Page 4 - FSUOGM Week 09 2022

FSUOGM COMMENTARY FSUOGM

Exodus of Western majors

from Russia begins

It marks a sudeen end of an area for Russia's oil and gas industry

RUSSIA INTERNATIONAL oil companies (IOCs) have BP its current shareholding in the national oil
started announcing plans to exit Russia, poten- company.
WHAT: tially marking the biggest ever withdrawal of for- The relationship between BP and Rosneft
BP, Equinor, ExxonMobil eign investment from the country’s oil and gas lasted over the years because it was mutually
and Shell have both industry during such a short period. beneficial. On the one hand, BP benefitted from
announced they will Russia’s low-cost production, helping it drive
withdraw from Russia. BP calls time on Russia growth elsewhere in its portfolio. The company
BP was the first to unveil plans to pull out of Rus- had been banking on its Russian assets to gen-
WHY: sia in light of Moscow’s invasion of Ukraine. The erate the capital necessary to rapidly build up its
Western majors have company has a 19.75% interest in Russia’s largest energy transition business, under an ambitious
quit in light of Moscow's oil company Rosneft, run by influential Krem- strategy it unveiled in 2020.
invasion of Ukraine. lin ally Igor Sechin. In an email to employees on On the other hand, Rosneft relied on BP
February 27 seen by NewsBase, CEO Bernard for its advanced technology and equipment, its
WHAT NEXT: Looney said that he had been “deeply shocked experience and its financial clout, which has
More IOCs face pressure and saddened by the situation unfolding in helped it take projects forward that would oth-
to withdraw, and the Ukraine.” erwise be considered too complex or costly to
exodus will leave Russia “In the hours and days since military action develop.
even more dependent on began, we have been fundamentally rethinking
Russia for economic and our position with Rosneft,” Looney said. Equinor follows suit
political support. BP plans to divest its shareholding in Rosneft, Rosneft has likewise reached out to Equinor to
and until a buyer is secured, it will not include help it exploit some of Russia’s more challeng-
any production and profits from the Russian ing oil players. But the Norwegian company too
company in its results. Looney and former BP decided to withdraw on February 28.
head Bob Dudley will also step down from Ros- In a statement, Equinor CEO Anders Opedal
neft’s board. said the company was “deeply troubled by the
In a statement online, BP said that having a invasion of Ukraine, which represents a terrible
stake in Rosneft no longer aligned with its busi- setback for the world, and we are thinking of all
ness and strategy, and that a divestment was in those who are suffering because of the military
the best long-term interests of shareholders. action.”
BP chairman Helge Lund made the UK major’s The conflict in Ukraine has made Equinor’s
position on the Ukrainian conflict clear. activities in Russia “untenable,” he said. Not only
“Russia’s attack on Ukraine is an act of aggres- will the company cease investing in the country,
sion which is having tragic consequences across but it will also begin the process of withdrawing
the region,” he said. “This military action rep- from its existing joint ventures there.
resents a fundamental change. It has led the BP Equinor has been working in Russia since
board to conclude, after a thorough process, our 2013, once again primarily with Rosneft. At
involvement with Rosneft, a state-owned enter- the end of 2021 it had $1.2bn of assets in the
prise, simply cannot continue.” country, from which it nets a combined 25,000
BP also said it would withdraw from its vari- barrels of oil equivalent per day (boepd) in pro-
ous upstream joint ventures with Rosneft in Sibe- duction. These assets include its joint ventures
ria. They include Taas-Yurakh, Yermak-Neftegaz with Rosneft in east and west Siberia and in the
and Kharampur. Volga-Urals formation, and its 30% stake in
BP has been working in Russia for over 30 the Zarubezhneft-operated Kharyaga produc-
years, having opened its first office in the coun- tion-sharing agreement (PSA) in the northern
try in 1990. Its biggest early upstream invest- Timan-Pechora basin.
ment was the acquisition in 1997 of a 10% stake As was the case with BP, Equinor was
in Sidanco, which at the time was the country’s attracted to Russia by its low-cost production.
fourth-largest oil company. BP combined its var- Without its support, Rosneft may struggle to
ious upstream assets in Russia with those of local maintain production at challenging North Kom-
investor TNK in 2003 to form TNK-BP. TNK-BP somolskoye heavy oilfield in west Siberia, and
was sold in 2013 to Rosneft for $55bn, giving may be unable to exploit the difficult-to-recover

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