Shell Oil Exiting Russia, Withdraws From Multiple Joint Ventures

Shell's refinery in Pernis, Netherlands, on Nov. 15, 2021. (Robin Utrecht/ANP/AFP via Getty Images)

Shell announced plans to pull out from Russia after the country launched an invasion into neighboring Ukraine, making the multinational oil and gas giant the latest in a series of companies and organizations to embrace decoupling.

Shell will exit its joint ventures with Gazprom, the Russian state-owned energy corporation, and its related entities. This includes withdrawing from the 50 percent stake Shell holds in Salym Petroleum Development and the Gydan energy venture, two projects in Siberia, as well as the 27.5 percent stake in the Sakhalin-II liquefied natural gas (LNG) facility off Russia’s east coast.

Shell also plans on ending its involvement in the Nord Stream 2 pipeline project. It’s one of five companies that committed to providing financing and guarantees for up to 10 percent of the project’s 9.5 billion euro ($10.6 billion) total cost. After Russia’s initiation of war, German Chancellor Olaf Scholz refused to certify the pipeline.

“Our immediate focus is the safety of our people in Ukraine and supporting our people in Russia,” Shell’s CEO Ben van Beurden said in a Feb. 28 press release. “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.”

Shell had around $3 billion in non-current assets in Russian ventures by the end of 2021. The exit plans are expected to affect the book value of its Russian assets. Shell’s Russian assets only accounted for less than 5 percent of its global oil and gas production in 2020.

Kwasi Kwarteng, the UK’s secretary of state for business, energy, and industrial strategy, welcomed the company’s decision. “Shell have made the right call to divest from Russia – including Sakhalin II. There is now a strong moral imperative on British companies to isolate Russia. This invasion must be a strategic failure for Putin,” Kwarteng said in a Twitter post.

Other companies have also announced their decision to get out of Russia. TotalEnergies SE, a French company involved in major LNG projects in Russia, will stop providing capital for new developments.

Norway’s biggest energy company Equinor ASA, will be withdrawing from Russian joint ventures, collectively worth around $1.2 billion. Only 4 percent of Equinor’s total production in 2020 was accounted for by Russia.

British oil and gas company BP declared that it will exit its 19.75 percent shareholding in Russian integrated energy company Rosneft. Two directors at the Rosneft board nominated by BP will be resigning immediately.

“We can no longer support bp representatives holding a role on the Rosneft board,” BP chair Helge Lund said in a Feb. 27 press release. “The Rosneft holding is no longer aligned with bp’s business and strategy and it is now the board’s decision to exit bp’s shareholding in Rosneft. The bp board believes these decisions are in the best long-term interests of all our shareholders.”