France’s TotalEnergies said on Wednesday it would book a $4.1 billion impairment charge on Novatek’s Arctic LNG 2 export project under construction in Russia.
In March, TotalEnergies said it would no longer provide capital and book proven reserves for the Arctic LNG 2 project due to the uncertainty created by the technological and financial sanctions on the ability to carry out the development.
“Since then, on April 8th, new sanctions have effectively been adopted by the European authorities, notably prohibiting export from European Union countries of goods and technology for use in the liquefaction of natural gas benefitting a Russian company,” TotalEnergies said on Wednesday.
According to the French energy giant, it appears that these new prohibitions constitute “additional risks” on the execution of the Arctic LNG 2 project.
“As a result, TotalEnergies has decided to record in its accounts, as of March 31, 2022, an impairment of $4.1 billion, concerning notably Arctic LNG 2,” the firm said.
The Arctic LNG 2 project located on the Gydan peninsula includes the construction of three LNG trains with a capacity of 6.6 mtpa, each, using gravity-based structure platforms.
Novatek is the LNG project’s operator with a 60 percent stake. Besides TotalEnergies, CNPC and CNOOC of China have each 10 percent in the development.
Japan Arctic LNG, a consortium of Mitsui & Co and Jogmec, owns a 10 percent stake in the project as well.
The Russian LNG producer previously expected to launch the first Arctic 2 LNG train in 2023, followed by the second and the third unit in 2024 and 2025, respectfully.
However, according to a recent report by Interfax, Novatek’s chief Leonid Mikhelson said that this schedule might change due to challenges in implementing the project and following several sanctions from the EU and the US over the Russia-Ukraine war.