prominent rivals, state-owned oil companies, and it's helping a group of smaller upstarts that areseeking to get into the business, such as hedge funds and private equity outfits. Just outside asuburban neighborhood near Dallas, for instance, it has drilled a half-dozen gas wells financed byNew York hedge fund Och-Ziff. While the majors typically want to own rights to oil reserves in thefields they operate—and take a share of the profits—Schlumberger has long been happy to work ona contract basis, getting paid a fixed fee for its services. "Schlumberger is the indispensablecompany," says J. Robinson West, chairman of PFC Energy, a Washington consulting firm. "Theyare involved in every major project in every important producing country."Since taking the top job in 2003, Gould has refocused the company on its core oil-servicesbusiness. The 61-year-old CEO's biggest efforts have been in Russia, the Middle East, and otherkey oil-producing regions, where he has won high-powered friends by building training facilities andresearch labs. Schlumberger's tentacles today stretch from drilling rigs in the scrublands of centralMexico to a 65,000 sq.-ft. research center in Dhahran, Saudi Arabia, to a dreary Soviet-era officecomplex in Siberia. In each case, Schlumberger's far-flung operations help solidify relationships thatthreaten Big Oil's dominance of the business.As fields such as Alaska's North Slope and the North Sea have been depleted, the internationalgiants have turned to the developing world for new supplies. But governments of the biggestproducing countries haven't exactly embraced the majors. Instead, they want the choicest reservesto be controlled by their national companies, which have turned to service providers such asSchlumberger, Halliburton (HAL), and Baker Hughes (BHI) for the latest Western oil-field
technologies.Flush with profits from record prices for crude, the state-owned outfits no longer need the capital ofthe majors. These national companies—Saudi Aramco, Mexico's Petróleos Mexicanos (Pemex),Gazprom and Rosneft from Russia, and a dozen or so others across the globe—control more thanfour-fifths of known reserves. They don't want a Western oil company telling them how to do thingsor taking a fat chunk of the profits.Schlumberger appeals to the state-owned players because it's a company without a country: It'sregistered in the Netherlands Antilles, but Gould is based in Paris, and the company maintains largeoffices in Houston and London. Since 2000, Schlumberger's sales to national oil companies havegrown twice as fast as those to the majors. By 2006, sales to the nationals hit $5 billion, just aheadof revenues from the big international players, the company says.At the same time, Big Oil has lost its lock on the knowhow needed to manage complex projects.While the majors still lead in this area, Schlumberger is closing the gap. And the company haspulled ahead in technology. As oil prices tumbled to just over $10 per barrel in the late 1990s, themultinationals cut back on research and development. Schlumberger, by contrast, has alwaysconsidered itself a technology company, so it kept up its spending, devising new and more efficientways of detecting and extracting oil and gas. Today the majors invest less than 1% of revenues inresearch, while Schlumberger spends about 3%, or some $700 million this year.
Schlumberger was founded in 1926 by two science-minded French brothers, Conrad and MarcelSchlumberger. They figured out how to use electric currents to locate oil hidden in the rocks deepunderground. Now, Schlumberger helps oil companies guide drill bits through twisted paths milesbeneath the earth's surface. It's a top player in seismic imaging—mapping the subsurface usingsound waves—and is the world leader in well logging, or lowering an instrument packed withsensors down a well to determine the rock structure along the drill hole. "It would be very hard to dowithout Schlumberger," says Sadad Husseini, a former executive vice-president at Saudi Aramco,the kingdom's national company. "Schlumberger has been critical for Saudi oil-field development."