BUSINESS REVIEW



                                     Third Quarter                     Nine Months
                               2008      2007     % change       2008       2007     % chg
                                                  (Stated in millions)
    Oilfield Services
    Revenue                   $ 6,356   $ 5,128         24 %   $ 18,027   $ 14,862      21 %
    Pretax Operating Income   $ 1,699   $ 1,505         13 %   $  4,905   $  4,424      11 %

    WesternGeco
    Revenue                   $   892   $   794         12 %   $  2,239   $  2,165       3 %
    Pretax Operating Income   $   355   $   306         16 %   $    748   $    789      (5 )%

Pretax operating income represents the business segments' income before taxes and minority interest. The pretax operating income excludes corporate expenses, interest income, interest expense, amortization of certain intangible assets, interest on postretirement medical benefits and stock-based compensation costs as these items are not allocated to the segments.

Revenue for the third quarter of 2008 was $7.26 billion versus $5.93 billion in the same period last year. Income before income taxes and minority interest was $1.96 billion for the three-month period ended September 30, 2008 compared to $1.71 billion for the same period in 2007. Net income was $1.53 billion-an increase of 7% sequentially and 13% year-on-year. Diluted earnings-per-share was $1.25 versus $1.16 in the previous quarter, and $1.09 in the third quarter of 2007. The overall impact of the hurricane season on Schlumberger third-quarter 2008 earnings was estimated at $0.04 per share. Without this effect, diluted earnings-per-share would have been $1.29.

The recent rapid deterioration in credit markets will undoubtedly have an effect on Schlumberger's activity though it is anticipated this will largely be limited to North America and in some emerging exploration markets overseas. The strengthening production of North American natural gas has also led a number of customers to reduce spending early.

At the present time, the rate at which the world economy will slow has become increasingly uncertain. Schlumberger has always maintained that the one event that could slow the rate of increase in worldwide exploration and production spending would be a reduction in the demand for oil caused by a severe global recession. At the moment, it is still too soon to predict to what extent current events will affect overall activity in 2009, but a slowing in the rate of increase of customer spending is anticipated.

However, Schlumberger believes the weakness of the current supply base, the age of the production profile and the decrease in reserve replacement are such that any significant drop in exploration and production investment would rapidly provoke an even stronger recovery.

Third-quarter revenue of $6.36 billion was 5% higher sequentially and 24% higher year-on-year.

Sequential revenue increases were recorded across all Areas led by the Canada, Mexico/Central America, US land Central, Peru/Colombia/Ecuador and Russian GeoMarkets. In addition, double-digit growth rates were achieved in the US land North, Libya, Caspian, Brunei/Malaysia/Philippines and Qatar GeoMarkets. Among the Technologies, growth was strongest in Well Services, Wireline and Drilling & Measurements.

Year-on-year, revenue grew across all Areas and Technologies. The most significant geographical increases were in the Mexico/Central America, Russian, US land Central and North Sea GeoMarkets. The consolidation of Framo Engineering AS (Framo) also contributed to the growth. Schlumberger acquired an additional 5.5% in Framo in November 2007 to take its holding to a majority 52.75%.

Third-quarter pretax operating income of $1.70 billion was flat sequentially but 13% higher year-on-year. Pretax operating margin decreased sequentially from 28.1% to 26.7%. Sequentially, pretax operating income growth was experienced from stronger demand for Well Services and Wireline technologies in Canada following the spring break-up; increased operating leverage in Russia; and increased higher-margin services in Peru/Colombia/Ecuador. However, this growth was offset by the hurricane-related effects in the US; an increased mix of low-margin third-party managed services for Integrated Project Management (IPM) in Mexico/Central America; and reduced high-technology services in the Gulf and North Sea GeoMarkets.

Year-on-year pretax operating income growth was primarily a result of higher activity levels and an overall more favorable revenue mix in Europe/CIS/Africa, Middle East & Asia and Latin America. These increases were partially offset by a decrease in North America as the positive impact of increased activity was offset mostly by cost inflation.

North America

Revenue of $1.5 billion increased 4% sequentially and 15% year-on-year. Pretax operating income of $317 million decreased 8% sequentially and 9% year-on-year.

Canada recorded strong sequential growth with the rapid recovery in rig count following spring break-up, resulting in robust demand for Well Services, Wireline and Drilling & Measurements technologies. The US land GeoMarkets experienced growth on a more favorable mix of Well Services, Drilling & Measurements and Wireline services. These increases were partially offset by a sharp reduction in activity in the US Gulf of Mexico due to Hurricanes Gustav and Ike and a slow-down in Alaska for seasonal rig and infrastructure maintenance.

The year-on-year revenue growth was led by the US land Central and West GeoMarkets on strong activity increases that resulted in robust demand for Wireline, Drilling & Measurements and Well Services technologies. The Canada GeoMarket also recorded growth primarily in Well Services technologies while the US Gulf of Mexico GeoMarket increased on improved pricing and higher Completion Systems product sales. These increases were partially offset by a decrease in Alaska due to reduced exploration-related services and Well Services activity.

Pretax operating margin decreased sequentially from 23.9% to 21.1% primarily as a result of the overall impact of the Gulf of Mexico hurricane season and the slow-down in Alaska. This impact was partially offset by a sharp margin improvement in Canada on increased activity and efficiency.

Year-on-year, pretax operating margin decreased from 26.9% to 21.1% as the positive impact of the increased activity levels was insufficient to offset the impact of cost inflation across the Area.

Latin America

Revenue of $1.14 billion was 8% higher sequentially and increased 32% year-on-year. Pretax operating income of $230 million decreased 5% sequentially but increased 13% year-on-year.

Sequential revenue growth was led by Mexico/Central America driven primarily by increased IPM activity and by Peru/Colombia/Ecuador on strong activity for Wireline and Drilling & Measurements services. In addition, the Brazil GeoMarket contributed to growth through robust demand for exploration-related technologies as well as through higher Schlumberger Information Solutions (SIS) software sales.

Year-on-year revenue growth was recorded across the Area. The Mexico/Central America and Peru/Colombia/Ecuador GeoMarkets increased primarily due to higher IPM activity while the Venezuela/Trinidad & Tobago GeoMarket grew on strong demand for Well Services, Drilling & Measurements and Wireline technologies. The Brazil GeoMarket increased on strong demand for exploration-related services in addition to higher SIS and Completion Systems sales. Argentina/Bolivia/Chile recorded growth on increased demand for Well Services technologies and higher Artificial Lift sales.

Pretax operating margin declined sequentially from 23.0% to 20.1% as the increased demand for high-technology Wireline and Drilling & Measurements services in Peru/Colombia/Ecuador and Brazil was insufficient to offset an increased mix of low-margin third-party managed services in IPM projects in the Mexico/Central America GeoMarket. Cost inflation across the Area also contributed to the margin decline.

Year-on-year, pretax operating margin decreased from 23.7% to 20.1% as the positive impact of increased activity levels in the Peru/Colombia/Ecuador and Brazil GeoMarkets were offset by less favorable revenue mixes in the Mexico/Central America and Venezuela/Trinidad & Tobago GeoMarkets and by cost inflation across the Area.

Europe/CIS/Africa

Revenue of $2.17 billion increased 5% sequentially and 28% year-on-year. Pretax operating income of $628 million increased 8% sequentially and 27% year-on-year.

Sequentially, revenue growth was led by the Russian GeoMarkets with the summer seasonal offshore exploration campaigns in the East and strong demand for Well Services technologies in the North and South while the Caspian GeoMarket experienced a sharp rise in activity resulting in strong demand for exploration-related technologies. Libya revenue increased in both exploration- and development-related activities that led to robust demand for Wireline, Drilling & Measurements and Well Services technologies, and the West & South Africa GeoMarket recorded exploration-related growth for Wireline and Well Testing services. Framo technologies also contributed to growth. These increases, however, were partially offset by a decrease in both exploration and development rig activity in the North Sea GeoMarket that resulted in reduced demand for Wireline, Drilling & Measurements and Well Testing services.

Year-on-year, revenue growth was also led by the Russian GeoMarkets on increased demand for Drilling & Measurements, Well Services, Wireline and Well Testing services coupled with higher IPM activity. The North Sea, West & South Africa, Caspian and Continental Europe GeoMarkets recorded growth on increased exploration and development activity that led to robust demand for Wireline, Drilling & Measurements and Well Services technologies. The consolidation of Framo also contributed to the growth.

Pretax operating margin increased sequentially from 28.2% to 29.0% primarily due to higher activity coupled with the more favorable mix of exploration-related services in Russia. This increase was partially offset by the less favorable activity mix in the North Sea.

Year-on-year, pretax operating margin was essentially flat as improvements in the Russian, North Sea and Caspian GeoMarkets resulting from a stronger and more favorable activity mix were offset by reductions in Libya due to a more competitive pricing environment and in the North Africa and Continental Europe GeoMarkets primarily due to cost inflation.

Middle East & Asia

Revenue of $1.49 billion was 4% higher sequentially and 22% higher year-on-year. Pretax operating income of $530 million increased 1% sequentially and 21% year-on-year.

Sequentially, the Brunei/Malaysia/Philippines GeoMarket grew on strong Completions product sales as well as on increased exploration activity that resulted in robust demand for Wireline and Well Testing services. The East Mediterranean, Qatar, Arabian and India GeoMarkets experienced growth from a more favorable mix of services. These increases were partially offset by a decrease in the Gulf GeoMarket due to a general shift from drilling to workover activity that resulted in sharply lower Wireline services.

Year-on-year revenue growth was recorded across the Area led by the Arabian, Australia/Papua New Guinea, East Mediterranean, Qatar and Brunei/Malaysia/Philippines GeoMarkets. Among the Technologies, growth was strongest for Drilling & Measurements, Wireline, Well Testing and Well Services.

Pretax operating margin moderated sequentially from 36.3% to 35.5% as the positive impact of high-technology services primarily in the Qatar and India GeoMarkets was insufficient to offset the combined effects of a less favorable revenue mix in Indonesia and the shift to lower-margin workover activity in the Gulf.

Year-on-year, pretax operating margin was essentially flat as increases in the Qatar GeoMarket due to a more favorable revenue mix and in the Arabian GeoMarket resulting from improved pricing for Well Testing services and higher margin Completions System sales were offset by decreases in the Gulf GeoMarket due to shift to lower-margin workover activity and in the Indonesia GeoMarket primarily as a result of cost inflation.

Third-quarter revenue of $892 million increased 33% sequentially and 12% year-on-year. Pretax operating income of $355 million was 81% higher sequentially and increased 16% year-on-year.

Sequentially, Marine revenue increased sharply on strong activity in the North Sea and the transfer of three vessels from multi-client to proprietary surveys during the quarter. Multiclient revenue grew due to increased sales in North America, Latin America and Europe. Data Processing also recorded higher revenue primarily in Europe, North America and India. However, these increases were partially offset by a decrease in Land revenue on reduced activity and contract completions in North Africa and Latin America.

Year-on-year, Multiclient recorded growth on increased sales, most notably in Asia, Europe and Africa. Marine increased mostly due to higher pricing while Data Processing grew on stronger activity in India, Latin America and Europe. These increases were offset by a decrease in Land on the reduced activity and contract completions in North Africa and Latin America.

Pretax operating margin increased sequentially from 29.2% to 39.8% mainly due to increased Marine activity with seasonally stronger pricing and to Multiclient as a result of the increased sales and more favorable margin mix. These increases were partially offset by lower Land operating income resulting from the impact of reduced crew utilization and contract completions.

Year-on-year, pretax operating margin increased from 38.6% to 39.8% primarily due to the increased level of sales coupled with a more favorable margin mix in Multiclient. Marine and Data Processing pretax operating margins declined mostly as the result of cost inflation while Land decreased due to the lower level of activity.

Nine-month revenue for the period ended September 30, 2008 was $20.29 billion versus $17.03 billion for the same period last year. Income before income taxes and minority interest was $5.38 billion for the first nine months of 2008 compared to $4.88 billion for the first nine months of 2007.

Nine-month revenue of $18.03 billion was 21% higher compared to the same period last year. All Areas recorded growth, most notably in the Mexico/Central America, Russian, North Sea, West & South Africa, Arabian and US land GeoMarkets. The consolidation of Framo also contributed to the increase.

Pretax operating margin decreased from 29.8% to 27.2% primarily due to reduced pricing for well stimulation services in the US land GeoMarkets, a higher mix of low-margin third party managed services in the Mexico/Central America GeoMarket and cost inflation across all Areas.

North America

Revenue of $4.36 billion grew 9% versus the same period last year. Growth was led by the US land Central GeoMarket primarily on increased gas shale activity and by the Canada GeoMarket as the result of extended winter drilling activity and record high activity following the spring break-up in the current year. The US land West GeoMarket increased on stronger rig activity coupled with higher Artificial Lift sales while the US Gulf of Mexico GeoMarket grew on increased deepwater activity. These increases were partially offset by a decrease in the US land North GeoMarket due to adverse weather conditions.

Pretax operating margin decreased from 29.9% to 23.5% mostly as the result of lower pricing for well stimulation services in the US land GeoMarkets and cost inflation across the Area.

Latin America

Revenue of $3.12 billion was 33% higher than the same period last year. All GeoMarkets recorded double-digit growth, most notably in Mexico/Central America and Peru/Colombia/Ecuador on strong IPM activity in addition to increased demand for conventional services. Brazil grew on a surge in offshore activity while the Venezuela/Trinidad & Tobago recorded strong rig-less activity and increased demand for SIS products and services. Argentina/Bolivia/Chile revenue increased on robust demand for Drilling & Measurements and Well Services technologies as well as Artificial Lift products.

Pretax operating margin decreased from 23.2% to 21.1% primarily as the result of a higher mix of low-margin third party managed services in the Mexico/Central America GeoMarket and cost inflation across the Area.

Europe/CIS/Africa

Revenue of $6.13 billion increased 27% versus the same period last year. Growth was led by the Russian GeoMarkets on stronger exploration activity and increased demand for Well Services technologies. The North Sea and West & South Africa GeoMarkets grew on increased exploration-related services as well as strong demand for Well Services technologies while the Continental Europe GeoMarket increased due to strong drilling-related and IPM activities. The consolidation of Framo also contributed to the increase.

Pretax operating magin decreased from 28.8% to 27.9% as improved revenue mix in Russia and in the North Sea GeoMarkets were offset by decreased margins in most other GeoMarkets and by the effect of the consolidation of Framo.

Middle East & Asia

Revenue of $4.26 billion was 21% higher than the same period last year, most notably in the Arabian GeoMarket on strong growth across the Technologies; in the Australia/Papua New Guinea GeoMarket on increased offshore exploration-related services; in the China/Japan/Korea on strong drilling-related services and higher SIS and Artificial lift services and product sales; and in the East Mediterranean and Gulf GeoMarkets.

Pretax operating margin increased slightly from 35.1% to 35.6% primarily due to the higher level of activity coupled with a more favorable revenue mix.

Nine-month revenue of $2.24 billion was 3% higher than the same period last year. Marine revenue increased as the result of higher pricing and the addition of one vessel to the fleet while Data Processing revenue grew on increased activity. These increases were partially offset by a decrease in Multiclient on lower late sales in North America, and in Land due to reduced activity and contract completions.

Pretax operating margin decreased from 36.4% to 33.4% primarily as the result of the impact of lower Multiclient late sales in North America and the reduced Land activity.

Interest & Other Income

Interest & other income consisted of the following for the third quarter and
nine months ended September 30, 2008 and 2007:



                                                     Third Quarter          Nine Months
                                                    2008        2007      2008       2007
                                                            (Stated in millions)
 Interest income                                  $     31    $     44   $    94   $    114
 Equity in net earnings of affiliated companies         76          64       212        175

                                                  $    107    $    108   $   306   $    289

Equity in Net Earnings of Affiliated Companies

The increase in net earnings of affiliated companies was primarily due to the results of the MI-SWACO drilling fluids joint venture that Schlumberger operates with Smith International, Inc.

Other

Gross margin was 31.6% and 34.1% in the third quarter of 2008 and 2007, and 31.3% and 33.9% in the nine-month periods ended September 30, 2008 and 2007, respectively. The decrease in gross margin was primarily driven by pricing decreases for certain land well-stimulation related activities in the US, the impact of cost inflation, and an increased mix of low-margin IPM project activity in the Mexico/Central America GeoMarket.

As a percentage of Revenue, Research & engineering, Marketing and General & administrative expenses for the third quarter and nine months ended September 30, 2008 and 2007 were as follows:

                                         Third Quarter          Nine Months
                                        2008       2007       2008       2007
            Research & engineering        2.9 %      3.2 %      2.9 %      3.1 %
            Marketing                     0.3 %      0.4 %      0.4 %      0.3 %
            General & administrative      2.1 %      2.3 %      2.1 %      2.2 %

Research and engineering expenditures, by business segment for the third quarter and nine months ended September 30, 2008 and 2007, were as follows:

                                      Third Quarter          Nine Months
                                     2008        2007      2008       2007
                                             (Stated in millions)
               Oilfield Services   $    177    $    151   $   500   $    429
               WesternGeco               28          36        86         91
               Other                      3           3        11         12

                                   $    208    $    190   $   597   $    532

The effective tax rate for the third quarter of 2008 was 21.4% compared to 20.8% for the same period in 2007. This increase was primarily attributable to WesternGeco as a result of increased multiclient and marine activity in

higher tax jurisdictions. The effective tax rate for the nine months ended September 30, 2008 was 20.5% compared to 22.3% in the same period of the prior year. This decrease was primarily attributable to the geographic mix of earnings in Oilfield Services which had a lower proportion of pretax earnings in North America.

CASH FLOW

Net Debt represents gross debt less cash, short-term investments and fixed
income investments, held to maturity. Management believes that Net Debt provides
useful information regarding the level of Schlumberger indebtedness by
reflecting cash and investments that could be used to repay debt. Details of Net
Debt follow:



                                                        Sept. 30       Sept. 30
                                                          2008           2007
                                                         (Stated in millions)
     Net Debt, beginning of period                     $    (1,857 )   $  (2,834 )
     Net income                                              4,285         3,793
     Excess of equity income over dividends received          (178 )        (128 )
     Depreciation and amortization (1)                       1,656         1,400
     Increase in working capital                              (918 )        (856 )
     US pension plan contribution                               -           (150 )
     Capital expenditures (1)                               (2,815 )      (2,207 )
     Business acquisitions                                    (345 )        (196 )
     Dividends paid                                           (712 )        (562 )
     Proceeds from employee stock plans                        272           521
     Stock repurchase program                               (1,665 )        (798 )
     Conversion of debentures                                  436           490
     Translation effect on Net Debt                             67           (92 )
     Other                                                      39           (64 )

     Net Debt, end of period                           $    (1,735 )   $  (1,683 )

(1) Includes Multiclient seismic data costs.

                                                    Sept. 30      Sept. 30      Dec. 31
 Components of Net Debt                               2008          2007          2007
                                                            (Stated in millions)
 Cash                                               $     188     $     162     $    197
 Short-term investments                                 3,305         3,076        2,972
 Fixed income investments, held to maturity               511           383          440
 Bank loans and current portion of long-term debt      (2,211 )        (771 )     (1,318 )
 Convertible debentures                                  (333 )        (934 )       (769 )
 Other long-term debt                                  (3,195 )      (3,599 )     (3,379 )

                                                    $  (1,735 )   $  (1,683 )   $ (1,857 )

Key liquidity events during the first nine months of 2008 and 2007 included:

• In September 2008, Schlumberger Finance B.V. issued €500 million 5.25% Guaranteed Notes due 2013. Schlumberger entered into agreements to swap these Euro notes for US dollars on the date of issue until maturity, effectively making this a US dollar denominated debt on which Schlumberger Finance B.V. will pay interest in US dollars at a rate of 4.7425%.

• During the first nine months of 2008, the $353 million of outstanding 1.5% Series A Convertible Debentures due June 1, 2023 were converted by holders into 9.8 million shares of Schlumberger common stock. In addition, $83 million of the 2.125% Series B Convertible Debentures due June 1, 2023 were converted by holders into 2.1 million shares of Schlumberger common stock.

                        Total cost         Total number         Average
                        of shares           of shares         price paid
                        purchased           purchased          per share
                        (Stated in thousands, except per share amounts)
. . .