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Schlumberger has won the conditional approval of the Russian Federal Anti-Monopoly Service to acquire a stake of between 25 and 49 percent in Eurasia Drilling, which boasts a 20-percent market share of the local oil drilling market. The tie up would make it the top dog in this field.
The deal does not fall within the scope of U.S. sanctions against the Russian oil industry, as these target Arctic, offshore, and shale drilling. Eurasia, instead, focuses on conventional onshore fields.
Bloomberg quotes the head of the FAS Igor Artemyev as saying that the agency had recommended that Schlumberger combine its bid with an offer from the Russian Foreign Investment Fund and the sovereign wealth fund of the UAE, with the U.S. major getting 25 percent and the other two bidders buying 16 percent.
The acquisition, first floated in 2015, was delayed by the anti-monopoly watchdog on concerns about a foreign company acquiring a controlling stake—the initial offer was for 51 percent in Eurasia—in such an important company to the country’s vital oil industry. These concerns only deepened as Washington expanded the scope of its sanctions against Russia—but apparently not enough to prevent the U.S. Treasury from greenlighting the acquisition.
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Agreeing to buy less than a majority stake has obviously become the solution to the problem, with the exact distribution of the 49 percent among the three potential partners yet to be determined, according to Artemyev. It looks like this partnership in the acquisition is something that the FAS firmly insists on.
“Twenty-five plus 16 is a very good configuration, not getting control but bringing in hundreds of millions of dollars, or even billions, for Eurasia, which gets interesting foreign investors with great experience and modern technology,” Artemyev said in his comments on the news, as quoted by Bloomberg.
Financial details of the deal have not been disclosed, but last year, when Schlumberger renewed its offer for Eurasia Drilling, the FT reported the initial 2015 bid had valued a 45.7-percent stake in the company at US$1.7 billion.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.