The pressure is on for other Western energy companies, such as ExxonMobil
Shell Oil is abandoning its energy deal with Russia’s primary energy company as Western leaders take a united stance against the country’s military attack on Ukraine.
The Houston-based energy company said it would exit its joint ventures with Russian energy conglomerate Gazprom and its subsidiaries on Monday. Shell’s announcement came a day after BP said it would withdraw its Russian holdings. BP had held a 19.75% shareholding in Rosneft since 2013.
Shell’s joint ventures with Russia’s state-owned energy giant and related entities include a 27.5% stake in a liquefied natural gas project and a 50% stake in two separate projects being developed in Siberia’s oil fields.
Neither Shell nor BP specified when these divestitures would be complete.
“We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression which threatens European security,” said Shell CEO Ben van Beurden in a statement.
Your move, ExxonMobil
There are a dozen Western energy companies with investments in Russia’s fossil fuel industry, according to Reuters. Aside from BP and Shell, others include Chevron, Halliburton and ExxonMobil.
Back in 2014, ExxonMobil said it would exit Russia after the U.S. issued sanctions against Moscow over the country’s annexation of Crimea, a disputed territory in Ukraine, in March of that year. However, in 2017, ExxonMobil was fined $2 billion for violating U.S. restrictions on Russia.
At the moment, Exxon has tangential exposure to Russia’s energy sector. It’s working with Sakhalin-1, a consortium of oil and gas projects in the Pacific Ocean. The company’s Russian subsidiary, Exxon Neftegas Limited, has been the operator of the Sakhalin-1 project since 1995. ExxonMobil’s share in the project is 30%. The total number of employees in Russia is more than 1,000 people.
ExxonMobil representatives did not respond to a request for a comment on the current status of its business in Russia in light of the invasion.
A new era—or back to business?
Fossil fuel companies have struggled to position their brands more favorably as climate change concerns have put greater pressure on their marketing and advertising strategies. But Russia’s war on Ukraine has galvanized a different form of opposition to these brands’ global activities and interests.
“Every company can and should—and most do—look at the human rights implications of their businesses, and for Shell and BP, clearly the invasion of Ukraine was a bridge too far,” said Aron Cramer, CEO and president of Business for Social Responsibility, a San Francisco-based organization focused on sustainability issues around the globe.
“They’ve taken these decisions, even though it’s unclear how they will divest [and from whom they’ll divest]. What is clear is that they stand to lose billions of dollars.”
According to Kantar figures, Shell has gradually increased major media ad spending over the past year, from $6.2 million in 2020 to $9.4 million last year. For the same period, BP’s ad spending has remained relatively flat at $128 million, while ExxonMobil reduced its expenditures from $19.5 million to $16.6 million.
As Cramer noted, taking human rights into account given Russia’s war against Ukraine comes at a cost for energy brands. And the acts taken by Shell and BP appear to demonstrate the power of public and government pressure to act quickly when there’s widespread agreement on addressing a crisis.
Aside from the specifics about these abandoned investments, it remains unclear if this will ultimately open up a new level of activism against fossil fuel companies once this conflict passes, or if it will simply be back to business as usual.
“At times when human rights violations become very acute, companies are inclined to engage,” Cramer told Adweek. “That’s their natural inclination. There are lines that they will choose not to cross. I’ve seen figures of $25 billion in losses, upward of that figure for BP. It’s a pretty substantial decision.”
