Russian Federal Antimonopoly Service (FAS) has announced that Schlumberger, a global oilfield services provider, withdrew its application to acquire a significant share in Eurasia Drilling Company (EDC), one of the biggest Russian drilling services providers, reports “Kommersant” business newspaper.
The Commission on Foreign Investment of the Russian government approved the deal on 28 April 2018, allowing Schlumberger to acquire a share of up to 49% in EDC. Later on, FAS imposed several requirements for the prospective deal. Thus, Schlumberger had to agree to transfer relevant technologies to EDC and to sell its share to a Russian investor in the case the U.S. imposes new sanctions against Russian oil and gas sector. However, the deal had to get the final approval from the Russian Government, which was consistently postponing the decision thus forcing Schlumberger to withdraw its application. According to undisclosed sources in the government, the main reason for that was the U.S. sanctions. Another source said that the government was not satisfied with the technologies Schlumberger agreed to transfer to EDC.
Image credit: EDC
This is the second attempt of Schlumberger to purchase this important asset. Earlier, the company tried to acquire a 45,6% share in EDC for approximately 1.7 billion U.S. dollars but didn’t get approval from the Russian government. On 21 January 2019 Paal Kibsgaard, Schlumberger’s CEO, said that the company would look for alternative ways to partner with EDC because Schlumberger still considers Russian onshore drilling market very attractive.
Following the news, Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF), said that the fund is ready to increase its offer to acquire a share in EDC from current 16.1% to 30%. However, the fund is only interested in a minor share in the company. He also noted that the deal can be closed with the participation of investors from the U.A.E. and Saudi Arabia. According to its charter, RDFI must attract at least 50% of foreign investments when funding projects in Russia. It was reported earlier, that to buy a share in EDC the fund planned to use a consortium of the Russian-Chinese investment fund, China-Eurasian Economic Cooperation Fund, and funds from the Middle East, including Mubadala from the United Arab Emirates.
Russian oil and gas experts stress out that no other foreign company would risk acquiring a share in EDC due to the sanctions. Although Russian oil service market, and especially its drilling segment remain very attractive, independent service providers have recently faced problems trying to get contracts due to the fact that Rosneft, a Russian state-run oil champion, decided to keep drilling services in-house. At the same time, it has been reported that Russian E&P companies were ready to increase their drilling activities in the near future.