Shell to take hit of up to US$5 bil on Russia exit

LONDON – British energy giant Shell warned today that it would take a hit of up to US$5 billion (RM21.1 billion) on its exit from Russia, following Moscow’s invasion of Ukraine.

Impairment from assets and additional charges relating to Russia activities were expected to be between US$4 billion and US$5 billion in the first quarter, Shell said in a statement after recently signalling its gradual withdrawal.

The write-off comes after the London-listed energy major announced in late February that it would sell its stakes in all joint ventures with Russian state energy giant Gazprom after the Kremlin launched its assault on Ukraine.

The group said at the time that the ventures were worth about US$3 billion.

Shell then announced in March that it would withdraw from Russian gas and oil in line with United Kingdom government policy, and also immediately stopped purchases of its crude.

The company also apologised for buying a cargo of Russian oil at a vast discount, adding that it should not have happened.

Britain, which is far less dependent than the rest of Europe on Russian energy, plans to phase out oil imports by the end of the year and eventually stop importing its gas.

A wide range of international companies have stopped doing business in Russia since President Vladimir Putin ordered the invasion of Ukraine on February 24.

Shell’s main rival BP has also announced its departure.

BP said in late February that it would pull its 19.75% stake in state energy giant Rosneft, ending more than three decades of investment in Russia.

Shell’s first-quarter earnings are scheduled for publication on May 5.

It had swung back into massive profit last year, as oil and gas prices jumped on recovering demand and geopolitical unrest.

Net profit stood at US$20.1 billion after a loss after tax of US$21.7 billion in 2020, as economies reopened from pandemic lockdowns.

The Ukraine crisis sent fresh shockwaves across the global oil market because Russia is a major producer.

Oil prices rocketed close to record levels of close to US$140 per barrel last month, although they have since fallen back to around US$100 on peace talk hopes. – AFP, April 7, 2022