Interview with Christophe de Margerie, Total’s Chairman and Chief Executive Officer

Speaking of the shift in your business model, has it led to any organizational changes?
Yes. We’re creating a new senior executives’ group this year, known for now as the G60. Our environment has changed dramatically: the East-West balance of power has shifted, the concept of OECD versus non-OECD countries is no longer the same, and the focus on the environment has sparked broad awareness. In this new world, we have to work differently.
The Management Committee is no longer adequate as the sole communication conduit between the Executive Committee and all the other senior executives, much less the rest of Total.

The new group comprises 60 senior executives, who sit on the Management Committees of our different businesses or, at the corporate level, work in Corporate Affairs and Finance. Its role is to reflect, in smaller groups, on a wide range of topics, such as our social license to operate, how to adjust our business model in a changing world, access to reserves, the concept of partnership, and alternative energies. The G60 will not set strategy; its job will be to support and then cascade it.

Christophe de Margerie

Is this new group a way of implementing Total’s cornerstone behaviors at the senior executive level?
Absolutely. Our cornerstone behaviors are boldness, listening, cross-functionality and mutual support. We call them the Total Attitude. These behaviors have become a real business model for us, which we apply across the board, and I’m convinced they’re what we need to stand out from the crowd.

Many people in France are skeptical about this kind of approach, but I’m struck by the fact that young people and non-French nationals have totally embraced the model. They consider it the way of the future. It’s not having the best seismic acquisition that will differentiate us - though, of course, we will have the best. It’s listening to others and treating producing countries like full-fledged partners, while helping them build schools, train local personnel and promote research.

Is cultivating personal relationships useful now that calls for tenders are becoming the norm and the awarding of blocks is an increasingly rigid process?
The way calls for tenders are currently organized is a mistake and I don’t think we’ll be able to continue doing it the way we do now. We saw that this year in Iraq. Some people criticized us, saying that we were being greedy when we refused to accept the financial terms and conditions imposed.

They thought we were being a typically arrogant major oil company. But I’m not backing down - it makes perfect sense to reject compensation of less than $2 per barrel when the price of oil is $80 and the capital expenditure involved is enormous. We’re talking about pretty complex fields and we’re the ones who have to carry the costs.

What’s your baseline price for making an investment decision and does it vary by project type?
We base all our assumptions on the same environment, namely the price of oil and gas, bearing in mind that we estimate them five to ten years forward, in line with the planned start date of the projects.

On the other hand, we don’t use the same terms of reference for all our projects. We use two very different yardsticks: one is the internal rate of return, or immediate return, and the other is value creation, which involves cash and long-term return.

The reason for that is we have projects that seem very lucrative but bring in little cash, because they’re short plateau. And with long-plateau projects, such as LNG or shale gas, you can have lower rates of return but greater value creation. They balance each other, so you need a mix of the two in your project portfolio.