Shell Plc will phase out all purchases of Russian oil and gas, with an immediate halt to crude deals on the short-term market, making a dramatic U-turn in response to international opprobrium over its dealings with the country.
“We are acutely aware that our decision last week to purchase a cargo of Russian crude oil” was wrong, the company said in a statement on Tuesday. “Our actions to date have been guided by continuous discussions with governments about the need to disentangle society from Russian energy flows.”
Shell said it will do this as fast as possible, but it could take weeks to wean itself off Russian crude and result in lower output of fuels at some of its refineries. That comes as diesel markets are already in crisis mode as traders tried to make sense of the magnitude of supply shortfalls due to the Russia crisis.
The invasion of Ukraine prompted a huge range of companies to withdraw from their operations in Russia, including energy giants BP Plc and Exxon Mobil Corp. Attention has now shifted to the country’s energy exports, a crucial source of revenue for President Vladimir Putin’s government.
On Friday, Shell bought a cargo of Russian crude, immediately drawing heavy criticism. Ukraine’s Minister for Foreign Affairs Dmytro Kuleba took to Twitter to ask the company whether the oil smelled like “Ukrainian blood for you?”
In the U.S., key lawmakers announced the outline of bipartisan legislation to bar imports of Russian oil into the U.S. Europe, which is more dependent on the country’s crude, have so far shied away from a ban, but pressure is growing on companies that continue to receive the country’s energy exports.
TotalEnergies SE Chief Executive Officer Patrick Pouyanne said on Monday that his company’s trading arm had already stopped buying Russian oil, but one its refineries in Germany would continue to receive crude from the country because there was no alternative supply.
Engie SE CEO Catherine MacGregor said in a Bloomberg TV interview on Tuesday her company continues to buy Russian gas because its customers depend on those supplies.
Shell will also shut its service stations, aviation fuels and lubricants operations in Russia.
Even without direct Western sanctions on Russian energy exports, the risk that buyers will voluntarily shun the country’s supplies have triggered unprecedented surges in crude and natural gas prices. The International Energy Agency, which already announced the release of 60 million barrels of oil from emergency stockpiles, is prepared to recommend that its members release more if necessary, Executive Director Fatih Birol said in an interview on Bloomberg.