Norwegian energy group Equinor has completed its exit from Russia, Reuters reports. The company promised to leave the Russian market on February 28, 2022. Now, six months later, the company has fulfilled the promise, marking the first complete, orderly exit from Russia by an international oil and gas company. However, there are still plenty of international companies staying in Russia. Some of them have declared moving towards the exit, but are still not there for various reasons and faced a sharp rise in dividends from Russian ventures as oil and gas prices surge around the world. These include TotalEnergies, Shell, and ExxonMobil.
Shell announced its intent to withdraw from its involvement in all Russian projects on March 8, 2022. But the company has not left the Russian market - until it was rather forced to do it. It was still in Russia to receive $165 million in dividends in the second quarter related to its 27.5% stake in Sakhalin-2. Only in early August, the supermajor lost control of its other Russian venture, Salym Petroleum Development which operates a group of Salym oil fields in West Siberia. Shell had held a 50% stake in the venture before its assets were expropriated and passed to a new operator, in accordance with a recent Moscow arbitration court ruling. Now a similar story is happening with Shell’s joint project Sakhalin-2. The Kremlin transferred it from a Bermuda-based operator to the one in Russia. Shell declined taking stake in a new operator and walked away from the Sakhalin-2 project taking a hit and facing a threat that their share will be sold. However, the company still claims its rights on Sakhalin-2. “We have notified the Russian Federal Government and our partners in Sakhalin Energy Investment Company Ltd (SEIC) that we will not take equity in the new LLC and that we reserve all our legal rights,” the spokesperson said.
Another energy multinational still operating in Russia is US supermajor ExxonMobil. The company tried to exit a joint venture in Russia called Sakhalin-1, but a new decree by the Russian government forbids investors from “unfriendly” countries from selling their Russian assets. The company is now ready to sue the Russian government.
Both cases indicate that Putin will allow international energy companies neither to be free to do whatever they deem necessary with their assets, nor to realize financial gains as they exit Russia over war.
Meanwhile, one of the last energy giants to declare and at least start leaving Russia has been French TotalEnergies. And this is a story of reputational risk facing companies that have maintained ties with Russia despite Russian atrocities in Ukraine. After the publication of the Global Witness investigation and following backlash over controversial activities, TotalEnergies finally announced plans to sell its stake in a Siberian gas field to local partner Novatek (19.4% of which is also owned by TotalEnergies). However, it is only one in a range of Total’s multibillion-euro investments in Russia, including stakes in the Yamal LNG and Arctic LNG 2 projects (though, the firm says it has no operational role in those projects).
There is also another controversy around the Total’s Russian business now. According to the media reports, TotalEnergies is due to receive 440 million euro dividends from Novatek. The problem is - they were earned thanks to soaring energy prices during Russia’s war on Ukraine. In the first half of 2021, the overall amount of dividends paid by Novatek was close to 1 billion euros (84 billion roubles, exchange rate as of October 1, 2021). This year’s first six months resulted in over 2.2 billion euros of overall dividends from Novatek (136 billion roubles), with Total receiving 440 million euros.
Russia’s unjust, bloody and devastating war on Ukraine literally helped Total to double its dividends from Novatek due to a two-times-increase in the company’s profits. And increased profits means more money for the Russian budget via taxes. The same budget that is used to finance the war in Ukraine.