War Impact How are Global Energy, Chemical Firms Reacting to Russia’s War on Ukraine?
Suspending their businesses, exiting projects and vowing to stop all new investments, this is how global energy and chemical firms are protesting against the world’s largest exporter of crude as well as the leading producer and exporter of natural gas – Russia.
With 14 days into the Russia-Ukraine war at the time of writing this article, things seem to be going only downhill for Moscow as well as for the global energy market. Crude oil reached an all-time high of 130 dollars per barrel and may possibly reach 300 dollars per barrel which would lead to catastrophic consequences for the global market, if Russian oil is banned, warned Moscow.
However, the West clearly wasn’t giving into Russia’s demands as the US banned oil and gas imports from Russia (The country’s oil contributes to 8 % of the total oil imports in the USA) as a symbol of protest against the war. The US is now looking at other oil producing countries including Saudi Arabia, Iran and Venezuela to fill the gap. Meanwhile, the European Union (EU) which is heavily dependent on Russian gas (accounts to 40 % of its total gas consumption) is also in talks to cut its dependence by 80 % this year, claim news reports.
International Energy Agency member countries agreed to release 60 million barrels of oil from their emergency reserves to send a unified and strong message to global oil markets that there will be no shortfall in supplies as a result of Russia’s invasion of Ukraine.
Reactions from global energy and chemical firms
Leading energy and chemical companies from around the world have decided to discontinue their operations in Russia. For instance, British Petroleum (BP) was the first major industry player to announce its exit (20 % shareholding) from the energy giant firm Rosneft.
Another oil & gas company, Shell followed suit by announcing its intention to quit its joint ventures with Russian majority state-owned multinational energy company Gazprom and related entities, including its 27.5 % stake in the Sakhalin-II liquefied natural gas facility, its 50 % stake in the Salym Petroleum Development and the Gydan energy venture. The British company also plans to terminate its involvement in the 11-billion-dollar gas pipeline project – Nord Stream 2 which is owned by Gazprom and runs from western Siberia to Germany, thus doubling the capacity of Russian gas directly to Germany. On the political front, Germany has also halted the energy infrastructure project.
In addition to this, the US-based natural gas company Exxonmobil has also declared to discontinue operations of the Sakhalin-1 project located in Russia. Comprising of three offshore fields – Chayvo, Odoptu, and Arkutun-Dagi, the project is operated by Exxonmobil (holds 30 % stake) on behalf of an international consortium of Japanese (Sakhalin Oil and Gas Development Company (Sodeco – 30 %), Indian (ONGC Videsh (20 %) and Russian companies (Rosneft (20 %). Measures are currently being undertaken to exit the project and stop new investments into the country.
The petroleum refining firm, Equinor from Norway will also make sure that it does no new business with Russia and has also begun the process of exiting Equinor’s joint ventures in the nation.
The International Energy Agency has released a 10-Point Plan on how European countries can reduce their reliance on Russian gas supplies by next winter.
Chemical companies are not far behind in this scenario, headquartered in Switzerland, the chemical company Clariant will also be suspending all of its business with Russia with immediate effect. The company has a sales office as well as a laboratory in Moscow which contributes approximately 2 % to the firm’s annual sales.
Solvay is another player in the chemical industry that has protested against the war in Ukraine and has terminated all its operations and new investments in Putin’s nation. Further, it will stop the dividend payments from Rusvinyl, an independent 50:50 joint venture in Russia.
Peace comes at a cost
This is just the beginning and more company announcements exiting business with Russian firms and suspending their operations in the country can be expected in the coming days. Some of the above companies have been operating in Russia since decades and are well aware that the move will significantly impact their business but peace comes at a cost and these firms seem ready to pay the price for it.