French supermajor TotalEnergies has taken a $4.1 billion impairment in its first quarter 2022 accounts relating to its withdrawal from a Russian grassroots liquefied natural gas project.
TotalEnergies in late March had 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, it had decided to no longer book proven reserves for the project.
“On 8 April 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,” the French energy giant said on Wednesday.
“It appears that these new prohibitions constitute additional risks on the execution of the Arctic LNG 2 project.”
As a result, TotalEnergies has decided to record in its accounts, as of 31 March 2022 an impairment of $4.1 billion “concerning notably Arctic LNG 2”.
The $21.3 billion Arctic LNG 2 project involves the construction of three 6.6 million tonnes per annum liquefaction trains. It will also produce 1.6 million tpa of condensate.
Russia's Novatek operates the Arctic 2 LNG consortium with a 60% interest and its partners are TotalEnergies, China's CNPC and CNOOC and Japan Arctic LNG - the pairing of Japan's Mitsui and Jogmec - each with a 10% stake.
Train one of the phased Arctic 2 LNG is scheduled to come into operation next year with the third and final train targeting start-up in 2025, Novatek chief executive Leonid Mikhelson last year said - one year ahead of the original timeline.