As bombs rain down on Ukraine and European and US sanctions mount to strangle the Russian economy, the war is also upsetting the energy world. And it is increasing pressure on major Western oil and gas companies with a historical presence in Russia to exploit its hydrocarbons.
Including France’s TotalEnergies, which relied heavily on Vladimir Putin’s country to develop its liquefied natural gas (LNG) strategy. After 2014 and the Russian annexation of Crimea, the tricolor TNK has already done everything to implement the Yamal LNG project to produce LNG in northern Russia at all costs, despite Western sanctions.
While Economics Minister Bruno Le Maire is now pointing out the “fundamental problem of working with any political or economic figure close to the Russian authorities” and confirmed on Tuesday that he is going to “discuss this with the President of Total”, the latter is not parting anytime soon. intends. And he is satisfied with the promise that “he will no longer invest in new projects in Russia.”
Chain sales
But in this strategy, TotalEnergies finds itself in complete isolation. Because most of the major Western oil groups have announced that they will leave Vladimir Putin’s country overnight after his attack on February 24th. First of all, British BP and Shell, which on February 27 and 28, respectively, announced their intention to withdraw from the Russian oil giant Rosneft for BP (in which it owns 19.75%), and from the Gazprom gas group for Shell. As well as the Norwegian company Equinor, which abandoned its stake in Rosneft and the Salym and Sakhalin-2 projects, which at the end of 2021 were worth about $3 billion.
Even US oil and gas giant ExxonMobil decided on Wednesday to gradually freeze its investments in Russia, while Italy’s Eni promised to sell its 50 percent stake in the Blue Stream gas pipeline destined for the Turkish market.
“All these seizures are primarily intended to send a very strong signal to Putin. The one that Western private companies do not wait for a political decision to act. Even if in fact, behind the scenes, they received directives from the authorities, ”comments John Plassard, deputy director of the Swiss banking and financial group Mirabaud.
Projects at the heart of the company’s growth strategy
But the situation is different for TotalEnergies, Ahmed Ben Salem, oil and gas consultant at Oddo BHF, explains to La Tribune. Because his projects on the ground address “key sectors of the growth strategy,” he explains. Specifically, TotalEnergies owns a 19.4% stake in giant Novatek, Russia’s second largest gas giant, and owns a 20% stake in Yamal LNG, which produced over 18 million tons of LNG in 2020 (transit via ship, not pipeline). ). The Group also owns a 10% stake in Arctic LNG 2, which is scheduled to launch in 2023. And if we take into account the shares in Novatek itself, then TotalEnergies even owns 29.7% of Yamal LNG and 21.64% of Arctic LNG. 2.
“These are all facilities for the exploitation of liquefied natural gas. However, according to Patrick Pouyanne [le PDG de TotalEnergies, ndlr]If we are to succeed in getting rid of oil, we must turn to renewable energy as well as gas. Thus, LNG is a core activity in his transition plan, and abandoning it today is not in line with his long-term strategy at all! “Slips La Tribune a source close to the company.
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Portfolio reorganization
However, in terms of financial assets, BP is even more vulnerable than TotalEnergies. But unlike the latter, BP is not necessarily interested in dragging things out in Russia, argues Ahmed Ben Salem.
“BP ended up in Russia rather by force, after the acquisition of TNK-BP by Rosneft in 2012,” he clarifies.
Established in 2003 by BP and a consortium of Russian oligarchs, Alfa Access Renova (AAR), TNK-BP has indeed been mired in shareholder conflict since the signing of an alliance between BP and Rosneft to develop the Arctic, which ultimately collapsed due to outside opposition. AAR.
Thus, BP finally found a compromise and sold its stake in Rosneft, regaining more than 19% of the Russian public group. “So for BP, the current situation is an opportunity to seize the opportunity to get out of it,” says Ahmed Ben Salem. Moreover, the risk that all Rosneft assets will be requisitioned by the state (which already owns 40%) is not zero in the current situation.
“Some of the companies that have invested in these Russian state monopolies for hydrocarbon production, and in particular oil, also see this as an opportunity to draw the line on these assets. Because they were a problem both from a geopolitical point of view and from the point of view of triggering the energy transition. Without it, they would probably resist the political pressure pushing them out of Russia,” says Jeremy Haddad, EY partner and energy specialist. As is the case with TotalEnergies.
“During the last general meetings of shareholders, we saw that these groups finally understood that their business, as usual, is not sustainable, and that it is necessary to offload the most problematic part of their portfolio. We can hypothesize that at the end of 2022 we will find ourselves with BP reorganizing its asset portfolio significantly, rather than towards renewables and clean tech, providing transparency to analysts and reducing its reputational risk.
Valuable know-how
However, no one really knows who will be sold shares in BP, Shell and other Equinor. “They won’t put any more capital into it, but there won’t be a buyer for a while. And when the latter presents himself, he will demand a low price, because today no one or almost wants to acquire Russian assets,” Ahmed Ben Salem said.
“Either the Russians will buy them out, but in the short term it is difficult to imagine, especially since financial transactions are blocked. Or they will be sold to other players less attentive to the current war and climate issues. For example, the Chinese, who are striving to secure their energy supply,” says Jeremy Haddad.
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But if, in fact, Equinor, BP, Shell or Exxonmobil fail to immediately sell their assets, this does not mean that their departure will not have consequences for the health of Russian interest groups. “They need the know-how of Western companies,” explains Ahmed Ben Salem.
For Artik LNG 2, carried by Novatek and TotalEnergies, French engineering company Technip Energies “is the only one who knows how to build structural modules,” the analyst illustrates. As far as TotalEnergies is concerned, its trading know-how, especially in relation to the client portfolio and the management of their teams, remains valuable to Novatek when it comes to LNG exports. If the two French companies decide in turn to leave the ship, the Russian gas company could be in serious trouble.
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Marine Godelier
March 05, 2022, 14:58