France's Total aims to grow its LNG and renewables business in the coming decade, while reducing its oil product sales, as it looks to transform itself into a broad, lower-carbon energy company.
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In a corporate strategy update Sept. 30, CEO Patrick Pouyanne said Total would though still focus on oil and gas production, using cashflow from that part of the business to help finance growth in its LNG and electricity businesses.
Pouyanne also unveiled a new emissions reduction target for carbon emissions by its customers -- so-called Scope 3 emissions.
It said it wanted to reduce emissions by its customers in Europe by 30% by 2030 and to reduce emissions by its customers globally to less than 2015 levels by 2030.
"We want to transform Total to meet a dual challenge -- more energy and less carbon," Pouyanne said in a webcast presentation.
"The time is right to accelerate growth in low carbon. The real risk is not participating in the transition and being left behind," he said.
In the next decade, Total said it wants to grow its overall energy production by one third, roughly from 3 million b/d of oil equivalent to 4 million boe/d, with half the growth from LNG and half from electricity, mainly renewables.
Total's oil products sales will be reduced by almost 30% in the same time frame.
As a result, Total's sales mix will be: 50% gases, 30% oil products, 5% biofuels, and 15% electrons. That compares with 55% oil products, 40% gas and 5% electrons in 2019.
LNG growth, Pouyanne said, would be at the "core of our ambition."
Total LNG sales will reach 50 million mt/year by 2025, up from around 35 million mt/year now, Pouyanne said.
Cashflow from its integrated LNG business is expected to grow by 40% to more than $4 billion in 2025 at an oil price of $50/b.
Pouyanne said Total also stood to benefit from a tightening of the global LNG market, which he said could take place as early as 2023 due to other projects being delayed in the recent past.
Total has interests in three major new LNG projects coming online in 2023-2024: the Novatek-operated Arctic LNG 2; Mozambique LNG; and Nigeria LNG's seventh train.
"We are in a good position to benefit from the evolution of the LNG market," Pouyanne said.
He added that Total had enough resources in its portfolio to grow its LNG business without additional acquisitions.
"We will not spend a lot on M&A in the next 10 years because we have what we need in our hands," he said, pointing to more resources to come in Mozambique, the potential expansion of Cameron LNG in the US and at its project in Papua New Guinea.
Total's strategy will look to have more equity LNG and less third-party supply in its LNG portfolio.
Pouyanne also pointed to Total increasing its position in the decarbonization of gas with future biomethane and hydrogen production, as well as continuing to reduce methane emissions.
As it looks to grow its LNG position, Total said it would also reduce its oil product sales, with plans to replace those sales with biofuels.
In electricity, Total said it would target 50 TWh of net power generation and 80 TWh of sales by 2025 from gas-fired power and renewables.
It wants to be a "world leader" in renewables, raising its target to 35 GW of gross capacity in 2025 and having the ambition to add around 10 GW per year beyond, as it managed to do in 2020.
"The group will progressively scale up profitable investments in renewables and electricity from $2 billion to $3 billion/year representing more than 20% of capital investments," it said.
Oil, gas 'engine' of transition
Pouyanne stressed that its upstream oil and gas business remained crucial to the company, not least as a way to finance future renewable projects.
"Oil and gas is the engine of the energy transition," Pouyanne said. "Oil and gas will continue to receive a major part of [investments] because we need to deliver cashflow from oil and gas to finance the growth we want to deliver in renewables and electricity," he said.
Pouyanne said oil would remain a core activity, but given demand trends -- he said oil demand would plateau in 2030+ and then decline -- Total would focus its investments on low-cost oil projects that are "resilient" to oil price volatility.
Pouyanne pointed to the Middle East and North Africa as an especially low-cost oil producing region, saying it would be the company's focus for any new upstream opportunities.
On capex, Pouyanne said Total would be "cautious" in 2021, with a budget of around $12 billion, down from $14 billion this year.
He said, though, that if there was a quicker economic recovery, some short-cycle projects that are currently on the "back-burner" could be activated more quickly.
Further out, capex is expected to be between $13 billion and $16 billion a year over 2022-2025, Pouyanne said.
Pouyanne also said Total would continue to drive down its refining capacity in Europe "to match demand" and that it would not build any new conventional refineries.