BRITISH energy giant Shell today warned that it will take a hit of up to US$5 billion (RM21 billion) on its exit from Russia, following the invasion of Ukraine.

The London-listed energy major in a statement said additional charges relating to Russia activities and impairment from assets are expected to be between US$4 billion and US$5 billion in the first quarter.

The news comes after it announced in late February that it will sell its stakes in all joint ventures with Russian state energy giant Gazprom, after the Kremlin launched its assault on Ukraine.

At the time, it said the ventures are worth about US$3 billion.

Shell later announced that it will withdraw from Russian O&G in line with UK government policy, and immediately stopped purchases of its crude on the spot market.

The company also apologised for buying a cargo of Russian oil at a vast discount, adding that it should not have happened.

However, it today revealed that it will continue to fulfil contracts on buying fuel from Russia signed before the Ukraine war.

“Shell has not renewed longer-term contracts for Russian oil, and will do so only under explicit government direction. However, it is legally obliged to take delivery of crude bought under contracts signed before the invasion.”

It warned that the state of global oil markets remains “volatile”, after prices rocketed to near record levels last month on the back of the conflict.

Britain, which is far less dependent than the rest of Europe on Russian energy, plans to phase out oil imports by year-end and eventually stop importing its gas.

A wide range of international companies have stopped doing business in Russia since President Vladimir Putin ordered the invasion on February 24.

Oil prices jump

Shell’s main rival BP has also announced its departure.

BP in late February said it will pull its 19.75% stake in state energy giant Rosneft, ending more than three decades of investment in Russia.

Shell’s first-quarter earnings are scheduled for publication on May 5.

It swung back into massive profit last year, as O&G prices jumped on recovering demand and geopolitical unrest.

Net profit stood at US$20.1 billion after a loss after tax of US$21.7 billion in 2020, as economies reopened from pandemic lockdowns.

Then, the Ukraine crisis sent shockwaves across the global oil market because Russia is a major producer.

Oil prices rocketed to record levels of close to US$140 per barrel in early March, although they have since fallen back to around US$100 on peace talk hopes.

Shell this year switched headquarters from the Netherlands to Britain after a century and dropped Royal Dutch from its name, in a move aimed at simplifying tax and share arrangements. – AFP, April 7, 2022.