TotalEnergies has increased its Russia impairment by another $3.056 billion over challenges in its LNG plans.
The company announced a first impairment of its Russian LNG interests in March, of $4.095bn, focused on Arctic LNG 2. It followed this in June with another $3.513 billion.
The June impairment was focused primarily on Total’s stake in Novatek.
Total said in March, following Russia’s invasion of Ukraine, that sanctions would make the Arctic LNG 2 project challenging and, as a result, it would no longer book reserves.
It based this first assessment on initial technological and financial sanctions. Europe imposed new sanctions, prohibiting liquefaction technology to be transferred to the benefit of Russian companies.
These “new prohibitions” impose additional risks on the Arctic LNG 2 plans.
Total sold off its 49% stake in Terneftegaz to Novatek in September. The terms allowed Total to recover its investments in the field, it said.
CEO Patrick Pouyanné noted the impact of the Russian value calculations in his comments to the market this morning.
“In the third quarter 2022, the Company posted adjusted net income of $9.9bn and IFRS net income of $6.6bn after taking into account a new impairment of $3.1bn related to Russia,” he said.
While the outlook for its LNG investments in Russia look murky, the company has benefited from higher gas prices as a result of the invasion.
Total expects gas prices to “remain high”, as a result of European needs to replace Russian volumes with LNG. In the fourth quarter, the company expects to sell LNG at more than $17 per mmBtu.
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