Markets React to Russia-Ukraine War: Live Business News – The New York Times

Shell, Europe’s largest oil company, said on Monday that it would exit its joint ventures with Gazprom, the Russian natural gas giant. It is joining BP, which said on Sunday that it would sell its nearly 20 percent stake in Rosneft, the Russian state-controlled oil company.

The twin declarations, each involving investments of billions of dollars, displayed a sudden revulsion in dealing with Moscow as the Russian army assaults Ukraine and forces hundreds of thousands of refugees to flee.

They also highlighted a remarkable reversal of sentiment in an industry that has worked diligently for decades to land Russian projects.

Shell had been careful to cultivate a strategic relationship with Gazprom, even providing financing and guarantees for the controversial Nord Stream 2 pipeline from Russia to Germany, which is now blocked.

That’s all over now.

“We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression,” Ben van Beurden, Shell’s chief executive, said in a statement. The investment in Russia was worth about $3 billion.

The oil giants’ investments in Russia have become embarrassments and targets for politicians as anger grows over President Vladimir V. Putin’s invasion of Ukraine.

Shell’s decision will put pressure on TotalEnergies, the French giant, to sell its considerable Russian gas holdings. Exxon Mobil also has a sizable Russian project.

There is much at stake here for both Russia and the Western companies, including loss of profits, but not as much as there might have been had the crisis in Ukraine occurred a decade or two ago. Even before this invasion, foreign oil developments in Russia had slowed sharply, partly because of sanctions imposed after Mr. Putin’s annexation of Crimea in 2014. Growing climate change concerns also may increasingly make Russian investments look expendable.

In addition, Russian oil and gas companies have had years to study the technology that Western oil companies brought with them, including modern well-enhancing techniques like fracking and drilling horizontally from service companies like Schlumberger.

Thane Gustafson, author of “Wheel of Fortune,” an account of the Russian oil industry after the fall of the Soviet Union, recalled that the oil executives who were instrumental in establishing their companies in Russia — John Browne of BP, Rex W. Tillerson of Exxon Mobil, and Christophe de Margerie of TotalEnergies — were “hailed at the time, and rightly, as models of Western entrepreneurship.”

Now, he said, “the participation of the three brand-name majors at this moment is not crucial for Russia, no.” And the momentum to leave Russia is building.

On Monday, Equinor, the Norwegian energy company, said it would “stop new investments into Russia” and “start the process of exiting” joint ventures there. “In the current situation, we regard our position as untenable,” Anders Opedal, the company’s president and chief executive, said in a statement.

Equinor’s investments in Russia are small, producing about 30,000 barrels a day, around 1.5 percent of the company’s total output, but calls for others to leave are continuing.

All of the Western oil companies’ deals in Russia over the last three decades must now be considered at risk, although the extent of their activities there and their importance to their overall results varies. While even a complete write-off — a possibility for BP — would not threaten the existence of any of the companies in this group, analysts say, losing a foothold in a major petroleum producer will still hurt.

In turn, Russia could lose the marketing power of these giant companies, making it more difficult to sell Russian oil while sanctions are already making buyers cautious.

After the fall of the Soviet Union in 1991, oil companies headed to Russia and its vast quantities of oil and gas, partly in hopes of replacing the resources they had lost to nationalizations in Saudi Arabia, Iran and other countries.

“If you look back 15 to 20 years ago, the assumption was that Russia would become a normal part of the European economic system,” said Stuart Joyner, an analyst at Redburn, a research firm.

BP took the most difficult yet potentially rewarding approach, investing $8 billion in a joint venture called TNK-BP in 2003 with a group of Russian oligarchs and applying its technology and know-how to improve operations. The venture flourished in its early years, but disagreements among the partners flared, and BP sold its share to Rosneft, taking $12.5 billion in cash and a large stake in the Russian company.

But BP’s connection to Russia became increasingly untenable under Mr. Putin and his aggressive approach to his neighbors. BP’s chief executive, Bernard Looney, and his predecessor, Bob Dudley, who earlier in his career ran TNK-BP, have also resigned from the Rosneft board.

It was not acceptable in Britain, which has taken a hard line against Moscow over Ukraine, for them to be participating on a board alongside the likes of Igor Sechin, a longtime associate of Mr. Putin, who is chief executive of Rosneft.

“BP finds itself caught for the best of reasons by the changing world,” said Mr. Gustafson, who is a professor at Georgetown University.

Even though some analysts applauded BP’s announcement, many investors were apparently rattled by the news that BP would lose about one-third of its reported oil and gas production and substantial profits that came to $2.4 billion last year. BP’s shares fell sharply in trading on Monday.

Shell, which only recently moved its headquarters to London from the Netherlands, said it would exit four joint ventures that it has with Gazprom and its subsidiaries. The most important of these is a minority but valuable holding in a liquefied natural gas facility on Sakhalin, an island in Russia’s Far East. Shell also will be pulling out of an oil joint venture called Salym IV, as well as ending its involvement with Nord Stream 2.

Shell said it would be taking an unspecified write-off. But, in an indication that management does not expect that leaving Russia will do major damage to earnings, the company said it planned to increase its dividend by 4 percent for the first quarter and continue with $8.5 billion in share buybacks.

Credit…Andrey Rudakov/Bloomberg

After the departure of BP and Shell, the oil company with the most at risk in Russia is TotalEnergies. The Paris-based company owns about 19 percent of Novatek, a Russian gas company, and a minority stake in a $27 billion natural gas export facility called Yamal LNG in the Russian Arctic. Giacomo Romeo, an analyst at Jefferies, an investment bank, said that supplies from the Yamal venture are vital to Total’s liquefied gas business, which in turn is an important pillar in the company’s efforts to reduce the carbon emissions of its products.

Total along with Shell has played a crucial role in bringing advanced liquefied natural gas technology to Russia. Total’s shares also plunged Monday as investors worried that the French company would follow BP out the Russian door.

Exxon Mobil has produced oil for a quarter-century from the same area as Shell, but the oil flow is only around 2 percent of the company’s global total.

Exxon did not respond to a request for comment, and Total declined to comment.

In the current environment, all of these investments look like holdovers from a more promising past rather than bases that could be built on in the future.

Clifford Krauss contributed reporting.

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