- President Putin was the first foreign leader received by President Macron after elections. What do you think of the meeting? What does it mean for the Russian-French relationships?
- It was quite a symbolic meeting on both sides. I think it is a strong signal. It was in Versailles and symbolic because of the opening of an exhibit about Peter the Great and Louis the 15th. By the way, Total was one of this big participants, so I welcomed the two presidents to the exhibit. I think it was a long and frank meeting. I think it was very important to both the presidents to put all the differences on the table. But they are both committed to planning the next moves. I think it is very important for us to find a new dynamic in Europe after the Brexit. I am convinced that differences are a question of sanctions against Russia and it is first matter for European countries. If you have a dialogue, you can find a solution.
- When you say it is a solution for Russia, what exactly do you mean?
- I don’t know. I am not a politician. What I am sure about is that Total will be continuing investing in Russia. And I can tell you is that the president of France told me that I need to continue with this. I strongly believe that the companies like Total are here to build projects. I think that our job is to demonstrate, as we have done, that despite sanctions we are able to build these gigantic projects such as Yamal LNG, putting in place the financing. We have respect for the sanction regime. By doing that, it’s proof that French companies are willing to maintain these relationships and invest in Russia.
- Less than one year before the elections in Russia. If you plan your business, how do you want things to develop in Russia?
- Yamal is invested for 25-30 years. If we come to Russia, why do we do it? Because you have a huge amount of resources for a very long term. And we are able in Yamal to produce LNG at a low cost, and to provide it to our customers. Those are the fundamental rules. Then, whoever is ruling Russia, it’s a matter of decision by the people of Russia, not by Total. I don’t want any influence here, and again, if we continue to invest in Russia, and we believe the fundamentals are worth taking all the risk. Given the fundamentals, the resources, the strong partners we have in Novatek, I think we could do new projects beyond this one, so this is our long-term strategy. You know, when you are the head of a major oil and gas company, you try to develop projects where you have big resources, and Russia is definitely one of the countries where we want to do work.
- President Trump decided to pull out of the Paris climate agreement. What does that decision mean for Total? Will there be any changes in the company's strategy due to the decision?
- When you look twenty years in front of us, if we want to be on the roadmap of two-degrees it means that the gas market should continue to grow, because gas emissions are twice less than the coal. So gas is a growing market. Oil does not have a big growth. So what does it mean for us – it means that we have to focus on low-cost foreign projects. So what we have done for our today strategy – we have divested all of our coal assets because we see less future. We continue to invest in gas, like in Russia… in LNG, and we go beyond. So it is a perfect example of strategy.
When we look at oil we focus on low-cost oil and mainly in the Middle East. We have received a license in Abu Dhabi. We have decided to put some money in renewables and new energy, low-carbon business. You integrate climate in the long term and this, by the way, you do not change because of the Donald Trump decision. We launched this strategy before this treaty was signed and I am convinced that we have to maintain this strategy for the company for the long-term. We are maintaining the strategy.
So is that a good signal? No, for sure. But we have to cope. When you are running an oil and gas company you cope with variability of your price and uncertainty, geographical uncertainty around the world. Therefore, you try to find a strategy for the medium- and long-term. And this will not change.
This treaty was signed by 195 countries, a lot of them have ratified it. The treaty is in force. Today, in Saint Petersburg, I have listened to the Indian Prime-Minister, he maintained his position, so it is a good treaty. Your President Vladimir Putin said he is with the treaty. France, Germany… The world is not only the United States. China and India are much more important for future if you think in terms of size of emissions. But of course the US is important.
- You say you’re interested in additional projects with Novatek. Have you started any negotiations in that respect?
- With Novatek, we have a very strong partnership. We are a shareholder in Novatek, 20%. So of course we have ambition. When you’ve done such a project, because the first project costs more than the second one, we learn a lot, so of course we have the ambition to continue beyond.
However, my focus first is to start the first project, and then we discuss. But the ambition will be, if there’s a new project, to make it less costly. Our engineers have plenty of ideas to be able to lower the cost of LNG.
- But Novatek is not the only producer of LNG in Russia. Are you considering participating in Rosneft or Gazprom LNG projects?
- I think these two companies already have foreign partners, because of Sakhalin etc. You speak of giant projects. In Yamal LNG we have a 20% direct share plus 10% indirect, so 30% of 27 billion dollars, it’s a lot of money, a lot of exposure. So I prefer to go step by step. We’ve also invested a lot to develop relationships, the one with Novatek, and for me, it’s also part of the strategy. Of course I’ve met the other companies and we listened, but I think at this point the priority will be given to Novatek.
- Let’s get back to the global agenda. You were one of the first to prolonging of the OPEC deal. Do you agree with OPEC that oil stocks will rebalance in the 1st quarter next year?
- Yes, earlier I said this is a deal that has to be expanded. Why? If you look at seasonal demand – demand does not grow every year steadily, but by seasons – in the 1st quarter, there is a drop of demand, in the 2nd quarter it’s stable, but you have a big increase of demand in the summertime: driving season in the US, climatization in the Middle East. You have big demand for oil, +1 mln bpd in the 3rd quarter. Which is why this deal has to be expanded.
The OECD inventories today are still 300 million barrels above the normal standard level, quite a big amount. OPEC has set a target that they want that to be divided at least by two. I think that by the end of the year we will have at a 150 million barrel decrease in inventories. If it is the case, I think the market will react positively. I am optimistic that we will see a rebalance of the inventories.
There is one unknown which is US shale oil production. It’s true that there is big activity going on there. We think that US production could grow this year by 600,000 bpd instead of 400,000 as it is anticipated by the end of the year. But 200,000 bdp doesn’t change the picture, because the demand is still quite big, quite strong.
- Do you think they will have to expand the deal after April or it too early to say?
- They have a meeting in November, but I think it’s very good of Saudi Arabia and Russia to give a vision beyond their meeting, so the meeting is safe. I am convinced that if the real objective of OPEC and non-OPEC countries is to stabilize the market through this kind of policy I think… should be maintained. If you begin to suddenly decide there are no more cuts, it will be difficult. We’ll see, it depends on the market.
- Does Total have to cut at any projects which are sub-quota?
- Of course, of course! In all the countries, in Abu-Dhabi, in Angola, Qatar, in all the OPEC-countries which are sub-quota. We have received some letters in those countries asking us, and Total obeyed. Because it’s my interest, I’ve always said that. The price of a barrel of oil before the meeting was $45, then it jumped $55. So it’s a good bet!
We lost some production. My production of the 1-2 quarter is impacted by the quota, so I’ve lost some barrels. But in the end it’s very good for the company. $10 per barrel is very good. Our break-even is under $40/barrel, so all the dollars above 40 are just extra revenue.
- One factor behind the OPEC deal was a new Russian-Saudi partnership. How do you view this factor? Do you think this partnership will strengthen and what role will it play in the global oil industry?
- I think this is obviously a historic factor because Russia never participated through an agreement in OPEC – and, by the way, Russia never cut production. It was also because Russia came and said, OK, we’re ready to participate in the cuts and so I mean the whole dynamics has changed because there are two main players and both joined together to represent 25 percent of the market. So there’s obviously the change of dynamics.
I am convinced that there were many reasons. One of them was that last year the price fell to 28 dollars per barrel and the situation was tougher for everyone, including Russia and Saudi Arabia. So there was the economic dynamics but there may also be a political line which could justify partnership. But I have the feeling it’s good to see these two countries to be able to discuss together at the top level because the president was involved, and at the Oil Ministry level. I participated this morning in a panel with Mr. Novak and Mr. Falih and there seemed to be a good connection between them.
Interviewed by Gleb Bryansky, Iuliia Khazagaeva at the St. Petersburg International Economic Forum