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Integra brochure
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March 09, 2006

For Freedom of Drilling

Russian Association of Oil and Gas Engineers estimates the oilfield services market at $6-10 billion (foreign companies’ share is set at 25%) while  top market player Integra’s estimate is $10 billion (15% for foreigners). According to Integra, services that giants Schlumberger and Halliburton provided to Russia in 2005 cost $700 million and $250 million respectively.
American oilfield service companies that help Russia to produce oil demanded that operating conditions should not get tougher after Russia joins WTO. Economic Development Minister German Gref has promised that there will not be discrimination but Americans are not satisfied with these assurances. Security Council fears that international companies will capture a $10 billion market and experts stress that there is only a relative difference between Russian and foreign companies.
The US is the only country with whom Russia has not agreed on joining WTO, the dispute rose mainly over foreign companies’ access to services market. Americans are concerned, in particular, with the situation in energy services sector comprising geological  and geophysical operations, drilling and well workover. Economic Development Minister German Gref wrote to US trade representative Rob Portman that no obstacles will be imposed on oilfield service companies’ business and they will operate “on conditions and scale provided for by the Russian Law” after Russia’s joining WTO.
These assurances left Americans unsatisfied.  In December 2005, oil service companies sent a request to congressman Brian Petty to vote against most favored nation status for Russia if Russia fails to guarantee undiscriminated access to the market, InsideTrade.com reported. “They want Russia to assume legal obligations to American energy service companies”, explains Maxim Medvedkov, director of department of the Ministry of Economic Development. The official said that Americans want to be insured against restrictions on foreign operations in Russia should such restrictions be imposed by laws on mineral resources and foreign companies’ access to strategic enterprises. However, energy services are beyond the agenda of WTO talks and Russia cannot assume such obligations, especially as it “has not yet found its position as for the policy of foreign capital attraction for this sector of economy”, Medvedkov added.
“Foreign competitors grab best contracts, hire away specialists, buy companies”, fumes Igor Melnikov, president of Soyuzneftegazservis. In 2004, Schlumberger bought a controlling block of stock of  Petroalians, major independent  service provider to oil companies. And Petroalians managers bought 100% stake in Lukoil-Drilling through Eurasia Drilling company they  registered in Cayman Islands. Founded and headed by John Fitzgibbons, Integra bought two of Uralmash divisions and Tyumenneftegeofisika.  According to director of Zrubezhneft Nikolay Tokarev, this is a dangerous tendency. And president of Russian Association of Oil and Gas Engineers Vyacheslav Manyrin forecasts that foreign companies’ share will increase to 35% over the next few years.
Vladimir Putin was informed at the December session of Security Council that foreigners’ share in seismic exploration had reached 13%,  48% in drilling and 31% in geophysical operations.
Integra president Felix Lyubashevsky says the threat of foreign domination is “statists’ fears”. The question is who should be considered as foreigners, he said. Foreigners hold a 50% stake in Integra and the other 50% is owned by Russian managers. According to Lyubashevsky, Integra is a Russian company and  local technologies will be most preferred  by oil companies in terms of price-quality ratio, so foreigners will not occupy more than 20% of the market. Troika Dialog analyst Valery Nesterov is glad that the best of global technologies will be employed in drilling and hydraulic fracture. However, he is concerned over possible foreign monopolization of the market that can cause a sharp expenditure growth in oil companies.  Russian office of Schlumberger refused to comment,  Halliburton was out of reach.