Patrick Pouyannе́, Total Chief Executive Officer, on Activities and Plans in Russia
- Jun. 18 2015 00:00
From the moment you took office, what changes have occurred in Total group's development strategy?
I do not uphold the general idea of sudden changes in strategy. I think continuity is better for the development of business. Our strategy, developed in the days of Christophe de Margerie, is realistic. It was defined by all of the Executive Committee of Total, of which I was myself part. Today, we are carrying it on.
What do you think about the U.S. and EU sanctions against Russia?
Of course, Total respects all sanctions that are applicable to the group, as well as all laws and regulations issued by France, the European Union and the United Nations. Some of these measures affect us, directly or indirectly.
Are you able to continue working on your projects in Russia?
On the technical side, the sanctions have no significant impact on our existing projects in Russia. But since they also concern shale oil activities, we had to suspend our cooperation project with Lukoil to explore and produce the Bazhenov play tight oil reserves, in the Khanty-Mansi Autonomous District. Another limitation concerning the long-term financing in U.S. dollars has had a negative impact on the Yamal LNG project. The partners of the project have had to review the initial financing scheme and look for other solutions, which is what we are doing.
What are the prospects, in your opinion? Will the European sanctions be eased or strengthened?
This is a question for politicians. As a CEO and representative of French investors, I do not want the economic situation to worsen because of the sanctions. I support the political initiatives that contribute to dialogue and rapprochement of positions. Then, it is up to us to continue our work! Without ignoring the present difficulties, but keeping a long-term strategy, the same one that led us to create our partnership with Russia.
What do you think of the strengthening of cooperation between Russia and its Asian partners?
Russia is one of the key energy exporters in the world, and China is a key consumer. They share over 4,000 kilometers of common border. Therefore, they are doomed to work together, and it would be surprising if they did not do so.
What do you think of the drop of crude oil prices on the world market?
The recent fall in oil prices is among the phenomena that none of the most experienced analysts has expected. The situation is not simple, and it will be a "stress test" for all of us. Total is however a financially strong company, and I am sure we will be able to overcome obstacles.
What impact could this have on Total's investment programs?
In response to the situation, we have revised our annual investment program by reducing it by approximately 10 percent. However it has not affected our major projects which contribute to our growth.
Many companies have announced cost-cutting measures. How about Total?
We established an internal policy to reduce costs long before the fall of crude oil prices. And the whole company is involved in this optimization process — initiatives from our employees also play a major role. Each one of them can suggest practical measures and benefit from the experiences shared with their colleagues in other subsidiaries. For our group, which is present in 130 countries, these exchanges are of vital importance. And it works!
Will crude oil prices stay low for much longer?
I do not know and I will not venture to make too accurate predictions, which reality could soon deny. Our duty is to improve our performance to withstand all scenarios.
Christophe de Margerie often came to Russia. How did your partners react to his tragic death?
Christophe de Margerie loved Russia. After his death, which affected me deeply, many Russians sent us very sincere words of sympathy and support. Particularly our partners, who are also our friends and with whom Christophe de Margerie had developed relationships that often went beyond business.
Is it difficult for you to start working in Russia as Total's new boss?
To develop successful cooperation, one must first be imbued in the spirit of the country, try to understand his partners and know how to recognize their strengths. That is how the best partnerships are formed in our business. For my part, I had already visited Russia several times in the past, both for business and as a tourist. In my new position, this is my third visit and my seventh meeting with my key partner — that is once a month!
What place does Russia hold in Total's development strategy? Are you planning to reduce your presence here?
Russia still occupies a special place in our development strategy. If you run away whenever you come across an obstacle, it will be extremely difficult to build an atmosphere of trust with your partners. Next year we will celebrate 25 years of our presence in Russia, but this is only the beginning of a long cooperation. We have very ambitious plans for the future, such as the Yamal LNG project. Our growing participation in Novatek also demonstrates the seriousness of our intentions.
You recently visited Sabetta, where the main facilities of the Yamal LNG project will be based. What impressions did you bring back from this trip? How is the project going?
It was a remarkable trip. I am closely following the progress of the Yamal LNG project, but it was absolutely necessary for me to see with my own eyes the worksite and facilities that were already finished or under construction. I can attest to the effectiveness of this investment, which to date has already reached $9 billion. The construction work is going well. I am content with this project.
How is this project financed?
As I said earlier, there are alternatives and despite the inability to finance the project in dollars, we have made great progress in this direction with our partners. We resort to banks and financial institutions, especially in Europe and China. This is a very promising project, we already have sale contracts for the entire gas production, and I am sure that we will realize the project on schedule.
Do you intend to increase your participation in Novatek?
To date, we hold nearly 18 percent of Novatek's shares and our strategic agreement allows us to go up to 19 percent. In the past we have never announced purchasing shares in advance as it may influence the stock price. Why change this?
How do you assess Total's participation in the Kharyaga production sharing agreement (PSA)?
Kharyaga is one of Total's first projects in Russia. The professionalism and expertise of our employees helped to start developing the reserves of this field, despite many technical challenges. It has been producing for more than 15 years and has excellent results in terms of industrial safety. The project's profitability has enabled the Russian state to receive more than $3 billion from the Kharyaga PSA so far.
What importance do you attach to it?
Over 10 percent of our production currently comes from Russia. Of course, Kharyaga's contribution is modest, but the project has allowed us to improve our practical knowledge of the Russian industry and build a strong relationship with our partner, Zarubezhneft.
You launched another project in Russia in May. How importante is this event for the group?
Termokarstovoye is our first joint project with Novatek. It is a good example of synergy between two big complementary companies, each bringing its expertise to the success of a common project. As a result, the project was launched ahead of schedule and below budget. Since the beginning of 2015, it is Total's fourth new project worldwide.
This is another gas project in the group's portfolio. Does that mean that gas plays a leading role in Total's strategy?
Gas plays an important role in the group's development strategy. In 2014, the share of gas in our production exceeded 50 percent. LNG (Liquefied Natural Gas) is an important and promising segment of the gas market. Total is one of the top three producers in the world and we are present throughout the industrial chain. We intend to strengthen our positions in LNG, including participation in major projects such as Yamal LNG.
Total is a vertically integrated company. Are there plans to develop the group's activities in Russia in other sectors than exploration and production?
It is already the case. Our Marketing & Services branch keeps on growing in Russia. With Gazpromneft we recently opened a plant that already produces top quality bitumen for road surfaces. We are considering developing other downstream activities as well.
Interview by Yelena Anisimova