TotalEnergies to ramp up LNG production as it shifts away from Russia

9/28/2022

(Reuters) - French oil major TotalEnergies said it would increase investments and ramp up production of liquefied natural gas as it laid out its strategy for a possible future without Russia - while still stopping short of severing links.

Unlike rivals such as BP and Shell, TotalEnergies has held on to several of its holdings in Russia, which include important LNG joint ventures. But on Wednesday, at an investor presentation in New York, it set itself a series of business targets for the next five years that excluded its Russian interests.

"There is no future with Russia in this presentation," chief executive Patrick Pouyanne said.

"Less Russia, more U.S.," he added.

As Europe scrambles to find alternatives to Russian gas, TotalEnergies said it would grow sales of LNG by 3% a year through 2027 and increase LNG production by 40% from 2021 to 2030.

The group at the weekend announced a big investment in an LNG facility in Qatar as it seeks to diversify away from Russia - one of the main exporters of LNG.

Capital expenditure will be increased to $14-18 B a year through 2025 from $13-16 B previously, with investments targeting wind and solar energy, energy savings as well as LNG capacity.

The company also said it would maintain its $7 B share buy-back program for 2022 and pay a special interim dividend of 1 euro per share in December of this year.

The new goals and the special dividend are likely to please investors, but the future of the company's Russian investments - including minority stakes in Russia's Novatek, Yamal LNG and Arctic LNG 2 - remains the elephant in the room, analysts said.

The group has said it will not invest in new projects in Russia and will phase out purchases of Russian oil by the end of 2022.

Analysts say uncertainty over Russia, as well as the hit from a possible European Union windfall tax for energy groups that that have benefited from soaring prices, explain the relative underperformance of TotalEnergies' shares despite record profits.

Its shareprice has barely risen this year, compared to rises of around 20% for Shell and BP.

(Reporting by Benjamin Mallet, writing by Silvia Aloisi, editing by Richard Lough)