Shell will leave Russia after the invasion of Ukraine, joining BP

LONDON, March 1 – Shell (SHEL.L) will leave all of its operations in Russia, including a large liquefied natural gas plant, it said on Monday, becoming the last major Western energy company to leave the oil-rich country after the operation. of the Moscow invasion of Ukraine.

The decision comes a day after rival BP abandoned its stake in Russian oil giant Rosneft (ROSN.MM) in a move that could cost the British company more than $ 25 billion. Norwegian Equinor (EQNR.OL) also plans to leave Russia. Read more

Shell said in a statement that it would leave Sakhalin 2, the leading liquefied natural gas plant, in which it owns a 27.5% stake and which is 50% owned and operated by Russian gas giant Gazprom.

Shell said the decision to leave the Russian joint ventures would lead to devaluation. Shell had about $ 3 billion in non-current assets in these plants in Russia at the end of 2021, it said.

“We are shocked by the loss of human life in Ukraine, which we regret as a result of a senseless act of military aggression that threatens European security,” Shell CEO Ben van Beurden said in a statement.

Rival BP CEO Bernard Looney convened an emergency meeting with his management team on Thursday, just hours after the first Russian bombs fell on the Ukrainian capital Kyiv last week, two BP sources told Reuters. Russia calls its actions in Ukraine a “special operation.”

During the unannounced meeting, Looney made it clear that the company’s investment in Rosneft had become insolvent, sources said.

“There was only one decision we could make,” said one BP insider. “The way out was the only viable way.”

Looney held two more board meetings over the weekend, after which board members voted to leave Rosneft immediately, sources said.

Looney also spoke with British Business Secretary Quasi Quarteng on Friday when Quarteng expressed concern about BP’s interests in Russia. Kwarteng welcomed BP’s decision to leave on Twitter on Sunday.

SHELL

Kwarteng had a similar announcement for Shell on Monday.

“Shell has made the right call for liberation from Russia,” he said on Twitter, adding that he spoke with van Beurden earlier Monday.

The Sakhalin 2 project, located off Russia’s northeast coast, is huge, producing about 11.5 million tonnes of LNG a year, which is exported to major markets, including China and Japan.

For Shell, the world’s largest liquefied natural gas retailer, leaving the project is a blow to its plans to supply gas to emerging markets in the coming decades.

Shell said Russia’s exit would not affect its plans to switch to low-carbon and renewable energy.

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

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

Together, Salim and Sakhalin II contributed $ 700 million to Shell’s net revenue in 2021.

“It’s the right decision for the Shell board to leave its Russian companies,” said Adam Matthews, chief investment officer for the British Church’s pension council, which is investing in Shell, in a LinkedIn post.

“Following BP’s decision, the focus is on those who have not yet taken such a step,” Matthews said.

Japan’s Mitsui & Co (8031.T) and Mitsubishi Corp (8058.T), which hold 12.5% ​​and 10%, respectively, in Sakhalin 2, said separately that they were investigating Shell’s announcement. They said they would discuss the situation with the Japanese government and project partners without giving further details.

Norwegian Equinor, a majority owner of the Norwegian state, said earlier on Monday that it would start giving up its joint ventures in Russia. This came after the country’s sovereign wealth fund, the world’s largest, said on Sunday it would sell its Russian assets.

Other Western companies, including global bank HSBC and the world’s largest aircraft leasing company, AerCap, have said they plan to leave Russia as Western governments tighten economic sanctions against Moscow. Read more

Report by Ron Busso in London, Shanima A in Bengaluru and Yuka Obayashi in Tokyo; Edited by Jonathan Oatis, Simon Webb, Richard Pullin and Kenneth Maxwell

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