Shell to shut Russian retail, aviation fuels and lube operations

Shell plc (Shell) announced yesterday that it will close its service stations, aviation fuels and lubricants operations in Russia.

In addition, it will stop all spot purchases of Russian crude oil “as an immediate first step,” following the controversy surrounding its purchase of 100,000 metric tons of flagship Urals crude from Russia at a discounted price last Friday. The London-based energy major said it will donate the profits from the transaction to a fund dedicated to humanitarian aid for Ukraine.

So far Western countries have not imposed sanctions on Russian oil imports, but U.S. Secretary of State Antony Blinken said last Sunday that the U.S. was now in “active discussions” with European partners about banning them.

With 533 employees in Russia, the London-based energy major reported revenues in excess of USD2.3 billion in 2020. Shell started its lubricants business in Russia in 1992. According to an article that appeared in F+L Daily in February 2018, Shell was supplying about 120 million liters of finished lubricants to the Russian market, with 90 million liters being produced in Torzhok, Tver Region, in Russia. At that time, Shell planned to increase lubricant production in Torzhok to 200 million liters per year in 2027. Shell has more than 400 Shell-branded retail sites in Russia.

On February 28, Shell plc announced its intention to exit its joint ventures with Russia’s natural gas giant Gazprom and related entities.

This latest announcement stated Shell’s intent to withdraw from all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas (LNG) in a “phased manner, aligned with new government guidance.”

“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. As we have already said, we will commit profits from the limited, remaining amounts of Russian oil we will process to a dedicated fund. We will work with aid partners and humanitarian agencies over the coming days and weeks to determine where the monies from this fund are best placed to alleviate the terrible consequences that this war is having on the people of Ukraine,” said Shell Chief Executive Officer, Ben van Beurden.

“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. Following government statements this week, I want to set out our position clearly. Unless directed by governments, we will:

• Immediately stop buying Russian crude oil on the spot market and we will not renew term contracts.
• At the same time, in close consultation with governments, we are changing our crude oil supply chain to remove Russian volumes. We will do this as fast as possible, but the physical location and availability of alternatives mean this could take weeks to complete and will lead to reduced throughput at some of our refineries.
• We will shut our service stations, aviation fuels and lubricants operations in Russia. We will consider very carefully the safest way to do this, but the process will start immediately.
• We will start our phased withdrawal from Russian petroleum products, pipeline gas and LNG. This is a complex challenge. Changing this part of the energy system will require concerted action by governments, energy suppliers and customers, and a transition to other energy supplies will take much longer.

“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,” said van Beurden. “But ultimately, it is for governments to decide on the incredibly difficult trade-offs that must be made during the war in Ukraine. We will continue to work with them to help manage the potential impacts on the security of energy supplies, particularly in Europe.”