Stephane Michel, Total’s Middle East-North Africa president, talks about winning the new Abu Dhabi concession, the company’s historical role in the region and how the French giant plans to build on its legacy through regional expansion and investing in its workforce.
Abu Dhabi’s decision in January to award Total a 10% share in 15 of its prime oilfield must have made the company’s president in the Middle East breathe a sigh of relief, especially at a time when industry players are increasingly scrambling for market share and ways to secure contracts.
Previously, Total owned a 9.5% interest in the fields for 75 years, which expired at the end of 2014. After a nerve-wracking year-long selection process, the French super-major was the first company to be approved for the new concession, beating fierce competition from fellow international oil giants and winning ADNOC’s trust for the next four decades.
“[The deal] is clearly a milestone in the history of the group in the Middle East. We are both extremely proud and honoured to have been chosen as the first company to enter the new concession with a 10% [share],” said Stephane Michel, president of Total for the Middle East and North Africa region.
“When you have the chance to get a 40-year contract, 2bn barrels reserves, 6% increase of production in a very stable country, which is not that common in the Middle East, we believe that it was really worth it,” he added.
Total will also own a 10% stake in Abu Dhabi Company for Onshore Petroleum Operations (ADCO), a subsidiary of ADNOC and the main operator of the field.
“The concession, which has been extremely successful to develop, [demonstrates] the potential of Abu Dhabi and the UAE so obviously the company was very keen to continue to capitalise on that history and be part of the concession for 40 years,“ said Michel.
Total’s presence in the UAE dates back to the second quarter of the last century, with its first operations starting in 1939.
Today, the company operates a number of key fields and owns interests in a multitude of exploration and production sites in the country.
Total is the operator and owner of a 75% stake of the Abu Al Bukhoosh (ABK) field offshore Abu Dhabi. Furthermore, it has production shares in ADMA-OPCO, ADGAS and Dolphin Energy.
But it wasn’t only its historical relationship in the country that helped the energy giant secure the contract. Its technological edge and know-how were the key drivers behind winning the deal, reports Michel.
“We are always working on technology. It is a technology intensive industry because to produce a barrel of oil tomorrow will be more complex than today and to do that you really need a technological enabler.
“Our proposal was considered the best from an economic standpoint as well as from a technical standpoint. I think it is a very important aspect because it demonstrates the innovation capacity and the capability of Total as a strong operator.
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“Linked to that, we have been appointed as asset leader, which is a kind of technical advisor for both group of fields, which represent two thirds of the production from Al Bukhoosh [field],” he added.
These include the Bu Hasa and Southeast Sahil, Asab, Shah, Qusahwira and Mender fields.
In the next development phase, ADNOC has set itself the ambitious target of raising production to 1.8mn barrels of oil per day (bpd) by the end of 2017, from 1.6mn bpd currently.
As asset manager, Total will have a significant role to play in achieving this, which it plans to do through an increased adoption of new technology and closer cooperation with ADCO, explains Michel.
“We are going to have some Total staff sitting in ADCO located in the assets. We are going to work with ADCO staff to put that growth in place and that goes from reservoir understanding to project management operation, health, safety and the environment, and purchasing.
“Then there is the second aspect: the transfer of technology, which is bringing our best know-how, helping the company further, and the training aspect as well. We would like to help ADCO and the Emirates to raise its competencies.”
The two companies will join forces in some of the brown fields in Abu Dhabi to increase production and Enhanced Oil Recovery (EOR) will be one main area of focus, says Michel.
“It’s clear that there is a huge challenge around EOR to increase the recovery rate of the field. That’s one aspect, where you need to do research and development, you need to do pilots, and go from pilots to industrialisation and do that case by case depending on the type of the field, the technology you want to use and so on. That’s the usual map that you need to build, implement and… oversee regularly.”
Total’s big plans for the UAE come at a time when the company announced a 30% cut to its budget and thousands of layoffs over the next two years. This inevitably raises questions to what extent this region will be affected.
“Historically, there was a huge phase of investment in 2000-2008 in the Middle East. In the last years, like everybody else, we felt the duty to contribute to the reduction of capital expenditure and operational expenditure of the group.
“I would say that the relative impact on each of the projects is going to be the same but as we have fewer projects the [combined] impact is going to be smaller,” Michel says.
Echoing the general sentiment of oil and gas executives, he added: “The oil price is cyclical. We have been through cycles before and we will go through cycles again.
“At the end of the day the only way to weather those kind of cycles is to lower your breakeven cost and to do that you have to be more selective on projects, you have to cut capital expenditure, you have to work with your contractors to be more cost efficient; you have to cut operational expenditure as well.
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“All that building up, you have to postpone projects that aren’t profitable in the current environment and that should help you lower that breakeven point, which is really key.”
Despite the volatility of the oil price, the Middle East will continue to be Total’s third biggest market after Africa, and Europe and Russia combined, says Michel, who as president of MENA, is probably best placed to make such a prediction.
Furthermore, the 41-year old has spent the latter part of his career heading operations in Qatar and Libya, before moving on to become president of the Middle East in 2014 and relocate to Total’s main headquarters in Paris.
Speaking about his role to Oil & Gas Middle East during one of his weekly visits to Abu Dhabi, Michel says: “The role is different in the sense that you are not directly managing in the leadership aspect in the country where you are. Business wise, you are here to help, support (and challenge as well) your managing director which means the level of the business relation you have is different to what it was before, that’s for sure.”
In his new role Michel succeeded Arnaud Breuillac, now Total’s president of exploration and production, and Michel’s boss.
“The transition was quite easy in the sense that [Breuillac] helps me a lot to find my place in my new role and we were working together already before. After that, it was a challenging job, it remains a challenging job and it will be a challenging job for some years because of the security and political aspects of it,” he states.
Outside of the GCC, Total operates a number of onshore fields in Yemen and Libya, which in recent months have been rocked by political instability and violence making it extremely hard to stay in the region. While its operations in Yemen continue uninterrupted, with the situation in Libya escalating, the company had to withdraw all of its staff from the North African country and halt onshore production.
“We employ expats and locals and it is clear that as we are still producing in Yemen we still have staff on the ground. Now we are adapting day by day the number and what we are doing about the local security,” Michel reveals.
But rising violence in Yemen and frequent attacks on oilfields have started to highlight the safety of employees adding more pressure to the IOC, which is also the main operator in the region.
“It is one of our main concerns to make sure that we adjust our operation to the security aspect. For the time being we have been able to manage the situation,” he comments.
He doesn’t hesitate to state his plans for two potentially dangerous parts of the region, Iraq and Iraqi Kurdistan.
“Iraq is clearly a country where there is growth as well; we are involved in the Halfaya project with a Chinese partner.”
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Total owns 22.5% stake in Halfaya alongside PetroChina, which is the field operator with 45% stake, Petronas with 22.5% interest and Iraq’s South Oil Company with 10%. In Kurdistan, the IOC has started exploration in four blocks, says Michel.
“We are working in Kurdistan and the strategic decision that was taken to do so and the programme will go on. It may need to be adapted but there is no question about our commitment to Kurdistan in exploration.
“Now the usual challenge of exploration is to better understand what you have found because we made some discoveries and we are looking to see how we can develop them. And last but not least, we have countries that are closed today but could be open tomorrow,” he says.
Despite the challenges of falling oil prices and growing security issues in certain parts of the region, Total appears more committed to the region than ever.
“It’s a strong legacy. Total has grown in the Middle East. We feel accountable for all that has been built by our predecessors and just to be at the right level of the legacy,” Michel states.
The energy giant recently launched a campaign with a moto that speaks for itself – ‘Committed to Better Energy’. The campaign was designed to reduce its environmental footprint and raise awareness in employees- an initiative Total is particularly keen to highlight in this region, says Michel.
“It is really something in which we believe and which is helping to shape the company. We have a role to play in the world and it is to provide better energy.
“That is especially true here in these countries, and we believe in being more than just a company but being a citizen of the country you are in,” says Michel.
Total’s commitment in the GCC has been particularly evident through the various training initiatives and educational establishments it has started or helped to start in the region. Particularly successful so far has been the Total ABK Academy in Abu Dhabi, which Total launched together with the Abu Dhabi Vocational Education and Training Institute ADVETI–VEDC in order to help develop more local talent.
“I believe it is very important in the Middle East and, for example, when you take Yemen, the involvement we have in Yemen is key for the macro economy of the country. We have an important role to play in the stabilisation of countries such as Yemen.
“And then when you take the Emirates or Qatar your role can be very different.
“Our participation to help them to raise the standard of training, competence and education is absolutely key because that is one of the main changes,” he adds.
Amid worsening skills shortages in the oil and gas industry, training and education are becoming increasingly important for IOCs operating in the region – something that Total has been long aware and looking to leverage.
“What is very interesting is to see all those young talent in the country where we are.
“There is a full new generation of very bright people that will be managing directors in ten years and it is really interesting to help them and raise them.
“For me it is a long-term challenge but it is one that is worth it because it will change the company tomorrow.”
As for himself, Michel says he is completely focused on the job at hand.
“They say the journey is more important than the final destination so we will see what the final destination will be, but that is important right now I have got both a challenging and fantastic job and I’ll try to make the best of it.”
Facts:
– 1.8 MN BPD the production target ADNOC has set to achieve by 2017 from the 1.6MN barrels of oil per day (BPD) currently.
– 22.5% The stake total owns in Iraq’s Halfaya field alongside PetroChina, Petronas and IRAQ’S South Oil Company.
