Oil majors flee but TotalEnergies stays in Russia

France’s TotalEnergies cuts a lonely figure hanging onto its Russian investments during a mass exodus of western oil majors from the country after its invasion of Ukraine, even though no sanctions have forced such divestments.

“For existing assets, the company says it will respect European sanctions whatever the consequences. But for the moment, there are no sanctions on energy,” said a source familiar with the thinking inside TotalEnergies.

TotalEnergies has a future-oriented position in Russia, heavily weighted towards liquefied natural gas (LNG), with stakes in the yet-to-be built $21 billion Arctic LNG 2 project as well as in the producing Yamal LNG operation.

With the world trying to slash carbon emissions, oil majors are betting on LNG to replace more-polluting coal and oil. TotalEnergies first bought a stake in Russian gas producer Novatek in 2011 for $4 billion and gradually increased its stake to just under 20 per cent by 2018.

“The company cannot divest assets from one day to the next unless sanctions force it to do so. One must take time to reflect,” said the source.

The French government has declined to comment on specific companies and Russia. French President Emmanuel Macron, who convened members of a Franco-Russian forum on Tuesday, did not urge TotalEnergies or French companies to leave Russia, two participants told Reuters. Among those present was TotalEnergies Chief Executive Patrick Pouyanne.

In contrast, Britain’s government immediately applauded Shell’s and BP’s decision to exit Russia. Chief ExecutiveOfficer Bernard Looney told employees BP “couldn’t reasonably carry on in Russia given the conflict in Ukraine,” according to a company source.

Billions of dollars of impending write-downs are piling up for the companies that have said they would exit their Russian assets: BP, Shell , Equinor and Exxon Mobil. For now, there are few potential buyers for the stakes and operations they are leaving in Russia.

Share prices of the companies that have exited Russia have outperformed TotalEnergies in recent days.

“We see a potential exit by TTE being much more complicated than it is for peers,” said RBC equity analyst Biraj Borkhataria

on Wednesday. “We see Russia as strategically important for TTE, particularly for its LNG business.”

TotalEnergies aims to satisfy 10 per cent of global LNG markets by 2025 with 50 million tonnes a year. Russia accounts for 6 million tonnes from Yamal and another 4 million tonnes from Arctic LNG 2 once operational, according to RBC.

Reuters could not verify total returns on investments in Russia by the oil majors, which do not regularly publish asset and country-specific financials. Still, it was clear that BP, for example, has already made good on its investments.

When former U.S. President Donald Trump hit Iran with sanctions, TotalEnergies also stuck with its investment in a big gas field, dropping it only after failing to obtain a sanctions waiver from Washington in 2018.