“Our priority is growth – organic, profitable, diversified and balanced”

2007 was a year rich in events, chief among them the increase in the price of oil. Did Total’s profits increase too?

Total’s results were good, indeed very good. Our increased profits were mainly due to the growth in our production and to the rise in oil and gas prices. Of course, some of the price increase was absorbed by certain host countries as well as certain of our contractors and suppliers, which is quite understandable. This being said, prices of gas, which accounts for more than a third of our overall production, rose less than oil prices. In the end, our adjusted net income expressed in dollars increased by 6%.

In 2007, the Group’s production grew less than expected. Is this cause for concern?

During the first quarter of 2007, we recorded a decrease in production that was largely due to events beyond our control, such as the security situation in Nigeria, production cuts by OPEC and the negative mechanical impact of oil price increases on our rights under production-sharing contacts.
On the other hand, we did benefit from the ramp-up of production from the giant Dalia field in Angola, and during the second half we brought on stream the nearby Rosa field as well as the Dolphin project in the Middle East. These projects allowed Total to return to growth. Above all, by the end of the year Total was the only major to post production growth. Looking to the future, we have one of the strongest and most diversified project portfolios in the industry, including fields such as Moho Bilondo and Jura that are due to come on stream in the second quarter of 2008. Regarding technology, a quarter of Total’s current production involves heavy oil, LNG and deep-offshore fields. By 2012, these three areas will account for more than a third of our output.

You became CEO of Total during 2007. Will you be making any changes to the Group’s strategy?

For many years I have backed the strategy devised and implemented by Thierry Desmarest. We will be making adjustments, but only those necessary to ensure the continuity of our growth model. For example, we will be stepping up our efforts in the area of renewable energies and fully integrating into our growth model the need to curb climate change. I am convinced that Total has a winning strategy that will benefit everyone - our shareholders, our employees and our stakeholders as well.

How does Total’s strategy differ from that of its competitors?

Total is an integrated energy group active all along the petroleum chain. Ours is a long-term strategy intended to enable us to make a durable contribution to meeting energy demand, to play a part in the global effort to curb climate change and to reduce energy consumption, while also creating value for our shareholders.
Since 2005, Total has managed to develop its resources without resorting to major acquisitions, securing nearly 6 billion barrels of oil equivalent in major long-term projects, in most cases in partnership with major national companies. And that is in addition to some 2.5 billion barrels of oil equivalent contributed over the same period by our exploration programmes.
These ongoing efforts have put us in an advantageous position compared to the other majors. We now have greater growth potential. This also means that in the coming years we will be investing proportionately more than our competitors. Our current target is to increase our production by an average of 4% per year over the period 2006-2010, on the basis of a Brent price of $60 per barrel. All the projects that are expected to start production within that time frame are now in their development phase and most are on schedule. Over the longer term, our priority is to maintain growth - organic, profitable, diversified and balanced. This strategy is underpinned by solid resources: at present production levels, Total has resources for production over more than 40 years.

Major projects need investments, and project costs are now increasing.

For several years now, our investments have been increasing significantly. Between 2006 and 2008, they rose from $12 to $19 billion. We intend to keep on investing, because an oil company like Total can only remain a durable and competitive player by implementing an ambitious but disciplined investment policy. We will continue to work very hard to keep projects within budget and on schedule, and our project teams have invaluable expertise in this area. We will also have the courage to launch new very large projects, despite a more complex project environment.

What are Total’s investment priorities, in concrete terms?

Some 75% of our investments are in the Upstream segment. We continue to give priority to this business segment because we think this is the best way to help satisfy growing demand for energy for many years to come, and to add to the Group’s value. But at the same time we also value the notion of integration, which means supporting all three of Total’s core businesses – Upstream, Downstream and Chemicals – and capturing maximum
synergies between them so as to benefit from strategic visibility all long the hydrocarbon value chain. This also ensures that our growth is balanced and makes our contribution more attractive to host countries.
While on the subject of host countries, I am convinced that we must foster new kinds of relationship between consumer countries and producer countries, and that we need to be part of the dialogue between them. In Qatar, for example, Total is present in exploration-production, in liquefied natural gas, in petrochemicals, in the transport and sale of pipeline gas, and at the same time we are involved in education and research projects, alongside two French universities.

Where is Total’s main exploration and production focus at present?

We have numerous projects under way in all regions of the world. Much of our effort during 2008 will be directed to developing Jura in the North Sea and Moho Bilondo in Congo, as well as ongoing work on Yemen LNG and Akpo in Nigeria.
We will also be starting work on several major projects launched recently, including Pazflor in Angola and Usan in Nigeria, and we will be joining forces with Gazprom to study the development of the giant Shtokman gas field and also preparing major heavy-oil projects in Canada. Exploration is essential too; our budget for this has increased from $800-900 million three years ago to a planned $1.8 billion for 2008.
The deep offshore, where we have posted a number of technological achievements, accounts for a large part of the Group’s investment. Late in 2006 we brought on stream the Dalia field, 135 kilometres from the Angolan coast in water 1,200- 1,500 metres deep. Dalia is currently a world reference for deep-offshore oil production, and today we are capable of developing fields at depths of more than 2,000 metres.
The challenge now is to be able to develop very-deep fields both offshore and onshore. This dual challenge will be a tough one. We know that there are additional reserves lying much deeper and that these fields contain hydrocarbons whose physical characteristics are largely unknown. The deeper you go, the higher the temperature and pressure are and the less we know about nature of the oil and gas present. Everything leads us to believe that they will be hotter, sourer and more complex, and therefore more difficult to process. So we will have to work on the quality and resistance of the metals used in our equipment. And we will have to innovate.

How involved is Total in countries regarded as politically unstable, or of questionable repute?

As an oil and gas company, Total has to work in the countries where the hydrocarbons are, and wherever we operate we comply with all applicable laws as well as our own Code of Conduct, and we ensure that our employees can work in safety.
Our projects have a duration of 20, 25 or 30 years and sometimes more. Who can say that any particular country will abide by what we in the West regard as acceptable behaviour throughout those 30 years? The questions we ask ourselves are: can we work in the particular country while still complying with our Code of Conduct, and can we make a positive contribution to the social and economic development of the local communities and the people who work with us? We are all very concerned by the situation in Myanmar, but to pull out of that country is not an appropriate response, nor is it the response desired by either our local personnel or the tens of thousands of people with whom we have worked and who count on our presence and support. In difficult countries, Total has to set an example, in every possible area.

As you have pointed out, Total is an integrated energy group. Can you tell us about your Downstream activities?

We are currently investing so as to improve the positioning of our Refining assets, with particular emphasis on new conversion and desulphurisation plants. For example, in early 2008 we launched a $2.2 million modernisation programme at our Port Arthur refinery in Texas, aimed at improving its performance and significantly boosting production of diesel motor fuel from heavier crudes.
As regards Marketing, we at Total feel that an oil company should be present all along the chain, including distribution of its refined products. Some of our competitors have pulled out of this sector, seeing it as too risky. But we see still marketing as a core business, even if it is not always easy (in particular in France) when prices go up.

What are your future projects in the Chemicals segment?

We will continue to expand our petrochemicals business based on world-class plants. Our main facilities in Europe will be optimised and we will be expanding our industrial platforms in Asia and the Middle East. At the same time, we are looking for broader access to other projects based on ethane, which will allow us to be more competitive when crude prices go up.
This is the rationale behind our partnership with Sonatrach in the Arzew project in Algeria. We also expect strong growth in specialty chemicals, but in targeted markets.

This year Total’s Gas & Power division was reorganized. Why was this?

I would like to point out that we have kept the word “Gas”, and for good reason. LNG is one of our key growth drivers. In 2007, it accounted for about 13% of our overall production and that should rise to 17% by 2012. On the other hand we have shifted focus on “Power” to also included “New Energies” quite simply because in future, the world will need all possible forms of energy. Gone are the days when fossil fuels competed with the “new energies”. They are now complementary. Fossils fuels are today indispensable for meeting demand growth, and they will still be indispensable tomorrow. At the same time, we must make them cleaner. That’s why Total is also committed to helping curb CO2 emissions. One of the solutions we favour here is CO2 sequestration, and we are now working on a pilot project at Lacq that will be the first integrated capture and storage facility to use a depleted natural gas field.
Furthermore, and this may surprise some people, Total is firmly in favour of controlling and even reducing energy consumption. From our standpoint, this is the best way to combat climate change and also to ease pressure on supply.

Does this mean Total will be diversifying it energy supply offers?

We will obviously be trying very hard to increase our hydrocarbon supply capacity. The main problem on the supply side is not a lack of reserves. There are abundant reserves and the technological advances made by our industry, and by Total in particular, should allow us to produce most of them.
At the same time, we want to strengthen our position in new energies. That is where our new Gas & Power division organisation comes in. New energies are not only economically important but they also a vector for sustainable development and Total clearly has a role to play here. We may not become a player in all segments. We will be looking at areas that have high technological content and a viable long-term future, and where we have a legitimate contribution to make, such as solar power and second-generation biomass.

What about nuclear power?

That is indeed the rationale behind the partnership that we entered into in early 2008 with Suez and Areva, but we are still at the preliminary stage here. Nuclear power could become a natural complement to our traditional activities, particularly if oil and gas producing countries decide to develop nuclear power to ensure long-term optimisation of their natural resources.
And power station projects would be a good way to leverage Total’s ability to carry out successfully complex, integrated and capital-intensive industrial projects.

In January 2008, a judgement was finally handed down in the case involving the “Erika” sinking. Do you wish to comment on that?

Yes, I don’t make a habit of avoiding complex and difficult issues. Total has accepted its responsibilities right from the start of this unfortunate incident. When the ship sank, we helped to clean up the shoreline and treat the waste, and Total pumped out the oil remaining in the wreck. The cost of these operations amounted to €200 million. It was money well spent and it was our clear duty to make this contribution.
Now, we have decided to compensate the victims of that pollution immediately and finally. But that does not mean we feel that Total was legally responsible. We had no way of knowing that the “Erika” had hidden defects. Every day, there are 150 ships carrying our cargoes over the seven seas. It’s not our job to go down into the bilges and inspect the vessels we charter. That’s a job for marine surveyors, and survey companies need to be properly qualified and accept responsibility for their reports. But since the “Erika” incident we have stepped up our charter control procedures. We only accept vessels with double hulls, we have lowered to 15 years the maximum age of vessels we use to carry heavy fuel oil, and the average age of our overall fleet is five years. Ours is the youngest fleet in the industry.

You often speak in terms of “acceptability”. What exactly do you mean by that?

Operational excellence is necessary in our business, but it must be accompanied by exemplary and responsible behaviour in all areas. Acceptability means going beyond business via a greater contribution to the community and more active involvement in safeguarding the environment. It means being more creative in our overall offer to host countries. It means behaving like responsible local players keen to cement a durable presence in all countries where we do business. Today, we are entering a new era: old expectations are still there, but new behaviour is necessary as well.

A last comment perhaps?

Yes, a message – a very important message – to Total’s employees. I would like to pay homage to them all. It is thanks to their knowledge, their professionalism and their know-how that our projects are successfully completed on time and within budget, and that the energy we produce gets to the consumers who need it. The quality of Total’s employees is a major asset, and it is our responsibility to develop their talents, to foster greater diversity as regards their origin and culture, and to raise their awareness of the environment. The women and men who make up Total are the key to our industrial excellence and to our ongoing success.

* Source: Total in 2007