Oil and gas will remain critical to economic activity and prosperity—contributing more than 50% to the global energy mix in the next few decades. Our role is twofold: to enable customers to produce these resources efficiently and cost effectively and to support the industry transition as the world diversifies its energy mix.
Oil and gas continue to satisfy a substantial portion of energy demand, while renewables continue to grow, displacing coal.
Source: STEPS scenario, IEA, World Energy Outlook, November 2020
The strategy is built around three major themes, all of which are focused on customer performance—a defining attribute in the new industry landscape.
The core of Schlumberger is how we work with customers and execute our business. The elements in this theme—which include Operations Integrity & Efficiency, Customer Collaboration, and Capital Stewardship—are enabled by our people and technology.
Operations integrity—core to our culture—is enhanced by the digitalization of our operations. Just as Schlumberger is delivering digital solutions to our customers, we are advancing them in our own operations to capture more value from our equipment and services businesses by integrating them into our digital infrastructure.
As a service company, we have always worked closely with customers and are exploring new ways to collaborate and help them overcome their challenges and increase performance. This year, we set a new record in safety and service quality performance for a third consecutive year.
Capital Stewardship is a crucial factor for our industry moving forward. Schlumberger implemented a new capital allocation framework that governs all investments, whether those relate to capex, mergers and acquisitions, or research and engineering. The underlying principle behind the framework is that investment opportunities are prioritized on returns and cash flow before any other criteria. Using the framework, we performed a critical assessment of our technology portfolio, which resulted in decisions to rationalize our offering and exit certain commoditized businesses and restructure underperforming business units.
The steps we took this year reduced our capital intensity, while free cash flow generation remained strong, despite severe industry headwinds. We structurally increased our earnings power and margin profile, which position us well to lead in the industry recovery cycle.
Schlumberger contributed its onshore hydraulic fracturing business in the United States and Canada (“OneStim®”) to Liberty Oilfield Services, including its pressure pumping, pumpdown perforating, and Permian frac sand businesses, in exchange for a 37% equity interest in Liberty. This enables us to participate in the US unconventional market without the high capital burden this business demands.
Industry markets have evolved into multiple, diverse regional markets that are increasingly in competition with each other to meet global, regional, and domestic oil and gas demand. Each of these regions has a set of resource plays—or basins—with localized economics and operational drivers. This presents Schlumberger with opportunities that can be optimally addressed with a basin-specific approach.
This strategic theme includes Performance Models, Fit-for-Basin, and Technology Access. These elements develop deeper partnerships with our customers, expanding on their needs and challenges from a basin-specific perspective to provide technology and business models tailored to regional or individual customer requirements. These elements help us share in the performance improvement we deliver for customers and partners.
Fit-for-Basin describes the mindset we adopted toward technology development and deployment, in-country value, and market access. In an increasingly regionalized energy market, we believe these attributes become more customer-specific, and we rely on our long-standing relationships and expertise in more than 120 countries for the insight to deliver technology where we can enhance performance.
Schlumberger opened a world-class manufacturing center in King Salman Energy Park (SPARK) that supports Saudi Aramco’s In-Kingdom Total Value Add (IKTVA) program to promote economic growth. The center will manufacture various technologies, including liner hangers and packers, in addition to isolation valve technologies—such as GROVE* valves and ORBIT* rising stem ball valves—to help improve the efficiency of oil and gas operations in Saudi Arabia and neighboring countries.
Fit-for-basin technologies under development
New local manufacturing centers inaugurated
Partners globally using technology access models
The Middle East Center for Reliability and Efficiency (CRE) is another example of our commitment to in-country value. Local engineers service PowerDrive* rotary steerable systems, supporting the region from Dammam, Saudi Arabia.
The third set of strategic elements positions Schlumberger to build share in current markets and expand into new long-term markets: Digital, Production & Recovery, and Sustainability & New Energy. These elements are now in sharper focus in the context of energy transition. The importance of Production & Recovery and Digital increase with the drive to maximize performance, while Sustainability & New Energy address the need to provide energy with reduced environmental impacts.
Digital capabilities helped the industry navigate the challenges of 2020 and are crucial to long-term performance and resilience. Through our industry digital platform, we are enabling digital transformation at scale, unlocking significant value, and leading innovation across the digital domain in our industry.
In the last five years, we designed and built a highly secure and flexible digital industry platform around differentiated digital technologies—enabled by key partnerships. We have worked closely with Google Cloud™, IBM®, and Microsoft® to provide an open digital platform that takes advantage of on-demand, high-performance computing and makes capabilities like embeded AI or machine learning readily accessible to customers.
In 2020, we made substantial progress on our Digital ambition, accelerating digital adoption by removing barriers and introducing new technologies in a year when digital capabilities became critically important to many customers. We move technical workflows from the desktop to the cloud, creating data structures that enable AI and machine learning to provide insights at scale across operations. The platform provides us with opportunities to create new revenue streams, as our customers execute on their digital journeys to achieve a step change in performance and efficiency.
During 2020, our DELFI* cognitive E&P environment saw more intense adoption, with more than
This year, we reached a unique agreement with IBM and Red Hat® to leverage hybrid digital infrastructure. The collaboration is empowering our customers to overcome data residency constraints—a major barrier to adoption internationally. Using Red Hat OpenShift® and a variety of cloud platforms, including in-country solutions and hybrid cloud architectures, we can now deploy for every customer in every basin. This open technology architecture makes our DELFI environment the first-ever private and public cloud-portable digital environment for all domains across the E&P life cycle.
With the elements of the new strategy set, we needed an organization specifically designed to execute and maximize the effectiveness of that strategy. To fully capitalize on a strategy focused on delivering a step change in industry performance, we accelerated the most comprehensive restructure in company history.
This new structure is aligned with our customers’ workflows and directly linked to the performance strategy. It consists of four Divisions that combine and integrate Schlumberger technologies. The Divisions are positioned to capitalize on the recovery cycle and growth drivers in the new industrylandscape: digital transformation, sustainable and lower carbon operations, the mandate for production and recovery, maximizing reservoir performance, and well construction integration and efficiency.
The Divisions are deployed around a geographical structure within five highly focused Basin organizations that bring agility, responsiveness, and competitiveness. The Basins were configured around common regional characteristics to deploy fit-for-purpose technologies, operating models, and skills. With a strong focus on regional customers, the Basins identify opportunities for local growth.
