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Shell Cuts All Ties With Russia

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Shell said it will end all involvement with Russia’s oil and gas sector, marking the most radical break with that country by any Western oil and gas company to date.

Shell’s pledge includes the following steps:

  • Immediately stopping purchases of spot cargoes of Russian crude
  • Not renewing term supply contracts
  • Changing its crude oil supply chain to remove Russian volumes
  • Shutting service stations, aviation fuel and lubricant operations in Russia
  • Starting a phased withdrawal from Russian petroleum products, pipeline gas and LNG 

Shell had already announced its exit from Russia’s upstream sector, including its 27.5% interest in the Sakhalin 2 LNG project, where it is partnered with state-controlled Gazprom.
The UK energy major indicated that it was taking these additional steps in order to align itself with advice from policymakers in the West.

It made the announcement shortly before the US and UK governments said they would ban imports of Russian oil and gas.

“Our actions to date have been guided by continuous discussions with governments about the need to disentangle society from Russian energy flows, while maintaining energy supplies,” said CEO Ben van Beurden.

Shell had come under intense public criticism last week after it purchased a deeply discounted cargo of Russia’s Urals crude that would have delivered an estimated profit of as much as $20 million.

“These societal challenges highlight the dilemma between putting pressure on the Russian government over its atrocities in Ukraine and ensuring stable, secure energy supplies across Europe,” Van Beurden said.

“But ultimately, it is for governments to decide on the incredibly difficult trade-offs that must be made during the war in Ukraine.”

UK Minister for Energy, Clean Growth and Climate Change Greg Hands declined to say whether the UK government had asked Shell to stop all trade in Russian hydrocarbons or had similar discussions with BP.

"A lot of those are principally commercial decisions for the companies concerned but on a policy basis of course the UK government welcomes companies moving out of Russia," he said on the sidelines of the CERAWeek conference in Houston. "We think that is absolutely the right thing to do."

Other Western majors have not set out out such comprehensive plans, but they have said they are limiting their involvement with Russian oil and gas.

Total and BP

TotalEnergies CEO Patrick Pouyanne defended his company’s investments in Russia’s publicly listed Novatek, including its interest in the Yamal LNG facility and its offtake agreements there.

Pouyanne told CERAWeek that he has spoken with “the highest authority” in France on the company’s involvement in Russia. “Obviously there is no push from them for us to exit from Russia,” he said.

But Pouyanne did say that Total had told its traders to avoid spot cargoes of Russian crude and was looking at alternative sources of supply for European refineries that receive Russian oil delivered by pipeline.

“Except for one refinery in Germany where we would face some difficulties, the rest of the system we can do that,” Pouyanne said.

BP was the first oil and gas major to commit to exiting its upstream interests in Russia, including its 19.75% interest in its top oil producer Rosneft.

Sources tell Energy Intelligence that BP has been avoiding Russian crude in the spot market and has little, if any, exposure to Russian natural gas volumes.

Exxon and Chevron could not be reached for comment on the record by press time.

Topics:
Sanctions, Military Conflict, Corporate Strategy , Majors, Policy and Regulation, Ukraine Crisis
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