Following Moscow's invasion of Ukraine, world's largest oilfield firm SLB has boosted its business in Russia by cherry-picking service and equipment contracts from rivals who left, according to company documents and people familiar with its operations.

While SLB's continued embrace of Russia has drawn sharp criticism, interviews with two people close to the company and industry sources, as well company documents reviewed by Reuters show SLB's decision to help Russia increase oil and gas production with its services and drilling equipment has paid off.

For example, SLB's Russia and Central Asia reservoir performance division in the third quarter of 2022 grew revenue by 25% over the prior quarter. That outpaced growth of 12% and 11% for its Asia and Middle East and North Africa regions, respectively, according to one of half a dozen documents viewed by Reuters.

The company also expects to report record results for the fourth quarter for its Russian reservoir performance division, according to a separate presentation viewed by Reuters.

SLB, which changed its name from Schlumberger last October, did not respond to several requests for interviews or written questions for this story. The company said in March that, while it is continuing operations in Russia, it has halted new investments there.

SLB has not likely fallen afoul of U.S. and European sanctions prohibiting financial transactions with Russia, in part because measures taken against Russia's energy sector are not meant to fully curtail oil production, according to sanctions experts interviewed by Reuters.

“The Russian energy sector is not subject to comprehensive sanctions, and with care, companies can comply with prohibitions or restrictions that may apply to certain transactions," said Peter Kucik, a managing director with Mercury Public Affairs and a former official with the U.S. Office of Foreign Assets Control, a unit of the Treasury Department that administers sanctions.

"Trading with Russia is financing aggression, murder of civilians and destruction of peaceful cities," said a spokesperson for Ukraine's embassy in Washington, D.C. in response to a question about SLB's operations in Russia.

The Business & Human Rights Resource Centre, an international organization that monitors corporate responses to human rights issues, has warned the firm risks being pulled into the war efforts with Russia's military mobilization.

Companies working in Russia must take steps to "mitigate the increased risk of contributing, or being directly linked, to the armed conflict,” said Ella Skybenko, a senior researcher at that organization. She pointed to SLB's compliance with Russia's military mobilization as an example of being complicit in the conflict.

SLB did not respond to requests for comment. Russia's Ministry of Energy and the Russian embassy in Washington, D.C. did not respond to a request for comment.

In the months since Russia invaded Ukraine, scores of western companies have shuttered or sold their operations there to avoid running afoul of sanctions or avoid the appearance of aiding Vladimir Putin's war. Others have suspended investment or operations, while some remain in Russia.

Russia unit grows

By contrast, SLB added around 70 employees in Russia in late 2022, including personnel to its key accounts such as Gazprom and Rosneft, according to two sources familiar with the matter who cited this as a sign that its business there is not slowing down.

The Curacao-registered company is a major foreign employer in Russia with some 10,000 employees, or around 10% of its global workforce, spread across Russia and neighboring Kazakhstan, where it has also posted sales increases.

Russia accounted for 6%, or $1.21 billion, of SLB's total revenue in the first nine months of last year, according to a regulatory filing, up from 5% before the invasion of Ukraine. Business there is further slated to ramp up this summer, according to a source and company documents.

One reason SLB is finding new success in Russia is that rivals have exited the region. Halliburton Co. and Baker Hughes Co. sold their businesses in recent months. The companies did not specify the reason for selling.

SLB's regional unit that includes Russia saw revenue grow by 45% between the first and third quarters of 2022, while a similar unit at Halliburton experienced a 6% decline, according to regulatory filings.

Halliburton said in September it sold its business to a Russia-based management team made up of former Halliburton employees. It now operates under the name BurService LLC and is independent from Halliburton, the company said.

Baker Hughes and Halliburton declined to comment.

Weatherford, a smaller competitor remains, but its participation in the industry is diminishing as it has terminated some existing contracts that SLB has been able to pick up, a source working in Russia told Reuters. Reuters was unable to determine how many contracts SLB has gained.

SLB is also in line to be the exclusive provider of directional drilling for a major Russian gas project, a source said.

"The message from HQ is to take mostly exclusive contracts with high revenue," said a SLB employee involved in the business wins. With fewer rivals, SLB has been able to receive price increases and better terms and conditions, the source, who is not authorized to speak to the press, said.

Weatherford declined to comment for this story.

Past violations 

Russia's output has defied predictions of a steep decline, and for January through November of last year rose by 2.2% from year-ago levels, averaging 10.91 MMbbl/d of oil and gas condensate production, Reuters reported last year, citing Russian media. Countries like India, China and Pakistan are buying Russian oil at steep discounts, while production at the Sakhalin-1 project, which was operated by Exxon Mobil Corp before it exited after the Ukraine invasion, is nearing a return to full capacity.

SLB is currently a contractor on that Russian Far East mega-project, and is anticipating more business in 2023, including work to help produce more natural gas at the Sakhalin-3 project, according to a recent presentation viewed by Reuters.

The company continued to work there in 2014 after the U.S. slapped sanctions on Rosneft, a partner in the project.

SLB has previously violated government sanctions imposed on countries where it operates. In 2015, a unit of SLB pleaded guilty to violating sanctions related to Iran and Sudan, paying a $237.2 million fine to the U.S. Justice Department. In a 2015 statement, the company said it "cooperated with the investigation" and was "satisfied that this matter is finally resolved."

In 2021, SLB paid $1.4 million for violations of Ukraine-related sanctions by its subsidiary Cameron International Corp for providing services to Russian energy firm Gazprom-Neft Shelf.