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French oil giant TotalEnergies has confirmed plans to take a $3.7bn hit in Q4 on its stake in Russian group Novatek.

Taken in response to Russia’s invasion of Ukraine, the decision will also see the French firm withdrawing its two members from the Novatek board.

In a press statement, TotalEnergies said: “TotalEnergies holds a 19.4% stake in the company Novatek, a stake that it cannot sell given the prevailing shareholders’ agreements, as it is forbidden for TotalEnergies to sell any asset to one of Novatek’s main shareholders who is under sanction.”

With the European sanctions, the two directors representing TotalEnergies on the Novatek board of directors are prevented from voting in board meetings, particularly on financial matters.

TotalEnergies noted that since the two directors could not fully accomplish their roles, it has decided to withdraw the representatives from the Novatek board, effective immediately. 

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The French firm said in a statement: “As a result of the criteria for significant influence no longer being met within the meaning of the accounting regulations that apply to the company, TotalEnergies will no longer equity account for its 19.4% stake in Novatek in the company’s accounts.

“In addition, TotalEnergies will no longer book reserves for its interest in Novatek, with an impact on the company’s reported proved reserves at the end of 2021 of 1.7 billion barrels. However, the life duration of the company’s proved reserves will remain above 11 years of production.”

Separately, TotalEnergies said it would retain its stake in the Yamal liquefied natural gas (LNG) project, reported Reuters, citing a source familiar with the matter.

TotalEnergies owns a 20% stake in the Yamal LNG project, which produces LNG in Russia’s Arctic.

Other partners in the project include Novatek, with a 50.1% stake; China’s CNPC, holding a 20% interest; and Silk Road Fund, with a 9.9% stake.