The market will, however, have to wait for costs to come down even further to make such investments a reality, the boss of the French supermajor said at LNG 18 in Perth on Wednesday.
“I am convinced that a new phase of projects will come – but we have to be patient and not rush,” Pouyanne said at a press conference following a morning plenary address, insisting that LNG producers, buyers, contractors and governments must play their part in getting fresh projects off the ground.
“Beyond the wave of energy production arriving from Australia and the US, the industry needs also to anticipate and decide on new projects that will start production from 2020/2025 and onwards.
“Major companies like Total, we have the balance sheets to be able to launch new projects, but we need the full supply chain and governments – like the UK government has taken good measures to adapt its fiscal terms to the new oil price environment and incentivise (companies) to launch new projects.”
The Total boss said that most industry players “are hoping to see a recovery in the oil price”, but warned that the longer they wait to make final investment decisions, “the more difficult the situation will become”.
Pouyanne said the opportunity to discuss new projects should come next year when contractors, already squeezed by price drops, will “face a very tough situation” once they work through their 2016 project backlogs.
“Frankly for a major company like Total, the best strategy is to invest when the prices are low, because then the costs are low – it is countercyclical. In a commodity business, you make money when you invest in a counter cycle. If you are just investing at the peak of prices and costs, you have little chance to make a differentiation.
“Yes, the market changes will also affect the way projects are marketed and sanctioned, (so) we will need to reconcile short-term and long-term imperatives... We should not focus too much on the short term ... If we do not prepare projects for the future, we must prepare for a (difficult) future.”
Pouyanne also denied that the company has signed any new upstream deals in Iran, now free from international sanctions, although admitted that the company was scouting for opportunities in the country.
“We are just coming back to Iran and our priority is gas, in fact, rather than oil,” he said, adding that it is also interested in the Iranian petrochemicals market as a way of monetising gas assets.
Total on Wednesday signed a memorandum of understanding with South Korea’s Kogas to develop further partnerships, mainly on the downstream side.
