Shell to take hit of up to $5 bln on Russia exit

LONDON 

British energy giant Shell said yesterday that its decision to pull out of Russia in response to the country’s invasion of Ukraine has already cost the international energy giant as much as $5 billion.

The reduced value of Russian assets, credit losses and “onerous” contract terms will cut earnings for the first three months of the year by between $4 billion and $5 billion, London-based Shell said.

Shell said last month that it was “appalled” by the invasion of Ukraine as it announced plans to exit joint ventures with Russian state-owned energy company Gazprom. Those assets alone were valued at about $3 billion at the end of last year, according to Shell’s annual report.

The company later said it would stop buying Russian oil and withdraw from any involvement with Russian hydrocarbons “regardless of their financial implications.”

Shell’s decision came as the U.K. joined governments around the world in imposing sanctions on Russian companies, banks and wealthy individuals in an effort to pressure President Vladimir Putin to withdraw his forces from Ukraine.

Energy companies are under pressure to cut ties with Russia because oil and natural gas exports are crucial to financing the Kremlin and its military.

However, Shell revealed yesterday that it would continue to fulfil contracts on buying fuel from Russia that had been signed before the Ukraine war.

“Shell has not renewed longer-term contracts for Russian oil, and will only do so under explicit government direction, but we are legally obliged to take delivery of crude bought under contracts that were signed before the invasion,” it said in the statement.

Britain, which is far less dependent than the rest of Europe on Russian energy, plans to phase out oil imports by the end of the year and eventually stop importing its gas.

Shell’s main rival BP has also announced its departure from Russia. BP said in late February that it would pull its 19.75-percent stake in state energy giant Rosneft, ending more than three decades of investment in Russia.

Shell had swung back into massive profit last year, as oil and gas prices jumped on recovering demand and geopolitical unrest. Net profit stood at $20.1 billion after a loss after tax of $21.7 billion in 2020, as economies reopened from pandemic lockdowns.

Oil prices rocketed close to record levels of close to $140 per barrel in early March, although they have since fallen back to around $100 on peace talk hopes.