Following are excerpts from a CNBC interview with Patrick Pouyanné, CEO of Total, and CNBC's Geoff Cutmore and Steve Sedgwick.
SS: Well, I'm delighted to welcome to the set Patrick Pouyanné, who is the CEO of Total, and Patrick, I-, I know, because of-,of recent events in the Middle East, as well, that you are just getting on with business, regardless of the politics, as well, we can revisit that story a little bit later on, if we need to, but the fact of the matter is, you have to insulate Total, and your company, against the wild oscillations, against the wild political gyrations, so to speak, as well. Are you succeeding in doing that for Total, at the moment, regardless of the politics?
PP: I cannot insulate my company from what is happening in the world-,
PP: Look what happened in Iran, has been a demonstration-,
PP: But we go where you have oil and gas, there is a lot of oil and gas-, oil, mainly, in-, in Venezuela, for example. What we think is-, what we do is that we manage our risk, country risk, by spreading the risk among many countries around the world, you know, and we are going where we find oil. In Venezuela, we have been there for-, for 25 years-,
PP: We are still there, we are resilient. What is happening is probably, maybe, a very good news for-, for the people of Venezuela, we will see, the situation there is not easy, to be honest, my main priority, in the last two, three years, was the security of our staff-,
PP: And problems-, real problems, lack of access to water, to electricity, basic needs, and so we are, on the operations, [inaudible] operations are quite tough, because there is no more money, and now huge inflation, so you don't have access to [inaudible] for maintaining all your operation, so it's quite tough, we'll see what will happen, but that is not-,
PP: Total's hand, and we will observe-,
PP: If there is a political-,
SS: And that's why it's very important that you've got your cost per barrel below $50 a barrel, I think, was the latest announcement you came up with, in October, as well. But-, but, I mean, look, the great Dan Yergin told me, years ago, he said, 'Watch Venezuela. Yes, there are concerns over Iran, and other places. Watch Venezuela.' So it's been a very slow-burn crisis, there's been a very tempered reaction on the market, very calm reaction, as well. Is that because everyone knew, and has watched the multi-decade decline of the Venezuelan oil industry?
PP: Yeah, of course, there is a big decline, you know, we are today, 1, 1.3, 1-, 1 million barrel per-, per day-,
PP: Compared to 3 million, so-, and even if there is a change of regime, political regime, it will not come like that, you know, you will need to invest huge amount of money, the installations are not in very good shape, to be honest, so it will not have a direct impact on the oil market very quickly. It will have an impact, I can tell you, because these-, you know, these markets are very volatile, any news, bad or wrong, uh, immediately translated in plus one, plus two, plus four, you've seen what we observe, historical activity in this market, in November, going down from 85 to 60-, less than 60, 55, nobody has-,
SS: Why does everyone get that so wrong, Patrick?
PP: Why? I think because you have plenty of tensions, around the world, you have some-, on the demand side, people are asking around-, , there is still a strong demand, but-, but the consequence of all these trade wars on economic growth, in particular in emerging countries, in particular in China, we have seen this year, yesterday, or two days before, when China announced 6.6%, which is a little lower than the 7%, which-, I would love to see 6.6% in Europe, you know, but immediately, the oil market reacted by -1.5 dollar, which is not zero, it is quite big. So, you have demand, and then on the supply side, with the trade diplomacy, plus OPEC, which manages the market in a-, you know, too much optimism in June-,
PP: They increased their quota, then in November, they had to put back the quota in place. So, you have some moves, in particular, all the decisions of the US about Iran, which was expected to be no quota, and finally, some export quotas were accepted. So, many elements, and-, and on the top of it, you have also the equity markets today, which is-,
PP: Also very volatile. So, the only word I can describe, for the market, is volatility.
GC: The oil industry knows about geopolitical risk, though, it's had to live with it, basically since the stuff came out of the ground here. So, what do you think the real risk premium is in the price currently, because of this nervousness?
PP: It's very difficult, I have no idea, honestly, I'm-, I don't see any-, there is, obviously, a threat, the main risk for the oil market, of course, is the situation in the Middle East, because this is-, you have-, this is the big areas of production, you know, not only Saudi Arabia, but the UAE, Kuwait, and all this region is connected, Iraq, Iran, and all that, and that's clear that the events at the last quarter of the year, around Saudi Arabia, around Iran, which are the two big blocs there, have worried a lot of people, so there is clearly a premium risk. Having said that, we should not overestimate that, there is also supply and demand, which is also important, and-, so the reality is that yes, the demand is strong, but the supply is going also very strong, US Shale, etc., OPEC policy. And so, in fact, in 2018, we continued to increase, I mean, the inventories did not clearly-, went back to their, I would say, standard state, that we had five years ago. So-,
PP: There is still a supply and demand dynamic, there is geopolitics, and clearly-, again, it was clear during the last quarter of last year, and then that's fundamentals.
GC: Can I ask you, just briefly, about the situation in France-,
PP: Of course.
GC: With the-, with the gilets jaunes, and-, and the whole industrial strife that we're seeing at the moment. I know you offered workers 3.1%-,
GC: Have the unions accepted that, and do you think that's the end of any prospect of problems at the refineries?
PP: Yeah, of course, I mean, I have done two things. I give them a-, because the results of Total in 2018 will be quite good, at $71 per barrel, we will, after nine months, we have more than $10 billion figure. So it's-, I cannot announce the result today, because I have-, the market authorities would-, would not be happy-,
PP: But they are quite good, and so we have to share part of it, and so we gave a special premium, of around 1,500 euro, which means more or less 1,800 dollars, to-, to all our workers in France, 30,000 workers, plus the salary increase of 3.1%. So-, but I think it's a way to-, to share the revenues, and the-, the-, the profits, benefits of the company, that's normal. Having said that, coming back to your question, I think the situation is-, is making, I think, our government-, make strong announcement in December, we see a-, a clear decrease of demonstrations. You have today still a group, it's a stadium, you know, it's 50,000 people, so it's not big, but-,
PP: And I think, fundamentally, we cannot have-, accept that 50,000 people could put in to question the democratic institution of the country, but I think the government is-, will recover, the President has launched a nice national dialogue, he will campaign, I think, until the European elections, and we'll see, I think the European elections, obviously, will be important, in terms of political dynamic. In our country, we had a very strong momentum, thanks to all the reforms by President Macron, attracting-, this was-, last year, France was the number one country in Europe to attract foreign investment, so it was-, the momentum was there. Of course, the whole world is looking to that. It's a country where, for 200 years, you know, we like to demonstrate, we have the-, we have freedoms in France, but the freedom, of course, to demonstrate, has a limit, which is also the freedom for people to move, and to be-, and to benefit. So, the world should not be too afraid, you know, you can come to Paris, you will not be attacked, I can tell you, I am living there, it's fine, and, uh-,
SS: Only if we comment wrong on the French markets. Look-, look, Patrick, I want to ask you about the hypocrisy there is, around oil companies, at the moment, and-, and you and I, and other leaders, have talked a lot about what you are, and you're unambiguous, you're an oil and gas company, perhaps, you might want to say, you're a gas and oil company, as well, but people want you to be low carbon, they want you to be a battery manufacturer, they want you to look at solar, they want you to-, and you are looking, to a degree, at all those things, but let's be honest about it, you're going to remain an oil and gas company, or a gas and oil company, for a long time to come, and it is very high in terms of carbon intensity, as well. Oil and gas companies need to have the support of investors, they need to have the investment, otherwise something terrible's going to happen to the world, isn't it?
PP: No, fundamentally-, you are very good, Steven. Yes, of course, fundamentally, our first mission is to bring to the world the energy the people need. You know? This world, where, today, you have 1.5 billion people who have no access to energy, and they want cheap energy, they want an affordable energy, even look what happened in France, about this crisis-,
PP: About gasoline prices. So, we-, we need to deliver that. And it is wrong to say that we can get rid of hydrocarbons in one night, it doesn't work. Any prospective, like the International Energy Agency, in 2040, 2050, you still have-,
SS: It's still oil and gas.
PP: Hydrocarbons. So somebody needs to deliver it. So, yes, we will continue to be a hydrocarbon company, more gas than oil, so yes, I use that expression, gas and oil, which, immediately, people-, natural gas I would say, natural gas. But we will be also, and this is part of my strategy, we will be, in 2040, and because we want to decrease, fundamentally, the CO2 content of the energy products we sell to our customers, we have an ambition to decrease it by 25% minimum by 2040, 15% by 2030, we are on this path, and so we have introduced in the strategy a new segment about low carbon electricity, and, very seriously, we spend more up to $2 billion per year, in 2018 it was more than that, because we make a big acquisition-,
PP: So we are very serious, and I think it's ourselves, we need to take in to account the future market, and the most growing-, the quickest growing market, is electricity. So it's why we look to renewables. We don't look to renewables to be green. We look to renewables because it's the best way-,
PP: To go in to this electricity market, but the electricity market will require also natural gas, so natural gas and renewables, it's the recipe for future growth for my company, and I want Total to continue to be one of the leading energy companies in 2040.
PP: I talked to the Economy Minister of Germany, Peter Altmaier, yesterday, and he talked a lot about batteries, and how he thinks it's an important direction for Europe to go, but, quite frankly, Europe's lost its edge, in this area, hasn't it? The Chinese now are the world leaders in renewable energy, and-,
PP: Not only Europe, the US, as well, I can tell. Uh, in fact, today-, no, I think my-, my profession, we are-, we have acquired a battery company, but it's not a mass market battery company, it's more a high-tech battery company, Saft, so we are involved in discussions. Political leaders in Europe would like to-, would like to-, of course they are driving a policy, a very strong policy, towards EV, so can we benefit for jobs in Europe for that, and batteries are a key element. It's a complex issue, exactly, because we have to face the competition of many Korean, Japanese and Chinese, and Chinese, again, it's a big mass market, with quite a lot of state aids, I would say, and they can attack your-, rest of the world, and from that point of view, Trump is right, to say that there is a-, there is a problem of fairness of the competition. I don't want my remarks, and I explained this earlier, be careful, we don't want to do what we have done in batteries what we have done in solar panels, you know? In solar panels, Europe has developed a huge policy, but then, at the end, we have only Chinese solar panels.
PP: So, if we do that, we need to find a way to build-, to make a protection, because whatever we think, in Europe, jobs are more expensive, and so we can catch up, technologically, I don't-, I am not afraid about-, we have the technology, we can-, we have OEMs, we have big car manufacturing companies-,
PP: In-, in Europe. We can catch up, technologically, and be as efficient as the Chinese. The question is that these guys have five years of advance, how long will this catch up, so it will require some subsidies, and more than that, if we do that, we need to have a clear, I would say, commercial policy-,
PP: Vis a vis China, and so, for example, I think that something which is not well handled in batteries today is the recycling of batteries, and we are very keen on environmental matters, so can we establish, in Europe, a recycling-, a recycling standard, which could be a way to oblige Chinese companies, and others, to meet our standards? That's some ideas. It's a very-, it's a lot-, very capital intensive, so the decision is very-, is tough-,
PP: I can tell you, but we discuss, but again, for a company like Total, if we invest in that market, first, primarily, it is because it makes sense from a business point of view, not because of a political point of view.
SS: Let's leave it there. Something many of our viewers don't even know, that you used to be in politics, a long, long time ago-,
PP: Yeah, I was Chief-,
PP: I was-,
SS: You were Chief of Affairs, weren't-,
PP: Chief of Staff of a former Prime Minister, but-,
PP: But I prefer to be CEO of Total, you know?
SS: I think you do.
SS: Always nice to see you, sorry we brought you out in the minus 18, but, there you go, no global warming here. Patrick Pouyanné, thank you very much indeed, as ever, nice to see you, sir, the CEO of Total.