As energy supermajors such as BP and ExxonMobil pledge to exit Russia because of its war in Ukraine, a lower profile group of companies that serve the country’s oil industry have not followed.
Schlumberger, Baker Hughes and Halliburton are the three biggest western oilfield services companies, hired to do the frontline work at oilfields such as drilling wells and producing oil and gas. The US-listed companies conduct billions of dollars of business in Russia and are partners of state-backed producers Rosneft and Gazprom.
Recent US sanctions on Moscow ban American imports of Russian oil, natural gas and fuel products and also bar US companies from making “new investments in the energy sector” in Russia.
The measure is meant to “ensure that American companies and American investors are not underwriting Putin’s efforts to expand energy production inside of Russia”, a senior administration official said of the order.
The EU on Tuesday also put in place what it called “a far-reaching ban on new investment across the Russian energy sector” as part of a blast of new economic sanctions, further tightening western companies’ ability to operate in the country.
But while the sanctions stop oilfield services companies from pumping new money into Russia, they stop short of preventing them from continuing their current operations. Schlumberger, Baker Hughes and Halliburton did not respond to requests for comment.
Schlumberger has invested more than $10bn in Russia over the past decade. Last November, the company signed a deal with Gazprom Neft, Gazprom’s oil-focused subsidiary, to develop a “localised” business based on Schlumberger’s digital oilfield technologies. Baker Hughes last summer touted a deal with Rosneft to use its technology to help the Russian company slash emissions from its operations.
Russia accounts for about 5 per cent of Schlumberger’s total revenues, which were $22.9bn in 2021, or about $1.15bn. Protesters gathered outside company offices in Texas earlier this month to call on Schlumberger to sever connections with Russia, according to the Houston Chronicle.
Russia also made up about 5 per cent of Baker Hughes’ revenues, Brian Worrell, its chief financial officer, told analysts recently. The company’s revenue was $20.5bn in 2021, implying it does about $1bn of business in the country.
Hundreds of name-brand western companies including McDonald’s, Levi’s and Starbucks have suspended or curtailed business in Russia amid public and political outrage over Russia’s bloody invasion of Ukraine. BP and ExxonMobil, along with Shell and Equinor, are among the western oil groups that have said they will exit Russian projects or investment stakes.
But for now the oilfield services firms have been spared the same level of public scrutiny.
“It’s much easier for them to operate under the radar because they are not directly exploiting or exporting oil and natural resources,” said Audun Martinsen, head of energy services research at consultancy Rystad.
According to Rystad, projects in Russia were expected to require about $22bn for drilling and other services this year, and had been expected to grow before the country’s invasion of Ukraine. US and European countries have been careful to avoid a sudden disruption to Russian oil and gas flows while designing sanctions.
“The overall objective is to make the arc of future Russian energy activity much lower, much worse, but without compromising immediate activity,” said Richard Nephew, a senior researcher at Columbia University and an expert on sanctions.
The western oilfield services firms have managed to sign new deals in Russia despite US sanctions put in place after Moscow seized the Crimean peninsula from Ukraine in 2014.
“From a business perspective, we’ve managed these sorts of things up and down for, I hate to say, nearly 100 years,” Halliburton chief executive Jeff Miller told analysts of potential sanctions in January. “These are the kinds of things that we would manage through.”
Additional reporting by Amanda Chu
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