SLB expands business in Russia after competitors leave
2023.01.19 08:01
SLB expands business in Russia after competitors leave
By Tiffany Smith
Budrigannews.com – According to company documents and people familiar with the company’s operations, the world’s largest oilfield company, SLB, has increased its business in Russia following Moscow’s invasion of Ukraine by selecting service and equipment contracts from competitors who have left.
SLB’s decision to assist Russia in increasing oil and gas production with its services and drilling equipment has paid off, according to interviews with two company insiders and industry sources as well as company documents reviewed by Reuters.
For instance, SLB’s Russia and Central Asia reservoir performance division saw a 25% increase in revenue over the previous quarter in the third quarter of 2022. One of the half a dozen documents viewed by Reuters indicates that this surpassed growth of 12 percent, 11 percent, and 11% for its Asia, Middle East, and North Africa regions, respectively.
A separate presentation that was seen by Reuters also stated that the company anticipates reporting record results for the fourth quarter for its Russian reservoir performance division.
Schlumberger’s former name was changed to SLB (NYSE:) in October of last year, did not respond to multiple requests for written questions or interviews for this story. In March, the business stated that, while it continues to operate in Russia, it had stopped making new investments there.
According to sanctions experts interviewed by Reuters, SLB has not likely violated U.S. and European sanctions that prohibit financial transactions with Russia. This is due, in part, to the fact that sanctions taken against Russia’s energy sector are not intended to completely reduce oil production.
Peter Kucik, a managing director at Mercury Public Affairs and a former official with the U.S. Office of Foreign Assets Control, a unit of the Treasury Department that administers sanctions, stated, “The Russian energy sector is not subject to comprehensive sanctions, and with care, companies can comply with prohibitions or restrictions that may apply to certain transactions.”
In response to a question regarding SLB’s operations in Russia, a spokesperson for Ukraine’s embassy in Washington, D.C. stated, “Trading with Russia is financing aggression, murder of civilians, and destruction of peaceful cities.”
An international organization that monitors corporate responses to human rights issues, the Business & Human Rights Resource Centre, has issued a warning that the company runs the risk of becoming involved in the war efforts due to Russia’s military mobilization.
According to Ella Skybenko, a senior researcher at that organization, businesses operating in Russia must take measures to “mitigate the increased risk of contributing, or being directly linked, to the armed conflict.” As an illustration of SLB’s complicity in the conflict, she cited SLB’s compliance with Russia’s military mobilization.
SLB did not respond to inquiries about its position. The embassy of Russia in Washington, D.C., and the Ministry of Energy of Russia did not respond to a request for comment.
Numerous Western businesses have closed or sold their operations in Ukraine in the months since Russia invaded to avoid sanctions or the appearance of supporting Vladimir Putin’s war. Some are still based in Russia, while others have stopped investing or operating.
SLB, on the other hand, increased its workforce in Russia by approximately 70 people toward the end of 2022, including personnel for its key accounts like Gazprom (MCX:). and Rosneft, according to two knowledgeable sources who cited this as evidence that the company’s operations there are not slowing down.
The company, which is registered in Curacao, is a major foreign employer in Russia. It has 10,000 employees, or about 10% of its global workforce, spread out across Russia and Kazakhstan, which is next door. Sales have also increased in Kazakhstan.
According to a regulatory filing, Russia contributed $6 million, or $1.21 billion, to SLB’s total revenue during the first nine months of the previous year, up from 5% prior to the invasion of Ukraine. According to a source and company documents, business there is expected to expand further this summer.
The fact that rivals have left the region is one reason why SLB is having new success in Russia. NYSE: Halliburton In recent months, Baker Hughes Co. and Co. sold their businesses. The businesses didn’t say why they were selling.
According to regulatory filings, revenue for SLB’s regional unit that includes Russia increased by 45 percent between the first and third quarters of 2022, while revenue for a comparable unit at Halliburton decreased by 6 percent.
In September, Halliburton announced that it had sold its business to an ex-Halliburton management team based in Russia. According to the company, it is now independent of Halliburton and operates under the name BurService LLC.
Halliburton and Baker Hughes both declined to comment.
A Russian source told Reuters that Weatherford, a smaller rival, is still around, but its role in the business is shrinking because it has ended some contracts that SLB has been able to pick up. Reuters was unable to ascertain the number of SLB contracts won.
According to a source, SLB is also in the running to be the sole provider of directional drilling for a significant gas project in Russia.
An employee of SLB who was involved in the business wins stated, “The message from HQ is to take mostly exclusive contracts with high revenue.” The source, who is not authorized to speak with the media, stated that SLB has been able to receive price increases and improved terms and conditions as a result of having fewer competitors.
Weatherford declined to speak with this publication.
According to Reuters, which cited Russian media, Russia’s output defied predictions of a sharp decline, rising by 2.2% from a year earlier to an average of 10.91 million barrels per day of oil and gas condensate production from January to November of last year.
While production at the Sakhalin-1 project, which was managed by Exxon Mobil Corp. (NYSE:), is at an all-time low, countries like India, China, and Pakistan are purchasing Russian oil at substantial discounts. before it left following the invasion of Ukraine, and is getting close to returning to full capacity.
According to a recent presentation that was viewed by Reuters, SLB is currently a contractor on that huge Russian project in the Far East and anticipates receiving additional work in 2023, including assistance in producing more at the Sakhalin-3 project.
In 2014, after the United States imposed sanctions on Rosneft, a project partner, the company continued its operations there.
SLB has previously broken sanctions against the nations in which it operates. A section of SLB entered a guilty plea in 2015 to violating sanctions against Iran and Sudan and paid the U.S. Justice Department a fine of $237,2 million. The business stated in a 2015 statement that it “cooperated with the investigation” and was “satisfied that this matter is ultimately resolved.”
SLB paid $1.4 million in 2021 for Cameron International Corp.’s violation of sanctions against Ukraine for providing services to Russian energy company Gazprom-Neft Shelf.
