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Shell joins BP to exit Russia over Ukraine invasion

Shell joins BP to exit Russia over Ukraine invasion

 

Global oil and gas giant Shell announced Monday that it will exit all its Russian operations, becoming the latest major Western energy company to quit the oil-rich country following Moscow’s invasion of Ukraine.

Shell's pullout includes a major liquefied natural gas (LNG) plant, as President Vladimir Putin’s aggression continues to cost Russia's all-important energy industry foreign investment and expertise.

The decision comes a day after rival British Petroleum (BP) abandoned its stake in Russian oil giant Rosneft in a move that could cost the British company over $25 billion. Norway's Equinor also plans to exit Russia.

Shell said in a statement it will quit the flagship Sakhalin 2 LNG plant in which it holds a 27.5% stake, and is 50% owned and operated by Russian gas giant Gazprom.

Sakhalin 2, located off Russia's northeastern coast is huge, producing around 11.5 million tons of LNG per year, which is exported to major markets including China and Japan.

For Shell, the world's largest LNG trader, leaving the project deals a blow to its plans to supply gas to fast-growing markets in the coming decades.

Shell said the Russia exit will not affect its plans to switch to low-carbon and renewable energy.

The company also plans to end its involvement in the Nord Stream 2 Baltic gas pipeline linking Russia to Germany, which it helped finance as a part of a consortium of companies. Germany last week halted the project.

Shell said the decision to quit the joint ventures in Russia will lead to impairments. Shell had around $3 billion in noncurrent assets in these ventures in Russia at the end of 2021, it 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," Shell Chief Executive Ben van Beurden said in a statement.

Shell will also exit the Salym Petroleum Development, another joint venture with Gazprom.

Together, Salym and Sakhalin 2 contributed $700 million to Shell's net earnings in 2021.

"Right decision by the Board of Shell to exit its Russian ventures," Adam Matthews, chief responsible investment officer for the Church of England Pensions Board, which invests in Shell, said in a LinkedIn post.

"Following BP's decision the focus is on those that have yet to take such a step," Matthews said.

Other Western companies, including global bank HSBC and the world's biggest aircraft leasing firm AerCap, said they plan to exit Russia as Western governments ratchet up economic sanctions on Moscow.

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Published: 01-03-2022

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