US oilfield services group Schlumberger has dropped its bid for a share in Russia’s Eurasia Drilling (EDC), regulators in Moscow have reported.
The Houston-based giant filed an offer for a 51% stake in EDC in July 2017. It was seeking to claim a larger share of the Russian drilling market – a sector that proved resilient over the past few years in spite of low oil prices. EDC, as Russia’s leading onshore driller, is seen as having strategic importance to the country’s oil industry. As such, Schlumberger’s purchase required a greenlight from a special government commission on foreign investment control.
The commission repeatedly delayed its decision, however, amid worsening ties between Moscow and Washington. Schlumberger reportedly agreed to several conditions set by regulators, including a requirement that it cede control of EDC if US sanctions were introduced that impeded the Russian company’s operations. It also scaled down its bid to 49%, but the commission still would not sign off on the deal.
Schlumberger warned last month it would withdraw its offer unless the necessary approvals were secured within weeks. Russia’s Federal Antimonopoly Service (FAS) reported on February 4 that the company had made good on this threat.
Schlumberger has since said it will look at other ways of working in Russia’s drilling sector. Weighing in this week, the deputy head of FAS, Andrei Tsyganov, said that “other forms of co-operation are possible” for Schlumberger in Russia.
Schlumberger had had its eye on EDC for some time. It tried to buy 45.65% of the company in 2015, but this deal also fell through because of regulatory obstacles in Russia.
The collapse of Schlumberger’s bid could provide an opening to another group of investors. A consortium comprising the Russian Direct Investment Fund (RDIF), the Russia-China Investment Fund (RCIF) and Middle Eastern partners reached an agreement in principle to buy a 16.1% holding in EDC a month before Schlumberger’s offer was made public. Addressing reporters this week, RDIF CEO Kirill Dmitriev said the group was prepared to acquire up to 30% of EDC. The UAE’s Mubadala Petroleum is reportedly involved the deal.