Shell to buy Russian oil blend ‘Latvian’ to circumvent sanctions; stares at $5 billion loss

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Frontier India News Network
Frontier India News Network
Frontier India News Network is the in-house news collection and distribution agency.

British-Dutch Shell has made adjustments to its contracts to buy oil from Russia. Bloomberg reports that, as per the contracts available, Shell will buy Russian oil if it is at least half mixed with oil from another country.

“In the case of Shell, the company made changes to the so-called general terms and conditions of its contracts to allow Russian blending … The point is to sell a barrel of which only 49.99% is produced in Russia. According to Shell, since the rest 50.01% comes from other sources, the oil cargo is technically not of Russian origin,” the news agency writes.

Bloomberg writes that the sale of such a mixture is perfectly legal since Europe has not applied any restrictions or penalties on purchasing Russian oil. In addition, the newspaper writes that blending is a convenient tool for companies to say one thing and do another publicly.

According to Bloomberg, traders refer to this mix as “Latvian” because the mix takes place in the Latvian port of Ventspils. Traders talked about “Malaysian” or “Singaporean” blends during the Venezuelan oil export ban.

Shell estimates losses of $ 5 billion due to its withdrawal from Russia

The British oil giant Shell warned on 7th March that the withdrawal of its activities from Russia after the invasion of Ukraine would lead to a devaluation of assets and expenses worth 4 to 5 billion dollars in its results for the first quarter, which will be published on 5th May.  

In February, Shell announced its decision to withdraw from joint ventures with Gazprom and Gazprom Neft, including Sakhalin-2, Yenisei and Salym Petroleum, and cease participation in the Nord Stream 2 project. In March, the company announced that it intends to refuse participation in all Russian hydrocarbon projects and stop spot purchases of oil from the Russian Federation. 

Shell has not renewed its longer-term contracts for Russian oil, but the group is legally obliged to receive oil purchased under contracts signed before Russia invaded Ukraine, the company said in a statement. The group announced in late February that it was splitting its stake in many projects of Russian gas giant Gazprom. These assets are valued at $ 3 billion by the end of 2021 and were the source of adjusted earnings of $ 700 million last year. Shell said in early March that it was gradually withdrawing from Russian oil and gas to comply with new British government directives. 

The company was forced to apologize for buying a shipment of Russian oil at a lower price. Shell explained that it would stop all purchases of Russian oil on the spot market and close its gas stations in Russia and the activities of supplying aviation with fuel and lubricants in the country. The British government, which is less dependent on Russian liquid fossil fuels than other European countries, has said it will stop importing Russian oil by the end of the year and wants to stop importing gas over time. 

This week, the U.K. announced the cessation of imports of Russian coal by the end of the year, which the European Union also intends to do. Shell published good results for 2021 in early February, due to the economic recovery and the jump in prices of liquid fossil fuels, with a net profit of $ 20.1 billion. 

After moving its headquarters from the Netherlands to the U.K., the group is already British. In 2020, it suffered a historic loss of $ 21.7 billion in the midst of the health crisis. At the end of February, its British rival BP announced the end of its ties with the Russian giant Rosneft, in which it held 19.75 per cent (worth $ 14 billion by the end of 2021). It will also be reflected as an expense in the report for its first quarter.


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