Exiting Russia Costs Majors Oil Companies Billions
A combination of international sanctions, shipping issues, and public pressure has resulted in the closure of major oil industries and the cancellation of long-term investment plans.
Oil companies in the West had to pay billions of dollars in fines for abandoning their Russian assets. Still, the incredible rise in commodity prices that followed the invasion of Ukraine has more than compensated for those losses, according to financial documents.
In the first quarter, BP disclosed a $25.5 billion charge on Tuesday for relinquishing its 19.8 percent share in Rosneft, Russia's state-owned oil and gas business. There was a $20.4 billion shortfall. However, the British corporation's net profit soared to $6.2 billion, thanks to "extraordinary" oil and gas trading, which the company referred to as "exceptional" profits. More than twice as much money as it made in the same period in 2021, which is a 51% increase. A share purchase program worth $2.5 billion was also announced.
After temporarily hitting $130 a barrel immediately after the war began, oil prices held around $100 a barrel. Crude oil prices in London were at $106 per barrel on Tuesday, while West Texas Intermediate crude in the United States was trading at around $104 per barrel. Brent crude is the worldwide standard. According to AAA, the rapid rise in costs immediately reached consumers: according AAA, the average price of a gallon of gasoline in the United States on Tuesday was $4.20. That's an increase of $1.30 over last year.
According to a widely-read list compiled by Yale University, BP is one of more than 850 Western firms that severed connections with Russia in the wake of Russia's unwarranted attack on Ukraine. A combination of international sanctions, shipping difficulties, and public pressure has led to the closure of industries and the axing of long-planned investment plans.
Exodus expenses are becoming more apparent as the first quarter's financial results are released. To explain the $183 million charge following the suspension of sales in the nation, Honeywell CEO Darius Adamczyk told investors on Friday. Honeywell is a multi-billion dollar industrial conglomerate that manufactures everything from home appliances to chemicals and airplane components. A $200 million charge was made when the company suspended operations there, while Adidas told Reuters the fight might put its business at risk of up to $271 million in damages. As a fraction of their market value, the billion-dollar write-downs disclosed by oil corporations are very insignificant.
With a market worth of over $200 billion, Shell projected in an April 7 Securities and Exchange Commission filing that it would incur losses of $4 billion to $5 billion if it left Russia. Russia's Northern Gydan peninsula is home to the Arctic LNG 2 pipeline, built by French energy firm TotalEnergies for $4.1 billion. According to TotalEnergies, natural gas exports through the pipeline will commence in 2023.
Earlier this week, ExxonMobil disclosed a $3.4 billion charge related to its decision to shut down activities on Sakhalin island, off Russia's southern coast and north of Japan. Darren Woods, CEO of the company, stated on a conference call with investors that Sakhalin operations accounted for barely 2% of overall output last year. According to Reuters, an emergency contract clause that allows a party to escape accountability in the event of an inevitable calamity was used by the Houston-based oil business in late April.
The British oil giant, which had a greater holding in Rosneft than any competitors, sold its shares on February 27.
In a business statement, BP said it was ending a three-decade partnership. According to board chair Helge Lund, a "fundamental shift" has occurred in the board's relationship with Rosneft as a result of the attack on Ukraine.
On Tuesday, the business issued a cautionary statement to investors on the unpredictability of oil prices and the impact of the conflict on economic growth.