Total’s adventure shows Big Oil’s conundrum

Total has an admirably straightforward approach dealing with the slump in oil and gas prices. In an environment where oil and gas prices have fallen significantly and remain volatile, Total is focused on being excellent at everything it can control.

Sure, “be excellent” is an oddly retro, Bill-and-Ted-esque mantra for a French oil major. But it recognises that, even when you’re in the ranks of Big Oil, there’s really damn all you can do to move the market price one way or the other. When you produce a commodity, sustainable success really comes down to getting your hands on the lowest-cost reserves and sweating those assets furiously.

And at Thursday’s strategy presentation in London, Total duly announced further cost cuts and another $2 billion (Dh7.34 billion) or so coming out of its annual capital expenditure budget. Even so, the company says, it will increase its oil and gas production by 5 per cent a year through 2020 and keep growing at 1 or 2 per cent a year after that.

Investors ate it up, and a 4 per cent jump in the stock took Total from being the year’s worst performer in Big Oil’s ranks to third place.

Excellent as that sounds, though, there are undeniable tensions in Total’s message to the market that show how hard it is for Big Oil to adapt to a world of lower energy prices. to