It’s a race to the door for oil and gas companies with operations in Russia, Over the past 24 hours, three major international oil companies—BP, Equinor, and Shell—have publicly announced they will get out of the Russian oil business in response to Russia’s war against Ukraine.
In what is perhaps the most significant move, oil giant BP said Sunday that it would cut ties with Rosneft, Russia’s national oil and gas company. BP has owned a nearly 20% stake in the company, worth $14 billion, since 2013, making it one of the largest shareholders. BP CEO (and big LinkedIn commenter) Bernard Looney and former CEO Robert Dudley will also step down from Rosneft’s board. (Looney, by the way, hung out with Putin back in Octoberwhere he was on a panel with the Russian president that he later called a “privilege.”)
The oil company has been operating in Russia for close to 30 years, and Rosneft is pretty influential. Rosneft comprises around a third of BP’s oil and gas assets and half of the company’s oil and gas production. All that fossil fuel adds up: BP will take a roughly $25 billion hit thanks to its choice to divest. (The company hasn’t said how it plans to fund this transition.)
Incredibly, despite the massive amount of fossil fuel under BP’s control in Russia, cutting Rosneft will actually have no impact on its net zero goals. BP’s aggressive net zero goalset in 2020 that garnered widespread press, had a huge loophole in that it didn’t include emissions from Rosneft—which hadn’t set any kind of net zero target.
“I have been deeply shocked and saddened by the situation unfolding in Ukraine and my heart goes out to everyone affected,” Looney said in a statement. “It has caused us to fundamentally rethink bp’s position with Rosneft.” (In a separate statement, Rosneft said BP’s exit was due to “unpreceded political pressure.”)
Following in BP’s footsteps, Norwegian national energy company Equinor said Sunday it would also cut off all its ties with Rosneft. Equinor has a much smaller stake in Russia than BP, but the numbers are nothing to sneeze at: The company holds some $1.2 billion in investments with Rosneft, and it produces the equivalent of about 25,000 barrels of oil per day in Russia. On Monday, Shell joined in the fun, announcing it would cut ties with various projects in Russia that amount to around $3 billion in assets.
Given Russia’s outsize influence on the international oil and gas stage, and the recent focus on Germany’s decision to stall the Nord Stream 2 pipeline, sanctions-based action against the country’s fossil fuel industry has thus far been lukewarm. As of Monday, the Biden administration has placed no sanctions against big players in Russia’s energy space. The American Petroleum Institute, the lobbying arm of the oil and gas industry, has meanwhile been almost brazen in how it sees the war benefiting the American oil and gas industry. In a tweet thread posted just hours before Russia officially went to war, API posted a series of graphics with some of its key policy asks, including releasing permits to drill on federal lands and decreasing regulations, as solutions to “US energy leadership.” But the organization has also lobbied the Biden administration to make sure sanctions are “targeted,” to spare oil and gas organizations overseas that have investment in Russia.
And they’re right to be concerned for their dirty members: Other oil majors still have deep ties in Russia. While its involvement is not as extensive as BP’s, ExxonMobil has ties in Russia that amount to around $4 billion in Russian assets. Other major international companies like Total, Engie, and Eni also have investments in the region, We’ll see if they decide to find a way out or keep hanging on.