TotalEnergies eyes top position in LNG production as it moves away from Russia

French energy giant TotalEnergies is ramping up investments in liquefied natural gas (LNG) in a scenario that excludes Russia and is in a ‘very favourable’ position to benefit from the evolution of energy markets as a result of the energy transition, according to the company’s 2022 Strategy & Outlook.

Illustration (Archive); Courtesy of TotalEnergies

On 28 September, TotalEnergies presented its strategy and outlook in New York, revealing a number of business targets that exclude its Russian assets.

Thanks to refocusing the portfolio of oil and gas assets and projects on low cost (less than $20/b), a strong growth strategy in LNG to position itself among the top three worldwide, and the accelerated development into electricity, mainly renewable to reach the top five worldwide, the company is in a very favourable position to benefit from the evolution of energy markets, TotalEnergies said.

The presentation showed that with a breakeven anchored below $25/b, TotalEnergies is a much more profitable company today than it was ten years ago: at the same oil equivalent price, it generates an additional $15 billion of cash flow and can take full advantage of favourable environments.

In addition, the company expects underlying cash flow – excluding Russia – to grow by $4 billion over the coming five years using moderate energy price assumptions ($50/b for oil and $8/Mbtu for European gas), knowing that it would generate an additional cash flow of more than $3 billion for every $10/b increase in the price of oil. This structural cash flow growth will support dividend growth over the next five years.

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In this context, the Board of Directors has adopted a cash flow allocation strategy for the coming years. It provides for the allocation of 35-40% of cash flow to shareholders through the cycles while accelerating the company’s transformation strategy with net investments increasing to $14-18 billion per year over 2022-25.

This increase will be dedicated in priority to the development of carbon-free energies and carbon footprint reduction programs which will represent about a third.

Investments in solar and wind will exceed $4 billion in 2022 (compared to $3 billion in 2021) and a $1 billion energy savings program will be deployed globally in 2023-24 to control the cost of energy consumed and accelerate the reduction of emissions.

The remaining two-thirds will be dedicated to growing in the LNG sector and to developing low-cost, low-emission oil projects to meet demand.

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The decision to increase investments in LNG coincides with QatarEnergy’s selection of TotalEnergies as the first international partner in the North Field South (NFS) LNG project.

Prior to this, TotalEnergies was also selected as the first partner for the 32 Mtpa North Field East (NFE) LNG project.

The projects in Qatar are seen as one of the drivers in the company’s strategy and outlook to explore opportunities fueling LNG growth without Russia.

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