French energy giant TotalEnergies has said it will walk away from its stake in Russian natural gas producer Novatek, meaning it will take a $3.7 billion loss.
TotalEnergies, which has come under criticism for pursuing some of its projects in Russia amid the war in Ukraine, said Western sanctions prevent it from selling its 19.4 per cent stake to the Russian company.
It said it is withdrawing its representatives from the Novatek board, who have been abstaining from voting because of sanctions, with “immediate effect”.
As a result, TotalEnergies will no longer account for its ownership interest in Novatek, which will lead it “to record an impairment of approximately $3.7 billion in the accounts for the fourth quarter of 2022”, the French company said in a statement.
In line with its “principles of conduct” published on March 22nd, TotalEnergies “has gradually started to withdraw from its Russian assets while ensuring that it continues to supply gas to Europe”.
It comes amid an energy crisis in Europe provoked by Russia’s war in Ukraine that pushed up natural gas prices and has led governments to warn people to conserve this winter.
While prices have fallen from summertime peaks and Europe has largely filled its storage for the heating season, a colder-than-expected winter, a complete gas cut-off by Russia and other factors could lead to a supply crunch.
Environmental body Greenpeace France said the announcement comes “very late”, and denounced TotalEnergies’ continuing operations in Russia.
The French company has stakes in some other Russian projects meant to produce liquefied natural gas, including a 20 per cent stake in Yamal LNG and a 10 per cent stake in Artic LNG.
The decision “is not enough to make from TotalEnergies a responsible company as it keeps a foot in Russia and will continue to feed the climate crisis,” said Edina Ifticene, who is in charge of campaigning on fossil energy at Greenpeace France.
In October, TotalEnergies reported third-quarter net income rose to $6.6 billion despite losses from pulling out of a venture in Russia.
The company posted adjusted net earnings of $9.9 billion but notably took a charge of $3.1 billion after it sold a 49 per cent interest in a Siberian natural gas field to Novatek.
Other companies that have moved to pull out of Russia have taken big losses, ranging from Shell’s $3.9 billion charge to McDonald’s expected loss of between $1.2 billion and $1.4 billion.
