What happened at Shell when Russia invaded Ukraine? Mikel van Beek reveals how the energy giant balanced the demands of supply, stakeholders and public opinion
Mikel van Beek
The IR Magazine Awards nomination process encourages sharing of best practices, including those around crisis management. For Shell, the invasion of Ukraine constitutes such a crisis event, requiring swift and decisive action impacting many different stakeholders, including our investors.
First and foremost, the appalling war in Ukraine is a humanitarian disaster that has disrupted and destroyed many lives. It is immensely tough for our Shell colleagues in Ukraine and the region. In the escalating war situation, Shell needed to balance meeting public pressure to immediately exit Russia with ensuring continuity of energy supplies to Europe, including Ukraine, and implementing appropriate sanctions in a fast-changing environment.
Ensuring that essential products that people and businesses rely on every day, like fuel and gas for home heating and feedstock – such as naphtha – for other industries are available, while adhering to the increasing expectations of shareholders and other stakeholders to withdraw from Russian-linked activities required careful balancing.
The company’s decisive response to the crisis came without waiting for a comprehensive analysis of the longer-term business implications and came out very soon after the start of the war. Together with the Shell board, the CEO, CFO, IR and media team worked to formulate responses to the fast-changing crisis. Activity was co-ordinated by a cross-functional crisis team, which included the executive vice president of investor relations.
Shell announced its intent to exit from Gazprom-linked partnerships, even when all the consequences (and therefore answers to questions) were not fully clear. When two crude cargos were purchased from Russia with the intent of maintaining European energy security, but public opinion was expecting additional restraints over and above sanctions, Shell reacted to public opinion: we published an apology and communicated further constraints on dealing with hydrocarbons from Russia. The FAQ section on the Shell website was updated as soon as new information was available, to keep stakeholders informed.
Shell’s IR department, together with our media team and the C-suite have developed an effective, interactive communication strategy, using the full range of IR communications – press releases, website, analyst and media connections – to keep stakeholders informed in a challenging and fast-changing environment. As part of the first-quarter 2022 results announcement, this decisive action was captured in the results materials (including the presentation) with a detailed overview of the accounting impact for each of the different ventures clarified in a separate note to the quarterly results announcement.
Providing the transparency helped to focus the quarterly results call with sell-side analysts on other business, including new disclosures for our renewable & energy solution and marketing segments. To date, the implemented interactive communication strategy has been reflected in stable investor response, despite the ongoing war in Ukraine.
A Shell service station in Ukraine
Mikel van Beek is IR manager for Shell
On March 8, 2022, Shell announced its intention to withdraw from its involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas (LNG) in a phased manner, aligned with new government guidance. As an immediate first step, the company stopped all spot-purchases of Russian crude oil.
This followed Shell’s earlier announcement when it confirmed its intent to exit its joint ventures with Gazprom and related entities, including its 27.5 percent stake in the Sakhalin-2 LNG facility, our 50 percent stake in the Salym Petroleum Development and the Gydan energy venture. We also intend to end our involvement in the Nord Stream 2 pipeline project.
In May, Shell sold Shell Neft, its retail stations and lubricants business in Russia, to LUKOIL and transferred its share in Gydan to Gazprom Neft. Gydan has no production and has yet to make a commercial discovery.
