TotalEnergies continues to withdraw from Russia

Posted on December 9, 2022 at 11:50 amUpdated December 9, 2022 at 12:02 p.m

The withdrawal of TotalEnergies from Russia is nearing completion. The company announced on Friday that it has recalled two representatives from the board of directors of Russian gas company Novatek, in which it owns 19.4%. “Given the agreements in force between the shareholders, he cannot sell it, because it is forbidden to sell his assets to one of the main shareholders of Novatek due to the sanctions against him,” the press release states.

TotalEnergies notes that the managers are no longer able to influence Novatek’s strategy, and therefore it is more appropriate to withdraw them and consolidate their participation in the group’s accounts. This will cause a $3.7 billion impairment in fourth quarter results.

Still an LNG contract

This depreciation is in addition to the previous ones announced since the beginning of the year. The group reported $3.7 billion in impairments and charges in the second quarter, then $3.1 billion in the third quarter. In total, these sums ($14.4 billion) more or less correspond to the value of TotalEnergies’ capital invested in Russia ($13.7 billion) before the war began.

According to the company, the exit plan is therefore nearing completion, and the only two remaining stakes are Novatek (19.4%) and a stake in the Yamal LNG gas project (up to 20%), which it cannot currently resell. . This participation in the Yamal Arctic project in Siberia provides one-fifth of the quantities produced under a long-term contract that still covers 21 years.

Patrick Pouyanné, CEO of TotalEnergies, has repeatedly confirmed that he is not backing down from securing vital liquefied natural gas supplies to Europe. The company says it is ready to respect the new sanctions once Europe knows how Russia will behave without LNG. “It is the European authorities who have asked us to continue supplying European consumers, because they will not be able to do without it, probably until the winter of 2023. In addition, in the absence of official European sanctions, it has unilaterally denounced our long-term gas contracts. Russia will force us to pay a fine of 40-50 billion,” he admitted to Ouest-France in June.

On the oil side, TotalEnergies’ contracts in Russia expire on December 31 and will not be renewed. At the beginning of the year, the group announced that it would no longer buy Russian oil on the spot market and that the European embargo, which came into force on December 5, had “no effect”.

Earlier this year, TotalEnergies sold a 49% stake in the TerNefteGaz gas field (to same partner Novatek) and a 20% stake in the Kharyaga oil project to Russian public company Zarubezhneft.

Impact on reserves

Some oil companies have chosen to exit their assets in Russia. But sometimes they are overtaken by the reality on the ground. Thus, BP, which stated that it wanted to leave Rosneft at the end of February, has not yet done so. The British group, which has been accused of taking dividends and being pressured by parliamentarians, has denied receiving any payments and admitted the sale process was “complicated”. According to the results of the third quarter, BP, which spent 24 billion dollars on its accounts at the beginning of the year, announced that it could not sell Rosneft’s shares on the Moscow Stock Exchange.

For TotalEnergies, leaving Russia did not have a strong financial impact. It was only 3-5% of the country’s income. But the results at the level of its reserves are important. Russia accounts for almost 17% of hydrocarbon production. And he was strategic in his stance on gas.

The group clarified that it “will not celebrate[it] With an impact of 1.7 billion barrels on announced proved reserves at the end of 2021, it will acquire more reserves than its stake in Novatek. However, the useful life of proved reserves remains greater than 11 years of production equivalent. TotalEnergies was slightly lower on the Paris Stock Exchange on Friday, losing about 0.7% by midday.

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