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Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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Is This The Most Successful Western Oil Major In The Middle East?

  • French oil major TotalEnergies has successfully closed a number of high-profile deals in Qatar, Iraq and the UAE.
  • TotalEnergies is seen by some senior members of the EU as sometimes fulfilling a role that straddles both economic and political agendas.
  • TotalEnergies is one of Qatar’s leading partners in the supergiant North Field.

Because crude oil is still the lifeblood of any well-functioning economy and because the infrastructure surrounding it is so multi-faceted – including extensive pipelines running across vast swathes of land, expensive drilling rigs and refineries in place, and heavy on-the-ground security operations to protect such valuable installations – the major oil companies of various countries often play a bigger role for their countries than just a straightforward commercial one. At the extremes, there are the state-run oil companies of Russia and China that are at the vanguard of their countries’ geopolitical stratagems, and the same can be said of some of the Middle East’s big oil companies, such as Saudi Aramco, through which Saudi Arabia still tries to wield what remains of its declining power. On the margins, though, there are companies such as TotalEnergies, and some others in Europe and the U.S., that are very cleverly run, independent oil companies that nonetheless play a crucial role advancing the cause both of their countries and of the West simply by dint of their presence in a particular place. Whilst the overt political policies of the West in the Middle East have floundered in recent weeks and months, France’s TotalEnergies’ activities in the region just keep on expanding. Last week saw the French oil and gas giant sign a partnership agreement with the Abu Dhabi National Oil Co. (ADNOC) that includes cooperation in trading, product supply, and carbon capture, utilisation and storage. For ADNOC, the deal is firmly in line with its target of increasing its crude oil production to 5 million barrels per day (bpd), from around 4 million bpd currently, by 2030. The UAE state oil firm recently reiterated its intention of spending US$127 billion between now and 2026 on projects related to this growth target, and to achieving growth in other commercial areas as well. In this vein, it has already attracted just over US$64.5 billion in foreign investments since 2016 by monetising several of its assets. Perhaps the most notable of these – which created a template then followed by the Saudis – was the 49 percent stake in its gas pipelines that it sold in June 2020 to a group of investors for just over US$10 billion. For TotalEnergies, and France, the new deal will go part of the way towards compensating for the loss of Russian energy imports into the country, following the Kremlin-ordered invasion of Ukraine on 24 February. In its comments on the deal, the French company stated: “[The agreement includes] the development of oil and gas projects in the UAE to ensure sustainable energy supply to the markets and contribute to global energy security.” The deal last week also comes after the signing of the UAE-France Comprehensive Strategic Energy Partnership, which also focuses on securing energy supply for France going forward. Such concerns about the negative effects for France resulting from the staggered bans on Russian energy ahead were echoed again earlier this month by France’s economy minister, Bruno Le Maire, who said: “Let’s prepare for a total cut-off of Russian gas; today that is the most likely option.” Although France receives slightly less than 20 percent of its gas imports from Russia – much less than several other European Union (EU) states – its liquefied natural gas (LNG) imports fell by nearly 60 percent month-on-month (m-o-m) in June, to around 1.06 million metric tonnes, according to industry data.

Related: EU Ministers Sign Off On Voluntary Gas Cuts

This last fact also explains why TotalEnergies has been so busy recently in Qatar – the world’s foremost exporter of LNG – putting it in prime position to win, as it did, one of the highly prized partnership deals with the Qatari government to develop the huge offshore North Field East project. As also highlighted and analysed by OilPrice.com, Qatar’s energy minister, Saad al-Kaabi, stated that the French oil and gas supermajor will have a 25 percent stake in the project, with no other company to have a higher stake and the selection process for partners now finalised. As it stands, Qatar’s partners in the project include, in addition to TotalEnergies, Italy’s Eni, the UK’s Shell, and the U.S.’s ExxonMobil, and ConocoPhillips. Al-Kaabi confirmed that as Qatar has a unified approach, in which all four trains are considered to be one unit, TotalEnergies’ 25 percent stake in one virtual train gives it around a 6.25 percent holding in the whole four trains. The supergiant North Field natural gas field, together with the neighbouring 3,700 square kilometre area of Iran’s South Pars field, comprises the largest non-associated natural gas field in the world, with conservative estimates being that the entire 9,700 square kilometre site holds at least 1,800 trillion cubic feet (Tcf) of non-associated natural gas and at least 50 billion barrels of natural gas condensates. 

That TotalEnergies was one of the first international oil companies chosen for key roles in this key project may not just be a reflection of its capabilities as an oil and gas operation but may also reflect the onus that Qatar is placing on positioning itself as the ‘go-to’ emergency gas supplier for Europe, given the energy supply constraints that are likely to arise from its intended ban on Russian energy this year. “TotalEnergies is seen as ‘one of ours’,” a senior energy source in the EU exclusively told OilPrice.com. “Germany is effectively the economic leader of the EU, but France could be termed the ideological leader of it, having pushed for the ‘Treaty of Paris’ in 1951, which can be seen as the precursor to the European Economic Community and then the European Union itself,’ he said. “TotalEnergies is seen by some senior members of the EU as sometimes fulfilling a role that straddles both economic and political agendas, although this operates on a level distinct from the company itself,” he told OilPrice.com. TotalEnergies also put itself in a very advantageous position from both Germany’s and Qatar’s perspectives by announcing early on after the Russian invasion of Ukraine that it would no longer be investing in any new project in Russia. 

The final piece of the jigsaw is that TotalEnergies just over a week ago reiterated its commitment to the US$27 billion four-project deal agreed last year with Iraq’s Oil Ministry, which is set to move into its ‘execution phase’ this year. As also covered in depth by OilPrice.com, the first of these projects will be the completion of the Common Seawater Supply Project (CSSP). This project is absolutely crucial in enabling Iraq to reach its longer-term crude oil production targets of 7 million barrels per day (bpd), and then even 9 million bpd and perhaps 12 million bpd, as analysed in depth in my new book on the global oil markets. The second of the projects is also a matter of high importance and urgent necessity: to collect and refine associated natural gas that is currently burned off at the five southern Iraq oilfields of West Qurna 2, Majnoon, Tuba, Luhais, and Artawi. The third project is also focused on Artawi, specifically to increase its crude oil output, to 210,000 bpd of crude oil, up from the current circa-85,000 bpd, whilst the fourth and final project will be for the French firm to help in the construction and operation of a 1,000-megawatt solar energy plant in Iraq.

By Simon Watkins for Oilprice.com

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