Shell to Close Russia Lubes


Shell to Close Russia Lubes
Tank storage at Shell's lubricant plant in Torzhok, Russia, which will be shut down. © Boris Kamchev

Shell announced today that it will close its finished lubricant manufacturing plant in Torzhok, Russia, and shut down its lubricants business in the country as part of a full withdrawal from Russian hydrocarbon industries.

The moves ratchets the energy giant’s response to Russia’s invasion of Ukraine are meant to comply with the United Kingdom’s campaign of leveling economic penalties against the government of Russian President Vladimir Putin.

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A Shell spokesperson confirmed that the Torzhok lubricant plant is halting operations. The spokesperson did not say if the halt was intended to be permanent, but a news release said the company is withdrawing from all Russian hydrocarbons, including petroleum products.

Last week Shell said it would exit several joint ventures with Russian energy giant Gazprom – mostly upstream activities – along with the Nord Stream II pipeline joint venture. In the downstream sector, besides the Torzhok closure, Shell announced closure of its 400 fuel filling stations, primarily located in Moscow and St. Petersburg, according to RBC daily.

Shell’s announcement did not discuss steps that it will take to exit Russia downstream markets but indicate that it plans to act quickly. Regarding service stations, aviation fuels and lubricant operations, the company said, “We will consider very carefully the safest way to do this, but the process will start immediately.”

Today’s announcement also said the company will quickly cease purchases of Russian crude oil.

The financial implications of halting its lube operations in Russia might pale compared to the other actions, but it is still significant for a lubricant business that is the world’s largest and that has made significant investments in Russia the past decade and longer.

Located 240 kilometers northwest of Moscow, the Torzhok factory opened in 2013 and has capacity to make Shell’s 180,000 t/y of finished lubes. Last year, the company decided to expand the facility to 270,000 t/y in response to strong sales in Russia and the surrounding region. That project carried a price tag of 6 billion rubles (U.S. $84 million in September) and was scheduled to be completed in 2023.

The plant is one of the largest lube blending facilities in the region and one of a handful of large plants that Shell operates around the world.

Shell officials acknowledged that the actions it announced could have significant impacts on its customers as well as its own business but said the company bought into making sacrifices in order to penalize Russia.

“These societal challenges highlight the dilemma between putting pressure on the Russian government over its atrocities in Ukraine and ensuring stable, secure energy supplies across Europe,” van Beurden said. “But ultimately, it is for governments to decide on the incredibly difficult trade-offs that must be made during the war in Ukraine. We will continue to work with them to help manage the potential impacts on the security of energy supplies, particularly in Europe.”

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