Total announces exceptional $8B asset impairments
For the calculation of impairment tests of its assets, Total set in 2019 a price scenario with a 2050 Brent price of 50$/b, in line with the “well below 2 °C” scenario of the IEA. This scenario is described in the Universal Registration Document (note 3 of Chapter 8).
Given the drop in the oil price in 2020, Total decided to revise the price assumptions over the next years and selected the following profile for the Brent price: 35$/b in 2020, 40$/b in 2021, 50$/b in 2022, 60$/b in 2023; gas prices have been adjusted accordingly.
For the longer term, Total maintains its analysis that the weakness of investments in the hydrocarbon sector since 2015 accentuated by the health and economic crisis of 2020 will result by 2025 in insufficient worldwide production capacities and a rebound in prices. Beyond 2030, given technological developments, particularly in the transportation sector, Total anticipates oil demand will have reached its peak and Brent prices should tend toward the long-term price of 50$/b, in line with the IEA SDS scenario.
The average Brent price over the period 2020-2050 thus stands at 56.8$2020/b.
As a result of this short-term price revision, Total recognizes in the 2nd quarter 2020 an exceptional asset impairment charge of 2.6 B$, mainly on Canadian oil sands assets for 1.5 B$ and LNG assets in Australia for 0.8 B$, both being giant projects with high construction costs. These limited impacts (less than 2% of Total’s overall assets) reflect the strength of the Group’s balance sheet.
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