Shell flags industry hurdles to blocking all Russian imports into EU

The EU's plans to ban imports of Russian oil into the trade bloc by year-end could be diluted in their impact due to the processing or blending of Russian crude and oil products outside the region, Shell's CEO Ben van Beurden said May 5.

Question marks hang over how much Russian oil will find its way into Europe as it is very hard to trace what exactly is and isn't Russian-origin oil once it has been processed.

Van Beurden acknowledged that once a refinery processes Russian crude, the resulting oil products will find their way into global supplies of diesel, jet, and other fuels and it was impossible to tell where the crude originated.

"At that point in time, we do not have systems in the world to trace back whether that particular molecule originated from a geological formation in Russia...that doesn't exist," he told reporters on a quarterly earnings call.

Sanctions on Russian oil also assume that oil products lose their origin status once they are "substantially treated, reformed, or changed", he said.

The EU said May 4 it plans to phase out imports of Russian oil into the trade bloc by year-end have set the stage for a major upheaval in global oil trade.

If approved by all EU member states, the proposal would hit some Russian crude imports of 2.3 million b/d within six months, excluding a possible extension for 200,000 b/d to Hungary and Slovakia. Another 1.2 million b/d of refined product imports would cease by end-2022, while 700,000 b/d of total oil exports to the US have already halted and 200,000 b/d to the UK will wind down by the end of the year, according to S&P Global Commodity Insights.

"I would imagine, on the whole, we are well ahead of any sanctions that will come out on this," Van Beurden said.

Oil blending

Shell in the week ended April 30 tightened its requirement for buying non-Russian oil products in Europe in a move set to close a loophole that allowed the company to acquire cargoes of Russian fuels blended with non-Russian alternatives.

Shell Trading Rotterdam offered to buy a jet fuel cargo in Northwest Europe on April 27 on the condition that the seller was not of Russian origin or that it had been blended with any product that was produced in Russia.

Shell had previously been buying European diesel cargoes on the condition that less than 50% of the content by volume is sourced from Russia and had not been loaded in or transported from a Russian port.

The move follows a pledge by the Netherlands, home to key refineries and the Amsterdam-Rotterdam-Antwerp trading and storage hub, to be independent of Russian imports of oil, gas and coal by the end of the year.

Since February, diesel exports to the Netherlands have jumped more than eightfold by April 20 to more than 108,000 b/d, according to data from importing more Russian diesel to the Netherlands to blend it with other diesel supplies.

Van Beurden denied, however, that Shell has been buying Russian oil with the purpose of blending it and turning into non-Russian-origin oil.