Oil & Gas News

Shell Exiting All Russian Hydrocarbons

Shell plc exiting Russia

Shell plc has announced its intent to withdraw from its involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas, and liquefied natural gas (LNG) “in a phased manner”.

Story by Andreas Exarheas at RigZone.com

As an immediate first step, the company said it will stop all spot purchases of Russian crude oil. Shell also noted that it will shut its service stations, aviation fuels, and lubricants operations in Russia.

The company highlighted that it will not renew term contracts for Russian crude oil and outlined that it would consider “very carefully” the safest way to shut its service stations, aviation fuels, and lubricants operations in the country.

Shell also noted that, in close consultation with governments, it is changing its crude oil supply chain to remove Russian volumes. The company said it will do this as fast as possible but warned that the physical location and availability of alternatives mean this could take weeks to complete and will lead to reduced throughput at some of its refineries.

The company also highlighted that it will start its phased withdrawal from Russian petroleum products, pipeline gas, and LNG, describing the process as a “complex challenge”. Changing this part of the energy system will require concerted action by governments, energy suppliers, and customers, and a transition to other energy supplies will take much longer, Shell said.

“Our actions to date have been guided by continuous discussions with governments about the need to disentangle society from Russian energy flows while maintaining energy supplies,” Beurden said in a company statement.

“Threats … to stop pipeline flows to Europe further illustrate the difficult choices and potential consequences we face as we try to do this,” he added in the statement.

“These societal challenges highlight the dilemma between putting pressure on the Russian government over its atrocities in Ukraine and ensuring stable, secure energy supplies across Europe … But ultimately, it is for governments to decide on the incredibly difficult trade-offs that must be made during the war in Ukraine. We will continue to work with them to help manage the potential impacts on the security of energy supplies, particularly in Europe,” Beurden went on to say.

Commenting on Shell’s decision last week to purchase a cargo of Russian crude oil, Beurden said it was not right and apologized.

“We are acutely aware that our decision last week to purchase a cargo of Russian crude oil to be refined into products like petrol and diesel – despite being made with the security of supplies at the forefront of our thinking – was not the right one and we are sorry,” he said in a Shell statement.

“As we have already said, we will commit profits from the limited, remaining amounts of Russian oil we will process to a dedicated fund. We will work with aid partners and humanitarian agencies over the coming days and weeks to determine where the monies from this fund are best placed to alleviate the terrible consequences that this war is having on the people of Ukraine,” he added.

Shell’s latest update follows the company’s announcement last week that it intends to end its involvement in the Nord Stream 2 pipeline project and exit its equity partnerships with Gazprom and related entities, including its 27.5 percent stake in the Sakhalin-II liquefied natural gas facility, its 50 percent stake in the Salym Petroleum Development and the Gydan energy venture.

Sakhalin-2 is one of the world’s largest integrated, export-oriented, oil and gas projects and Russia’s first offshore gas project, Shell notes on its website, adding that, in 2016, the project met six percent of the LNG market in the Asia-Pacific region.

According to its website, Shell has been firmly linked to the Russian economy for 125 years and is currently one of the largest foreign investors in the Russian economy. The company opened a representative office in Russia in 1983 and in 1992 registered the Shell Oil company for the sale of lubricants, Shell’s site shows.

In addition to Shell, oil and gas majors BP, Equinor, TotalEnergies, Chevron, and Exxonmobil have all shed more light on their stances relating to Russia following the escalation of the country’s conflict with Ukraine.

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