Shell to withdraw from energy investments in Russia because of war

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LONDON (AP) — Global oil and gas giant Shell said Monday it is pulling out of Russia as President Vladimir Putin’s invasion of Ukraine continues to cost foreign investment and expertise in the country’s very important energy industry.

Shell has announced plans to exit joint ventures with Russian energy giant Gazprom and related entities, including a 27.5% stake in a key liquefied natural gas project as well as 50% stakes in two projects that develop oil fields in Siberia.

Shell also announced plans to end its involvement in Nord Stream 2, a controversial pipeline built to transport Russian natural gas to Western Europe. German Chancellor Olaf Sholz halted certification of the project after Russia invaded Ukraine.


“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’s move comes as Western energy companies are under pressure to ditch their Russian investments over fears that proceeds from oil and gas sales could help fund the war in Ukraine. Governments including the United States, United Kingdom and European Union have imposed sweeping sanctions on Russian banks, businesses and wealthy individuals in a bid to persuade Putin to change course.

On Sunday, Shell’s British rival BP announced its intention to shed its nearly 20% stake in Rosneft, which is controlled by the Russian state. Norwegian firm Equinor said on Monday it would halt all new investment in Russia and start selling its holdings in the country.

The Russian economy is heavily dependent on fossil fuels, which account for around 60% of the country’s exports. Russia was the world’s third largest oil producer in 2020, producing 10.5 million barrels of oil per day, or 11% of the world total, according to the US Energy Information Agency.

Shell’s largest investment in Russia is its stake in the Sakhalin-II project in the waters near Sakhalin Island off Russia’s east coast. The Japanese company Mitsui owns 12.5% ​​of the project and Mitsubishi owns 10%.

Shell also owns 50% shares in two joint ventures with Gazprom that are developing oil fields on the Gydan Peninsula in northwest Siberia and for the Salym development project in the Khanty-Mansiysk Autonomous District in western Siberia.

In addition to the investment, Shell provided expertise that helped develop Sakhalin-II, Russia’s first offshore gas project. It began year-round production in 2008 and features three offshore platforms designed to withstand earthquakes and falling ice caps into frozen seas.

The project supplies around 6% of the liquefied natural gas used in the Asia-Pacific region and is “one of the largest integrated and export-oriented oil and gas projects”, Shell said.

Yet Shell’s investments in Russia represent a relatively small share of the company’s total reserves and production. Russian assets accounted for less than 5% of the company’s global oil and gas production in 2020, according to Shell’s latest annual report.

By contrast, BP’s 19.75% stake in Rosneft accounted for about a third of the company’s oil and gas output last year and nearly 17% of profits.

For Equinor, controlled by the Norwegian government, the Eurasia region that includes Russia represents less than 5% of the company’s proven oil and gas reserves. Russia accounted for around 4% of total production in 2020, according to Equinor’s latest annual report.

Van Beurden said Shell was in talks with governments around the world as it considered the commercial implications of its decision, including the importance of a secure energy supply for Europe and other markets.

“Our decision to step out is a decision we make with conviction,” van Beurden said. “We cannot – and we will not – sit idly by. Our immediate goal is the safety of our people in Ukraine and the support of our people in Russia.”

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