Two powerhouses – one known for its subsea innovation and the other recognized for its reservoir expertise – have joined forces in hopes of uncovering ways to boost subsea oil and gas recovery rates.

Schlumberger and Cameron are partners, 40% and 60% respectively, in the subsea venture dubbed OneSubsea. As part of the agreement, Cameron will contribute its subsea division and receive US $600 million from Schlumberger. In turn, Schlumberger will contribute its framo, surveillance, flow assurance, and power and controls businesses. OneSubsea, which will be managed by Cameron, will bring together about 6,000 employees worldwide.

The joint venture (JV) will focus on manufacturing and developing products, systems, and services for the subsea oil and gas market. “This new company will offer a step change in reservoir recovery for the subsea oil and gas industry through integration and optimization of the entire production system over the life of the field,” the companies said in a press release.

Considering that offshore developments, especially deepwater offshore drilling, are expected to surge, Cameron and Schlumberger believe now is the optimal time for the JV.

“We have seen a rapid growth in the number of offshore developments using subsea technology in the most recent years,” said Joao Felix, a spokesman for Schlumberger. “With this growth in mind, and the need for technical innovation in order to unlock reservoir potential, we felt this was the perfect time to form this joint venture.”

A recent Bernstein Research report showed deepwater production has jumped globally from less than 500,000 b/d 15 years ago to about 5.5 MMb/d in 2012. Another 4 MMb/d from deepwater drilling could arrive by 2020.

Unlocking the recovery potential of subsea developments requires meeting key goals. For Cameron and Schlumberger, that involves “the design and optimization of an entire subsea production system, from the reservoir pore space through the well completion and the subsea processing system all the way to the export point,” Felix said. Another vital priority is to strengthen research and engineering investment, including parent companies’ complementary projects, toward integrating the subsea production system.

OneSubsea will target all major subsea provinces where it foresees adding value for customers that include national oil companies, international oil companies, and independents. “Subsea developments today are faced with significant technical challenges. We believe that combining the relative strengths of Cameron and Schlumberger we can, over time, deliver a step change in recovery rates from subsea fields,” Felix explained.

News of the JV brought praise from others with watchful eyes on industry happenings.

Barclays said “we feel the JV with Cameron creates a powerful force in the subsea processing market. … The partnership brings together Schlumberger’s expertise in subsea processing and platform integration with Cameron’s vast capabilities in subsea tree manufacturing. We feel the combined technologies will allow both companies to move towards a step change in optimizing subsea processing.”

EnergyPoint Research’s Doug Sheridan said “this move should benefit customers by combining the subsea capabilities of two of the industry’s most well-regarded names in a segment that needs to see both performance and standards rise. We also believe the move, to some extent, represents evidence of Schlumberger and Cameron taking steps to provide greater focus in the respective core businesses, continued evidence of a reversing out the several-year trend toward bundling that our data have shown to be ineffective for customers.”

In the statement released after the news, Sheridan said EnergyPoint sees competitive risks for Dril-Quip, FMC Technologies, Aker Solutions, National Oilwell Varco, and GE Oil & Gas, all of which could witness an impact on their subsea market product lines and shares.

“We suspect customers will welcome the JV, if for no other reason than it provides greater competitive pressure up supplier standards and performance in the subsea segment,” Sheridan said.

But OneSubsea still has a few hurdles to jump. The transaction must get regulatory approvals and is subject to other customary closing conditions. Regulatory approval is expected to arrive early next year, Felix said, with closing by 2Q 2013.

The JV will operate as a separate company, with Cameron as the 60% owner, serving as OneSubsea’s operator, and providing the CEO. Other representatives from the two companies will assume senior management positions, Felix said.

“The executive committee will be joint, and consist of the OneSubsea CEO, plus senior management from both Cameron and Schlumberger,” he added.

Contact the author, Velda Addison, at vaddison@hartenergy.com.