Arabic service

Saudi Arabia proposes to create a company to operate in the Russian oil services market

One of the “consequences” of Vladimir Putin’s trip to the countries of the Middle East , as the Saudi media learned, could be a joint project in the field of oil services. As the Arabic newspaper Al-Riyadh reported, during a meeting of the Russian-Saudi business forum, held last Tuesday in Riyadh with the participation of Vladimir Putin, the Arab side proposed creating a joint Russian-Arab oil service company. It is assumed that the new enterprise will operate in Russian fields, with the Arab side owning a controlling stake. According to the newspaper, the authorized capital could be about 500 million rials ($133 million). But as experts note, the Arab offer may be of interest to Russian companies only if they are given control in this enterprise.

As a source familiar with the progress of the negotiations told Vremya Novostey, no specific proposals were made by any Russian company at this meeting. “At the meeting, the Arab side expressed its interest in this to Russian oil workers, but no specific proposals were made to create a joint venture or conduct negotiations with any Russian company,” he noted.

Vladimir Putin, speaking at a meeting of the Russian-Saudi business forum, said that although Russia and Saudi Arabia are “world leaders in oil production,” they are “not competitors, but rather allies and partners.” Since both partners, as players in the global oil market, are generally self-sufficient, cooperation in this area can hardly be called intensive. Together with Putin, the heads of Gazprom and LUKOIL, Alexey Miller and Vagit Alekperov, flew to Saudi Arabia; other fuel companies were represented by less senior managers. Currently, of the Russian oil companies, only LUKOIL operates in Saudi Arabia. During the visit of the Russian President, the company announced the discovery of a large oil field in the country, made by a joint venture between LUKOIL Overseas and Saudi Aramco. Investments in the development of this field, the forecast reserves of which reach more than 300 million tons of standard fuel, will amount to about $2 billion, of which $80.4 million has already been invested.

The world leader in oil production, apparently, is not very interested in participation in production projects in Russia as such. But Saudi Arabia is ready to try its luck in the field of oil services. Representatives of Saudi Aramco have already tried to establish cooperation with the Russian Tatneft in April last year. The Tatars showed the Arab delegation their technology for local well casing, used in cases of drilling fluid leaks or drilling in porous rocks. Such technologies allow drilling to pass through areas of complications without loss of well diameter. As Tatneft reported then, representatives of Saudi Aramco became interested in the possibility of using it at their fields. But, apparently, the companies have not reached any specific agreements.

As experts note, the Russian service market has recently been on the rise thanks to constantly growing investments in production by large oil companies. In addition, now there is a clearer trend toward integration around several large companies, such as Integra, BC Eurasia, and Siberian Service Company. The world leaders in this sector, Schlumberger and Halliburton, have been successfully operating in the Russian market since the early 1990s. And now it is becoming increasingly difficult for foreigners to enter this market, especially on their own. Usually everything is limited to the purchase of small departments operating in the regions. Thus, at the end of last year, one of the Chinese oilfield service leaders, China Oilfield Services, long announced a deal to purchase a certain Russian company. As a result, it turned out to be a small “daughter” of TNK-BP LLC “Specialized Cementing Management”, operating in the Orenburg region.

Saudi Arabia is still only eyeing this sector of the Russian market. As experts note, against the backdrop of fierce competition existing in this sector, the conditions proposed by Saudi Arabia do not look attractive enough, and Russian companies are unlikely to rush to respond to them. So Saudi Arabia can not only cede control, but also promise sufficiently large funding or offer similar work on its territory.

Anna GORSHKOVA