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TotalEnergies Takes $4.1B Writedown on Arctic LNG 2 Terminal

arctic lng 2
Staging terminal for Arctic LNG 2 sitework (Novatek file image)

Published Apr 28, 2022 11:22 AM by The Maritime Executive

TotalEnergies has revealed the price tag that EU sanctions have imposed for its holdings in the Arctic LNG 2 project, a giant natural gas shipping terminal under development on Russia's northern coast. 

Due to sanctions on Russian banks and other entities in Russia, TotalEnergies decided to write off its proven reserves for the megaproject in March. In early April, the EU imposed a ban on the export of European LNG liquefaction technology to Russian producers, raising the risk that Arctic LNG 2 might not be completed. As a result, the French oil major has decided to record an impairment of $4.1 billion for the project in its Q1 earnings, reflecting the risk to its 10 percent stake in the project.

The hit to TotalEnergies' bottom line highlights the new financial risks that come with investments in Russian petroleum. Before the invasion of Ukraine, Arctic LNG 2 was fully financed and well under way to completion, and the first liquefaction train was scheduled to come online in 2023. According to TotalEnergies, that timeline may now be compromised.

Arctic LNG 2 is an ambitious liquefaction plant project designed around three gravity-based structures (GBS), a concrete platform design borrowed from the early days of offshore oil and gas. Each of the three floating GBS platforms will support a complete LNG train during transport and installation in the remote Gulf of Ob, located in Russia's Arctic north. 

This design choice simplifies plant construction, as most of the technical work can be completed near established support infrastructure in Murmansk. If completed, each GBS will be towed to the installation site, then partially flooded and sunk onto the bottom for a permanent mooring. 

If it is finished despite sanctions, the project will have a total capacity of about 20 million tonnes per annum (mtpa). This would more than double Novatek's LNG output from the Gulf of Ob; its existing Yamal LNG plant, located on the inlet's other side, puts out about 16 mtpa.