Schlumberger to buy controlling stake in Eurasia
Renewed attempt follows a thwarted 2015 offer for Russia’s biggest oil and gas exploration company
US oil services provider Schlumberger has agreed to buy a 51 per cent stake in Russia’s Eurasia Drilling Company in a renewed attempt to take control of the country’s biggest oil and gas exploration company.
Schlumberger made a bid for the Russian company in 2015 but the deal came unstuck after Moscow’s Federal Antimonopoly Service delayed approvals, amid concerns over allowing foreign ownership of an important asset in the country’s hydrocarbon industry.
The financial terms of the agreement were not disclosed, but Schlumberger’s 2015 bid valued a 45.7 per cent stake in Eurasia Drilling at about $1.7bn. That deal also included a clause that would have allowed the US company to take full control after three years.
The renewed attempt is an endorsement of the continued expansion of Russia’s oil and gas industry despite the impact of three years of western sanctions.
While a proposal to broaden and deepen the scope of US sanctions against Russia is being debated in Congress, the existing measures have had a limited impact in checking the growth of domestic majors such as Rosneft and Gazprom, while restricting the activity of US majors such as ExxonMobil in the country.
The US company, the world’s largest oilfield services provider, said in a statement late on Thursday that its bid would also be subject to antitrust approval.
The agreement comes after a consortium of Russian, Chinese and Middle Eastern funds said last month they would acquire an undisclosed stake in Eurasia Drilling. Work on that investment is ongoing, Eurasia Drilling said.
“I warmly welcome Schlumberger as our majority shareholder. It builds on our strategic alliance with Schlumberger since 2011 and our mutually beneficial business relationship since 2007,” said Eurasia chief executiveAlexander Djaparidze.
“The combination of the technology know-how and operational expertise of Schlumberger coupled to the financial strength of the investment funds, brings significant benefits to our customers and the Russian conventional land drilling market.”
Eurasia Drilling, Russia’s largest services company by metres drilled, operates more than 650 offshore and onshore rigs, and boasts four of the five rigs operating in the Caspian Sea, the company says.
While parts of Russia’s oil and gas industry are subject to US and EU sanctions imposed after the country’s annexation of Crimea in 2014, many western oil and gas firms have recently begun to expand their activities in the country by focusing on areas where the restrictions are not applied.
Sanctions restrict companies from providing goods, services or technology to Russian deepwater, Arctic offshore or shale projects. State-controlled Gazprom Neft, Russia’s third-largest oil producer, said earlier this year it was searching for western oil servicing companies to assist with its projects.
European companies such as Repsol, Eni and Shell have all announced projects in Russia in areas not covered by sanctions. But investments by US companies have been noticeably more muted than their EU counterparts since 2014.
Yesterday, Exxon said it had sued the US Treasury in an attempt to stop a $2m fine for allegations it behaved with “reckless disregard” in violating Russian sanctions while Rex Tillerson, now US secretary of state, was chief executive in 2014.