Oil service companies under pressure over ties to Russia

Oil and gas service companies are under increasing pressure to cut ties with Russia, in a bid to increase economic pressure in the wake of Russia’s invasion of Ukraine.

This follows an open letter from Scottish Finance and Economy Secretary Kate Forbes MSP in which she called on companies to take ‘economic action’ by reviewing their operations for ties and connections with Russia. and breaking them.

This week, a series of energy majors announced their intention to divest from Russian projects and companies.

UK-headquartered BP said it would exit its 19.75% stake in Rosneft, while Shell said it would divest its 27.5% stake in the Rosneft facility. liquefied natural gas (LNG) from Sakhalin-2, among other companies.

Pressure is now mounting on service companies to review their operations as well.

Wood Group, headquartered in Aberdeen, employs around 40,000 people in 60 countries around the world, including offices in Moscow and Sakhalin.

His work in the country includes a five-year Technical Support Services (TSS) contract with Sakhalin Energy, the operator of Sakhalin-2, issued in 2017.

The five-year contract, which includes two one-year extension options, is provided by Wood’s engineering team based in Yuzhno-Sakhalinsk on Sakhalin Island, and supported by the company’s offices in Australia, Norway, China and the UK.

A spokesperson for Wood said, “Like many companies, we have been shocked and saddened by the events unfolding in Ukraine. We condemn the invasion and support the international community in its call for peace.

“Our business in Russia represents a small portion of our overall business (1% of total revenue in 2021) and our team includes both local and foreign nationals. As always, the safety and well-being of our employees is our top priority, and we are taking a range of measures to support them in what remains a fluid and dynamic environment. »

Wood has announced expected group-wide revenue of £6.4 billion for 2021. He will publish full results for the year on March 8, 2022.

The spokesperson added: “Our trade compliance team continues to assess international sanctions, rules and regulations that have been introduced around the world. We are actively engaged with our customers in Russia on these issues and our duty of care to our people. This includes our contract to provide technical support services to Sakhalin.

Training and services

The Petrofac engineering and services group, headquartered in Jersey, has been working in Russia since 1993 and also has offices in Moscow and Sakhalin.

In addition to a long-standing training center on the island, it expanded its presence in 2017 following the award of a contract to support Sakhalin Energy with its onshore processing facility, and in early February to this year announced a new three-year agreement to support green hydrogen development on the island.

Last October, the group also signed a memorandum of cooperation for a five-year strategic partnership with Gazprom, with the aim of further establishing itself in Russia. The deal would see the two partners collaborate on industry standardization and sustainability, Petrofac said at the time.

In response, Petrofac said there was no significant ongoing activity in Russia with the Sakhalin-2 project now essentially complete, and no work had begun as a result of its memorandum signed with Gazprom.

The company said it has processes in place to comply with all relevant international regulations and sanctions.

Drilling and wells

Another Aberdeenshire-based company, KCA Deutag, employs nearly 9,300 people worldwide, operating and managing around 110 rigs in 20 countries, including 21 units in Russia.

It has operated there since 2002 and, according to filings, its Caspian and Russian businesses generated more than $280 million in revenue in 2020, nearly a quarter of the group’s revenue for that year.

Last June, it entered into a five-year agreement for platform drilling services offshore Russia, also with Sakhalin Energy.

KCA Deutag was asked to comment.

For its part, Plexus Holdings, also based in Aberdeen, announced on Monday that it would “suspend its activities” with its partner in Russia.

The oil well technology company first signed an agreement with Gusar LLC in 2016 to manufacture and lease its exploration equipment for jack-up rigs in Russia, which eventually led to an agreement to supply the Russian public company Gazprom.

Plexus said it was suspending operations in light of the “tragic war in Ukraine”, and that its “thoughts are with the people of Ukraine, as well as ordinary Russians who are suffering the consequences”.

The company said its performance would remain broadly in line with expectations for 2022, but it would suffer a negative cash flow impact of £650,000 as a result of the decision.

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