BP, Shell tighten up on their Russian oil restrictions

Market: Oil products
27/04/22

BP and Shell have tightened up their self-imposed restrictions on purchases of Russian-origin oil products.

The companies showcased their tougher policies today through bids on a trading platform to book jet fuel cargoes. In a bid for a 2,000-4000t jet fuel barge, BP stipulated a condition "that the goods shall not be, in whole or in part, produced" in Russia. Shell had a similar clause in a bid for a 27,000t jet fuel cargo.

"It is a condition of this bid that the goods sold and delivered by [the] seller will not be of [Russian Federation] RF origin, nor have blended with any product that was produced in RF, nor will the transport of the goods sold commence from or involve transit through RF," Shell said.

The clauses mark a tightening of restrictions imposed by the two companies in response to the war in Ukraine. BP previously operated a more relaxed policy in which it refused to conduct oil trades involving a Russian company, ship or port, but up until now it made no specific stipulations on the origin of the oil.

Meanwhile, Shell's previous position was to avoid buying oil products of Russian origin and products loaded or transported through Russia. But the firm defined Russian origin as either wholly produced in Russia or at least 50pc produced in Russia, meaning that it would accept up to 49pc Russian blend products.

The new clauses bring Shell and BP in line with the position adopted last month by their peer TotalEnergies. "We are working to phase out Russian oil and gas from our supply chain while protecting the energy and fuel supplies that millions of people rely on every day," Shell told Argus today. "We are making good progress and have taken a further step to tighten our trading terms to help achieve this."

Transparency problems

The new restrictions may prove challenging to implement on all transactions though, as it can be difficult to obtain full transparency on all the components that enter an oil product blend. Shell may also have to make isolated exceptions in order to meet supply commitments in Europe.

Russia does not export much jet fuel to European markets, but Shell and BP have previously implemented the same buying restrictions across all trades, and it is possible that they will mirror the new jet fuel restrictions across other oil products — including Russian diesel, which Europe relies heavily on.

Both companies have been taking steps to distance themselves from Russia since the war in Ukraine began. On 8 March, Shell announced it would end its involvement "in all Russian hydrocarbons" in a phased manner, starting with an immediate halt to spot purchases of Russian crude. It came after the company received a backlash for buying a Urals crude cargo from trading firm Trafigura on 4 March. BP is understood to have stopped new oil contracts with Russian entities in early March. It is also exiting its 19.75pc shareholding in Russian oil giant Rosneft.

EU sanctions against Moscow have yet to target Russian oil imports directly, although a bloc-wide ban is under consideration and some European countries are pledging to phase out imports by the end of the year. In the meantime, self-imposed embargoes and uncertainty over pending EU legislation have seen a spate of Europe-based firms pull back from Russian oil trade.

By Benedict George, Bea O'Kelly, Jon Mainwaring and Ruxandra Iordache

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Carbon intensity reg pivotal to biobunkers in 2025

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