Shell becomes latest oil major to quit Russia

SHELL is quitting its joint ventures with Russia’s Gazprom following the invasion of Ukraine.

Shell announced yesterday that it will exit its joint ventures with Russia’s majority state-owned energy firm Gazprom and its related entities. This includes a 27.5% stake in the Sakhalin-II LNG plant; a 10% stake in the Nord Stream 2 pipeline that would bring natural gas from Russia to Europe but has been shelved by German lawmakers; and a 50% stake in the Salym project that is developing oil fields in western Siberia.

The stakes were worth an estimated US$3bn at the end of 2021. The exit comes as countries ratchet up economic sanctions on Russia for its invasion of Ukraine. While Shell said leaving Russia will lead to impairment charges but it has not indicated whether it would seek to sell the assets or write them off. Shell’s exit follows a decision by BP to sell its 20% stake in Russia’s Rosneft which could cost the company US$25bn.

Shell CEO Ben van Beurden said: “We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression which threatens European security.

“Our decision to exit is one we take with conviction. We cannot – and we will not – stand by. Our immediate focus is the safety of our people in Ukraine and supporting our people in Russia. In discussion with governments around the world, we will also work through the detailed business implications, including the importance of secure energy supplies to Europe and other markets, in compliance with relevant sanctions.”

Construction of the 1,200 km Nord Stream 2 pipeline which runs from Russia through the Baltic Sea to Germany was completed in September, but Germany halted certification of the project last week to put pressure on Russia. The pipeline would have significantly increased supplies of Russian gas into the EU, which already meets around 40% of the bloc’s needs. The UK relies on Russia for around 4% of its gas supplies. Russia’s energy dominance and the uncertainty brought about by its invasion of Ukraine have seen energy prices spike, with oil rising above US$100/bbl for the first time since 2014. The EU is expected to publish a new energy strategy next week outlining how it will reduce its dependence on Russia, New Scientist reports.

UK Business Secretary Kwasi Kwarteng, tweeted that “Shell have made the right call to divest from Russia” and said “there is now a strong moral imperative on British companies to isolate from Russia.”

It is expected that other oil majors and energy traders will come under pressure to exit Russia. Equinor has also announced it will halt investments in Russia and look to exit its ventures in the country.