The oil industry, including companies BP, Shell, and TotalEnergies, was the industry that suffered the greatest financial losses from leaving Russia, an analysis by the Financial Times has revealed.
Out of total losses of some 100 billion euro, or some $110 billion, the losses incurred by Big Oil majors account for about 40%. Next were utilities, which account for over 15% of the total losses.
BP last year booked an impairment cost of $24 billion on its Russian business after it left the country. The supermajor had a minority stake in Rosneft. The 19.75% interest accounted for around 50% of BP’s total oil and gas reserves and a third of its oil and gas production.
Shell reported a writedown of $5 billion on its exit from Russia last year but said that would not affect its oil and gas profits. It was one of the first companies to declare it would leave Russia after the Ukraine invasion.
TotalEnergies, on the other hand, was slow to exit. The French supermajor had a stake in an LNG project led by Novatek and, in late 2022, Total said it would drop it and leave, taking an impairment of $3.7 billion since it could not sell it back to Novatek because of the Western sanctions on Russia.
Earlier in the year, TotalEnergies said it would incur an impairment of some $4.1 billion on its exit from Russia, to be booked in its first-quarter 2022 report. The biggest portion of that impairment came from the Arctic LNG 2 project of Novatek and the reduction in gas reserves TotalEnergies had to book with its pullout. According to FT calculations, TotalEnergies’ total cost of leaving Russia came in at $14.8 billion.
Yet these were only the direct hits to the supermajors. The Financial Times studied their more recent financial reports to calculate the losses, meaning those impairment charges were just the start. The calculations also did not include the surge in oil and gas prices last year.
That surge certainly benefited oil and gas companies, somewhat cushioning the blow for BP, Shell, and TotalEnergies, but at the same time, it delivered a blow to all other companies that had already booked billions in losses from their pullout from Russia.
Meanwhile, BP, Shell, and Total booked the biggest individual writedowns on their Russian operations when they left because of the size of their exposure to the local oil and gas industry. Yet higher oil and gas prices more than made up for those impairments as the three booked a combined 95 billion euro in profits, equal to some $104 billion and more than twice as high as the combined impairment costs of around $40 billion.