Shell to halt buying Russian oil and gas and close all service stations in country

Shell has announced plans to withdraw from Russian oil and gas and close all of its 500 service stations in the country, as the boss of the FTSE 100 company apologised for buying Russian crude oil last week.

In a U-turn from last week, when it defended its decision to buy a cargo of Russian oil as necessary to keep energy flowing through Europe, the company said it would immediately stop buying Russian crude oil on the spot market and not renew term contracts.

It will also change its crude oil supply chain to remove Russian supplies, but said this could take weeks to complete and would lead to reduced throughput at some of its refineries.

Shell got about 5% of its crude oil and natural gas liquids from Russia in 2020, the last available figures, to be turned into diesel, petrol and other products at its refineries, and 4% of its natural gas.

The company will shut its service stations, aviation fuels and lubricants operations in Russia, in a move that will affect 500 employees. That business is worth $400m (£305m). It will also start a phased withdrawal from Russian petroleum products, pipeline gas and liquefied natural gas.

“This is a complex challenge,” it said on Tuesday. “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.”

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The company’s chief executive, Ben van Beurden, said: “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 bought the oil from the Swiss trader Trafigura at a discount of $28.50 a barrel. As the backlash over the purchase grew last weekend, Shell pledged to donate the profits from processing the oil to a dedicated fund.

Van Beurden said the business would work with aid partners and humanitarian agencies to determine how best to use the fund to “alleviate the terrible consequences that this war is having on the people of Ukraine”.

A week ago, Shell said it would exit its joint ventures with the Russian state energy company Gazprom and said it would end its involvement in the Nord Stream 2 gas pipeline project.

It will exit its equity partnerships with Gazprom and related entities, including its 27.5% stake in the Sakhalin-II liquefied natural gas facility, its 50% stake in the Salym Petroleum Development in West Siberia and the Gydan energy venture.

Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, said: “Shell’s apology for buying Russian oil shows just how strong the winds of change are blowing through the corporate world.

“But unwinding Shell’s tentacles from the economy is set to be a complex affair and in making this announcement, Shell has also warned that exiting Russia’s energy sector will be hugely challenging.

“As worries about the squeeze in supply of oil continue, the elevated price of crude should keep Shell on the path of slicing big chunks off net debt and fund capital expenditure in new gas field expansion and into low-carbon alternatives like hydrogen.

“Whatever happens, Shell is still set to remain an oil and gas giant for decades, but by taking this stance and exiting the Russian markets with a continued focus on renewables, it should help reduce the risk of the company ending up in the ethical waste bin.”