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TotalEnergies’ transition to low carbon not impacted by events in Russia

Economy Materials 9 August 2022 09:15 (UTC +04:00)
TotalEnergies’ transition to low carbon not impacted by events in Russia
Laman Zeynalova
Laman Zeynalova
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BAKU, Azerbaijan, Aug.9. The exposure of TotalEnergies to investment in Russia is significant with nearly 10 percent of capital employed found in Russia via Novatek, Yamal LNG and Arctic LNG 2, Trend reports with reference to Fitch Solutions.

“More significantly nearly 17 percent of its hydrocarbon production and 21 percent of proved reserves originates within Russia’s borders. They have halted all capital inflows for development projects in Russia with Arctic LNG 2 being the largest source of capital expenditure. The efforts to transition to low carbon energy company do not appear to be impacted by the events in Russia as capital expenditure guidance remains unchanged,” reads the latest report from Fitch Solutions.

The report reveals that new investments in oil projects will be restricted to low cost and low carbon developments.

“TotalEnergies is targeting 2022 exploration capex of USD0.5bn well below historic levels and indication of a managed decline of hydrocarbon
production. The bulk of the upstream portfolio will remain focused on integrated LNG with capital expenditure split roughly between oil focused projects at 50 percent, LNG and natural gas at 20 percent and Renewables and New Molecules taking 30 percent of investment between 2022 to 2025,” reads the report.

Oil supermajors continue to hold back on investment as mid-year guidance remains mostly firm. Overall, the group will raise annual capital expenditure by 19% in 2022 versus earlier guidance growth of 17%. Previous trends which saw portfolios upgrades through structural cost reductions and divestment will see upstream portfolios focused on diminishing low cost barrels.

Capex growth diverted from upstream to low carbon efforts and returning shareholder value. Increased upstream capital investment will continue to be curtailed as most of the majors price future oil prices at levels much lower than today’s prices setting the stage for less flexibility in capital allocation in the future. The focus on low-cost upstream developments will prove challenging to regions where the existing resource base presents only higher breakeven projects raising the prospect that discoveries may go undeveloped.

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