The multinational gas company Shell announced on Tuesday that it intends to halt the purchase of Russian oil and gas due to the country’s attack on Ukraine.
The company will stop purchasing all Russian hydrocarbons, which includes “crude oil, petroleum products, gas and liquefied natural gas,” according to a statement released on Tuesday.
Shell faced sharp criticism last week when it purchased a large amount of Russian crude oil. In a statement announcing its decision to stop buying Russian oil, Ben van Beurden, CEO of Shell apologized for that misstep, saying:
“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.”
Shell to halt purchases of Russian oil
“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,” he stated.
Van Beurden then stressed that, after governments approached the company regarding strategies to “disentangle society” from Russian oil, the company has decided to halt the purchase of the commodity, while noting that the company may face “consequences” for this decision due to Russia’s “threats…to stop pipeline flows to Europe.”
The threat mentioned in the announcement refers to Russian Deputy Prime Minister Alexander Novak, who said on state television on Monday that it was “absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market”.
Not only would oil prices more than double, to approximately $300 per barrel, but the moves made by nations to close off Russian oil would also cause the closure of the main gas pipeline from Russia to Germany, he warned.
Van Beurden continued by outlining Shell’s plan to stop buying Russian oil, which states:
“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.”
The company’s decision will also affect Russian citizens, as Shell will shut down service stations in the country: “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,” Shell’s CEO said.
“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,” he concluded.
Russia is third-largest oil producer in world
Countries across the world, particularly in Europe, have attempted to reduce their dependence on Russian oil since Russia invaded Ukraine in late February.
Russia is currently the third-largest oil producer in the world and it contributes over 10% to the global supply of oil.
Shell’s decision comes as the US has decided to ban Russian oil and energy imports in the wake of the war in Ukraine.
Although the US produces the largest amount of oil in the world, the country consumes much more than it produces, so it relies on foreign imports from countries around the world like Saudi Arabia, Russia, and Canada.
Less than 10% of the oil the US imports comes from Russia, which may seem insignificant but amounts to hundreds of thousands of Russian oil barrels coming into the US each day, where gas prices are already high.