HOUSTON: The world’s largest oilfield services company, Schlumberger, is spending billions of dollars buying stakes in its customers’ oil and gas projects — investing in the same ventures it supplies with equipment and expertise.
The new business model gives Schlumberger a say in drilling decisions, oilfield management and even on hiring other Schlumberger units for service contracts, the company has told investors.
The expanded operational authority saves Schlumberger from bidding for each of the many jobs that typically require separate contracts on a large drilling project — effectively locking out the firm’s competitors.
Schlumberger’s gamble could upend the service business model throughout the industry, as rivals including Baker Hughes say they are considering whether to adopt similar strategies.
The model can supercharge profits on a given job but also ramps up risk, giving the firm more exposure to global oil price swings and potentially big losses if individual projects fail. The downsides have some analysts questioning whether the traditionally conservative firm is taking on too many speculative projects too quickly.
Schlumberger already has taken hundreds of millions in write-downs or impairments on some of these joint ventures, according to its financial filings.
Traditionally, oil producers manage the risk and make the financial and operational decisions on projects; they pay service providers a fee to carry out individual jobs. Firms such as Schlumberger typically supply a wide variety of services, such as well design, along with technology and staff to run rigs.
Schlumberger declined to make executives available for interviews and did not respond to written questions about its production business.
Despite early setbacks, Schlumberger has committed cash to growing the division, called Schlumberger Production Management, since its launch in 2011. Last year, it generated $1.4 billion in revenue. It had investment of $2.6 billion as of June 30.
The company’s investments have the firm co-managing about 230,000 barrels a day of oil and gas output at the end of 2016 — about as much as one of the largest US independent producers, Pioneer Natural Resources.
This year, the company stepped up the financing role, opening a standalone investment fund to provide financing for the ventures. The company has not disclosed the size of the fund.
Such ventures require a breadth of skills and a tolerance for risk generally found at large integrated oil companies such as Chevron and Exxon Mobil.
Two of Schlumberger’s newest partnerships — a deepwater liquefied natural gas project off the coast of Equatorial Guinea and an Argentina shale development with YPF — involve decision-making and operational authority similar to that typically held by multinational oil producers.
As Schlumberger’s production business has grown, it has negotiated deals that include equity in oil and gas fields and as well as deals that give the firm payment based on oil and gas output, according to interviews with customers, partners, investors and former Schlumberger executives.
Schlumberger this year agreed to contribute $390 million for a 49 percent stake in a venture with YPF in Argentina’s Vaca Muerta shale field, which has attracted international oil firms including Chevron and Royal Dutch Shell.
Schlumberger Chief Executive Paal Kibsgaard has downplayed the potential for its production business to compete with its own oil company customers.
He described the enterprise as “a new avenue for project investments alongside our customers” in remarks to investors in April.
Executive Vice President Patrick Schorn also insisted this spring that the business is “not significantly changing the risk profile ... the biggest risk remains the cyclical nature” of the oil and gas industry.
Investors say Schlumberger, which held $6.22 billion in cash and short-term investments at June 30, is strong enough to handle any increased risks and the price volatility of its investments in long-term projects.
As both project manager and service provider, Schlumberger also has an enviable level of control over operations, said Mike Breard of Dallas-based wealth management firm Hodges Capital, which invests in oilfield service companies.
“I like the long-term aspect of it — the fact that they are telling frack crews where to work, and using their own equipment more efficiently than might be used by some other operator,” he said.
British-based natural gas explorer Sound Energy PLC was happy to give Schlumberger full rights to the service contracts on drilling projects in Morocco in exchange for a Schlumberger investment amounting to 27 percent of total costs, said the chief of British-based natural gas explorer.
Schlumberger will get 27.5 percent of revenue from the oil produced.
“We’re smaller and entrepreneurial. Schlumberger has the technical capability and cash. That’s the nature of the partnership,” Sound CEO James Parsons said in an interview.
The duo has completed three wells in Morocco and plans to drill three more by year end.
“It’s a $50 or $60 million bet for them so far,” Parsons said.
Schlumberger’s appetite for these ventures is spurring rivals to consider similar financing and services deals. Baker Hughes recently agreed to provide about $10 million in financing to Twinza Oil’s first offshore gas field in Papua New Guinea, supplying the cash to prove the merits of the field.
“It allows Twinza to have success in going out to raise financing,” Baker Hughes CEO Lorenzo Simonelli said.
Baker Hughes will not take a stake in the oilfield, unlike some of Schlumberger’s joint investments with producers.
In 2014 and 2015, Schlumberger took nearly $400 million in combined write-offs on oil production investments, including an Eagle Ford shale field in south Texas that struggled after oil prices crashed.
It also is owed about $900 million by Ecuador. In July, the South American country said it had negotiated a payment plan that includes an expanded contract that has Schlumberger agreeing to invest another $1 billion in the venture.
Schlumberger hasn’t commented on the South American nation’s disclosure. It previously acknowledged taking Ecuadorian bonds in lieu of cash for $150 million in bills. It also previously estimated its investment in the projects at up to $4.9 billion over 20 years.
The write downs have stirred some on Wall Street to question whether Schlumberger should take a more conservative path with its oil production partnerships.
The firm’s production division “used to focus on production management of well understood low-risk oil fields,” said Colin Davies, a Bernstein oilfield services analyst. “Now it has expanded into frankly somewhat more speculative ventures.”
Schlumberger’s new business model bets on huge returns — but at higher risks
Schlumberger’s new business model bets on huge returns — but at higher risks
Multilateralism strained, but global cooperation adapting: WEF report
DUBAI: Overall levels of international cooperation have held steady in recent years, with smaller and more innovative partnerships emerging, often at regional and cross-regional levels, according to a World Economic Forum report.
The third edition of the Global Cooperation Barometer was launched on Thursday, ahead of the WEF’s annual meeting in Davos from Jan. 19 to 23.
“The takeaway of the Global Cooperation Barometer is that while multilateralism is under real strain, cooperation is not ending, it is adapting,” Ariel Kastner, head of geopolitical agenda and communications at WEF, told Arab News.
Developed alongside McKinsey & Company, the report uses 41 metrics to track global cooperation in five areas: Trade and capital; innovation and technology; climate and natural capital; health and wellness; and peace and security.
The pace of cooperation differs across sectors, with peace and security seeing the largest decline. Cooperation weakened across every tracked metric as conflicts intensified, military spending rose and multilateral mechanisms struggled to contain crises.
By contrast, climate and nature, alongside innovation and technology, recorded the strongest increases.
Rising finance flows and global supply chains supported record deployment of clean technologies, even as progress remained insufficient to meet global targets.
Despite tighter controls, cross-border data flows, IT services and digital connectivity continued to expand, underscoring the resilience of technology cooperation amid increasing restrictions.
The report found that collaboration in critical technologies is increasingly being channeled through smaller, aligned groupings rather than broad multilateral frameworks.
This reflects a broader shift, Kastner said, highlighting the trend toward “pragmatic forms of collaboration — at the regional level or among smaller groups of countries — that advance both shared priorities and national interests.”
“In the Gulf, for example, partnerships and investments with Asia, Europe and Africa in areas such as energy, technology and infrastructure, illustrate how focused collaboration can deliver results despite broader, global headwinds,” he said.
Meanwhile, health and wellness and trade and capital remained flat.
Health outcomes have so far held up following the pandemic, but sharp declines in development assistance are placing growing strain on lower- and middle-income countries.
In trade, cooperation remained above pre-pandemic levels, with goods volumes continuing to grow, albeit at a slower pace than the global economy, while services and selected capital flows showed stronger momentum.
The report also highlights the growing role of smaller, trade-dependent economies in sustaining global cooperation through initiatives such as the Future of Investment and Trade Partnership, launched in September 2025 by the UAE, New Zealand, Singapore and Switzerland.
Looking ahead, maintaining open channels of communication will be critical, Kastner said.
“Crucially, the building block of cooperation in today’s more uncertain era is dialogue — parties can only identify areas of common ground by speaking with one another.”
