World Expro: With the rise of national oil companies (NOCs), would you agree that the definition of success has changed for the IOC? Would it be fair to say that IOCs no longer simply go where the oil is but rather where the best deal can be made?

Patrick Pouyanné: It is clear that production and reserves remain the simplest indicators for growth. But barrels are not the only story.

Profits, also, are a core indicator of performance. Total’s upstream strategy is to target a profitable growth, and both words – profitable and growth – are equally important in our view.

It is true that growing at a faster rate than the world oil and gas market – 1.5-2% – is not so easy to achieve given the global environment and the absolute size of majors, but it remains an objective. In terms of profitability, majors have always looked at making the best deals.

In the past, not only was there more oil available, but it was also more easily accessible to IOCs, so there was more choice to facilitate negotiations and hence make better deals. Shtokman, for instance, is clearly an innovative deal, which was made possible thanks to Gazprom and Total listening closely to each other’s needs and requirements; the arrangement is designed to bring growth and profits to both companies.

Where, in your view, are the biggest opportunities now for IOCs – principally deepwater Gulf of Mexico, North Sea and perhaps West Africa?

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“Our global strategy is to develop an integrated energy offer for producing countries”

There are still numerous exploration opportunities and this is the reason why we continue to invest $1.8bn per year in exploration and acquiring licences. In the past 15 years, new geological concepts have been discovered: tertiary plays in West Africa deep offshore in the 1990s, paleogene plays in the Gulf Mexico in the early 2000s, subsalt carbonates offshore in Brazil more recently, and Kashagan in Kazakhstan.

This discovery was one of the biggest in the history of our industry. Total has acquired several promising licences in Angola and Nigeria in the past three years, as well as in some prolific basins like offshore Australia.

We have also established a joint venture with Cobalt in order to reinforce our presence in the Gulf of Mexico. And we have taken more frontier licences targeting deep plays, like in Malaysia, Vietnam and Egypt.

So will IOCs be left with the difficult, high-risk properties, such as ultra-deep offshore, Arctic, tar sands and shales? Will their expertise, strong organisational structures and hard-nosed management enable them to handle the significant E&P risks, as well as covering the increased HSE overheads, which NOCs – often with easier oil – do not have to spend?

Since 2000, we have observed a trend where the majors have had mainly access to “technological” reserves, which require technology, financial strength and project management capability, such as the tar sands, ultra-deep offshore, LNG and unconventional gas. Handling these risks has been and remains our core competency.

“There are still numerous exploration opportunities and this is the reason why we continue to invest $1.8bn per year in exploration and acquiring licences.”

Therefore, nothing has changed in essence but the magnitude of the developments is larger, and compounding the risks makes it even more complicated. On the back of several ultra-deep offshore projects in Angola and Nigeria, Total followed its strategy by acquiring positions in the oil sands in Canada – such as the Surmont SAGD project, Joslyn and Northern Lights mines – and Madagascar, in some LNG projects – including Shtokman in Artic Russia and Ichthys in Australia – and in some unconventional gas plays, such as Sulige in China.

In the past twenty years many of the big independent oil companies have spun off or sold some of their core expertise, such as geophysical, thus removing a cost centre and buying the skills in as and when required. To what extent do you think this might have been a strategic error, since IOCs have perhaps reduced what they can bring to partnerships with NOCs, which need no project capital and can go to service companies for virtually everything they need?

It is obvious that IOCs need to develop their in-house know-how, and technology is indeed for us the first argument to bring to the negotiation table with NOCs. In the case of Total, I disagree that the core competency in geophysics has been sold.

“Barrels are not the only story. Profits, also, are a core indicator of performance.”

Geophysics (seismic acquisition and treatment) is in fact one of the most important areas of our R&D programme because it involves geology and reservoir engineering, the heart of the trade of an oil and gas company. On top of that, Total, like some other major IOCs, has kept a core competency that service companies cannot bring: the capability to integrate all technologies from subsurface to surface and to take the global risk of the project.

I also disagree that NOCs don’t need project capital. While it is true for some of them, it is certainly not the case for all of them, like in Venezuela, Iraq, Nigeria and other African countries.

Will IOCs start to head away from their traditional core hydrocarbon activities and find new ground where they can dominate? And will the NOCs, meanwhile, be left primarily with their hydrocarbon reserves?

First of all, Total is and will remain for many years an oil and gas company. We don’t “head away” from our core activities; on the contrary, we want to continue to grow in our core activities.

At the same time, we want Total to get ready for the longer term, by bringing other energy sources in addition to oil and gas. As such, we have selected some key domains: solar, second-generation biomass, clean coal and nuclear.

In nuclear, Total wants to participate in the energy diversification that some Middle Eastern countries, like Abu Dhabi, want to develop for their future.

Our global strategy is in fact to develop an integrated energy offer for producing countries, including oil and gas, LNG, refining and marketing and petrochemicals, as well as solar and nuclear power.