Airing on CNBC EMEA, 23:00 CET, Friday, February 13, 2015.
Following are excerpts from the unofficial transcript of a CNBC conversation with Total CEO, Patrick Pouyanné.
Interviewed by Steve Sedgwick of CNBC.
On latest results:
Patrick Pouyanné (PP): Of course it's a beat in terms of results. The impairment is a question first of accounting rules. But it's also differing to some industry decisions, what we impair this year, was high costs, high costs in all assets - which obviously don't fit or represent oil price. And we have to take into account what the vision today for the oil prices. So what did we impair? We impaired oil sands in Canada - which are obviously very high cost developments. And by the way what we decided was to impair assets [that] in fact we don't want to develop between many years - it's put on the back burner. We impaired northern lights and other properties we don't want to develop so in fact there is, you know, impairment is an accounting decision, but it is more than that. What else did we impair? We impaired refining assets in Europe where we just announced restructuring in the refinery and we announced restructuration in French refineries - so there is a logic there again between accounting and industrial decisions, I would say.
On French refineries:
PP: What I guarantee is that all the  sites will continue to have industrial activity. Of course we will have some reduction of capacity but all the sites will have industrial activity and will remain in industrial activity, not necessarily refining, all. But will maintain the activity, that's true. It is the main priority, not only for this year, but of my successor in charge of refiners and chemicals. You know a CEO of an oil and gas company is not only concentrating in refining in France, of course as I plan to do these restructuring I am still godfather of it. But Philippe Sauquet my successor will handle it and I am trusting him very well.
On industry cycles:
PP: It's just a question of a cycle in the commodity business. When the price went up from $30 to $100 a barrel from 2003 to 2006/ 7/- 8 suddenly this industry had plenty of cash. Many projects, many players and other companies were taking a look at the stock market in London; plenty of oil companies, many players asking for rigs, asking for services for new projects. And in front of that the service companies did not have the capacity to answer why? Because you have to remember that in the 90s this industry was… not hiring anybody. This industry was just cutting costs and so after a period of low level activity suddenly a boom and then it's a question of supply and demand. You had plenty of products and people were asking for services and in front of you, you had nobody in fact, very little people, so the rocketing cost is just because there was a lack of capacity. And then what happened? Human people were obliging TOTAL to look for drillers with really very little experience. Not the best one and so the industry created its own inefficiencies. More time to drill, more time to build a new plant, so it's just a question of over-heating, this industry was in over-heating mode… today in fact we're still looking at where is the right balance.
PP: Frankly TOTAL is investing a lot. A lot. When you generate $25 bn of cashflow at $100 a barrel and eventually invest all of that even before giving a dividend to your shareholders, that means we are at a very high level. Maybe a little too high in comparing, so it's always a balance, we had very aggressive growth strategy, but we need also to, we have a strong balance sheet we can face the situation for 1,2,3 yrs, I'm not worried about, let me be clear. In my head I know I'm at the head of a company which can easily go through these low tides in oil price. At the same time you need to find a way to force your organization, it's not contrary and there is opportunity. And frankly what I told you about the industry we need to cool down everything, including internally, people are spending a lot of money and sometimes you need to give signals, so you know we may cut our investment by 10% but we still invest $23-24 bn. So I think all that has to be kept in mind and so I think it's still an aggressive strategy because we need to stay the course on a medium term view and at the same time we need to act, in order to take benefit, to get stronger out of that, even if we are already very strong.
On North American energy independence:
PP: I'm not convinced of that. You know the US is still relying on oil from the ME. It is not true the US will be independent in oil, they continue to import. Yes, the production in the US has increased from the 6 mn to 11 mn barrels but the US consumes 18 mn barrels and part of the oil is coming from there. So I think it's true that as soon as you mention oil people imagine plenty of geopolitics. I think it's in the interest by many countries to have a stable ME and we need this oil, whatever we are, we need the oil we can't avoid it. Relationships are going up and down, that's diplomacy, maybe sometimes the ME people are feeling the US is more looking to come back to their own garden I would say. That's true and maybe a little angry but, by the way what is happening today, with the decision of Saudi Arabia to leave the oil price going down you can see that KSA is back in the middle of the game. And people are going to go around them, so I'm back in the middle of the game, and by the way, once again the price has now dropped but speaking for the US economy it is good news. Maybe the US independent producers are not happy. The US investors in oil and gas are not happy. But globally speaking for the US economy as an importing economy it is good news.
PP: Yes, it was the big adventure. We were not in Russia until 2006/ 7 we had a small operations and in fact we decided to go to Russia. Why? For the simple reason, by that time we were looking for new resources, and you know the earth is rounder so you go where the oil where the gas is, in Russia you have plenty of oil and gas, Russia going from USSR to Russia was an opening, so opportunities there again. So we look and take time by the way to go there to find the right partner with Novatek which is an independent gas company, the largest one driven by a very strong businessman Leonid Mikhelson and to develop a relationship. We fell in the first attempt, and we had to come back 3 years after I participated to buffer them so I know the wrong story, so you have to stubborn sometimes you have to understand the way to make business, it's not easy, it's not easy because in Russia there's a number 1 who's picked a number 1 so you need a strong involvement of the CEO himself and then if you have plenty of good teams, to take a decision in Russian system is often going up to the top, even on technical matters which is not the case in our company. So you have to be, to dedicate a lot of time and you know since I took my office 3 months I meet already Leonid Mikhelson 4 times so it's probably my partner so, you see it's really engaging but there is a lot at stake so it's not easy for sure, nothing is easy in oil and gas. You know the wiser would not be there, it's even more difficult today with the sanctions that's true, we cannot use a dollar to finance a project which is not easy so we have to discover nice money which is Euro by the way or which is maybe the currency of the future so there are some challenges. Obviously I wouldn't like to tell you it's easy no it's not an easy ride for sure but then again we invest for 25 years, 30 years so if I'm stopping every time there is another door in front of me I will never be in that business. Clearly on this type of project I need to keep, to stay on the course, medium and long term view otherwise I have so many doors in front of me and we have so many other doors to develop that business in the last 10 years... you have to be passionate in the oil industry you have to be stubborn, never give up is a good motto and then oil will be as a reward so it's not easy, it's challenging but we are committed to it.
On former CEO, Christophe de Margerie
PP: Christophe was a unique personality. I worked for him for 12 years, he was visionary on many items, he had a real charisma, it is impossible for me to be like him I won't try. I will make a big mistake to try to imitate Christophe. It's impossible. He was unique. When Thierry Desmarest the chairman of the board asked me to take, to become CEO, you know he asked me do you want the job. It's important you know, he told me, it's important maybe you are lucky where you are. I told him of course I want it, it will probably be a lot of fun to be CEO of Total and it's probably a passion more than fun, it's an incredible job. And then, in fact what happened in my mind is okay you are there. You have been selected to do this. You have some qualities. You have some faults as well but you have to be as you are. So of course it went through, and I would say in my mind there were two parts, one of which was a personal part of my mind with all the relationship I had with Christophe de Margerie and the other one was okay I became responsible: we have 100,000 people who want to have somebody who will lead them so I need to behave and become the new CEO.
It was a little tough during the first 10 days and so, what was by the way unique in the company is that when you have these types of huge events it was, you know everybody was behind that, the whole company was so shocked but the people who wanted to be together, and then we managed to transfer that from supporting Christophe to supporting the new management team … It really was a tough time for everybody and people still speak about him, but life continues. I think Christophe frankly with his vision put a company, not only to consider it an oil and gas company, but to be more than that, to be a citizen of the world.
I think he had a unique way to have human relationships He was incredible the way he was establishing human relationships, able to do that, everyone has the capacity to do it in his own way but I think there was very different from that and so he left his impression that he was different , which was true.
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