Shell, an international oil company, announced Monday that it would exit its joint ventures with Gazprom – Russia’s state-owned gas company – due to the country’s invasion of neighboring Ukraine.
“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,” said Shell’s chief executive officer, Ben van Beurden.
Russia began the invasion last week and Ukrainians have been fighting off attacks in cities throughout the country for days. As of Tuesday, at least 136 civilians have been killed in Ukraine, including 13 children, said a United Nations Agency, according to Reuters. Another 400 have been injured, the agency said.
Before Russia attacked Ukraine – which split from Russia after the fall of the Soviet Union – Russian President Vladimir Putin argued against its sovereignty. In 2014, Russia also invaded the Crimean Peninsula.
One of the Gazprom ventures Shell plans to pull out of is the Nord Stream 2 pipeline.
According to the BBC, the U.S., the U.K, Poland and Ukraine have been opposed to Nord Stream 2, an approximately 745-ft. pipeline running under the Baltic Sea, from the Russian coast near St. Petersburg to Lubmin in Germany. Detractors believe the pipeline would give Russia too much control over the European gas supply.
For example, Russia cut off gas supplies through Ukraine in 2006 due to a financial dispute between the two countries, which caused energy shortages throughout Europe.
Ukrainian president Volodymyr Zelensky called Nord Stream 2 “a dangerous political weapon” and U.K. Prime Minister Boris Johnson said Europe should “snip the drip feed into our bloodstream from Nord Stream,” said the BBC.
There is an existing Nord Stream pipeline that the new line runs parallel to, which has been operating since 2011. While Nord Stream 2 has already been constructed, it is not yet operating. Together, the two pipelines could deliver more than a quarter of all gas European Union countries use annually.
Although former German Chancellor Angela Meckel worked to push the Nord Stream 2 pipeline project through, current Chancellor Olaf Scholz has halted an operating license for the pipeline.
“In light of the most recent developments we must reassess the situation in particular regarding Nord Stream 2,” he said last week.
The U.S. also announced sanctions on the pipeline last week.
According to a Monday press release, Shell is one of five energy companies which have each committed to provide financing and guarantees for up to 10 percent of the estimated $10.5 billion total cost of the project. Other companies that invested in the pipeline are OMV, Engie, Uniper and Wintershall, according to Deutsche Welle.
Apart from the Nord Stream 2 project, Shell also announced it would exit the Sakhalin Energy Investment Company consortium, its 27.5 stake in the Sakhalin-II liquefied natural gas facility, its 50 percent stake in the Salym Petroleum Development in western Siberia and the Gydan energy venture in north-western Siberia. At the end of 2021, Shell had around $3 billion in non-current assets in these ventures in Russia.
Shell expects that its departure from the ventures will impact the value of Shell’s Russia assets and lead to impairments.
“Our decision to exit is one we take with conviction,” said van Beurden. “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. In discussion with governments around the world, we will also work through the detailed business implications, including the importance of secure energy supplies to Europe and other markets, in compliance with relevant sanctions.”
Shell staff in Ukraine and other countries have been working together to manage the company’s response to the crisis locally, said the company. Shell also said it will work with aid partners and humanitarian agencies to help in the relief effort.
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