U.S. oil groups under pressure to exit Russia after Biden administration expands sanctions

Unlock the White House Watch newsletter for free

One of the largest U.S. energy groups is facing fresh pressure to halt operations in Russia after the Biden administration imposed sweeping new sanctions on the Russian oil industry.

Oilfield services company SLB, better known as Schlumberger, should exit Russia or risk violating U.S. sanctions, two U.S. lawmakers told the Financial Times.

Lloyd Doggett and Jake Auchincloss come after the Biden administration issued an order on Friday banning U.S. oil services to persons in Russia starting February 27 This warning was issued.

SLB, the world's largest oilfield services group, is one of the few U.S. oil companies still operating in Russia after Moscow's full-scale invasion of Ukraine in February 2022. SLB's two biggest Western rivals, Baker Hughes and Halliburton, sold their Russian operations in 2022 to local managers.

An investigation by the Financial Times last year found that SLB had signed new contracts, hired more than 1,000 jobs and imported equipment to Russia since its rivals withdrew from the country.

There are calls for SLB to withdraw from Russia nearly three years after Russia invaded Ukraine, reflecting concerns that some Western companies continue to provide critical support to Russia's energy sector. On Monday, the Financial Times reported that European shipyards were continuing to service Russian ships carrying lucrative natural gas cargoes to international markets.

SLB did not respond to a request for comment on the new restrictions. It says on its website that it takes its responsibilities for export control and sanctions compliance seriously. “We invest significant resources across the company to ensure we meet or exceed a variety of international laws,” SLB said.

The Treasury Department's decision did not name Houston-based SLB or its Russian subsidiary. But lawmakers and legal experts said the order would increase the SLB's risk of legal problems if it continues to have a presence in Russia.

“Any reasonable interpretation of the Treasury Department's new guidance to 'cut off access to U.S. services related to crude oil extraction' would mean pulling U.S. oilfield services companies out of Russia,” said Doggett, a Democratic member of Congress from Texas.

Asked whether SLB and any other U.S. oilfield services companies would have to exit Russia to comply with the order, a Treasury spokesman said: “The oil services ban prohibits all U.S. persons, regardless of location, from providing oil services, directly or indirectly. Indirectly, against anyone located in the Russian Federation.”

In October, a bipartisan group of more than 50 members of Congress sent a letter to the Biden administration calling for tougher sanctions on U.S. oilfield services companies operating in Russia, claiming that SLB's work in Russia was undermining President Vladimir Putin powered by war machines.

Oilfield service providers do the heavy lifting for the global oil and gas industry—from building roads and laying pipelines to drilling wells and pumping oil. They also provide advanced technologies critical to supporting exploration and development of complex drilling operations.

Western policymakers have so far avoided imposing sweeping sanctions on Russian oilfield services for fear they would hamper fossil fuel exports and lead to higher global oil prices. But the Biden administration said last week it expected the oil market to be oversupplied in 2025 and that new sanctions would “significantly increase” the risks associated with trade with Russian oil.

The Biden administration's new measures mean the provision of oilfield services in Russia is now “prohibited and sanctioned by U.S. law,” said Jeremy Parna, a partner at law firm Hughes Hubbard & Reed.

“Currently, the risk of U.S. sanctions to SLB’s Russian operations could not be higher,” he said.

Craig Kennedy, a Russia analyst at Harvard University's Davis Center, said the Treasury Department's new sanctions appeared to be aimed at SLB, a move that would put it at risk. He said it would “upset the Kremlin” if SLB was forced to withdraw from Russia because it would increase costs for the country's oil industry.

“Russia relies heavily on state-of-the-art Western reservoir modeling technology to design efficient, low-cost development plans. This is something they have struggled to replicate and cannot find elsewhere. Now, for the first time in 30 years, they are going to It’s on your own,” Kennedy said.

SLB has previously violated U.S. sanctions. In 2015, the company pleaded guilty to a federal charge and paid $232.7 million for facilitating trade with Iran and Sudan.

Additional reporting by Chris Cook in London