As oilfield service companies left Russia after Ukraine invasion, Houston's SLB stayed - and profited

When companies in the oil field services sector sold their businesses in Russia last year after the invasion of Ukraine, one Houston company stood pat.

Schlumberger, now known as SLB, not only didn't head for the exits -- it has been hiring en masse in Russia despite that nation's pariah status as Western countries look to impose sanctions in response to the attack on Ukraine.

“There is no indication that SLB will ever opt to leave Russia,” said Lela Stanley, a senior investigator at the climate advocacy group Global Witness, which studied jobs sites in which SLB is seeking hundreds of employees in Russia. “That leaves its shareholders — top American asset managers among them — implicated in the continued production of oil that’s funding Russia’s attacks on Ukraine.”

SLB, the world’s largest oil field services company, brought in around $1.7 billion last year from its Russia operations, 6 percent of its more than $28 billion in 2022 total revenue, and anti-war and climate groups have taken aim at the company for its continued business there.

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SLB said in a statement that while it was not divesting its holdings in Russia, the company has committed to discontinue new investments and technology deployments in the country. Still, it said, it continues to provide “certain products, spare and replacement parts, and other consumable goods” as part of its oil field services business there. It said its workforce in Russia has declined nearly 10 percent since the invasion.

“We anticipate a decline in activity and revenue from our Russian operations in 2023,” SLB said. The company does not break out its Russian operations in its financial reporting.

Heading for exits

The refusal of the company, which also maintains a headquarters in Paris, to leave Russia comes as Western companies began rolling back their operations there last year as the war marched on and sanctions mounted. Since those initial announcements last February and March, SLB has done less than its Houston-based rivals Baker Hughes and Halliburton, which each lost hundreds of millions of dollars as they pulled out of Russian projects.

Baker Hughes, which signed its Russian business over to local management in August, took a $365 million charge for costs associated with its departure, on top of the lost revenue. Halliburton took a $344 million charge when it sold its Russian assets.

Job postings by SLB uncovered by Global Witness and reviewed by the Chronicle show the company has recently sought to hire more than 200 workers. It is not clear whether those were for new positions, said Matt Hale, vice president of supply chain research for the research company Rystad Energy, who cautioned that the openings may represent replacements for people who have quit or retired.

Whether to leave Russia was a more difficult decision for SLB than it was for its rivals, analysts said. Hale said the company was more invested in Russia than Baker Hughes and Halliburton and that its work there was less exposed to sanctions, which targeted larger, more complex equipment such as units needed for offshore drilling and liquefied natural gas production. Russia is more likely to rely on Western companies for that equipment, Hale said, which would have little effect on the conventional onshore drilling sites where SLB is operating.

The bulk of Baker Hughes’ financial blow stemmed from sanctions that prohibited it from deploying LNG equipment, Hale said. Halliburton had worked primarily with oil majors that pulled out of their Russian projects, said James West, an oilfield services analyst for Evercore ISI.

What's more, sanctions were never intended to completely shut down Russian oil production. Russia's oil is necessary to balance the global market, and losing it could trigger a spike in prices and an energy crisis, which is why sanctions aim to only limit the government's profits, not shut them down completely.

Even if SLB were to withdraw its services in Russia, the skill level and equipment needs are simple enough that Russian employees on the ground could handle it with little effect on production, Hale said.

“Russia has a lot of capability internally, and I think this has been discounted in a lot of discussion on the topic,” Hale said. “It ends up being symbolic when they exit.”

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SLB is not historically one for symbolic gestures, Evercore ISI's West said.

“They're known for not leaving markets when there’s issues or coups,” West said, noting this kind of unrest is common in oil-producing regions. “They’re always loyal to the customer base; they’re not playing the political angle.”

Calls for SLB’s exit are about much more than politics for  Nataliya Pashchenko, an immigrant from Ukraine now living in Houston whose sister died of a stroke in Kyiv late last year. While her 56-year-old sister was in poor health, she believes she would have lived longer had her final months not been addled by the stress of war.

Pashchenko, who protested outside SLB's Houston headquarters last year,  said companies that continue to operate in Russia are contributing to the needless deaths of Ukrainian civilians.

"It’s helping Russia to generate profits," she said, "which are ultimately killing Ukrainian civilians."