According to the Russian newspaper Kommersant, the Russian Private Investment Fund, PIF, and Saudi Aramco will become participants of a Russian-Saudi investment fund worth $1 billion. The fund is planning to invest in the oilfield service business; namely, it can invest in EDC.
The official registration of the fund should take place during the visit of King of Saudi Arabia to Moscow this week. But experts are cautious in assessing the chances of the new fund to be able to put any competitive pressure on the global players of the oilfield service industry. Russia and Saudi Arabia are to sign a number of deals this week, including in the Russian fuel and energy sector, Head of the Russian Private Investment Fund, Kirill Dmitriev announced yesterday.
Head of the Ministry of Energy Alexander Novak mentioned that Russia and Saudi Arabia will agree on establishing an energy fund of $1 billion. According to Kommersant, the fund will be established by the Russian Private Investment Fund on the Russian part and by the Royal Sovereign Fund and Saudi Aramco oil company on the Saudi part. The deal can be announced during the visit of King Salman bin Abdul-Aziz Al-Saud to Moscow on October 5.
One of the first investments of the fund will be a Russian oilfield service company that will subsequently be able to enter the Saudi market, Mr. Dmitriev said without specifying the name of the company. It is believed that it could be the Russian Eurasia Drilling Company (EDC). Saudi Aramco will be able to become a minority EDC shareholder through the fund. “We can see about ten companies providing oilfield and infrastructure services to oil companies that are of interest for investment. EDC is, without doubt, one of them,” Russian Private Investment Fund representatives said. However, they refused to provide any additional comments.
Back in June, Russian Private Investment Fund agreed with its partners, including Middle East funds, about investing in EDC as a minority shareholder. Late July, it became known that Schlumberger is planning to get hold of the controlling interest in EDC again, but the deal could fail again due to the position of the Russian authorities. “Now, the situation is such that new sanctions against Russia are imposed almost every month. Therefore, the government of Russia is thinking about keeping the company within the Russian jurisdiction,” Igor Artemyev, Head of FAS, told Kommersant on September 28.
The Russian Private Investment Fund has a cooperation agreement with the state Russian company Rosgeologiya, but no specific projects have been announced yet. Advisor to Head of Rosgeologiya Anton Sergeev told Kommersant that he was not aware of any negotiations with Saudi Arabia about joint projects in the oilfield service. The Russian Ministry of Energy and EDC did not respond to a request from Kommersant.
Two years ago, Russian Private Investment Fund and PIF agreed on investing $10 billion in Russia, but yesterday it was reported that $1 billion has been invested so far. Additional investment opportunities can be used within the partnership concluded in 2015, a source familiar with the fund’s plans told Kommersant. He specified that projects more than $500 million worth are at an advanced stage. Alexei Malashenko, Head of the research institute “Dialogue of Civilizations,” notes that the economic cooperation between Moscow and Riyadh, despite repeated declarations of convergence of interests, is still at a low level. The expert does not believe that the current statements will lead to a breakthrough due to persistent foreign policy disagreements.
The oilfield service market in Saudi Arabia is mainly represented by transnational corporations such as Schlumberger, Halliburton, Baker Hughes, and Weatherford, said Artyom Malov, senior analyst at the Skolkovo Business School Energy Center. The authorities of the country are thinking about localizing their production. In particular, Saudi Aramco intends to purchase 70% of the oilfield services and oilfield equipment in the country by 2030.
“Speaking of particular technologies, it seems logical and promising to develop cooperation with Russia, which has technologies for the production of not only oil and gas servicing equipment, but also coring, separation equipment, tanks and vessels, pipes for main pipelines,” believes Artem Malov. “As for services such as exploration and drilling, extensive cooperation in these areas is unlikely. It will rather be limited to local pilot projects.”
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