Shell abandons Russia and the Nord Stream 2 gas pipeline Business

SHell has pledged to sever ties with the Kremlin by quitting its joint ventures with Russian state-backed energy colossus Gazprom.

The oil giant said it would end its tie-up with Gazprom by selling its 27.5% stake in the Sakhalin 2 liquefied natural gas (LNG) plant and stop working on the pipeline project Nord Stream 2, which Germany put on ice earlier this month. .

Shell’s Russian assets were valued at $3 billion at the end of last year.

The move came just over 24 hours after BP announced it would sell its nearly 20% stake in Kremlin-controlled oil major Rosneft.

Shell’s announcement follows a crucial meeting between Shell chief executive Ben van Beurden and Kwasi Kwarteng, the business secretary, earlier on Monday.

Shell has invested around $1bn (£750m) in the 750-mile pipeline designed to double the amount of gas flowing from Russia to Germany.

Mr. 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.

“Our decision to go out is the one we take with conviction. We cannot – and we will not – sit idly by. Our immediate objective is the security of our people in Ukraine and the support of our people in Russia.

“Discussing with governments around the world, we will also work on detailed trade implications, including the importance of a secure energy supply for Europe and other markets, in line with applicable sanctions.”

Mr. Kwarteng said: “Shell [has] made the right decision to divest from Russia.

“There is now a strong moral imperative for British business to isolate Russia. This invasion must be a strategic failure for Putin.

The Sakhalin 2 LNG plant is based on the island of Sakhalin in northern Japan. It supplies about 4% of the global LNG market and was Russia’s first offshore plant.

Shell said it would also sell its 50% stake in Salym Petroleum Development and energy company Gydan, both based in Siberia.

Together, Salym and Sakhalin 2 contributed $700 million to Shell’s net profit in 2021.

Nearly £3bn was wiped off the value of BP on Monday as the oil major’s shares fell nearly 4% after the announcement.

BP now faces a one-time $25 billion hit on its Rosneft stake, with a limited number of potential suitors likely to demand a steep discount because they know the company is forced to sell.

The move will put FTSE 100 miner Glencore under additional pressure to sell its Russian interests. The commodities giant owns 10% of EN+, the London-listed energy and metals company, whose owners include oligarch Oleg Deripaska.

Earlier this month, Glencore announced it would sell its stake in Russian oil producer Russneft back to the Gutseriyev family, one of the country’s wealthiest families.

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This notice was published: 2022-02-28 20:07:45

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