Shell and Equinor to Exit Russian Projects with Gazprom and Rosneft
The oil and gas industry, which has sometimes been criticized as slow to respond to global issues, is taking a lead in responding to the economic sanctions against Russia as a result of the attack on Ukraine. Shell has become the latest to announce that it would exit its large oil and gas projects in Russia including participation in Nord Stream 2 as well as Norway’s Equinor which noted that it had been operating in Russia for over 30 years. The announcements come a day after BP, once one of the largest foreign investors in Russia, said it would divest of its investments.
“Our decision to exit is one we take with conviction,” said Shell’s chief executive officer, Ben van Beurden. “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.”
According to the statement from Shell, the company at the end of 2021 had around $3 billion in non-current assets in Russia. “We expect that the decision to start the process of exiting joint ventures with Gazprom and related entities will impact the book value of Shell’s Russia assets and lead to impairments,” they noted while saying that its board supported the decision to exit its joint venture with Gazprom.
Shell has a 27.5 percent interest in Sakhalin-2, one of the largest integrated LG operations and Russia’s first offshore gas project. The field supplies about four percent of the world’s LNG production with Japan, South Korea, and China among its major customers. Gazprom owns half the project with Japan’s Mitsui ad Mitsubishi also participating. Shell also has a 50 percent stake with Gazprom Neft in the Salym oil fields in western Siberia. They were also a joint partner on exploration projects in Siberia.
In addition to the projects in Russia, Shell was also one of five energy companies participating in the Nord Stream 2 pipeline project. The announcement said that the company intends to end its involvement in the project.
Earlier today, Equinor also announced that has decided to stop new investments into Russia and start the process to exit its joint ventures in Russia. The company noted that it was operating in compliance with Norwegian, European Union, and United States’ sanctions while noting that it would go beyond the sanctions to end its joint efforts in Russia.
“In the current situation, we regard our position as untenable,” said Anders Opedal, president and CEO of Equinor. “We will now stop new investments into our Russian business, and we will start the process of exiting our joint ventures in a manner that is consistent with our values. Our top priority in this difficult situation is the safety and security of our people.”
Having operated in Russia for over 30 years, Equinor entered a cooperation agreement with Rosneft in 2012. At the end of 2021, they reported having $1.2 billion in non-current assets in Russia. As with the other companies that are existing Russian investments, Equinor expects impairment charges but said, “We are all deeply troubled by the invasion of Ukraine,” and focused on the people caught in this tragedy. They said they would be announcing funding to the humanitarian effort in the region.
Joining with others including British major BP, the energy giants are seeking to join the global effort to sanction Russia’s oil and gas industry. The industry plays a critical part in Russia’s economy and is a major contributor to the country’s foreign trade.