- Shell
- 01 March 2022 08:08:53
Source: Sharecast
The Anglo-Dutch oil giant announced after trading closed on Monday that it intended to exit all its joint ventures with state-backed energy firm Gazprom, including its 27.5% stake in the vast Sakhalin-II liquified natural gas project.
As at 31 December 2021, Shell had around $3bn in non-current assets in its ventures in Russia, which also include a 50% stake in the Salym Petroleum Development and the Gydan energy venture.
Shell, one of five energy companies involved in Nord Stream 2, had committed to provide financing and guarantees for up to 10% of the estimated €9.5bn total cost of the project.
Shell said it had made the decision following Russia’s invasion of Ukraine.
Chief executive Ben van Beurden said: "We are shocked by the loss of life in Ukraine, which we deplore, resulting in a senseless act of military aggression which threatens European security.
"Our decision to exit is one we take with conviction. We cannot and will not stand by."
Shell did not say if it planned to sell its stakes or write them off. However, it acknowledged that the exit would "impact the book value of Shell’s Russia assets, and lead to impairments". Shell’s adjusted earnings from the Sakhalin and Salym joint ventures were $0.7bn in 2021.
The move comes a day after BP said it would sell its 19.75% stake in Russian oil company Rosneft, at an expected cost of up to $25bn.
Business secretary Kwasi Kwarteng tweeted: "Shell has made the right call to divest from Russia - including Sakhalin II. There is now a strong moral imperative on British companies to isolate Russia."
Other shareholders in the Sakhalin project include Japan’s Mitsui and Mitsubishi, which have 12.5% and 10% stakes respectively. Gazprom holds the remaining 50%.
Last week Germany said it was freezing the Nord Stream 2 pipeline, which runs through the Baltic Sea from Russia to Germany, while the US has imposed sanctions on the Gazprom subsidiary building it. The project was finished in September 2021 but has stood idle since then as it waits for certification by Germany and the European Union.
Naeem Aslam, chief market analyst at AvaTrade, said: "Traders will be looking at other oil and energy companies, and they will be anticipating a similar move by them. Exxon is one company that could potentially announce a similar action today or in the coming days; TotalEnergies is also likely to make a similar announcement. The shares of these companies are likely to be highly volatile."
