(MENAFN- Gulf Times) The energy industry must use "whatever levers it controls to stay profitable" at a time of declining oil price, which is a challenge, says Total Chief Executive officer Patrick Pouyanné.
"The decline in oil prices is a challenge for the whole industry. But it needs to be kept into perspective. At least it has reminded everyone in the industry that this is a commodity business, and that, it is by definition volatile," Pouyanné said in an interview with Gulf Times.
He said: "I often stress the fact that Total's profitability was the same in 2002, at $30 a barrel, than it was in 2014, when the barrel was at $100 and more. What happened in the meantime was that the industry lost control of its costs, with an inflation that rocketed to levels that were unsustainable, and eroded profitability.
"And I believe the industry has been a bit complacent when the prices were high. What I tell my teams at Total is - let's work hard to turn this difficulty into an opportunity. We have been there; we will be able to weather the storm. But crossing your fingers in the hope that prices will go back up is definitely not a solution," said Pouyanné who is in Doha to attend the ninth International Petroleum Technology Conference (IPTC).
On steps that need to be taken to navigate through the crisis, Pouyanné said his responsibility was to make sure that "Total stayed profitable" whatever the oil price was.
"This is why we need to stay focused on things we can control, not on things that are out of our hands, like the oil price. So what can we control? Our costs, our ability to deliver projects, our ability to get the most of our assets, thanks to operational excellence and to generate cash. My focus, and everyone's focus at Total, is on four key words € safety, delivery, costs and cash."
"Safety, the top priority for which I accept no compromise. Delivery, and by this I mean we need to strive for operational excellence, getting the most of our assets and turning projects into actual production. Costs, as we need to manage the money we spend, and make sure each dollar we allocate is well spent. And finally cash, which at the end of the day, is what fuels a company like Total. In a commodity business like oil and gas, you have to permanently keep an eye on your breakeven cash in order to be able to cope with price volatility."
Highlighting Total's plans to keep costs in check, Pouyanné said: "First of all, I must stress that we didn't wait for the barrel to drop to $50 and below to act. As early as the beginning of 2014, we already had an across-the-board initiative ready at company level. Because we had identified that costs were just not sustainable. The first thing that needs to be done is to be stringent on costs: this year, we will deliver more than $1.2bn of savings on our operating costs and we target $3bn of savings a year by 2017.
"Secondly, we have adapted our capex strategy. We are coming out of a highly intensive capex phase. We will invest around $23bn this year, we plan around $20bn next year, and we are heading towards $17bn to $19bn from 2017 onwards. Thanks to the high capex that we spent in the years leading to 2014, we now have a strong portfolio of 20 projects, eight of which started-up this year and will allow us to deliver a 9% production growth in 2015. Over the 2014 to 2019 period, it will be 5% yearly. From 2017, we will be able to cover our capex and dividend by our organic cash flows at $60 a barrel."
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