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Shell, Europe’s largest oil company, said Tuesday it would begin withdrawing from its involvement “in all Russian hydrocarbons,” including an immediate halt to all spot purchases of Russian crude and the shuttering of its service stations in the country.
Days earlier, Shell was criticized for buying a tanker of Russian crude at a sharp discount. The company had said that it was forced to make the purchase because it was unable to find alternative sources of oil for its customers, and that it would donate profits from the purchase to humanitarian causes.
The decision to buy the fuel “was not the right one, and we are sorry,” Ben van Beurden, the chief executive of Shell, said in a statement on Tuesday.
Shell’s announcement ratchets up the exit of Western oil companies from Russia. Last week, several of them, including Shell, said they would leave major investments there. But spurning Russia’s oil and gas — the country produces one in 10 barrels of oil globally and provides about a third of the European Union’s natural gas — will put a strain on alternate sources of both fuels and inevitably push prices higher.
Shell, which has a large petroleum-trading operation, buys most of its Russian oil on the spot market — where individual shipments are bought and sold — rather than under longer-term contracts. But it also has some extended arrangements to purchase fuels from facilities in Russia, including a part-owned liquefied natural gas terminal on Sakhalin Island, near Japan, that will take time to unwind.
In 2021, Shell tankers took on an average of 175,000 barrels of crude oil a day from Russia, or about 9 percent of what Shell refined globally, according to estimates by Alex Booth, the head of research at Kpler, a firm that tracks energy shipping.
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If more oil companies decide to spurn Russian oil,consumers, especially in Europe, might encounter fuel shortages, causing lines at gasoline stations, as occurred not long ago in Britain when there were too few truck drivers to deliver the fuel.
Shell said in its release that the changes would result in “reduced throughput” at some of its refineries. In other words, there will be less gasoline and diesel in an already tight market. Prices, already high, are likely to rise further.
“Products are tighter than they have ever been in the West,” said Oswald Clint, an analyst at Bernstein, a research firm. “You will have queues at petrol stations,” he added.
Shell said it could take several weeks to change its oil supply chain to cut out Russian crude. But the process of shutting the service stations and quitting sales of aviation fuel in Russia will begin immediately, the company said.
The Russia-Ukraine War and the Global Economy
A far-reaching conflict. Russia’s invasion on Ukraine has had a ripple effect across the globe, adding to the stock market’s woes. The conflict has caused?? dizzying spikes in gas prices and product shortages, and is pushing Europe to reconsider its reliance on Russian energy sources.
The move goes beyond the company’s recent announcements that it would exit both the Nord Stream 2 pipeline project linking Russia and Germany and its joint ventures with Gazprom, the Russian natural gas company. The German government said in February that it would halt the certification of the natural gas pipeline.
Shell said on Tuesday that it would begin the phased withdrawal from Russian petroleum products, pipeline gas and liquefied natural gas, but the process is a “complex challenge” that will also require actions from governments and customers. The transition to other energy supplies will take even longer, Shell said.
“These societal challenges highlight the dilemma between putting pressure on the Russian government over its atrocities in Ukraine and ensuring stable, secure energy supplies across Europe,” Mr. van Beurden said in the statement. “But ultimately, it is for governments to decide on the incredibly difficult trade-offs that must be made during the war in Ukraine.”
