Shell heads for more Russian exits says Susannah Streeter

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:

‘’Shell’s apology for buying Russian oil shows just how strong the winds of change are blowing through the corporate world. After coming under huge criticism over the weekend for snapping up a shipment of Russian crude at a bargain price, the company is putting reputation before immediate profits and severing more ties with the country. It’s vowed to immediately cease the purchase of further spot crude, will stop aviation fuel and lubricant operations and also close down its network of services stations.

But unwinding Shell’s tentacles from the economy is set to be a complex affair and in making this announcement, Shell has also warned that exiting Russia’s energy sector will be hugely challenging, requiring concerted government action to ensure stable and secure supplies across Europe. As worries about the squeeze in supply of oil continue, the elevated price of crude should keep Shell on the path of slicing big chunks off net debt and fund capital expenditure in new gas field expansion and into low carbon alternatives like hydrogen.

With European governments looking even more determined to help support the green transition with plans reported to be afoot for a capital raise on the bond markets, Shell should be well positioned to capitalise on this direction of travel. Whatever happens, Shell is still set to remain an oil and gas giant for decades, but by taking this stance and exiting the Russian markets with a continued focus on renewables, it should help reduce the risk of the company ending up in the ethical waste bin. However, there will be pressure on Shell to keep up a concerted effort to fully open the sustainable pipeline.’’

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