Shell has announced it will exit its joint ventures with Gazprom following intense pressure to divest from Kremlin-backed assets, after Russia’s brutal invasion of Ukraine.
The London-listed fossil fuel giant will ditch all its arrangements with Gazprom.
This includes 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.
It also intends to end its involvement in the now shelved Nord Stream 2 pipeline project.
Chief executive Ben van Beurden said: “We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression which threatens European security.”
Business Secretary Kwasi Kwarteng praised the decision, revealing he held talks with Shell earlier today.
He said: “There is now a strong moral imperative on British companies to isolate Russia. This invasion must be a strategic failure for Putin.”
Shell estimates it has around $3bn worth of assets in its Russian ventures – meaning the divestment could represent a hefty hit for the energy giant, although it was unable to provide a specific forecast on potential losses.
The decision follows rival fossil fuel giant BP announcing yesterday that it would exit its near 20 per cent stake in Rosneft, and Equinor backing out of its partnership with the same Russian energy firm.
Since yesterday, it has faced sustained calls to separate itself from its Russian assets, with BEIS Committee member Alexander Stafford the latest high-ranking MP to call on British businesses to exit Kremlin-backed arrangements.
Despite the lack of clarity over the terms of its departure, van Beurden insisted the decision was definitive.
He explained: “Our decision to exit is one we take with conviction. We cannot – and we will not – stand by. Our immediate focus is the safety of our people in Ukraine and supporting our people in Russia.”
Shell also revealed its environmental strategy and financial framework remain unchanged, alongside its current dividend policy – which consists of an $8.5bn share buyback programme for the first half of 2022.
However, Shell told City A.M. it was unable to provide further details concerning how it will offload the assets.
Earlier this week, Russia’s central bank told brokers to temporarily not fulfil orders to sell securities by non-residents – complicating the ability of overseas firms to sell Russian energy holdings.
There is also a risk the assets will be perceived as tainted or as a risk as Russia ramps up conflict in Ukraine – with both legal and reputational ramification from acquiring stakes in Kremlin-backed companies.
Speaking to City A.M. Susannah Streeter, senior investment analyst at Hargreaves Lansdown said: “Given BP’s and Equinor’s decision to divest from Russian businesses, it doesn’t come as a surprise that Shell has followed in their footsteps. Questions remain over how its exit will unfold, given buyers may be few and far between,”