Shell is exiting its joint ventures with Gazprom and related entities, while Equinor and bp are ending their cooperation agreements with Rosneft over Russia’s attack on Ukraine. The move will cost the companies billions.
In addition to the joint ventures with Gazprom, Shell gives up its 27.5 per cent stake in the Sakhalin-II liquefied natural gas facility, its fifty per cent stake in the Salym Petroleum Development and the Gydan energy venture and its involvement in the Nord Stream 2 pipeline project.
‘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,’ says said Shell’s chief executive officer, Ben van Beurden. ‘“We cannot – and we will not – stand by.’
At the end of 2021, Shell had around USD 3 billion in non-current assets in these ventures in Russia. The company expects that the decision to start the process of exiting joint ventures with Gazprom and related entities will impact the book value of Shell’s Russia assets and lead to impairments. In 2021, Shell share adjusted earnings from the Sakhalin Energy joint venture and Salym joint venture were USD 0.7 billion.
Equinor exits joint ventures in Russia
Equinor’s Board of Directors has decided to stop new investments into Russia, and to start the process of exiting Equinor’s Russian joint ventures. Equinor has been in Russia for over thirty years and entered a cooperation agreement with Rosneft in 2012.
‘We are all deeply troubled by the invasion of Ukraine, which represents a terrible setback for the world, and we are thinking of all those who are suffering because of the military action,’ says Anders Opedal, President and CEO of Equinor. ‘In the current situation, we regard our position as untenable. We will now stop new investments into our Russian business, and we will start the process of exiting our joint ventures in a manner that is consistent with our values. Our top priority in this difficult situation is the safety and security of our people.’
At the end of 2021 Equinor had USD 1.2 billion in non-current assets in Russia. The company expects that the decision to start the process of exiting joint ventures in Russia will impact the book value of Equinor’s Russian assets and lead to impairments.
bp drops shareholding in Rosneft
The bp board has announced that the company will exit its shareholding in Rosneft. bp has held a 19.75 per cent shareholding in Rosneft since 2013. Additionally, bp chief executive officer Bernard Looney is resigning from the board of Rosneft with immediate effect. The other Rosneft director nominated by bp, former bp group chief executive Bob Dudley, is similarly resigning from the board.
bp chair Helge Lund: ‘Russia’s attack on Ukraine is an act of aggression, which is having tragic consequences across the region. bp has operated in Russia for over thirty years, working with brilliant Russian colleagues. However, this military action represents a fundamental change. It has led the bp board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue.’
As a result of accounting changes, and excluding Rosneft from base year and future periods, bp now expects EBITDA from resilient hydrocarbons and group to be around USD 2 billion lower in 2025. bp will also exit its other businesses with Rosneft within Russia. This includes an interest in three joint ventures with a carrying value of around USD 1.4 billion at year-end 2021.
Picture by Shell/Stuart Conway.