ENERGY giant BP’s decision to sever links with Kremlin-controlled Rosneft has piled pressure on other oil majors to follow suit, with FTSE 100 rival Shell facing calls to dump its Russian assets.
BP’s share price plunged by 7.5% today, despite a surge in Brent Crude and natural gas prices, as investors were taken by surprise at its decision to abandon a 20% holding in the state-run oil company, ending a lucrative 30-year association with Russia.
UPDATE: Shell cuts ties with Gazprom to exit Russia
BP faces a one-off $25 billion hit from the exit with harsh sanctions making the prospect of finding a buyer “very challenging”, in the words of Santander analysts.
Rosneft accounted for almost a fifth of BP’s $12.8 billion profits in 2021.
BP CEO Bernard Looney said: "I have been deeply shocked and saddened by the situation unfolding in Ukraine and my heart goes out to everyone affected. It has caused us to fundamentally rethink BP's position with Rosneft.”
Norway’s biggest energy company Equinor also announced a retreat from Russia, where it holds assets of $1.2 billion, amid a growing corporate backlash.
Shell holds a 27.5% stake in Gazprom’s offshore gas project Sakhalin-2, which supplies about 4% of the global market for liquefied natural gas.
It is also holds a 10% stake worth $1 billion in Gazprom’s Nord Stream 2, the 750-mile undersea pipeline that had been due to double the flow of natural gas from Russia to Germany before Berlin pulled the plug last week.
Other western companies are also facing questions over their exposure to Russia.
France's TotalEnergies is a 19.4% shareholder in Russian natural gas producer Novatek and holds a 20% stake in a major LNG project in Yamal.
Exxon has been operating in Russia for 25 years, producing oil and gas in a partnership involving two Rosneft affiliates.
Trafigura and Vitol both have stakes in Rosneft's oil project run by Rosneft, while FTSE 100 commodities trader Glencore owns 10% of hydropower group EN+, whose owners include the oligarch Oleg Deripaska.
Ed Miliband, the shadow climate secretary, hailed BP for having taken “the right decision” and called on other UK companies to “similarly consider their positions”.
He said: “Shell should now follow BP and divest its Russian holdings to isolate the Putin regime. These investments are crucial for Putin’s regime and these companies need to act.”
AJ Bell’s Russ Mould said it would “not be a shock to see Shell follow BP’s lead”.
Susannah Streeter, at Hargreaves Lansdown, said: “Given the scale of the impairment charges expected, the reaction is pretty limited, illustrating that investors feel the reputational damage of continuing to do business with Russia could be more damaging long term.
“BP is leading the way by opening up a new channel of censure with its course of action.”
Shell said it was “monitoring the situation closely” but has yet to comment. Its shares fell 41p, or 2%, to 1960p.
