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TotalEnergies and Engie ordered to decide on their presence in Russia

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Will leave? Won’t go? The embarrassment is obvious at TotalEnergies, regarding the maintenance of its presence in Russia. The group issued a press release on Tuesday, March 1, supposed to clarify its position, but which in fact raises more questions than it answers. TotalEnergies will no longer provide capital for new projects in Russia”he explains, without withdrawing from the projects in which he has invested.

→ LIVE. War in Ukraine: follow the latest news on the development of the Russian-Ukrainian conflict

The group nevertheless says it condemns “Russia’s military aggression against Ukraine”and “endorses the scope and strength of the sanctions put in place by Europe and will implement them regardless of the consequences (being assessed) on the management of its assets in Russia”.

The government puts pressure

Two hours earlier, the Minister of the Economy, Bruno Le Maire, had put additional pressure on the energy company. There is a “problem of principle to work with any political or economic figure close to Russian power”, he said at the microphone of France Info. But the CEO of TotalEnergies, Patrick Pouyanné, “is acutely aware of the gravity of the situation” and “I think we will be able to make decisions together in the days to come”, he added. The position of the group could therefore still evolve.

Two other giants in the sector, BP and Shell, also heavily invested in Russia, have already announced their withdrawal from Russia following the invasion of Ukraine by the Russian army.

→ READ. Ukrainian crisis: oil giant BP decides to withdraw from Russia

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The stakes are enormous for TotalEnergies. Russia represents one of its first sources of extraction. In 2020, the group provided 16.6% of its annual production there, mainly in gas, an energy which it has made one of its priorities.

In recent days, TotalEnergies has been trying to put things into perspective. “It’s 3 to 5% of TotalEnergies’ revenues. We will manage »explained Patrick Pouyanné, on February 24 during a conference in Paris.

Two major projects for the group

TotalEnergies is a 19.4% shareholder in Novatek, Russia’s second-largest natural gas producer, controlled by Gennady Timchenko, who is on the list of sanctioned oligarchs. The Frenchman holds with the latter a stake in the enormous gas field of Yamal, in Western Siberia, which brings its weight to almost a third in this project to 23 billion euros, entirely financed by Chinese and Russian banks .

Inaugurated at the end of 2017, Yamal LNG produced 18 million tonnes of liquefied natural gas in 2020 (equivalent to half of the group’s LNG sales) and is expected to ramp up further with the construction of a fourth liquefaction train. And another giant project is looming. With Novatek, Chinese oil companies and a Japanese industrial consortium, TotalEnergies completed the financing of Arctic LNG in December, on the Gydan peninsula in Russia.

The French holds a 21.6% stake in this new giant field, the cost of which is estimated at 21.3 billion euros. It should produce 20 million tonnes of LNG in 2026. The first deliveries are expected in 2023. Again, financing should be provided by Russian and Asian banks, without a single dollar. The project had been heavily criticized by the government, which had decided that it could not benefit from export credits for all the French companies participating in it.

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Settle the Engie case

In addition to TotalEnergies, another very sensitive issue is looming for the government, following the sanctions against Russia. He will have to find a solution for Engie, of which he is the largest shareholder. It is difficult to force the company to cut all ties with Russia, from which it buys around 20% of the gas consumed in France.

→ ANALYSIS. Sanctions against Russia: gas, an unwieldy energy weapon

However, the question of its 10% stake in the Nord Stream 2 gas pipeline is clearly posed, while Germany has suspended its commissioning. “We financed the project, but we are not shareholders”, we say at Engie. For the group, the loss would be around one billion euros.

It also remains to consider the future of its 9% stake in Nord Stream 1, the first tube of this gas pipeline, in operation since 2012. It is valued at 552 million euros in the accounts of Engie. AT “Medium term or long term, we need Russian gas”especially “to re-fill the storage during the summer”explained its general manager Catherine MacGregor, on February 15.

According to her, “Nord Stream 2 is part of the equation”because it allows “to further secure supplies from the Russian market”. But these words date from before the invasion. And since then things have changed. It is no longer certain that she would hold the same speech now.

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