

community organizations that reflect

the interests and diversity of our U.S.-

based employees. The Foundation also

awarded 50 college scholarships to the

children of employees.

• Halliburton established a corporate

partnership with the Juvenile Diabetes

Research Foundation (JDRF). The

partnership enables the Company and

our employees to provide financial

and volunteer support to JDRF

around the world, with the shared

goal of eradicating the global problem

of diabetes.

T H E E N E R G Y T O H E L P O U R C O M M U N I T I E S

1 2 H A L L I B U RT O N 2 0 0 2 H S E A N N U A L R E P O RT

In Houston, Halliburton received special recognitionfrom the Gulf Coast Regional Blood Center for 3,331donations in 2002.

Halliburton supportshealth, education, arts,

environmental and civicorganizations.

The Houston Ballet performed in the legendary Bolshoi Theatre in Moscow, Russia, in 2002 with corporatesupport from Halliburton. The Company also contributes to museums, symphonies and other performingarts companies.

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B E YO N D T H E R E D Z O N E 1 3

Our community relations work in the

U.S. is well-documented. As we become

more aware of activities in other parts of

the world, we’re improving our ability to

track them.

Our employees are willing and eager

to help out in their communities, and

we try to provide them many avenues

for volunteering. Whenever possible, we

partner with our suppliers, contractors

and customers to jointly support non-

profit organizations. Halliburton also

contributes to industry charitable efforts.

By taking advantage of all these oppor-

tunities, Halliburton is able to support a

wide variety of organizations dedicated

to health, education, arts, the environ-

ment and civic improvement.

Our diverse workforce and operations

make it possible for Halliburton to reach

out to a wide range of people and proj-

ects. Our employees and their energy to

help allow Halliburton to be a force in

making our communities and our

industry healthier, safer and cleaner.

In Tampa, KBR employees assisted in building base-ball facilities for disabled children by donating theirtime to dig out the ground for foundations, pourconcrete and erect roofs. They also secured donatedpipe, rebar and other materials from vendors andcustomers for the facilities.

HES employees in Maturin, Venezuela, helped 25orphans celebrate the holidays. Using office partyfunds, employees purchased a refrigerator, food,medicines, clothes, toys and a party cake for theAbrigo Niños Jesús de Maturin orphanage.

The American Cancer Society (ACS) recognized Longview, Texas, KBR employees for their ACS fundraisingcampaign and participation in the Relay for Life. The Company and employees also supported the Leukemiaand Lymphoma Society, the Susan G. Komen Breast Cancer Foundation, M.D. Anderson Cancer Center andCancer Council Australia in 2002.

Halliburton fielded a team of more than 1,000 employees and their family members and friends for the Marchof Dimes (MOD) WalkAmerica in Houston. The Company consistently ranks among Houston’s top 10 moneyraisers for MOD locally, collecting $139,000 in pledges in 2002.

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V I S I O N

HEALTH, SAFETY AND ENVIRONMENTAchieving HSE Excellence by:

• Creating an incident-free

environment

• Conducting business with no adverse

environmental impact

• Integrating HSE into all of our

business activities

• Defining the value of HSE

• Demonstrating industry leadership

in HSE performance

For further information, please contact:

Bob Sherman

Halliburton

10200 Bellaire Boulevard

Houston, TX 77072-5206

281.575.4420

robert.sherman@halliburton.com

H03543 07/03© 2003 HalliburtonAll Rights ReservedPrinted in U.S.A. Produced by Halliburton Communications

Printed on Recycled Paper

www.halliburton.com

COMMUNITY RELATIONSImproving the quality of life in

communities where we have operations

by providing volunteer, financial and

in-kind support to health, education,

arts, environmental and civic

organizations.

For further information, please contact:

Ellie Francisco

Halliburton

10200 Bellaire Boulevard

Houston, TX 77072-5206

281.575.4046

ellie.francisco@halliburton.com