TotalEnergies announces “the start of a downturn” for its gas megasite in Russia

Two months and three days after the start of the war in Ukraine, Western sanctions against Russia lead the French company TotalEnergies (ex-Total) to initiate “the beginning of a retreat”, according to a spokesperson. On the evening of Wednesday April 27, the oil and gas company announced an asset impairment of around 4.1 billion dollars (3.9 billion euros), in particular for the Arctic LNG 2 gas megaproject. production from 2023, the gigantic liquefied natural gas plant, located on the Gydan peninsula in northern Siberia, could be stopped dead.

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TotalEnergies is thus planning a premature withdrawal from the site, forcing it to record the provision in its accounts for the first quarter of 2022, presented on April 28. Without this programmed subtraction of $4.1 billion, the company has recorded adjusted net income of $9 billion. That is three times more than in the same period of 2021.

Since February 24, the Russian attack on Ukrainian soil has driven up oil and gas prices, amplifying the effects of the strong recovery in economic activity in 2021. General tension in the hydrocarbons sector. “Consumer countries and markets fear possible risks to future oil and gas suppliesrecalls Francis Perrin, director of research at the Institute of International and Strategic Relations, in Paris. Especially since the Organization of Petroleum Exporting Countries and its allies, including Russia, are keeping an immutable roadmap for the moment, as if war did not exist. »

Central strategic place

To justify its incipient withdrawal of Arctic LNG 2, TotalEnergies highlights Western sanctions against Russia. these “pose additional risks to the ability to execute the project”, says a statement from the company. Since April 8, the European Union, for example, has prohibited its member states from exporting goods and technologies necessary for the liquefaction of natural gas in Russia.

On March 22, the company had already indicated its choice to no longer record proven reserves for Arctic LNG 2, “given the uncertainties posed by technological and financial sanctions on the ability to carry out the project under construction”. It currently owns 21.6% of the project, notably through its presence in the capital of the private Russian group Novatek. On the other hand, TotalEnergies has so far remained very present in the neighboring field, that of Yamal.

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The country occupies a central place in the group’s industrial strategy: betting more and more on gas, presented as a less harmful energy than coal and therefore as a possible alternative for the Chinese market. Russia alone represented 31.5% of the firm’s gas production in 2021.

Unlike other heavyweights in hydrocarbons (BP, Shell, Equinor, Exxon), the multinational therefore refuses for the moment to announce a withdrawal of all its Russian assets, despite strong pressure from environmental NGOs. or politicians. In the midst of the presidential campaign in March, the environmental candidate, Yannick Jadot, went so far as to accuse the company of “complicity in war crimes” for his refusal to leave Russia. “Abandoning these participations without financial compensation would contribute (…) to enrich Russian investors”, then replied the company, while announcing libel suits.

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