Christophe de Margerie: Total boss says deep-water drilling is necessary to meet demand.
Total boss says deep-water oil needed
Drilling in deep-water oil fields remains essential in spite of the moratorium in the US Gulf of Mexico following the BP oil spill, Total boss Christophe de Margerie said.
Global demand for transportation fuels leaves no choice but to drill in such deep-water fields, he said.
Exploration continues in other deep-sea fields around the world, such as the North Sea, off the west coast of Africa and offshore Brazil.
"This remains a job that not only is normal but is necessary," he said in an interview with The Wall Street Journal at his Paris office.
"If we stopped producing in the North Sea, prices would soar."
Other oil executives including Chevron head John Watson similarly have cautioned against imposing bans on drilling in waters over 200 metres deep.
From his office atop of a building in La Défense, a business district west of Paris, de Margerie said he expects the BP spill to usher in more stringent safety measures globally, and that could mean higher oil prices as related costs are passed along to consumers.
"Our policy is clearly towards zero risk," he said.
"All this means extra attention, potential additional costs... and this might mean a slight delay before new projects are announced," he said. "This can only have a negative impact over oil prices" and push them higher.
An oil price rise would be a turnaround from recent trends.
After a rise at the start of the year, oil prices have remained relatively stable during the first half, due to the sovereign debt crisis, falling demand from developed countries and stricter environmental standards.
The company reported first-quarter profit of €2.61 billion ($3.46 billion) on revenue of €37.6 billion.
But de Margerie sees rough seas ahead.
In addition to the prospects of higher oil-exploration costs, Total faces difficulties turning around its oil-refining operations.
First quarter refinery output dropped 11% on plant shutdowns designed to trim operating losses.
Last October, a Total official said its oil-refining division was losing around €100 million a month at the time.
A further blow to Total's profits could come from the euro's current weakening against the US dollar.
Total and other European producers buy their oil in dollars, but sell in euro at the gas pump.
The exchange rate effect could hit European gas consumption—though this has not yet happened.
"But it's clear that if the barrel [price] gets higher along with a weaker euro, there would surely be an impact," de Margerie said.
He said the price of oil could easily bounce back to $90 per barrel by year end, as the BP well disaster was reducing investments in finding new fields.
The spill in the Gulf "will probably trigger an additional delay in investment," he said. "There will be a very clear impact on production capacity."
De Margerie said that pooling safety knowledge among those in the energy industry could be a key to improving safety standards without the costs becoming excessive.
In the case of BP, he said, Total has offered to help stop the spill.
"Many industry colleagues have offered support and we have accepted gratefully," said a BP spokesman.
"Have we reached the limits [in safety measures]?" de Margerie asked.
"No we haven't, we will never, we'll always look for something new. But I think that this should be done by working together. And instead of shouting at BP, we'd better sit and discuss over what to do in common."
BP is spending billions of dollars to stop the spill and restore investors' trust, and has already announced plans to sell $10 billion in assets this year to raise money.
De Margerie said Total would move cautiously as those properties come onto the market.
"I won't be the first to take advantage of someone else's downfall," said De Margerie. Still, he added: "We'll have a look as we always look at potential opportunities all the time."
