8th Mar 2022 14:20
(Alliance News) - Shell PLC said Tuesday it will no longer buy Russian oil, and went as far to apologise for buying a cargo of Russian crude oil last week.
"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 security of supplies at the forefront of our thinking - was not the right one, and we are sorry," said Shell Chief Executive Ben van Beurden.
The oil major bought the oil last week at knock-down prices, as sanctions began to bite on the Russian economy.
The apology came as part of a move to withdraw its involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas, following Russia's attack on its neighbouring country.
The London-based oil and gas company said the withdrawal would be done in a "phased manner" in alignment with new government guidance.
Shell said it will stop spot purchases of Russian crude oil and shut its service stations, aviation fuels and lubricants operations in Russia.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Shell's apology for buying Russian oil shows just how strong the winds of change are blowing through the corporate world.
"After coming under huge criticism over the weekend for snapping up a shipment of Russian crude at a bargain price, the company is putting reputation before immediate profits and severing more ties with the country. It's vowed to immediately cease the purchase of further spot crude, will stop aviation fuel and lubricant operations and also close down its network of services stations."
Shell confirmed it has around 500 service stations across Russia that will shut following the move.
The rest of the company's exit from Russian oil and gas will take place over time.
Profits from the remaining Russian gas that Shell will process will be sent to a fund and the business will work with humanitarian organisations to figure out how best to spend the money.
van Beurden said: "Our actions to date have been guided by continuous discussions with governments about the need to disentangle society from Russian energy flows, while maintaining energy supplies.
"Threats today to stop pipeline flows to Europe further illustrate the difficult choices and potential consequences we face as we try to do this. As we have already said, we will commit profits from the limited, remaining amounts of Russian oil we will process to a dedicated fund."
HL's Streeter said: "Unwinding Shell's tentacles from the economy is set to be a complex affair and in making this announcement, Shell has also warned that exiting Russia's energy sector will be hugely challenging, requiring concerted government action to ensure stable and secure supplies across Europe. As worries about the squeeze in supply of oil continue, the elevated price of crude should keep Shell on the path of slicing big chunks off net debt and fund capital expenditure in new gas field expansion and into low carbon alternatives like hydrogen."
Spot Brent crude oil rose to USD127.09 a barrel on Tuesday from USD125.13 at about 1200 GMT on Monday. But the US benchmark WTI spot price was quoted at USD122.76 a barrel, down from USD123.15.
On Monday, the global benchmark oil price soared to nearly 14-year high on fears that the US and its allies might impose a ban on Russia oil and gas over Moscow's invasion of Ukraine.
"With European governments looking even more determined to help support the green transition with plans reported to be afoot for a capital raise on the bond markets, Shell should be well positioned to capitalise on this direction of travel," Streeter added.
"Whatever happens, Shell is still set to remain an oil and gas giant for decades, but by taking this stance and exiting the Russian markets with a continued focus on renewables, it should help reduce the risk of the company ending up in the ethical waste bin. However, there will be pressure on Shell to keep up a concerted effort to fully open the sustainable pipeline."
Last week, Shell said it would end its involvement with the Nord Stream 2 pipeline which was intended to bring Russian gas into Europe.
It also said at the time it would exit its partnerships with Gazprom. On Tuesday the company said it might take weeks to complete the removal of Russian crude oil from its supply chains.
It said that withdrawing from Russian petroleum, piped gas and LNG is a "complex challenge" which will need "concerted action by governments, energy suppliers and customers".
"A transition to other energy supplies will take much longer," the company added.
By Paul McGowan; [email protected]
Copyright 2022 Alliance News Limited. All Rights Reserved.
Related Shares:
Shell