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European energy companies BP, Shell, and Equinor each said this
week that they plan to divest from Russian joint ventures, a blow
to not only Russian oil production but also early-stage cleantech
plans.
Equinor and BP planned to work with Russian state-owned energy
company Rosneft to produce oil and gas while slashing carbon at
projects, alongside exploring renewable energy, capture,
utilization, and storage (CCUS), and hydrogen potential, but both
companies said they would sell their shares in joint ventures with
Rosneft at the start of the week.
Rosneft said in a statement that BP's move "destroys the
successful 30-year cooperation" between the two companies.
Norway's state-owned energy company Equinor announced 28 February it would
"start the process of exiting its Russian joint ventures." The
company's move aligns with the intentions of the Norwegian
government, which announced plans to send
military equipment and up to NOK 2 billion ($220 million) in aid to
Ukraine on 27 February.
Meanwhile, Shell on 28 February announced it will divest from
the Nord Stream 2 pipeline development company controlled by
Russia's Gazprom, the state-owned natural gas producer which has
had legal disputes with Ukraine regarding its pipelines.
Finally, France's TotalEnergies, which jointly with Gazprom
develops oil and gas projects in Russia and around the world, said on 1 March it will not
finance new Russian projects, and Danish renewables developer
Ørsted is cutting Russian companies from supply deals.
Equinor ends carbon management deal
Rosneft and Equinor, which collaborate on two Russian
oil-producing joint ventures, have been strategic partners since
2012.
The companies set up a joint venture to produce oil in the
Severo-Komsomolskoe field in 2017, producing its first million tons
of oil and condensate last year, and another to hold the wider
Danilovsky region production license in 2020.
The pair targeted emissions reductions at their joint production
projects under a cooperation agreement on carbon management
last year.
Through that deal, Equinor and Rosneft agreed to cooperate on
emissions management, possibly by deploying methane emissions
detection equipment and avoiding routine flaring by 2030, at the
projects.
The companies were in the early stages of the agreement on
limiting methane. They also planned to develop low-carbon design
standards for their upstream projects, but these greening projects
will not go ahead for now.
"The cooperation was initiated, but as we have indicated our
exit in Russia, everything will be dissolved in that sense over
this process," Ola Morten Aanestad, press spokesperson for
Equinor's international upstream business, told Net-Zero
Business Daily by S&P Global Commodities Insights
As part of the agreement, the companies had planned to
investigate cooperation on wind power, CCUS, and green and blue
hydrogen businesses.
BP-Rosneft progressed on sustainability
Similarly motivated by Russian "aggression," BP intends to exit
its businesses with Rosneft within Russia, sell its 19.75% stake in
Rosneft acquired in 2013, and two BP directors have left Rosneft's
board.
BP and Rosneft launched a joint carbon management agreement in 2021 at Rosneft's
Russian oil and gas projects.
Through the deal, they "agreed to cooperate in identifying and
developing new low carbon solutions and programs that will support
their shared sustainability goals." They also had intended to
develop methane reduction initiatives. That year, Rosneft said it became the first
Russian oil and gas company to present a comprehensive carbon
management plan with clear targets to cut GHG emissions.
BP's recent results presentation outlined
how Rosneft had "made significant progress" towards sustainability
by including interim targets on absolute emissions, methane, and
flaring. For example, Rosneft's board, which included BP's CEO
Bernard Looney and former CEO Bob Dudley until this week, had
approved a new 2030 strategy with a target to be net-zero by 2050
for Scope 1 and 2 operational emissions.
Although Rosneft had published a plan to reduce the emissions
intensity of its upstream operations by 30%, the page with the plan appears to
have been removed from its website.
BP and Rosneft's three Russian joint ventures are worth around
$1.4 billion, including the 2016 Yermak Neftegaz joint venture
exploring hydrocarbon resources in West Siberia, the 2016
Taas-Yuryakh joint venture in Eastern Siberia and a new joint
venture in the Kharampur project.
Outside of Russia, the two companies both entered into the
Shourouk concession that operates the Egyptian Zohr gas field in
2017.
Ørsted divests from Russian renewables, biomass, coal
In turn, Danish offshore wind power giant and utility Ørsted
rapped Russian renewable energy sector suppliers.
The company, widely known for offshore wind development,
operates biomass power stations across Northern Europe, but it
announced it was withdrawing Russian biomass and coal from its
supply contracts.
It also pledged not to use "direct" Russian suppliers for
renewable energy construction and to pause entering into new
contracts with Russian companies.
Ørsted had vowed to decarbonize by replacing coal with biomass
in its power plants by 2023. Accordingly, it has increased its
bioenergy production 55% between 2020 and 2021.
While Ørsted had not been sourcing biomass directly from Russia
to fuel this growth, some of its suppliers provide it with Russian
wood pellets, making up about 5% of all the wood pellets the
company buys.
Ørsted confirmed that ending its Russian-origin supply deals is
not expected to impact the timeline for switching all of coal power
to biomass.
This year, it will complete its pre-existing phase-out of coal
that will divest not just from Russian coal, but all coal. "As we
have decided not to buy coal from Russia anymore, the next supplies
will be from South Africa," Carsten Birkeland Kjær, group
communication manager at Ørsted told Net-Zero Business
Daily.
Potential shortages of natural gas from Russia are nonetheless a
concern for Ørsted's CEO Mads Nipper, seeing as prices have risen since
the start of the invasion. "Shortfalls in gas supplies will, as
opposed to stopping the supply of other types of products, have
severe human and societal consequences and therefore need to be
coordinated at EU and national levels rather than decided by
individual companies," said Nipper in a statement.
Ørsted uses natural gas to power some
of its combined heat and power plants in Denmark.
Shell to split from Gazprom's Nord Stream 2
Shell plans to "exit" joint ventures with Gazprom in which the
company had invested about $3 billion.
"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 particular, Shell is selling its 27.5% stake in LNG
liquefaction terminal Sakhalin-II, which started operations in
2009, as well as its 50% stake in the Salym Petroleum company,
which has a license to produce hydrocarbons in Siberia.
Shell also pledged to sell its stake in the joint project
company that owns German-Russian Nord Stream 2 gas pipeline, in
which Gazprom owns a controlling 51% stake. Nord Stream 2 has been
a focal point for Ukraine-Russia disputes, partly because Russia
may choose to use the pipeline to export more of its gas via
Germany, depriving Ukraine of its transit fee income.
Other European companies with an interest in the pipeline include two large European
power and natural gas utilities, Engie and E.ON, German chemical
company BASF, and Austrian oil and gas company OMV.
Posted 01 March 2022 by Cristina Brooks, Senior Journalist, Climate and Sustainability