TotalEnergies to record $3.7bn impairment as it writes down stake in Russia's Novatek

The French oil company will withdraw its representatives from the board of the Russian LNG producer

TotalEnergies' reported proved reserves will decrease by 1.7 billion barrels following the exclusion of Novatek’s assets. AFP

France’s TotalEnergies will take an impairment of $3.7 billion in the fourth quarter related to its stake in Novatek, Russia's largest producer of liquefied natural gas.

TotalEnergies, which owns a 19.4 per cent stake in Novatek, will also withdraw its two representatives from the Russian company’s board.

“In view of the European sanctions in force since the beginning of the war, the two directors representing TotalEnergies on the board of directors of Novatek are led to abstain from voting in meetings of the board of directors of this company, in particular on financial matters,” said TotalEnergies on Friday.

“They are therefore no longer in a position to fully carry out their duties on the board, which might become an issue for the governance of this company.”

In August, TotalEnergies signed an agreement to sell its 49 per cent stake in Terneftegaz, one of the largest Russian oil companies, to Novatek.

Earlier in March, TotalEnergies said it would support EU sanctions against Russia in response to its military offensive in Ukraine but stopped short of saying it would divest or pull out of the country.

The company’s reported proved reserves will decrease by 1.7 billion barrels following the exclusion of Novatek’s assets, it said.

Many oil companies, including BP and Shell, have exited their stakes in Russian energy projects since the beginning of the conflict.

Upstream investment in Russia’s oil and gas sector is set to plunge by 30 per cent to $35 billion this year amid sanctions and a mass departure of foreign companies, according to Rystad Energy.

Several large LNG projects have been delayed by a few years due to technological and funding constraints as western partners pull out.

Greenfield projects are set to suffer the largest drop in spending due to the sudden sharp decline in approval activity this year.

Investments in new Russian projects are expected to fall by 40 per cent to $8 billion in 2022 from a year earlier, the Norway-based consultancy said.