- Shell said it's writing off up to $5 billion in assets over its decision to pull its Russian operations.
- It had previously purchased Russian crude oil after saying it would limit its business with Russia.
- Russia is the world's third largest oil producer, but the West is now trying to diversify away from Russian supplies.
- For more stories go to www.BusinessInsider.co.za.
Anglo-Dutch oil and natural gas giant Shell is writing off up to $5 billion in assets after it pulled its Russian 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 Ukraine. It followed an announcement that it would end its involvement in the Nord Stream 2 natural gas pipeline and exit its investments in a number of other Russian energy projects.
In an earnings update on Thursday, Shell said: "For the first quarter 2022 results, the post-tax impact from impairment of non-current assets and additional charges (eg write-downs of receivable, expected credit losses, and onerous contracts) relating to Russia activities are expected to be $4 to $5 billion.
Russia is the world's third largest oil producer and the second largest crude oil exporter, according to the International Energy Agency. It also supplied around a third of the EU and UK's total natural gas demand in 2021, the Agency said.
Shell had said on February 28 that it would limit business with Russia by divesting from its joint ventures with Kremlin-owned energy company Gazprom and related businesses and pulling out of the Nord Stream 2 pipeline project.
The firm attracted criticism five days later when it announced that it had purchased a cargo of Russian crude oil. "We will continue to choose alternatives to Russian oil wherever possible, but this cannot happen overnight because of how significant Russia is to global supply," the company had said.
On Thursday, the firm said that it had "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."
Shell was among a number of Western oil firms that announced they would be discontinuing operations in Russia following the outbreak of the conflict and the ensuing package of international sanctions, designed to force Russian President Vladimir Putin to abandon the invasion.
London-headquartered BP announced it would dump its 19.75% stake in Russia's state-backed oil giant Rosneft, citing the invasion of Ukraine as a "fundamental change." The firm said the move would result in $25 billion in non-cash charges by the end of the first quarter.
ExxonMobil, meanwhile, announced that it would discontinue operations at the Sakhalin-1 oil and gas venture, 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 reduce EU demand for Russian gas by two-thirds before the end of the year under a plan to diversify supplies. Germany – heavily reliant on supplies of natural gas from Russia – halted plans for the Nord Stream 2 pipeline, and on Monday it said it had seized control of a local Gazprom unit.
Over the weekend, Lithuania said it became the first EU country to completely cut off Russian gas imports. The US has offered to ship more liquefied natural gas to its allies to help squeeze Russian exports.
Russia's finance ministry said on Tuesday that revenue from the country's oil and gas sales in March was 38% lower than it had initially forecast.