TOTAL: STICKS WITH RUSSIA

When Russian billionaire Gennady Timchenko was presented with France's highest honor, the Légion d'honneur, last autumn, the award recognized his contribution to Franco-Russian economic ties—in particular his role in supporting oil major Total SA's growth ambitions.

Now Mr. Timchenko, the co-founder of oil trading company Gunvor and the largest shareholder in gas company OAO Novatek, is one of the most prominent Russian businessmen placed under sanctions by the U.S. Government in protest at Russia's actions in Ukraine.

But Total is standing by its man and, in line with other oil majors including Exxon Mobil Corp. and BP BP.LN -0.10% PLC, sticking with its investment strategy in Russia, hoping the current tensions between Western governments and Moscow prove to be a temporary problem.

"Russia is a strategic country for Total," Yves-Louis Darricarrère, the company's head of exploration and production recently said.

By 2020, the French oil company, with interests stretching around the globe, from Canadian oil sands to deep offshore West African fields, expects Russia will be its most important region in terms of oil and gas output, with production of hydrocarbons seen around 400,000 barrels of oil-equivalent a day, double the current level. Total's total oil production last year was 2.3 million boe.

Behind the scenes, Total has been lobbying the French government "to get the message across that business relations between Russia and France are crucial" and that "political decisions should be pragmatic and take French companies' interests into account," a person familiar with the matter said.

During a visit to Mexico in mid-April, Total Chief Executive Christophe de Margerie told French President François Hollande he was worried the French government was taking too hard a line against Russia—and that it could disrupt relationships in that country, which Total relies on for income, according to a person familiar with the situation.

The French major's big breakthrough came in 2011 when, in agreement with Mr. Timchenko, it invested $4 billion to take a 12.8% stake in Novatek, Russia's largest independent oil and gas producer. The stake has since risen to 17% and should reach 19.6% by the end of 2014.

Total and Novatek together have a $27 billion project to develop a liquefied natural gas project in Yamal in the Russian Arctic, that should start producing in 2017. The field's proven reserves are estimated at around 800 million barrels of oil equivalent, from which the two companies could one day produce as much as 15 million tons a year of LNG.

Total and Novatek are also developing the Termokarstovoye gas field, which has proved and probable reserves of around 145 million barrels of oil equivalent.

Expanding in Russia fits Total's strategy of finding new reserves to meet growing demand from energy-hungry Asian customers, and, if need be, to supply its European refineries.

"We're all in some sort of a poker game," said one Total executive, speaking on condition of anonymity. "Let's not be hypocritical about it. All oil majors seek a piece of the Russian cake because they all need to put their hands on new resources, new fields and Russia is the largest cake that is reachable —for now."

Accordingly, Total is staying loyal to Mr. Timchenko.

When the Russian businessman canceled his attendance at a Paris industry conference in mid-April, Total's Mr. de Margerie initially intended to pull out in solidarity with his Russian partner, according to a person familiar with the situation. Though he eventually spoke, Mr. de Margerie told the audience he was speaking for himself and Mr. Timchenko, according to people who attended the conference.

Mr. de Margerie still intends to attend a high-profile business conference in St. Petersburg later this month, a Total spokesman said, even though some Western executives have pulled out.

Total does have other partners in Russia. The company expects to sign a joint-venture soon with OAO Lukoil,  another Russian oil and gas major, to develop the immense Bazhenov shale oil field in Western Siberia. It also has a stake in the Shtokman gas field, off the Arctic Circle, majority-owned by Russian gas giant OAO Gazprom,  though that project is currently stalled.

Total has past experience riding out political tensions to keep hold of strategic assets. That fits Mr. de Margerie's motto to "go where the oil is."

The company, for example, refused to leave Myanmar after international sanctions targeted the military junta there in 1992. Its investment was made before the sanctions were imposed, so Total stayed despite years of public opposition. With other oil majors now pressing for a share of Myanmar's resources as the country opens up to foreign investment, Total reckons its strategy as been proven correct.

wsj.com