PARIS (Reuters) - The chief executive of French oil major Total (TOTF.PA) is giving himself until the end of the year to strike oil at a big new field somewhere in the world before considering whether to change direction and cut the exploration budget.
The Paris-based oil major, which launched a drilling strategy that it termed “high-risk, high-reward” two years ago, has had disappointing explorations results so far.
“It’s not a success in terms of results for the moment,” Christophe de Margerie told Reuters in an interview. “But exploration takes more than two years to yield results.”
De Margerie was asked whether the group could drop the expensive strategy, which had been a shift from Total’s previous, more cautious approach. “Not before the end of the year; at the end of the year we’ll see if we didn’t get enough,” he said.
“If we have to change, we’ll do it, but there won’t be a revolution where we stop everything and start over,” he said, adding that the company had yet to drill so far in countries such as Angola, South Africa and Bulgaria.
In any event, he expected Total’s exploration budget to drop next year from the $2.9 billion set for this year, which represented an increase of about 12 percent compared with 2012.
Total, like other big oil majors, has been under pressure from shareholders to cut costs and raise dividends. France’s biggest company by market value and the Western world’s No 4 oil and gas firm said last year it would engage in what De Margerie called a “soft-landing” in capital investments.
De Margerie also played down the importance of reaching the production capacity target he set for 2017: 3 million barrels of oil equivalent per day.
“It’s clear that if we continue to have problems like today in Nigeria, Venezuela, Libya and elsewhere, countries with problems beyond our control, then we can’t reach the 3 million,” he said.
Total has cut its staff in Libya to the bare minimum due to increasing violence in the North African country, for example, while security issues and oil theft have hurt its output in Nigeria.
De Margerie said he should be judged based on new projects launched under his watch such as a string of African fields including Angola’s CLOV and Nigeria’s Egina and Ofon Phase 2 as well as Laggan-Tormore off the coast of Scotland, not on existing production areas affected by political tensions.
“If the old fields are stopped for reasons like embargos, etc, then we won’t reach the 3 million. I know we’ll be slammed, but it’s ok,” he said.
“What I’m interested in is CLOV, Egina - projects where we’ve ploughed new investments. If they don’t deliver, that would be a failure.”
Asked whether missing the objective could harm the group’s credibility, de Margerie said being ambitious was necessary to put pressure on his teams and that he was ready to take on the critics.
“I have no regrets at all. But if I’m at 2.6 million by June 30, 2017, start preparing the coffin and the candles,” he joked.
Embarking on acquisitions also is not a good way to make up for a potential miss in its production target, he said.
“Mergers don’t automatically work out well; it’s not an easy exercise. I’m not under the impression that Total has a size problem.”
He said the best way to reorganise its asset portfolio would be through joint-ventures, especially in the upstream business.
He was also focussed on costs after having cut $4 billion from the Kaombo project launched last April in Angola and “several billions” from the Yamal LNG project in Siberia, which kicked off last December.
De Margerie, who will turn 63 this year and has held the CEO position since 2007, also confirmed that Total would seek a successor from within the company rather than an outsider.
He said he would eventually suggest a name to the board, which would then approve it or not, but that he had no favourite candidate at the moment.
editing by Jane Baird