IOCs Divest From Russian Oil & Gas

Two major IOCs have divested their considerable holdings and commitments in Russian oil and gas companies as a direct response to Russia’s movements in Ukraine, according to top executives. 

Supermajor BP, which has a significant Mexican presence, initiated the first of these separations. The company announced over the weekend that it would abandon its participation in Russian NOC Rosneft, equivalent in stock holdings to 19.75 percent of the Russian company. BP’s involvement in Rosneft was originally acquired in 2013. Due to this considerable participation, BP CEO Bernard Looney has also been a member of Rosfnet’s board throughout this time. He has now resigned this position “effective immediately,” according to a press release.

Additionally, Robert Dudley, former BP CEO also resigned from the Russian company’s executive board. He was the only candidate BP nominated to become Rosneft director. “Russia’s attack on Ukraine is an act of aggression that is having tragic consequences across the region. BP has operated in Russia for over 30 years, working with brilliant Russian colleagues. However, this military action represents a fundamental change. It has led the BP board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue,” said Helge Lund, Chair, BP, as part of the announcement.

Looney added that he was deeply shocked and saddened by the situation unfolding in Ukraine. “My heart goes out to everyone affected. It has caused us to fundamentally rethink BP's position with Rosneft.” According to analysis by Reuters, Rosneft accounts for around half of BP's oil and gas reserves and a third of its production, so its exit could represent as much as US$25 billion.

BP’s announcement was followed by Norway’s Equinor on Monday, which claimed that its board of directors “has decided to stop new investments in Russia and to start the process of exiting Equinor’s Russian joint ventures.” Anders Opedal, President and CEO, Equinor, said that the company is “deeply troubled by the invasion of Ukraine, which represents a terrible setback for the world … In the current situation, we regard our position as untenable.” 

Equinor entered into a cooperation agreement with Rosneft in 2012. The company has participated in the Russian oil and gas sector since the post-soviet reconsolidation of the current Russian Federation over 30 years ago. Equinor’s Russian assets totaled US$1.2 billion by the end of 2021, so this divestment is expected to be a lengthy and complicated process.

The Norwegian oil company confirmed it is leaving the Mexican market in August 2021, after it deemed its deepwater Areas 1 and 3 commercially unviable. Both BP and Equinor’s actions highlight the possible future moves that could be made by other major IOCs that invested heavily in the Russian oil and gas environment, which include Total and Shell.