Shell Withdraws from Russia’s Oil and Gas Industry, Cancels Term Contracts

Shell Plc (Shell) has withdrawn from its involvement in the Russian oil and gas industry and canceled term contracts alongside shutting down service stations in the country.

The company made the announcement on March 8 following the criticism it received last week over the purchase of a cargo of Russian crude oil.

As a first step, Shell stated that it will stop all purchases of Russia’s hydrocarbons, including crude oil, petroleum products, gas, and liquefied natural gas (LNG).

It also committed to shutting down service stations, aviation fuels, and lubricants operations in Russia.

“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,” Shell Chief Executive Officer, Ben van Beurden.

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Shell said that they were changing their crude oil supply chain to remove Russian volumes, making it the latest company to withdraw from its involvement with Russia.

However, due to the physical location and availability of alternatives, Shell could take weeks to complete and will lead to reduced throughput at some of its refineries.

“We will start our phased withdrawal from Russian petroleum products, pipeline gas, and LNG. This is 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,” said Shell in a statement.

Other dealers that have pulled out of Russia’s energy sector include BP, which on March 6^th said it was abandoning almost 20 percent stake in Russia’s state-owned oil and gas company Rosneft.

Equinor, Norway’s biggest energy company on March 7^th also announced that it was withdrawing from its joint ventures in Russia, valued at about 1.2 billion dollars. Exxon followed suit on March 8.

Although the companies are complying with Western sanctions against Russia, most of them are also aware of the potential risks these actions could have on their reputations if they continue to trade with Russia.

Some companies have cited their corporate responsibility standards for pulling back whereas others are expressing concern about the plight of Ukrainians who are suffering as a result of the war. So far, 2 million people have fled Ukraine, according to the United Nations refugee agency.