Total Writes down $4 Billion on Russian Assets
French petrochemicals, plastics and energy group TotalEnergies has taken a $4.1 billion writedown on its flagship Russian gas exploration project and is seen to have softened its position on exiting the country despite earlier statements that it could not pull out.
While Total said last month it would stop buying Russian oil by the end of 2022 and refrain from concluding any new investment projects in the country, it quickly modified that statement to stress that the decision did not apply to natural gas.
Addressing critics of the group’s plans to stay active in Russia, CEO Patrick Pouyanné said at the time that withdrawing from gas projects would require it to “effectively hand over $13 billion” (its total capital employed in Russia at the end of 2021) to its local partners. Withdrawing from both oil and gas would effectively lead to a partial economic shutdown in Europe, he added.
The only way to pull out of Total’s 25-year gas supply contracts, Pouyanné suggested, would be for European governments to impose sanctions on Russian gas. Companies involved could then declare force majeure and safely exit.
While European Commission president Ursula von der Leyen is still treading carefully on new sanctions, saying they would be passed “in due course," Total said the latest package (the EU’s fifth), prohibiting exports of technology for use in the liquefaction of natural gas benefiting a Russian company, has already cast doubt on the future of its flagship Russian project, Arctic LNG 2.
The Paris-based group is a minority shareholder in several privately owned Russian energy companies and has played a role in financing LNG exploration projects such as Arctic LNG 2 and the Yamal pipeline which supplies Germany and other countries. Last month, it said it would continue to supply liquefied natural gas to Europe through Yamal as long as governments “consider that Russian gas is necessary.”
“This $4 billion charge shows that TotalEnergies has started turning a page” in Russia, a spokesperson told the Bloomberg news agency. “It’s the beginning of a pullback.”
Author: Dede Williams, Freelance Journalist
