PARIS-- Total SA has stopped increasing its stake in Russia's
second-largest gas producer OAO Novatek since the crash of Malaysia
Airlines Flight 17 and is bracing for the possible impact of
tougher international sanctions against the nation.
The oil major, which on Wednesday posted a 12% drop in its
second-quarter adjusted net profit, will review the sanctions and
discuss them with its partners in Russian projects at the end of
August, said Chief Financial Officer Patrick de la Chevardière
The European Union's sanctions for the first time targets
sectors of Russia's economy, including its state-controlled banks
and its oil industry. The moves remain tightly focused because the
EU wants to give President Vladimir Putin a chance to stop his
alleged support of rebel groups in eastern Ukraine.
Like other energy giants, Russia is a crucial market for Total,
which expects the biggest share of its oil and gas output to come
from the country by 2020. BP PLC warned investors on Tuesday that
the sanctions could weigh on its future earnings while its
second-quarter profit were boosted by its stake in the Russia
government-controlled oil group OAO Rosneft.
Total forecasts that its hydrocarbon production in Russia is set
to increase to 400,000 barrels a day from 207,000 last year, thanks
to its partnership with Novatek and their joint project of
liquefied natural gas of Yamal, off the Arctic Circle, along with
China National Petroleum Corp.
"Russia is a great oil and gas country and we'll have to wait
and see the nature of these new sanctions first," Mr. de la
Chevardére said in a conference call.
But the group, which has planned to eventually increase its
stake in Novatek to 19.4% from an initial 12.08% bought in 2011,
stopped buying shares in the Russian group since the Malaysia
Airlines MH17 crash over Eastern Ukraine on July 17, Mr. de la
Chevardére said.
"We stopped buying (Novatek) shares with the Malaysia Airlines
accident, " he said without elaborating.
Total now owns 18% of Novatek, whose largest shareholders,
Russian billionaire Gennady Timchenko, was targeted earlier by a
wave of U.S. sanctions following the annexation of Crimea by Russia
in March.
The French oil major's net profit adjusted for change in
inventories dropped to $3.15 billion in the second quarter from
$3.58 billion a year earlier. Net profit fell to $3.1 billion from
$3.36 billion.
The results were due to a drop of oil and gas output to 2.054
million barrels of oil equivalent a day from 2.29 million a year
earlier, on the back of the Libyan unrest and the loss of a license
in the United Arab Emirates, which is to be re-attributed at a
later date. This was also due to a high number of planned
maintenance over the period.
Total also suffered from the continuing challenging environment
of the refining business in Europe with margins down to $10.9 a ton
from $24.1 a year earlier.
Total's CFO said he was confident for the rest of the year
despite the geopolitical uncertainties as startups should boost
production.
The group is current putting the final touches to a cost-cutting
plan, which is to affect all lines of businesses and will be
announced during an investor day on Sept. 22. No job cuts are
planned at that stage, Mr. de la Chevardére said.
-Write to Géraldine Amiel at geraldine.amiel@wsj.com;
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