Gazprom Neft could gain control of Russia's biggest drilling contractor, Gazprom Drilling - sources

MOSCOW. March 21 (Interfax) - Oil producer Gazprom Neft could gain control over the largest drilling contractor in Russia, Gazprom Burenie (Gazprom Drilling), which currently operates as part of Gazprom's integrated construction complex under the management of Gazprom Invest LLC, several sources familiar with the situation told Interfax.

Gazprom's oil subsidiary is performing a comprehensive audit of the drilling company, which may take several weeks, one of the agency's sources said. Another said personnel changes had already begun in the top management of Gazprom Burenie, during which representatives of Gazprom Neft are cropping up among its management.

Gazprom Neft itself switched to a management model similar to Gazprom during 2024. Gazprom Neft was also integrated into the Gazprom Group's centralized payment control system using the services of Gazprom ERC LLC. Thus, Gazprom strengthened its control over its oil subsidiary.

It recently emerged that Denis Sugaipov left the post of CEO of Gazprom Burenie LLC, and deputy head for economics and finance Ilya Sandler became the acting head of the company. Sugaipov led Gazprom Burenie since April 2022, before which he worked at Gazprom Neft.

Gazprom Burenie (formerly Burgaz) was created in 1997 on the basis of specialized drilling departments that were part of Gazprom's gas production enterprises. The contractor was owned by private investors from 2011 to 2021. In 2021, in the company's own words, "measures were taken to change the owner of the Gazprom Burenie LLC and RusGazBurenie LLC group of companies, as well as to integrate them into the PJSC Gazprom system." The drilling contractor's revenue was 105 billion rubles and net profit 8 billion rubles in 2023.

Service divisions had always been incorporated within Russian oil companies since the late 1990s. But a trend gradually emerged in the oil industry to divest service assets, and international service companies took over the domestic market and provided services of all levels, introducing Western technologies. Against this backdrop it was easier for Russian oil companies to hire a service contractor from outside than to maintain and develop their own services, which at the time Russian oil companies described as a non-core business.

In recent years, when Russia has faced sweeping sanctions, a lot of which hit the oil sector, oil companies have been focusing on developing in-house technology and even equipment production to reduce their exposure to foreign suppliers.