Shell plays double game, sells stake in Gazprom yet buys Russian crude
By Jeph Ajobaju, Chief Copy Editor
Shell is playing a double wager in Russia, divesting interest in an oil firm and still buying Russian crude while other multinationals such as American ExxonMobil and Nike, and Norwegian Equinor have announced plans to pull out of Russia.
BP, another oil giant, is to offload its 19.75 per cent stake in Russian state-owned oil firm Rosneft over Vladimir Putin’s invasion of Ukraine on 24 February which he threatens to escalate to a third World War with nuclear weapons.
BP has held the shareholding in Rosneft since 2013 but came under pressure from the British government to sell it off as part of coordinated global sanctions against Russia.
Shell on 7 March defended its decision to purchase Russian crude oil despite the atrocities Russia is committing in Ukraine. It confirmed that it had bought a cargo of Russian crude oil on 4 March because it had “no alternative”.
That came after Shell had announced on 28 February that it would end all of its joint ventures with the Russian energy company Gazprom following the invasion of Ukraine, per reporting by the BBC.
The move will include the oil giant’s 27.5 per cent stake in a major liquefied natural gas plant.
Shell’s chief executive, Ben van Beurden, said the company was “shocked by the loss of life in Ukraine”.
Shell will quit the flagship Sakhalin II facility, which is 50 per cent owned and operated by Gazprom.
It will also sell its 50 per cent stake in two Siberian oilfield projects, as well as end its involvement in the Nord Stream 2 gas pipeline from Russia to Germany, which it helped finance among a mix of other companies.
The 1,200km pipeline under the Baltic Sea had already been put on hold by German ministers.
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Russian oil smells Ukrainian blood
Shell announced its double face a week later on Monday, but said in a statement that its decision to buy Russian crude at a discounted price was “difficult”.
Ukrainian Foreign Minister Dmytro Kuleba hit out at the energy company, asking on Twitter: “Doesn’t Russian oil smell Ukrainian blood for you?”
So far Western countries have not imposed sanctions on Russian oil imports, fearing it will drive up already record high energy prices around the world.
But on 6 March, US Secretary of State Antony Blinken said the US was now in “active discussions” with European partners about banning them while also maintaining a “steady global supply”.
Russia is the world’s second top producer of crude oil after Saudi Arabia, and supplies about a third of Europe’s needs.
Shell said it was forced to buy oil from Russia in order to maintain timely supplies of fuel to Europe.
The firm said it remains “appalled by the war in Ukraine” and has stopped most activities involving Russian oil, but it added the situation with supplies is “highly complex”.
Choosing alternatives to Russian oil
Russian oil currently makes up about 8 per cent of Shell’s working supplies. One of the firm’s refineries, which produces diesel and petrol and other products, is also among the biggest in Europe.
“To be clear, without an uninterrupted supply of crude oil to refineries, the energy industry cannot assure continued provision of essential products to people across Europe over the weeks ahead,” a spokesperson said.
“Cargoes from alternative sources would not have arrived in time to avoid disruptions to market supply.
“We didn’t take this decision lightly and we understand the strength of feeling around it.”
The firm also said that it will try to choose alternatives to Russian oil “wherever possible”, and that profits from Russian oil will go to a dedicated fund aimed at helping people in Ukraine.
It comes shortly after the company announced that it would end all of its joint ventures with the Russian energy company Gazprom following the invasion.
That will involve the company selling its 27.5 per cent stake in a major liquefied natural gas plant and a 50 per cent stake in two oilfield projects in Siberia.
It will also end its involvement in the Nord Stream 2 pipeline between Russia and Germany. The 1,200km pipeline under the Baltic Sea had already been put on hold by German ministers.
In a statement issued on Monday, Shell said that it expected the move, which will also apply to any “related entities” to Gazprom, would be worth about $3 billion (£2.2 billion). The associated costs will be marked on its balance sheet later this year.
Shell followed on from the likes of BP, which had already announced that it would offload its stake in the Russian state-owned oil giant Rosneft – a potential hit of $25 billion.
BP said earlier this week it was too soon to say how or to whom its stake in Rosneft would be sold.
Norwegian oil and gas producer Equinor has also announced its exit from Russia, saying the conflict made its current position “untenable”.