According to Reuters article published on May 10, 2023, SLB (SLB.N) has made several operational and structural changes to keep its Russian business in compliance with Western sanctions on oil equipment and technology transfers, as it aims to ride out efforts to curb Russia's use of energy to finance its war efforts.
SLB, the world's largest oil services and equipment provider, last year rejected calls from human rights groups to withdraw from Russia as Western rivals exited quickly after the invasion of Ukraine. While SLB wasn't in breach of sanctions, the decision has triggered a backlash from employees and human rights groups.
Now, the former Schlumberger is tightening equipment transfers, barring Russian employees from accessing certain software and messaging systems, and walling off the unit from other operations, according to documents and two people familiar with the matter and confirmed by a SLB spokesperson.
The Curacao-domiciled company's moves come after Reuters reported in January that SLB had boosted operations in Russia by cherry-picking service and equipment contracts from rivals who left. But as the war and sanctions drag on, the company has warned business is slowing.
"As the international sanctions have evolved, we have taken further actions to curtail our activities, often beyond sanction requirements," an SLB spokesperson said. Among them are recently enacted "additional controls restricting the shipment of all SLB-manufactured products and technology from the United States, United Kingdom, the European Union and Canada" to Russia, the spokesperson said.
The changes "ensure our employees comply with all evolving sanctions," the person added.
Reuters was unable to establish why SLB implemented new restrictions on its Russian business. Earlier this year, the U.S. expanded sanctions on Russia, including some targeting its mining and metals sector.
The European Commission and U.S. Department of Commerce declined to comment on the new internal restrictions implemented by SLB.
SLB had some 10,000 employees in Russia helping Gazprom Neft, Rosneft and other top energy firms pump more oil and gas when the war began last year. The business contributed roughly 6% of its $28.1 billion in revenue at the end of 2022.
Since then, its workforce in the region has declined to around 9,600, according to a source familiar with the matter, Russia's portion of its revenue has now fallen to around 5% from 6% at the end of 2022, according to SLB financial disclosures.
'CHANGE IN TONE'
Neither the U.S. nor the European Union have required western oil companies to leave Russia but barred new investment. Both last year also restricted financial transactions with Russia and placed export restrictions on certain energy equipment, technology and services.
Some of SLB's initiatives have been implemented last month, a person familiar with the matter said, citing an internal reshuffling of its Russia, Caspian and Kazakhstan units. The latter two now report up to Asia and while Russia is a standalone unit, the source said.
"It seems there is a change in tone about Russia," said an employee who declined to be named because he was not authorized to speak on the record. Technology restrictions increased and were more heavily emphasized in SLB communications starting in February, the employee said.
In recent weeks, SLB also blocked its Russian workers from accessing some software and data stored in the U.S. and Britain, the employee said. Russian employees are now barred from using certain company message boards.
"Any new Global SLB Group-wide systems/applications should not be connected to or accessible by Russia," SLB told employees in a late-March memo viewed by Reuters.
'BEST PATH' IS TO REMAIN
The questions raised by employees about SLB's assistance to the Russian oil industry, which some see as aiding its war against Ukraine, prompted CEO Olivier Le Peuch to address questions about the region in a pre-recorded internal message in late February. He also acknowledged business conditions have changed.
Le Peuch told employees it was a "challenging situation" and said it continues to evaluate its presence, but reiterated the company has no plans to leave.
"At this point, we believe the best path forward for all stakeholders is to continue to operate in Russia, as long as we can do so in full compliance with international sanctions," said Le Peuch in the address, according to audio reviewed by Reuters.
"We expect the scale of operation in Russia to decrease because of market conditions and the action we have taken, including the ban on new investment and technology deployed," he said.
