bp has announced that it will exit its 19.75% stake in Rosneft, becoming the first major European oil and gas producer to announce an exit from Russia. Shell and Equinor followed suit. Oil and gas companies such as Exxon Mobil and Total have yet to take a stance.
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BP was the first to announce that it expected a loss of US$25 billion.
On February 27, 2022 local time, bp announced that it would exit its approximately 19.75% stake in Rosneft.
bp has been in the Russian market for more than 30 years and was one of the first European oil companies to invest in Russian oil and gas business. Since 2013, bp has held a 19.75% stake in Rosneft, making it one of Russia’s largest foreign investment companies.
BP said in an official statement that this exit may cause it to face losses of US$25 billion, which includes US$14 billion in asset value impairments and US$11 billion in losses such as foreign exchange gains and losses accumulated since 2013. bp did not mention whether it would sell the divested equity or withdraw directly, nor did it describe potential sellers.
Rosneft is a Russian state-owned enterprise. The company’s oil and gas reserves account for about half of BP’s total reserves, and its production accounts for one-third of its total production. In 2021, BP received approximately $640 million in dividend income from Rosneft, accounting for approximately 3% of its total operating cash flow.
At the same time, bp CEO Bernard Looney and former CEO Bob Dudley will resign from the Rosneft board with immediate effect. Helge Lund said that bp’s decision to exit is in the best long-term interests of all shareholders.
On February 28, local time, according to Bloomberg citing anonymous sources, BP may seek to sell its approximately 20% stake in Rosneft back to the state-controlled Rosneft at a huge discount.
Hours after bp announced its exit from Rosneft, Norwegian state oil company Equinor also said it would divest from its joint venture in Russia. Equinor’s joint venture properties in Russia are worth approximately $1.2 billion.
Shell followed suit
One day later, Shell announced that it would join BP in withdrawing from the Russian business.
Shell owns a 27.5% stake in the Russian Sakhalin-2 project joint venture. The project is one of the largest export-oriented oil and gas projects in the world.
Russia’s Salimneft field is a joint venture between Shell and Gazprom. Shell, Europe’s largest oil company, said on Monday it would exit its joint venture with Russian gas giant Gazprom.
Shell said in a statement that it would exit the flagship Sakhalin 2 LNG plant, which it has a 27.5% stake in and is 50% owned and operated by Russian gas giant Gazprom. Shell said the decision to exit the Russian joint venture would result in impairment. Shell said it had about $3 billion in non-current assets in these businesses in Russia at the end of 2021.
The massive Sakhalin 2 project, located off Russia’s northeastern coast, produces about 11.5 million tons of LNG per year and exports it to major markets including China and Japan. For Shell, the world’s largest LNG trader, leaving the project is a blow to its plans to supply gas to a fast-growing market for decades to come.
Shell said exiting Russia would not affect its plans to shift to low-carbon and renewable energy.
The company also plans to stop participating in the Nord Stream 2 Baltic gas pipeline connecting Russia and Germany, which it helped finance as part of a consortium of companies. Germany halted the project last week. Shell will also exit Salym Petroleum Development, another joint venture with Gazprom. Salym and Sakhalin 2 together contributed $700 million to Shell’s 2021 net earnings.
Equinor, Norway’s majority-owned state oil company, said earlier on Monday it would start divesting its joint venture in Russia.
So far, oil giants such as ExxonMobil and Total have not made a statement on their assets in Russia.
ExxonMobil has about $4 billion in assets in Russia and holds a 30% stake in the Sakhalin-1 oil and gas project. Total holds a 19.4% stake in Novatek, Russia’s largest independent natural gas supplier.
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