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For Western energy giants, escaping Russia has become the longest goodbye

The Telegraph

For Western energy giants, escaping Russia has become the longest goodbye

Not long ago oil and gas companies were scrambling to get into Russia, rather than out

Shell has had ties to Russia since 1912 after buying the Rothschild family’s interests there. More recently, its partnership with Russia’s state gas giant Gazprom has helped it access vast gas reserves in Russia’s far east.

It, too, hung on even after having to cede control of the $22bn [£19bn] Sakhalin-2 gas facility to Russia in 2006 following months of Kremlin pressure.

Shell’s boss, Ben van Beurden, met Putin in April 2014, shortly after Russia’s annexation of Crimea, to tell him they wanted to expand the project. Equinor, meanwhile, entered Russia in the 1990s and ten years ago struck a major exploration deal with Rosneft as the two Arctic powers forged closer ties.

By the start of the war, foreign companies covered about 11pc of Russia’s oil and gas production, according to James Henderson, at the Oxford Institute for Energy Studies. BP, TotalEnergies, Wintershall Dea, Shell and India’s Oil and Natural Gas Corporation were the largest.

Many hoped that the energy ties with Russia would help prevent tensions with the West due to mutual interest. That has proven a miscalculation.

Severing those ties is not proving easy. Russia put a temporary ban on foreign investors selling assets at the start of the war and last month banned investors from countries which have supported sanctions from selling assets, including oil and gas production projects, until the end of the year.

Halliburton, the US oilfield services giant, also got out, splitting off its Russian operations to a team of former Halliburton employees.

Shell’s entanglement is more complex, though it has made big strides to break free. Van Beurden announced plans to exit in February, deploring the “senseless act of military aggression”.

Talks with Indian and Chinese buyers for its stake in the Sakhalin-2 gas facility in the far east are believed to have taken place earlier this year. But Russia then seized full control of the project, forcing partners to request permission if they wanted to stay. Shell has declined, walking away.

Moscow-listed Novatek has been touted as a possible replacement. Shell sold its 411 retail fuel stations in Russia to private Russian oil giant Lukoil, in May, with no value disclosed. It has quit the board of Salym, a joint oil development venture with Gazprom Neft, but is still working on options for its stake, with its shareholder rights curtailed by Russia. It has transferred another joint venture back to Gazprom Neft.


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