The Times: Oilman with a Total solution

By Carl Mortished
Christophe de Margerie, head of exploration at the French oil giant, talks to our correspondent about going beyond the old petroleum practices
SMALL enough to be a prayer rug, the Iraqi carpet occupies a special position in front of Christophe de Margerie’s large and cluttered desk. It’s a crudely woven piece of tourist tat, strangely out of place in the office of such a powerful man, but Total’s head of exploration is a little bit mischievous. He likes to point it out to visitors. “You can buy it for a dollar in the Baghdad market. It’s the famous goddess of Babylon,” he says.
For Total, Iraq is more than just another oil-rich and desperate country. In its former guise as Compagnie Française des Petroles, Total was one of the founding shareholders of Iraq Petroleum Company, which discovered oil at Kirkuk in 1927. And de Margerie, 54, has not given up on Majnoon and Bin Umahr, the two massive oilfields over which Total was negotiating a production contract — never signed — until embargo and war intervened.
“If we do not do it (develop the Iraqi fields) it will be considered a mistake, more than that, a mismanagement.”
Nothing is happening on the ground because of security problems. He will not put the lives of his employees at risk, but he reckons that investors will ask questions if Total loses its position. “It is giving us additional pressure,” he says.
The pressure is mounting on de Margerie, not only in the struggle to acquire reserves and boost oil and gas output, but internally in the company. He admits after a long, circuitous conversation that he is the choice of Thierry Desmarest, Total’s chairman and CEO, for the top job in France’s biggest and most prestigious enterprise. “The date is up to Thierry to announce,” he says. “We have a big chance to have a man like him at the head of the company. I hope the next one does as well.”
They are like chalk and cheese. Shy and a bit severe, the current chairman is a reluctant speaker, hesitant in English, while his apparent successor talks a blue streak, cracking jokes and puns in an American accent.
Total is as big a national champion as they come, but its prospective chief is unimpressed by the current political fashion in Paris for business that wraps itself in a Tricolour. He jokes that he is worried about delivering a speech in English at a Paris oil conference for fear of causing half of the audience to leave the room.
English is sometimes used in the Total boardroom, he says, adding mischievously: “If I am talking to Desmarest, I will certainly not speak in English unless we want to facilitate the work of MI5 or CIA.”
The French press baits de Margerie, calling him a bit posh (he has links to the Taittinger champagne family) while suggesting he struggled initially at Total, lacking the laurel leaf of a diploma from Ecole des Mines, France’s finishing school for would-be oil barons.
He dismisses this as “just a Franco-French thing, like going to Oxford and Cambridge”. Instead he is proud of being “un homme du terrain” working in the trenches in the company’s stamping ground in the Middle East.
If de Margerie seems to some people an odd fellow, he is also distinctively Total. There is an old chestnut that sums up the oil majors: Exxon is about systems, BP is about deals and Total is about relationships. For de Margerie, the world’s current energy plight has a lot to do with the failure of relationships.
The oil price has become a monster, he says, feeding on its own entrails. If we want to produce more oil, we need to stop lecturing and take the trouble to persuade producing countries that it is in their interests to do so and let the oil majors through the door.
Why should sovereign nations build more capacity to use up more of their oil reserves just to benefit us when they don’t need the money, he asks.
“Definitely, nationalism and the price of oil are linked. At $17 per barrel, nationalism was not there. They were asking us for help and it was easy to explain they needed foreigners because they needed money. Today it is difficult for them to say they need the help of foreign oil companies.”
Offering technology is not enough, de Margerie says,because few countries will admit they lack skills. “Can you imagine a politician in France saying I need help from the UK because they have expertise?” In a thinly veiled reference to the shrill cries in Washington against the regime in Caracas, de Margerie says the harangue against Opec producers can only make matters worse. “Everybody is criticising Chavez. I would criticise some others. How can you order them to produce more. They have the right to do what they want. They have their own people, their own interests. They cannot just take into account the concerns of the West.”
It’s a sensitive matter for Total which has a big position in Sincor, the Venezuelan heavy crude oil project, a long-term and high-cost investment in producing fuel from vast deposits of bitumen-like oil that is hugely difficult to extract. In a campaign to get better terms from Western oil companies, Venezuela confiscated Jusepin, a minor Total oilfield.
So, what should Total be saying to Venezuela? De Margerie admits the conversation is not going well. “I am not saying it is easy, but it is what we have to do.”
De Margerie’s answer is that the oil companies must sell more than the business of pumping barrels of crude, and should provide refining, marketing and petrochemical skills. But these are hardly novel ideas. What else do they have to offer? De Margerie cannot resist another dig. “We need to go beyond old petroleum practices, which is different to beyond petroleum.” What he means is participating more actively in a country’s development, using the project management skills of oil companies in other areas for the benefit of host countries. He admits that it is non-core to the business and potentially very expensive. Beyond old petroleum means coping with the new price of oil, which is not just so many dollars per barrel but complex geopolitics in which small communities, such as in Nigeria, where Total has a large position, can bring operations to a standstill and move global markets.
People are failing to deal with the reality of the price, which has nothing to do with speculators or even any lack of reserves, which are ample. “It is a problem of capacities and of timing,” de Margerie says. “This is the real problem of peak oil.”
The oil is there, he says, but the amount you can deliver today depends on how many wells you can drill and how fast you can deplete an oilfield, not to mention gaining the co- operation of governments, which guard access to the precious resource jealously. There is no prospect of reaching the lofty peaks that economists at the International Energy Agency, predict will be needed to satisfy world demand for oil.
There are not enough engineers, rigs, pipelines and drillers to increase current world output of 85 million barrels per day to 120 million, he says.
It would be possible only in a world without politics, he says. “If there were no Americans, no Iranians, no English, no French and no Italians. Not a world I know.”
Swallowing an ELF to make a giant
Total is France’s largest enterprise and the world’s fourth-largest oil and gas company after ExxonMobil, BP and Royal Dutch Shell.
Valued at €136 billion, Total produces 2.6 million barrels per day and has 11 billion in reserve with a substantial presence in the Middle East, Venezuela, Africa and in the UK North Sea where it operates Elgin Franklin, a UK gasfield.
Once ranking second to Elf, Total’s scandal-ridden French rival, the company gained ground under Thierry Desmarest, the current chairman who extended its reach downstream with the acquisition of Fina, the Belgian company in 1999 and a year later, he launched a hostile bid for Elf.
Though fiercely resisted the bid was successful and brought Elf’s substantial Nigerian and Angolan oil and gas reserves into Total’s portfolio.

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