Oil and natural gas major Total SA sees itself more as a gas-first, then-oil company as the French firm looks to leverage its recently announced acquisition of Engie SA's upstream LNG business to invest more in natural gas and electricity in the coming years.
"That's our strategy. With low-cost oil, there's more gas. To gas, LNG is a growing market," CEO and Chairman Patrick Pouyanné said March 5 at CERAWeek in Houston.
Pouyanné said that the LNG market grew by 10% in 2017 following 7% growth in 2016. Long to medium-term, he sees the LNG market growing 5% to 6% annually.
Total announced in November 2017 that it would acquire Engie's LNG business for almost $1.5 billion, which paves the way for Total to manage an overall volume of about 40 million tonnes per year by 2020. The acquisition puts Total as the second-largest global player among the majors with a worldwide market share of 10%.
"We see the gas market as more global, more commoditized, more [flexible]," he said. However, the LNG business is still in its "infant stage of trading LNG." He noted that unlike oil markets, global LNG markets have not yet reached the point of being able to optimize all of the logistics.
"In this global market, size will matter," he said. Through the acquisition of Engie, "We'll be in the U.S. with the Cameron LNG plant, we'll be in Russia with Yamal LNG, we'll be in the Middle East … [and] Australia as well."
He said that acquiring Engie was fundamental for Total. "It's paving the way for us to put in place this global gas strategy for the company," he said.
The acquisition of Engie also helps the company weather future down-cycles for prices as it helps diversify the company's portfolio.
"We are a price taker – we don't control the price – so we have to be excellent at volatility control … because it's important that we get the most out of each asset and each production platform to the best of our ability," Pouyanné said.
The integrated model also helps, he said. "It's good to be a large integrated company like Total, upstream and downstream, because we manage to weather the storm ... integration matters and I think from the well down to distribution [integration] is a good business model," he said.
