France’s TotalEnergies to quit Russian oil supply contracts

But the company hasn't said it would exit its stakes in Novatek's Arctic gas projects.

By Geert De Clercq, Reuters, Shadia Nasralla, Reuters - March 22, 2022
The logo of French oil and gas company TotalEnergies is pictured at an electric car charging station and petrol station at the financial and business district of La Defense in Courbevoie near Paris on June 22, 2021. (Gonzalo Fuentes / Reuters File Photo)

PARIS/LONDON — French oil major TotalEnergies said on Tuesday it would not renew its Russian gasoil and crude oil supply contracts for its German refinery, but would source gasoil from Saudi Arabia and crude via Poland instead.

The firm — with stakes in several Russian projects, including Novatek’s Yamal LNG and Arctic LNG 2 projects — has come under criticism after it stopped short of joining rivals Shell and BP in planning to divest oil and gas assets in Russia.

Activists spray-painted its headquarters west of Paris on Monday and France’s green presidential candidate accused the company and its boss of complicity with the Kremlin.

TotalEnergies, one of the world’s top oil producers and the fourth-largest company in France’s CAC 40 bluechip index by market capitalization, has become increasingly isolated among oil majors as it holds on to its interests in Russia despite the latter’s invasion of Ukraine.

Environmental activists, led by the French group “Les amis de la terre” (Friends of the Earth), said they had sprayed black paint on the glass doors at the entrance of TotalEnergie’s building in the La Defense business district, posting a video of around a dozen activists dressed in yellow vests.

“At every minute, fossil fuels are arming the regime of the Kremlin and are the reason for people dying every day since almost a month,” a woman could be heard shouting.

TotalEnergies declined to comment on the Monday incident.

European sanctions and Russian laws controlling foreign investment prevents TotalEnergies from finding a non-Russian buyer for its assets, it said. “Abandoning these interests without consideration would enrich Russian investors, in contradiction with the sanctions’ purpose.”

TotalEnergies aims to satisfy 10 percent of global LNG markets by 2025 with 50 million tonnes a year. Russia is a key source, via the Yamal LNG project and the not-yet-operational Arctic LNG 2 project.

The French firm said it would “no longer record proved reserves for Arctic LNG 2 in its accounts and will not provide any more capital for this project.” It did not immediately respond to a request for comment.

BP is facing write-downs of $25 billion for its Russian exit and Shell of over $3 billion.

TotalEnergies said on Tuesday it would not renew crude supply contracts for its 240,000-barrel-per-day Leuna refinery in Germany, which gets fed with Russian oil via the Druzhba pipeline.

Leuna, far from Germany’s ports near the city of Leipzig, would be fed with oil via Poland, although TotalEnergies’ statement was unclear about the source.

Having already stopped spot purchases of Russian fuel, TotalEnergies said an end to its longer-term contractual supplies from Russia means the last crude and oil products would be imported by the end of this year.

TotalEnergies said that in accordance with the European Union’s decisions to maintain Russian gas supplies at this stage, it would continue to supply Europe with liquefied natural gas from the Yamal plant as long as Europe’s governments consider that Russian gas is necessary.

Additional reporting by Benjamin Mallet and Tassilo Hummel.