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Shell pledges to stop buying Russian oil and gas

·Business Reporter, Yahoo Finance UK
·4-min read
Shell pledges to stop buying Russian oil and gas
Shell will close its service stations, aviation fuels and lubricants operations in the country. Russian oil currently makes up about 8% of Shell's working supplies. Photo: Mike Kemp/In Pictures via Getty

Shell (SHEL.L) has announced it will cut ties with Russia after it came under fire last week for purchasing a shipment of Russian crude at a record discount.

The oil giant said it will immediately halt all spot purchases of Russian crude oil, and that it would not renew contract terms.

It will now withdraw from all hydrocarbons, including crude, petroleum products, gas and liquified natural gas in a phased manner.

The group will also close its service stations, aviation fuels and lubricants operations in the country. Russian oil currently makes up about 8% of Shell's working supplies.

Shell rose on the back of the announcement. Chart: Yahoo Finance
Shell rose on the back of the announcement. Chart: Yahoo Finance UK

“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,” Ben van Beurden, chief executive of Shell, said.

“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 added: “Our actions to date have been guided by continuous discussions with governments about the need to disentangle society from Russian energy flows, while maintaining energy supplies. Threats today to stop pipeline flows to Europe further illustrate the difficult choices and potential consequences we face as we try to do this.”

Read more: European stock markets climb despite Russia threatening to cut gas supply

The company said the change could take weeks to complete and will lead to reduced throughput at some of its refineries.

It comes after public backlash last week after it made the decision to continue buying Russian oil.

Ukraine’s foreign minister, Dmytro Kuleba, criticised Shell, tweeting on Saturday: “Doesn’t Russian oil smell [like] Ukrainian blood for you?”

He urged the public to press multinational companies to cut all business ties with Russia.

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

"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."

"However, there will be pressure on Shell to keep up a concerted effort to fully open the sustainable pipeline.’’

Benchmark Brent crude (BZ=F) rose 4% to more than $127 (£96.80) a barrel on the back of the news, while West Texas Intermediate (CL=F) also gained on Tuesday.

Both had hit their highest level since 2008 on Monday as Britain and the US consider banning oil imports from Russia as the Ukraine war intensifies.

Meanwhile, the International Energy Agency (IEA) has urged oil producers to bring extra supply to the market, warning that the crisis in Ukraine will drive prices even higher.

Read more: UK faces biggest income squeeze since 1970s

Fatih Birol, executive director of the IEA, said the agency had been “disappointed” in the response from oil producers, and that a “significant amount” of spare capacity could be tapped.

He told Bloomberg the release of 60 million barrels from stockpiles announced last week represented only 4% of IEA members’ reserves, insisting they could release a “substantial amount” more if required.

Watch: Why are gas prices rising?