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TotalEnergies withdraws from Novatek

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As part of it gradual withdraw from Russian assets, TotalEnergies has disengaged with its stake in Novatek, Russia’s second-largest producer of natural gas and one of the world’s biggest publicly traded producers of natural gas by volume.

Shareholders’ agreements prevent the company from divesting its 19.4% stake in Novatek because it cannot sell the stake to another main shareholder that is currently sanctioned. In line with sanctions, TotalEnergies’ two directors on Novatek’s board have also been abstaining in meetings, so the company has decided to withdraw its representatives completely.

With the company no longer having a significant enough influence on Novatek to satisfy the applicable accounting regulations, TotalEnergies has opted to stop accounting for its equity stake in Novatek. According to a press release from the company, this will cause it to
record an impairment of approximately $3.7 billion in the accounts for the 4th quarter of 2022.

Furthermore, TotalEnergies will cease booking reserves for its interest in Novatek, with an impact of $1.7 billion of barrels on the company’s proved reserves going into 2022.

Despite the hit to proven reserves, the company will continue to have more than 11 years’ worth of proved reserves to maintain production, according to the press release.

While TotalEnergies, which also makes the Total Azolla range of hydraulic oil, has faced criticism for not abandoning its Russian assets more rapidly, CEO Patrick Pouyanné has said this was driven solely by the need to satisfy Europe’s demand for liquefied natural gas supplies.

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