Q&A with Patrick Pouyanne Senior Vice President, Strategy, Business Development, and Engineering Research and Development, E&P, Total
- Joel Parshall (JPT Features Editor)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- April 2009
- Document Type
- Journal Paper
- 22 - 85
- 2009. Copyright is retained by the author. This document is distributed by SPE with the permission of the author. Contact the author for permission to use material from this document.
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The economic assumptions undergirding everyone’s business outlook have changed completely over the past half-year, to say nothing of the price of oil. How is Total responding to that, in terms of upstream strategy, the amount and direction of E&P capital spending, and the implementation of projects?
We didn’t discover just today that we are in a cyclical industry. It is true that since 1999, the price of a barrel essentially has climbed, but this is nothing new. We think that it is a good time to demonstrate that the business model of major companies like Total is the right one. Why? Because we have the financial robustness that will allow us to go through such a cycle. Basically, our view is not to make any stop-and-goes in our investment policy. We think that if you are strong enough to continue to invest in the lower part of the cycle, then you will benefit on lower costs, and when the high cycle comes back again, you will benefit from such investments. So of course to do that, you need to be financially robust, which is our case.
We need to keep our long-term view, which is that between supply and demand, the demand will continue to grow, thanks to Asian markets and for the supply it will be difficult to grow it beyond a certain level. The price of energy, which will have to take into account the future costs of development of unconventional plays obviously will climb. So on a mid-term and long-term basis, we are of the view that the price will be higher than today. So we want to keep acting now. When you are in the upstream business, you look at not only the short-term price but the long-term price. Otherwise, you don’t make the right business decisions.
So basically what we are going to do is to keep our investment program—keep the volume of projects that we forecasted 1 year ago. But the value of this program should be lower because the costs have to come down and to reflect the general trend of the world economy. On the other side, we will be very rigorous on the operating expenditures. We have requested all of our subsidiaries to control and cut down their operating expenses. So we are preserving our future, keeping the capital expenditures, but being tough on short-term expenses.
What are some of your biggest upcoming projects?In 2009, the main big project that we have to sanction is CLOV in Angola, Block 17, which is a deepwater project, and Laggan in the UK North Sea. Most of our big projects to sanction are coming in 2010. We have Shtokman in Russia, Ichthys in Australia—another huge LNG project—and then Joslyn, an oil-sand mining project in Canada in 2011. We are in front-end engineering for these projects at present, and all of that is continuing.
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