SANA, Yemen

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A French Oil Giant’s Gamble in Yemen

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• Total SA

Shawn Baldwin for The New York Times

Martin Deffontaines, Total’s general manager in Yemen for the last 13 months, with local officials. 

IT’S been a tough first year for Martin Deffontaines in this arid, impoverished and secluded country on the southern tip of the Arabian peninsula.

Since moving here 13 months ago as the local manager for Total, the French oil giant, Mr. Deffontaines has seen his main export pipeline damaged by terrorists, endured devastating flash floods and sent expatriate families back home because of security concerns.

Despite these challenges, Mr. Deffontaines, a lanky, 43-year-old Parisian, doesn’t appear overly anxious. Indeed, Yemen is a showcase for Total, whose experience here shows how far an oil company will go these days to unearth new energy supplies.

Because of the endlessly complicated interplay of geology and geopolitics, access to petroleum resources is increasingly constrained, costs have soared and energy projects are becoming more complex. Add the recent, dizzying collapse in oil prices to that picture, and you have a raft of companies rethinking their investments and scurrying to cut costs.

So Mr. Deffontaines was philosophical, and a little amused, when he recounted some of the challenges the company had faced here, like negotiating with tribal leaders and sending actors to remote villages to stage a play about the hazards of gas pipelines. In meetings with government officials to thrash out problems, participants typically chew khat, a mildly narcotic plant that is widely consumed in Yemen but banned in many places around the world.

This is a country where tribes are often better armed than government troops, where piracy runs rampant along the coastline, and where many trappings of modern life are absent.

The risks are so pervasive that Total employees can’t travel around town without an escort and are not allowed to leave Sana, the Yemeni capital, on their own. A wave of attacks linked to Al Qaeda occurred last year, including suicide bombings at the United States Embassy in September that left almost 20 dead, 6 of them attackers.

But Total has still gained a strong foothold here. It will soon start shipping liquefied natural gas from the Gulf of Aden, completing a $4 billion project begun less than four years ago. Those shipments will make Yemen the newest member of the world’s small club of gas exporters — and earn the government as much as $50 billion in tax revenue over the next 25 years.

“If we can build this here, we can do it anywhere,” says Stéphane Venes, a construction manager at Total’s natural gas plant in Balhaf, a coastal town. Building the plant required about 10,000 workers, a monumental endeavor in such an isolated place. It also meant building a 210-mile pipeline that had to snake through 22 different tribal lands and one of the world’s most unforgiving deserts.

Such “audace” is precisely what Christophe de Margerie, Total’s chief executive, says he would like to instill throughout his company.

“I make a big distinction between being risky and being bold,” says Mr. de Margerie, 57, in an interview at Total’s headquarters in La Défense, the business district on the outskirts of Paris.

“If you’re in a desert without water, that’s not bold, that’s dumb,” he says. “If you storm out of the trenches with your sword drawn while machine guns fire at you, it’s not bold, it’s dumb. Times have changed.”

Total doesn’t have much choice but to charge ahead. Although it managed for years to expand its hydrocarbon production — even as larger rivals like Exxon Mobil and Royal Dutch Shell struggled to keep output from falling — that run ended last year when it reported a production drop.

Like its competitors, Total now faces one of the sharpest downturns in the history of the oil business, with consumption collapsing and oil prices shedding 73 percent of their value since peaking in July. At the same time, public opinion is sharply divided about oil companies themselves as environmental concerns take an increasingly important place in debates about the future of the energy business.

With no domestic production but deep roots in the Middle East and Africa, Total — as well as its longtime domestic rival Elf Aquitaine, which it acquired in 2000 — has always been forced to blaze or bully its way through faraway lands.

It has struck deals in countries where few wished to do business, like Sudan and Myanmar, or sailed against the tide when it saw lucrative opportunities, as it did in Iran in the 1990s. Such forays have come with complications: in separate investigations, French judges have been examining Total’s role in the United Nations oil-for-food program in Iraq, and whether it made secret payments to enter the Iranian market.

Total’s appetite for risk has also turned it into the top-ranked Western oil company in Africa, and the second-largest in the Middle East, after Exxon. Total pumps an average of 2.3 million barrels of oil and gas a day, and it earned more than $15 billion last year.

While the company has operations throughout the Middle East, some of its biggest bets in the region have not yet paid off.

During the 1990s, Total negotiated with the government of Saddam Hussein and laid the groundwork to eventually develop Iraqi oil fields. But now, some Iraqi officials prefer American companies to European ones and view Total with suspicion because of this past. In Iran, a political confrontation with the West has forced a reluctant Total to walk away — at least for now — from a multibillion-dollar investment to develop a huge natural gas field there.

Total still has its eyes on other targets. It’s aggressively developing assets around the world, whether in Angola’s deep offshore sites, the Sahara in Libya or the forests of Venezuela. And it has decided that part of its future lies in developing expertise in nuclear energy.

“They are very good at capturing deals,” says J. Robinson West, the chairman of PFC Energy, a consulting firm based in Washington that counts Total as a client. “They are also prepared to ride through storms where American companies aren’t. And they are more commercial and agile than others.”

NESTLED at the foot of the Pyrenees near the Basque country in southwestern France, the town of Pau is home to Total’s global research center and a communication hub linking its global operations.

Teams from around the world send core samples from wells — which the French call “carottes” — for analysis there. Lab workers use magnetic imaging technology, also employed in the medical industry, to look for traces of oil in the samples.

The center is home to one of the world’s most powerful computers, which can crunch billions of bits of seismic information and provide invaluable clues as to where oil deposits are hidden. Geologists analyzing that data can then consult with drill sites thousands of miles away, using technology that links the research center to platforms around the world.

Total spends about $1 billion on research annually to find better ways to discover, squeeze or refine oil and gas.

Technological advantages are becoming crucial in the race for petroleum resources. The world’s easy oil reserves have mostly been found, forcing companies to drill at ever-greater depths — sometimes exceeding 30,000 feet — and to look for hydrocarbons in remote places, like the Arctic.

“I don’t think we should be alarmed about reserves’ running out,” says Manoelle Lepoutre, Total’s vice president for research and development. “The potential is there. Engineers know how to extract resources. It’s not a question of resources, but more of production capacity.”

Yet there are increasing limits to oil exploration, which are worrying both engineers and energy experts. At a conference in London two years ago, Mr. de Margerie shook up his colleagues and challenged the industry’s consensus when he warned that the world would not be able to pump enough oil to meet energy demands in coming decades.

At the time, most energy forecasters, including those at the Department of Energy in the United States, expected that supplies would rise above 120 million barrels a day by 2030, up from around 85 million barrels.

But in Mr. de Margerie’s estimation, world production will struggle to rise to 95 million barrels a day, mostly because of geopolitical constraints but also because oil fields produce less and less as they mature.

“In a wine cellar, you know exactly how much wine you have,” says Jean-Jacques Mosconi, Total’s director of strategy. “For oil, it’s different. You only know your final reserves once you run out.”

More recently, Total has warned that a “major oil supply crisis” will emerge if oil prices remain at today’s lower levels and companies cut their investments.

Of course, Total has long been accustomed to provoking the status quo. After buying Petrofina of Belgium in 1999, Total surprised the French establishment when it started a hostile takeover bid for Elf. Total prevailed after a corporate battle by paying about $50 billion for the company, which was nearly twice its size.

Overnight, the hard-fought merger propelled Total into the small club of “super majors,” pitting it against much larger American corporations.

Total recently outplayed its rivals when it grabbed a piece of a huge offshore natural gas field in Russia, beating out Chevron and ConocoPhillips to snare 25 percent of the project. The field, Shtokman, in the Barents Sea, about 350 miles northeast of Murmansk, will cost $20 billion to $25 billion to develop. It is likely to be one of the biggest energy projects of the next decade.

While that deal was a success, the company suffered a setback more recently in Saudi Arabia’s treacherous Rub al-Khali desert, where the kingdom in 2001 had taken the rare step of allowing foreign investors to look for natural gas.

The new policy initially generated great enthusiasm among Total and other foreign oil companies, which saw it as the kingdom’s first step toward reopening its oil sector after nationalizing Aramco in the early 1980s.

But the excitement quickly waned after the Saudis imposed strict limits on foreign partners, including mandates that all oil discoveries belonged solely to the kingdom and that all gas found there had to be sold on the Saudi market at a cut rate. Total left Rub al-Khali early last year, after its program there ran far over its budget and its teams drilled three wells that came up dry. Shell, another shareholder in the venture, has decided to stick with the project.

No hard feelings, however. After Total left Rub al-Khali, Aramco renewed its commitment to build a new refinery with the French company in the Red Sea port town of Jubayl, said Michel Bénézit, Total’s president for refining and marketing.

The refinery is expected to be completed by around 2013.

IN a conference room at Total’s headquarters, Mr. de Margerie lingered with a visitor recently, joking, stretching his schedule after an already long day and straining the nerves of his assistants, who complain that the boss is always late.

A few years ago, after arriving nearly two hours late for a meeting with Qatar’s oil minister, Abdullah al-Attiyah, Mr. de Margerie fell to one knee to apologize for his tardiness.

Such bonhomie has endeared him to colleagues, clients and analysts since his days as Total’s chief for the Middle East in the 1990s. But it also made him an unlikely choice to replace Thierry Desmarest as C.E.O. two years ago.

Mr. Desmarest, who was seen as cold and reserved, is nonetheless widely credited for the success of the merger with Elf, and he remains the company’s chairman.

Mr. de Margerie is neither an engineer nor a geologist. He joined Total in 1974, just after graduating from the École Supérieure de Commerce in Paris, a business school, and picked oil over diplomacy or a career running the family business. His grandfather, Pierre Taittinger, founded the Champagne company that bears his name. Mr. de Margerie’s family also once owned the Crillon hotel in Paris and Baccarat, the maker of crystal and jewelry.

A gregarious talker with a taste for fine whiskey, Mr. de Margerie can be alternately humorous, rambling or serious and single-minded. He is a bon vivant who enjoys long lunches, preferably with a good bottle of wine and pleasant company.

His bushy, starburst mustache, which The Economist magazine once said “would look right at home on the face of a British cavalry officer,” earned him the nickname “Big Mustache” in the French press.

He also used to have a Kazakh Army hat on hand, which he would wear when he wanted to scold his assistants. (“It was a joke,” he cautions.)

Now he keeps nearby a graceful Indonesian figurine from the island of Java to “keep evil people at bay.” It was given to him by an employee after he was investigated on suspicion of corruption two years ago.

The episode still rankles him. In March 2007, a little more than a month after being named chief executive, he was held in an investigative judge’s chambers for nearly 36 hours to answer questions about a 10-year-old gas deal in Iran. The judge ordered that Mr. de Margerie’s tie, shoelaces and belt be removed, lest he try to harm himself.

It was not the first time that he had found himself in such an uncomfortable position. The previous year, he was questioned about his role in the United Nations oil-for-food program in Iraq, which Saddam Hussein used to skim billions of dollars in fees.

Total and Mr. de Margerie deny any wrongdoing. No charges have been brought forward, and neither case is part of an active prosecution.

For his part, Mr. De Margerie says other issues demand his attention.

At a time when national oil companies — like Aramco, Petronas in Malaysia, Petrobras in Brazil and Gazprom in Russia — control large shares of the world’s reserves, and nationalistic governments tighten the screws on foreign companies, the traditional role of Western oil companies is under threat.

“Being accepted simply means being able to perform your job even in the most hostile environments,” Mr. de Margerie says.

THE Hadhramaut region of central Yemen offers a stunning natural backdrop of deep gorges and lush valleys interlacing one another like delicate fingers.

It also provides a good window on how Total balances the requirements of its oil business and its relationship with the locals.

Total operates its main oil-producing block on a desert plateau about 700 feet above the valley. The company’s rigs are practically invisible from below. On the plateau, the scene feels like a lunar landscape. The facility, called Block 10, produces around 50,000 barrels a day, a relatively small operation compared with the huge fields found in neighboring Saudi Arabia.

Despite its size, the operation exemplifies the hardships that Total is willing to take on in its hunt for new energy sources.

The company, which has been in Yemen since the 1980s, is now the country’s largest outside investor. While the government has welcomed foreign concerns, dealings can be complicated.

In 2006, a joint venture between the Hunt Oil Company and Exxon ended abruptly after Yemen canceled a contract to explore a field known as Marib al-Jawf.

Total’s managers here believe that their work with local communities — building schools or financing computer classes and sewing tutorials — can help them avoid similar problems.

But dealing with local residents can still be tricky. A few months ago, torrential rains devastated the region that lies beneath Total’s operations, uprooting nearly half the palm trees in the area and killing 44 people. The company says it has provided more than $300,000 in emergency aid to help deal with the flooding, in addition to $800,000 it spends each year for its own local development programs.

On a recent morning, Mr. Deffontaines, Total’s general manager in Yemen, was meeting with residents hit by the floods. Sitting among tribal representatives, Mr. Deffontaines grew uncomfortable as Dr. Awad al-Jabery, a local politician, asked Total for more money for reconstruction in the region.

“We are like kids demanding things from their father,” Dr. al-Jabery said. “Oil will one day be depleted in this area for Total, but if you contribute to this project, you will be remembered here for centuries.”

Mr. Deffontaines defused the tension with a broad smile and a quick joke.

“I prefer to keep a brotherly relationship with you rather than one of father and son,” he said.

So it goes for Mr. Deffontaines, who says he spends about a third of his time on community-related issues in Yemen — in addition to attending to such matters as the explosive charge placed on his pipeline by terrorists last year that punched a fist-size hole in the tube.

More recently, he has had to contend with thorny personnel issues. In April, in response to growing security concerns, he decided to send the families of his workers back to France. His own wife, son and twin daughters were among those forced to depart.

Mr. Deffontaines says that sending loved ones home was among the hardest choices he’s had to make, but it may have been very wise. A few months later, militants disguised as soldiers detonated two car bombs outside the American Embassy compound here.

While Mr. Deffontaines chalks up all of this to the ups and downs — and the thrills — of working for Total, he says his family is less enamored of the hardships.

“My wife’s not too thrilled,” he says. “You could say she doesn’t fill up at Total these days.”