Paris-based Technip said its unit that builds oil rigs, refineries and liquefied natural gas (LNG) plants will incur lower operating margins over the next two years because of sanctions against Russia’s oil and gas industry.
The oil and gas services firm said margins for the onshore/offshore unit account for more than half its revenue.
It was aiming for an operating margin of about 6-7 percent for the next two years for that unit, but has lowered projections to 5-6 percent.
Chief Executive Thierry Pilenko cited the risk that sanctions against Russia could interrupt revenues flows from Yamal LNG development in Siberia, among other risks.
“If our assumptions on these issues were to prove insufficiently cautious, we estimate our margin to be about a percentage point less this year,” Pilenko said.
Technip won the engineering, procurement and construction contract for Yamal in May. The giant liquefied natural gas export project in Siberia is owned by Russia’s Novatek , French oil company Total and China’s CNPC, according to Reuters.
That project brought Technip’s backlog to 19.9 billion euros ($27 billion) at end-June, up from 14.9 billion euros a year earlier.
The European Commission said Wednesday that the European Union should withhold giving technical assistance to Russia to develop Arctic oil and gas fields “if Moscow fails to help defuse the Ukraine crisis,” Reuters said.
“If the new sanctions do prohibit Technip’s involvement, this could dent their revenue further, as Russia is one the biggest contractors along with China and the UK,” Naeem Aslman, an analyst at AvaTrade told Reuters.