BP and Shell: the significance of Big Oil walking out of Russia

BP’s decision to ditch its 20% stake in the Russian state oil giant Rosneft was almost a foregone conclusion following accusations that it was “fuelling the invasion of Ukraine”. And it was swiftly joined by Shell, which is divesting its stake in the Sakhalin-2 liquefied natural gas project, said Bloomberg.

The two companies “will write down billions of dollars”, but the moves have a greater significance. In just two days, Britain’s twin energy giants have dumped Russian investments nurtured over decades and shut themselves out of the world’s largest energy exporter, probably forever.” The US titan Exxon announced that it would follow; France’s Total is reviewing its Russian business.

Given that the total cost of jettisoning Rosneft could hit $25bn (including $11bn in forex losses), the immediate hit to BP’s shares was “a modest 4%”, noted Nils Pratley in The Guardian. The fall might have been steeper had the board “risked serious reputational damage” by ignoring “the UK government’s entreaties”. The hit to Shell, at around $3bn, is much less.

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Neither company has outlined the “mechanics” of their exits. BP can either seek a buyer – at a fire-sale price – “or accept whatever token sum of devalued roubles” Rosneft cares to offer. “The latter looks more likely.”

BP boss Bernard Looney, and his predecessor Robert Dudley, are now off Rosneft’s board. Welcome news, said Alistair Osborne in The Times. But BP should have ended its tumultuous relationship with Russia years ago. “How much evidence did it need that Putin is no business partner?”

In time, a greener, cleaner BP may thank Ukraine for forcing its hand, said George Hay on Reuters Breakingviews. It is now “rid of an asset that presented an increasing headache on environmental, social and governance grounds”.