France’s TotalEnergies said it had recorded a first-quarter impairment of about 4.1 billion US dollars partly related to Novatek’s Arctic LNG 2, a liquefied natural gas development project in the Russian Arctic that has been hit by sanctions against Russia.
The Arctic LNG 2 facility was expected to start operations in 2023 but the plans have been under threat following sanctions by Western powers against Russia in response to its invasion of Ukraine.
TotalEnergies holds a 10 per cent stake in the 19.8 mtpa Arctic LNG 2 development, as well as a 20 per cent in Novatek’s Yamal LNG project and a 19.4 per cent interest in Novatek.
In March, TotalEnergies announced that, given the uncertainty created by the technological and financial sanctions on the ability to carry out the Arctic LNG 2 project currently under construction and their probable tightening with the worsening conflict, TotalEnergies SE had decided to no longer book proved reserves for the Arctic LNG 2 project.
“Since then, on April 8th, new sanctions have effectively been adopted by the 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. It appears that these new prohibitions constitute additional risks on the execution of the Arctic LNG 2 project,” TotalEnergies said in a press release.
As a result, TotalEnergies has decided to record in its accounts, as of March 31, 2022, an impairment of 4.1 billion US dollars, concerning notably Arctic LNG 2.
Novatek is the LNG project’s operator with a 60 per cent stake. Besides TotalEnergies, CNPC and CNOOC of China have each 10 per cent in the development. Japan Arctic LNG, a consortium of Mitsui & Co and Jogmec, owns a 10 per cent stake in the project as well.