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Shell to take hit of up to $5b on Russia exit

By AFP - Apr 07,2022 - Last updated at Apr 07,2022

LONDON — British energy giant Shell warned on Thursday that it would take a hit of up to $5 billion (4.6 billion euros) on its exit from Russia, following Moscow's invasion of Ukraine.

Impairment from assets and additional charges relating to Russia activities were expected to be between $4 billion and $5 billion in the first quarter, Shell said in a statement after recently signalling its gradual withdrawal.

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

The group said at the time that the ventures were worth about $3 billion.

Shell then announced in March that it would withdraw from Russian gas and oil in line with UK government policy, and also immediately stopped purchases of its crude on the spot market.

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

However, Shell revealed on Thursday that it would continue to fulfil contracts on buying fuel from Russia that had been signed before the Ukraine war.

"Shell has not renewed longer-term contracts for Russian oil, and will only do so under explicit government direction, but we are legally obliged to take delivery of crude bought under contracts that were signed before the invasion," it said in the statement.

The group 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 the end of the year 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 of Ukraine on February 24.

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

BP said in late February that it would pull its 19.75-per cent 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 had swung back into massive profit last year, as oil and gas prices jumped on recovering demand and geopolitical unrest.

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

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

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

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