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Total CEO sees geopolitics driving oil prices to $100/bbl in next few months

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Total CEO sees geopolitics driving oil prices to $100/bbl in next few months

The head of French-based oil and natural gas major Total SA said that crude oil prices could rally to $100 per barrel in the next few months amid ongoing geopolitical tensions.

"We are in a new world. We are in a world where geopolitics are dominating the market again," Total Chairman and CEO Patrick Pouyanné said May 17 during an event hosted by the D.C.-based think tank, The Center for Strategic and International Studies.

Brent oil futures are currently trading above $80/bbl, their highest level since the end of 2014, amid growing tensions between the United States and Venezuela, and the recent withdrawal of the U.S. from the 2015 Iran nuclear deal and reinstatement of sanctions against the country.

However, Pouyanné noted that oil prices at these levels are not likely to be sustained for too long.

Looking further out, he said that Total will continue to diversify its business as he sees the global appetite for oil declining in roughly 20 years amid the ongoing shift to a low-carbon world.

In an effort to expand its reach beyond the oil sector, Total recently inked a US$1.73 billion deal to acquire a 74.33% interest in French power and gas retailer Direct Energie.

"We want to be in all steps of the gas value chain and electricity, including distributing gas and power to end customers because it is part of the business," Pouyanné said.

The transaction combines Direct Energie's 1.35 GW of combined gas and renewable capacity, including 800 MW of gas-fired capacity and 550 MW of renewable electricity, with Total's existing portfolio of 900 MW. Direct Energie also has about 2.4 GW of mainly renewable energy capacity under development.

As part of its push into the natural gas and electricity space, Total announced in November 2017 that it would acquire ENGIE SA's upstream LNG business for almost $1.5 billion, paving the way for Total to manage an overall volume of about 40 million tonnes per year by 2020.

"Gas demand will grow. In particular, the LNG market is growing very quickly. So, LNG is a way to connect the markets," Pouyanné said.

The Engie acquisition positions Total as the second-largest global LNG player among the majors, with a worldwide market share of 10%.

Additionally, Total plans to buy a 25% stake in California-based natural gas transportation company Clean Energy Fuels Corp. for $83.4 million and then team up with the company for a leasing program that could add thousands of heavy-duty natural gas fueled trucks to the roads.

Speaking to the company's May 16 announcement that it will have to withdraw from the South Pars 11 natural gas project in Iran in light of sanctions reimposed on the country by the United States, Pouyanné said, "At the end of the day, I am in charge of protecting Total."

In early May, President Donald Trump announced that the U.S. would withdraw from the 2015 Iran nuclear pact and that sanctions suspended under the deal would resume, leaving businesses that entered into contracts based on the agreement with either 90 days or 180 days to cease those operations.

If Total is not given a waiver of protection from secondary sanctions by the U.S., which Pouyanné said May 17 could prove challenging to obtain, the company will be forced to dispose of all of its South Pars 11-related operations by Nov. 4.