LAUNCESTON, Australia, Feb 28 (Reuters) – BP’s decision to shed its stake in oil giant Rosneft is the first high-profile example of companies self-sanctioning their business ties with Russia, a process that could to have significant short- and long-term consequences. long-term implications for energy markets.

BP’s dramatic exit from its 19.75% stake in Rosneft (ROSN.MM) could cost the London-listed oil major up to $25 billion, a high price to pay to be seen to be doing what it takes in response to the Russian invasion. from neighboring Ukraine.

“I was deeply shocked and saddened by the unfolding situation in Ukraine and my heart goes out to everyone involved. BP, Bernard Looney. Read more

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BP’s severance of three decades of ties with Russia is putting pressure on other Western oil majors to reconsider their business ties as well.

These include Shell (SHEL.L), which owns 27.5% of the Sakhalin-2 liquefied natural gas (LNG) plant on the Russian Pacific island of Sakhalin, and France’s TotalEnergies ( TTEF.PA), which holds a 19.4% stake in Novatek, a 20% stake in Yamal LNG and a 21.6% stake in the Arctic LNG 2 project.

If other Western companies seek to exit their Russian operations, the ramifications are likely to be significant.

The short-term implications are that these Western companies are unlikely to withdraw any more crude oil and LNG shipments from these operations.

This means that they will not buy, trade or transport the volumes they had in the past.

This does not necessarily mean that crude and LNG will not be sold or delivered, but it will make it harder for the Russian companies involved to market and sell cargoes that were previously taken by Western oil majors.

Add to that the removal of some Russian banks from the SWIFT international payment system, and trading Russian crude and LNG cargoes has become much trickier.

Never mind that Western sanctions against Russia, its President Vladimir Putin and his entourage, do not specifically target energy commodities, such as the majority of trading houses, refineries, utilities, shippers, banks and insurers. are likely to conclude that doing business with Russia under the current circumstances is too risky.

And even if companies try to continue to trade with Russia, the process is likely to be more complicated.

This means that export volumes are likely to be lower as it takes longer to arrange shipments, and in order to incentivize companies to continue doing business with Russia, the price of its crude and its LNG, as well as probably coal, will have to be significantly below the alternatives. Read more

STRUCTURAL CHANGES

The longer-term implications for Russia’s energy exports are also profound.

At first glance, it may seem virtually impossible for the world to get by without the country that produces 10% of the world’s crude oil and supplies 40% of Europe’s natural gas, and exports of energy of Russia fall to zero.

But over time, buyers will likely try to turn away from Russian supplies, especially those from Western countries.

Crude oil flows are likely to be adjusted over time, with countries ambivalent about Russia’s invasion of Ukraine, such as China and India, likely to buy more Russian oil, but only if the price is right.

The Russian LNG and pipeline may be more difficult to replace in the short to even medium term.

But Putin’s aggression likely served as a major wake-up call for European leaders, who will likely seek short-term solutions such as buying more LNG on the spot market, trying to boost domestic production of natural gas and even the postponement of the withdrawal of coal. thermal and nuclear generation.

Over time, greater investment in renewables and battery storage will help reduce dependence on Russian gas.

The fact is that Putin’s invasion probably started a process that will not be stopped, even if Russia stops its military actions in Ukraine, withdraws its troops and seeks some kind of diplomatic solution.

The changes taking place in Russia’s energy exports are likely structural and could see Moscow become increasingly dependent on a handful of major buyers who don’t mind dealing with an authoritarian and likely unstable regime.

GRAPHIC-BP exits its stake in Rosneft: https://tmsnrt.rs/3BUxzv3

The opinions expressed here are those of the author, columnist for Reuters.

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Editing by Stephen Coates

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