Shadia Nasralla by Benjamin Mallet and Michel Rose

LONDON, (Reuters) – France’s TotalEnergies is a single figure that clings to its Russian investments in the midst of a massive exodus from western oil companies after Ukraine’s invasion. However, there have been no sanctions which would force such divestments.

The company said that it would respect European sanctions for existing assets. However, for now there are not sanctions on energy,” stated a source who is familiar with TotalEnergies’ thinking.

TotalEnergies holds a forward-oriented position within Russia. It is heavily weighted toward liquefied LNG (LNG) and has stakes in both the $21 billion Arctic LNG 2 Project as well as the Yamal LNG production operation.

Oil majors have been betting heavily on LNG as a replacement for more polluting oil and coal, in light of the global effort to reduce carbon emissions. TotalEnergies purchased a stake of Novatek, a Russian gas producer in 2011, for $4B. It slowly increased its stake to under 20% by 2018.

“Unless sanctions are imposed, the company can’t divest assets one day after another.” The source said that one must reflect.”

France’s government declined to speak out on Russian companies. Two participants to Reuters said that Emmanuel Macron, the French president, met with members of a FrancoRussian forum Tuesday. He did not encourage TotalEnergies and French companies leave Russia. Patrick Pouyanne (Chairman TotalEnergies) was one of those who attended.

The British government, however, immediately praised Shell’s (LON:), and BP’s (NYSE:) decision to leave Russia. A source close to the company said that Bernard Looney, chief executive officer of BP, told employees that BP could not reasonably continue in Russia “given the conflict in Ukraine.”

Companies that said they would sell their Russian assets are facing impending writedowns in the millions. Exxon Mobil (NYSE:). There are no buyers yet for their stakes or operations in Russia.

Recent days have seen TotalEnergies outperform the share prices of companies which have left Russia.

Graphic – TotalEnergies shares underperforming peers: https://fingfx.thomsonreuters.com/gfx/ce/xmpjoebwlvr/Pasted%20image%201646312060659.png

Biraj Borkhataria, RBC equity analyst, stated that a TTE exit would be more difficult than for peers.

on Wednesday. TTE considers Russia strategically important, especially in relation to its LNG business.

TotalEnergies plans to supply global LNG markets with 10% by 2025, and 50,000,000 tonnes per year. According to RBC, Russia is responsible for 6,000,000 tonnes of Yamal oil and 4,000,000 tonnes from Arctic LNG 2, once it becomes operational.

Reuters was unable to verify the total return on investment in Russia by oil companies, as they do not publish country and asset-specific financials. Nonetheless, it was evident that BP for instance, had already paid off its investment.

TotalEnergies continued to invest in the big gas fields even though Donald Trump had imposed sanctions on Iran. However, it dropped this investment after Washington failed to grant a waiver in 2018.

The media reports that Pouyanne said to Trump at that time that continuing investments could aid democratic progress in Iran.

TotalEnergies’ Russian cashflow in 2021 was $1.5 Billion. The company declined to provide further information on Russian investments or previous cashflows.

According to its quarterly results BP will be facing a write down of $25 billion.

The cashflow that Russia has provided over the years could help to alleviate some of this pain.

TNK-BP was created in 2003 by BP and Russian investors. BP had invested $8 billion. In the ensuing 10 years, BP earned around $19 trillion in dividends.

Rosneft purchased BP’s TNK-BP stake for approximately $12 billion cash and Rosneft stock that has yielded dividends to BP in excess of $4 billion.

Shell was an early investor in Russia’s Sakhalin II LNG plant. In 2007, half of the 55% share was sold to Gazprom (MCX) for $4.1 Billion. This sale took place two years prior to the launch.

According to it, the 2021 net income from Sakhalin II, its Salym oilfields and Sakhalin II were $700 millions. They began full production in 2006. The accumulated Russian earnings, according to tax records, were $455m in 2019, $384m in 2020, and $16 million respectively in 2019.

Shell stated that it was facing impairments as a result of its Russian exit and had approximately $3 billion worth of non-current assets. Shell spokesmen declined to provide further details.

Exxon Mobil closing the doors on Russia’s $4 billion assets and initiating what may become a writedown could be a bad thing. However, Exxon Mobil has been operating large offshore oil-and gas fields close to Sakhalin Island in 2005.

Exxon has not ceased its Russian investments and refused to discuss a possible writedown. Kathryn Mikells, Chief Financial Officer, stated on Wednesday that Exxon would lose 1% to 2% earnings if it shut down its Russian oil-and gas operations.

They will all have to work hard in Russia to get future Russian income. A difference between them is that TotalEnergies’ can argue they have less direct ties the government because Novatek is privately-owned. “The question now is whether that argument will hold,” Giacomo Romeo (Jefferies equities analyst) said.

Direct stakes held in LNG assets like Sakhalin Yamal, Arctic LNG, and Rosneft are more likely to be repaid than stakes held in Novatek and Rosneft. Indian and Chinese investors could be interested in LNG assets if there is enough volume uncontracted.

(additional reporting done by Ron Bousso, Sabrina Valle and Shadia Nasralla, writing by Shadia Naralla; editing by David Gregorio