Correction, 21st September 2023: The below article has been amended following changes made in September by Kpler to its LNG trade data. Volumes of Russian LNG traded by Shell, the rank of Shell as a Russian LNG trader, the rank of Russia as a source of LNG Shell traded, and the destinations of Russian LNG traded by Shell have changed.
All calculations have been made by Global Witness based on data provided by Kpler, downloaded in September 2023. According to Kpler, its data draws from multiple sources, including seaborne commodity flows, and can employ an algorithm to assign probabilities that specific companies are related to specific shipments. This data is subject to change when more accurate information becomes available.
Asked by Global Witness to verify our calculations, Kpler declined to comment.
On 8 March 2022, the oil and gas giant Shell was embarrassed. The horror of Russia’s full-scale invasion of Ukraine was clear yet the company had been caught trading cheap Russian oil. Shell’s then-CEO Ben van Beurden said sorry and promised to stop dealing in all Russian hydrocarbons: no oil, no petroleum products, no gas.
There was a caveat, however. Oil spot market purchases would stop within weeks, van Beurden said, but there was no deadline for stopping gas. Shell claimed it couldn’t quickly cut off Russian gas because it needed to help Europe’s energy security.
One week later, the tanker Grand Mereya set off from Russia’s immense gas field Sakhalin, which Shell helped set up. The boat’s cargo – 140,000 cubic meters of liquified gas (LNG) – was not initially sold by Shell, nor was it the final buyer. Instead, the company made money along the way, buying and selling the gas before it reached its final destination.
And despite Shell’s justifications for sticking with Russian gas, the Grand Mereya was not destined for Europe. It ended up in China.
Russia’s LNG exports are helping to finance the country’s war in Ukraine and in 2022 were worth an estimated $21 billion. At the same time, Global Witness estimates that Shell has made hundreds of millions trading Russian LNG last year.
Yet despite the war crimes this trade helps finance, it is legal. Shell, the UK, and the EU should immediately halt it.
Shell declined to comment when presented with Global Witness’ findings. In a statement addressing Russian oil and gas on Shell’s website, last updated April 2023, the company said it had "stopped spot purchases of Russian LNG but still has some long-term contractual commitments."
Shell has been critical to Russia
Analysing records from commodity trade data firm Kpler, Global Witness identified each LNG shipment that left Russia between March and December 2022, after Russia’s full-scale invasion of Ukraine. For each shipment, there were multiple traders: original sellers, final buyers, and companies that bought and sold the gas while it was at sea, likely making a profit along the way.
According to our calculations, between March and December 2022 Shell was critical to the trade of Russian LNG, buying and selling 7 percent of all exports, 4.2 million cubic meters of the gas.
During this period, Shell ranked as the eighth largest trader of Russian LNG, although two of the companies that ranked higher – OAO Yamal and Sakhalin Energy – are Russian companies that likely also produced much of the gas that was traded. (Shell part-owns Sakhalin, although in March 2022 the company wrote off the project and believes the Kremlin has since transferred Sakhalin’s assets to a new company it does not own.)
And Russia has been critical to Shell
The evidence suggests this trade has contributed to not only the Kremlin’s coffers, but also Shell’s bank accounts. In 2022, the company’s made an estimated $5.4 billion gross margin from trading LNG and optimizing its LNG portfolio, according to the analyst firm Bernstein. This was a third of Shell’s total estimated 2022 revenue from all energy trades, and the company did much better in 2022 than the previous year, with overall revenues jumping 60 percent.
Global Witness estimates that several hundred million dollars of this revenue came from Shell’s trade in Russian LNG. Since the start of the war in Ukraine, 5 percent of the LNG Shell traded came from Russia. It could be assumed that 5 percent of Shell’s $5.4 billion in LNG gross margins – some $260 million – came from Russian trades. However, as the prices at which Shell bought or sold its LNG, including Russian LNG, are not available it is impossible to precisely tell just how much Shell made from Russian trades.
Between March and December 2022, Russia ranked sixth in the countries whose LNG Shell traded. However, four of the five countries from which Shell traded more LNG – Australia, Nigeria, Trinidad and Tobago, and Peru – are also countries in which Shell itself produces LNG. It is thus likely that much of the LNG traded from these countries was also produced by Shell. However, the data reviewed by Global Witness does not specify which company produced the traded gas.
In Russia, Shell also part-owns one of the companies – Sakhalin – that produces LNG it has traded. As above, however, in March of last year Shell wrote off its Sakhalin ownership and says that since then – during the war in Ukraine – it has no control over the Russian company.
An embarrassment of riches
This trade is, of course, legal. Companies are not barred from trading Russian gas and, unlike in the US, neither the EU nor the UK have banned imports of Russian gas. In the words of Shell’s former CEO, dealing with Russia presents “a dilemma.” The company needs to balance “pressure on the Russian government over its atrocities in Ukraine and ensuring stable, secure energy supplies across Europe.”
There is no dilemma. Russia’s invasion of Ukraine and the atrocities that Russian forces have committed have been funded by the sale of Russian fossil fuels. Global Witness believes that there can be no justification for companies to buy, or for countries to import, Russian oil or gas, including LNG.
However, to the extent that Shell justifies its trade as helping keep the lights on, has the company sent its Russian gas to Europe? No. Since the start of the war, none of the Russian LNG Shell traded was sent to Europe, going to the Middle East and Asia instead.
Shell should be embarrassed by its Russian gas trade and should immediately stop. Only last month, as Russian forces flattened the city of Bakhmut, the company bought and sold nearly 170,000 cubic meters of Russian gas carried by the Nikolay Zubov tanker.
The UK and EU member states must act. Governments should cut off demand to Russian gas, including LNG, banning imports and the trade by companies based in their jurisdictions. And companies should be prevented from profiting from the war. All profits and dividends received by these companies since the start of the war from Russian operations should be subject to a 100 percent tax.
A trader is defined as a company listed by Kepler as any buyer or seller of an LNG shipment, including original sellers, final buyers, and any intermediary sellers and buyers. All trade types listed by Kpler are included: spot, flexible, contract, tender, and portfolio trades. Traders exclude charterers or owners of vessels transporting LNG, as these companies argue they are not responsible for the sale or purchase of their cargos.
Total 2022 Shell LNG revenue calculations are based on gross margin estimates provided by Bernstein. These include the money Shell made from trading LNG and the money it made from “optimizing” its LNG trades, or altering how it trades the gas. Estimates of revenues Shell obtained from trading Russian LNG are made by Global Witness.