- Shell said it was writing off up to $5 billion in assets following its decision to withdraw its Russian operations.
- He had previously bought Russian crude oil after saying he would limit his activities with Russia.
- Russia is the third largest oil producer in the world, but the West is now trying to diversify away from Russian supplies.
Anglo-Dutch oil and natural gas giant Shell writes off up to $5 billion in assets after pulling out of Russia operations.
The energy major announced on March 8 that it would withdraw from the Russian oil and natural gas sector, as well as close all its service stations in the country, in response to Moscow’s decision to invade the Ukraine. It followed the announcement of the end of its involvement in the Nord Stream 2 gas pipeline and its investments in a number of other Russian energy projects.
In an earnings update on Thursday, Shell noted“For Q1 2022 results, the after-tax impact of impairment of non-current assets and additional charges (e.g., receivables impairments, expected credit losses and onerous contracts) related to the Russia business should be $4 to $5 billion.
Russia is the world’s third-largest oil producer and second-largest exporter of crude oil, according to the International Energy Agency. It also supplied around a third of the EU and UK’s total natural gas demand in 2021, according to the Agency. noted.
Shell said on Feb. 28 that it would limit its business with Russia by divesting from joint ventures with energy company Gazprom and Kremlin-linked businesses and pulling out of the Nord Stream 2 gas pipeline project.
The company drew criticism five days later when it announced it had purchased a shipment of Russian crude oil. “We will continue to choose alternatives to Russian oil wherever possible, but this cannot happen overnight due to Russia’s importance in global supply,” the company said.
On Thursday, the company said it had “not renewed longer-term contracts for Russian oil, and will only do so under the explicit direction of the government, but we are legally obligated to take delivery of crude purchased in under contracts that were signed before the invasion.”
Shell was among a number of Western oil companies that announced they would cease operations in Russia after the outbreak of the conflict and the ensuing package of international sanctions aimed at forcing Russian President Vladimir Putin to abandon the invasion.
London-headquartered BP said it would divest its 19.75% stake in state-backed Russian oil giant Rosneft, citing the invasion of Ukraine as a “fundamental shift”. The company said the move would result in $25 billion in non-cash charges by the end of the first quarter.
ExxonMobil, meanwhile, said it would wind down oil and gas venture Sakhalin-1, a project it operates on behalf of an international consortium of Russian, Japanese and Indian companies.
Russia’s energy sector has also been a target for Western governments.
US President Joe Biden has pledged to ban Russian energy imports and the European Commission has said it could cut European demand for Russian gas by two-thirds before the end of the year as part of a plan diversify supplies. Germany – heavily dependent on natural gas supplies from Russia – halted plans for the Nord Stream 2 gas pipeline and said on Monday it had taken control of a local Gazprom unit.
Over the weekend, Lithuania noted it became the first EU country to completely cut off Russian gas imports. The United States has offered to ship more liquefied natural gas to its allies to help reduce Russian exports.
Russia’s Finance Ministry said on Tuesday that the country’s March oil and gas sales revenue was 38% lower than originally forecast.