French energy firm TotalEnergies said Wednesday it had taken a $4.1 billion impairment charge on its Arctic LNG 2 gas project under construction in northern Russia.
On the eve of reporting its first-quarter results, the firm said additional sanctions adopted by European authorities, “notably prohibiting export from European Union countries of goods and technology for use in the liquefaction of natural gas benefitting a Russian company… constitute additional risks” on the project’s execution.
Therefore, it said it had decided to record the $4.1 billion impairment charge as of March 31 in its first-quarter results.
A spokesman said this signalled the “beginning of a retreat” from the project.
“TotalEnergies has drawn conclusions from what’s happening. This four billion charge shows that TotalEnergies is starting to turn the page” on the investment, said the spokesman.
TotalEnergies took a stake in the project in 2019, making it its second in Russia’s extreme north alongside the Yamal LNG facility which is already shipping natural gas to clients via tankers plying Arctic waters.
Chief executive Patrick Pouyanne said last month that TotalEnergies would not suddenly stop its Russian operations completely, since “we’ve invested nearly $13 billion in these sites… that are going to operate whether I leave or not.”
“Pulling out would mean I’d be giving this $13 billion to the Russians… Should I abandon these assets to enrich the Russians that we have sanctioned?”
But Pouyanne insisted that in the wake of Russia’s assault on Ukraine, “There’s no future growth for TotalEnergies in Russia, I’ve crossed out all the future we were building in Russia.”
He also noted that Russia accounted for five percent of the firm’s cashflow and 10 percent of its earnings.