TotalFinaElf weathers the storms while expanding its reach
By Kim Housego, Associated Press, 12/25/2002 12:44
PARIS (AP) As TotalFinaElf has aggressively searched for new oil fields to explore, it hasn't been deterred by controversy.
The French energy giant has provoked outrage in other countries by doing business with such pariahs as Iran and Myanmar. And the world's fourth-largest oil group has positioned itself to profit when Iraq is free of U.N. sanctions.
''We have to go where the oil and gas is,'' said Christophe de Margerie, executive vice president in charge of exploration and production. ''Though not at any cost.''
The secret behind Total's success has been its exploration program.
It has the widest geographical spread of any major oil company and has made some of the biggest oil and gas discoveries over the last decade, notably in Angola, Iran, Venezuela and Kazakhstan where costs are lower and profits are higher.
The company's assertive stance has allowed it to surpass its larger competitors. While industry giants ExxonMobil, Royal Dutch/Shell and BP PLC have downgraded oil production targets amid tumbling profits, Total says it's on track to lift output by 10 percent this year.
''TotalFinaElf has been able to expand production and, above all, do it profitably,'' said John Parry, analyst at U.S.-based petroleum consultancy John S. Herold.
The company posted net profits of $4.65 billion in the first nine months of this year, down from the same period in 2001 but still in line with expectations.
Total's expansion into politically sensitive countries has angered the United States and human rights groups.
The company brushed aside U.S. objections and invested heavily in Iran during the mid-1990s, then insulated itself from the threat of U.S. sanctions by selling its American activities.
At the same time, it opened negotiations with Saddam Hussein's government to develop two vast oil fields under the Iraqi sands once the United Nations lifts sanctions imposed after the Gulf War.
Elsewhere, Total has angered separatist rebels in the disputed Western Sahara by signing a contract with Morocco to develop an offshore oil rig.
Does expanding into unstable countries not leave the company more vulnerable to Third World political risks such as coup d'etats, nationalization or terrorism?
De Margerie, who sees Total's diversity as one of its greatest assets, says no.
''We split our risks,'' he said in an interview at Total's headquarters just outside Paris. ''No one country has such an exposure that it would put our company at stake.''
Furthermore, de Margerie said rising demand over the next 20 years means oil companies will need to find much more oil but ''it's not easy to find new opportunities, it's a big fight.''
''When we see new opportunities we are very aggressive,'' he said. ''But we will never operate in a country unless we are certain we can uphold our rules of conduct and respect the laws.''
That wasn't the case in Myanmar, according to labor unions who lodged a complaint in a French court in August alleging the company used forced labor during the construction of a pipeline there. Total denies any wrongdoing.
De Margerie rejected calls by some rights groups for Total to leave the country because of the ruling junta's poor human rights record, citing the company's commitments to local communities there.
Asked about Iran, de Margerie said Washington's decision to bar U.S. companies from doing business there did not apply to Total.
Now the company is focused on Iraq. It is anxious for the opportunity to develop vast new energy deposits in a post-Saddam Iraq. But it also fears that two tentative agreements it has signed with Saddam's regime could be voided by U.S.-led military action.
''The contracts ... would be a major addition to the French company by giving them access to cheap oil,'' said Dr. Fadhil Chalabi, director of the Center for Global Energy Studies in London. ''Therefore it is essential for them to secure these two agreements.''
Iraq has the second-largest proven oil reserves on the planet an estimated 112 billion barrels just after Saudi Arabia. And that is just what is known.
''We would like to develop those fields as soon as possible,'' de Margerie said.
Total, formed two years ago in the merger of Total Fina and the former state-owned oil company Elf Aquitaine, has also had to contend with damage to its reputation at home.
Total Fina first took a beating after an aging tanker it contracted sank off France's Brittany coast in 1999. Some 10,000 tons of gluey oil washed up on the country's beaches.
Two years later, an explosion in a TotalFinaElf subsidiary's fertilizer factory killed 30 people, injured hundreds, and damages scores of buildings in the southern city of Toulouse.
A year ago, activists removed window panes from a chateau belonging to the group's chairman to protest the disaster. TotalFinaElf, France's biggest company, is responding, de Margerie said.
''We have taken new measures to ensure maximum possible security,'' he said, adding that the company would invest $500 million in additional precautions over the next four years. ''We must be more transparent and less defensive.''