Exxon joins BP and Shell in cutting investments in Russia

Exxon joins BP and Shell in cutting investments in Russia
(AP Photo/Mark Humphrey, File)

The US is still buying oil from Russia out of a desire to avoid a spike in prices here in the US. But major oil companies have been more direct about cutting ties with Russia. Yesterday, Exxon announced it was shutting down it’s involvement with a major oil and gas facility in eastern Russia.

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ExxonMobil supports the people of Ukraine as they seek to defend their freedom and determine their own future as a nation. We deplore Russia’s military action that violates the territorial integrity of Ukraine and endangers its people…

As operator of Sakhalin-1, we have an obligation to ensure the safety of people, protection of the environment and integrity of operations. Our role as operator goes beyond an equity investment. The process to discontinue operations will need to be carefully managed and closely coordinated with the co-venturers in order to ensure it is executed safely.

Given the current situation, ExxonMobil will not invest in new developments in Russia.

The Sakhalin-1 project was a joint investment between Exxon, Russia, India and Japan. It is reportedly one of the largest foreign investment in Russia so walking away from it is going to be a big blow to Exxon.

Other oil and gas companies have already walked away from Russia. BP announced Sunday that it was walking away from involvement with the Russian oil company Rosneft, a partnership that accounts for about 1/3 of BP’s production.

BP is abandoning its stake in Russian oil giant Rosneft in an abrupt and costly end to three decades of operating in the energy-rich country, marking the most significant move yet by a Western company in response to Moscow’s invasion of Ukraine.

Rosneft accounts for around half of BP’s oil and gas reserves and a third of its production and divesting the 19.75% stake will result in charges of up to $25 billion, the British company said, without saying how it plans to extricate itself.

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Shell quickly followed:

Shell is getting out of Russia and ditching its joint ventures with Gazprom, including its involvement with the moribund Nord Stream 2 natural gas pipeline.

The UK-based oil company said Monday it would dump its 27.5% stake in the Sakhalin-2 liquified natural gas facility, its 50% stake in a project to develop the Salym fields in western Siberia and its 50% interest in an exploration project in the Gydan peninsula in northwestern Siberia.

“We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression which threatens European security,” Shell (RDSA) CEO Ben van Beurden said in a statement.

Equinor, a Norwegian energy company also announced it was going to exit Russia which leaves France’s TotalEnergies as a bit of a hold out. The company released a statement in support of Ukraine and saying it would comply with sanctions on Russia. The statement said Total would not fund any future projects in the country but stopped short of saying it would exit the country.

Russia will certainly miss the investment of foreign money but having had years to study technological advances the expertise of these companies is no longer needed by Russia.

There is much at stake here for both Russia and the Western companies, including loss of profits, but not as much as there might have been had the crisis in Ukraine occurred a decade or two ago. Even before this invasion, foreign oil developments in Russia had slowed sharply, partly because of sanctions imposed after Mr. Putin’s annexation of Crimea in 2014. Growing climate change concerns also may increasingly make Russian investments look expendable.

In addition, Russian oil and gas companies have had years to study the technology that Western oil companies brought with them, including modern well-enhancing techniques like fracking and drilling horizontally from service companies like Schlumberger.

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Needed or not, it makes sense for western companies to get out of Russia and for western countries to decrease dependence on Russian gas and oil. That process is going to be painful for the west in the short term but in the long term it’s a good idea not to be relying on energy supplied by an increasingly rigid and belligerent thug.

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Dennis Prager 2:01 PM on September 22, 2023
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David Strom 10:41 AM on September 22, 2023
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