TotalEnergies is currently facing a production halt of approximately 15% due to ongoing conflict with Iran, which approaches its one-month mark. In an exclusive discussion with CNBC, CEO Patrick Pouyanné noted that while oil prices have climbed significantly, compensating for the lost production, the impact on product prices is more pronounced. He remarked that the refining margins for products such as Asian jet fuel have reached unprecedented levels, emphasizing that the products market is far more critical for consumers than the Brent crude market.
The conflict has broader implications, particularly concerning the supply of global fertilizers, as about 30% of these products transit through the Strait of Hormuz, potentially disrupting the upcoming planting season. Pouyanné highlighted that TotalEnergies maintains a robust position in the global liquefied natural gas (LNG) market, which includes being the largest exporter of U.S. LNG. Despite challenges caused by Iranian drone attacks leading to significant damage at QatarEnergy’s Ras Laffan plant, TotalEnergies is still able to meet customer needs due to its diverse global operations.
Looking ahead, Pouyanné anticipates that prices could rise dramatically if the conflict persists into the summer, coinciding with increased demand in Asia and Europe’s need to replenish storage. Natural gas prices in Europe are currently around $18 per million British thermal units and could potentially escalate to $40/MMBtu if the situation continues.
In the U.S., TotalEnergies has decided to withdraw from offshore wind projects under a deal with the current administration, opting instead to invest $1 billion into domestic oil and gas initiatives. Pouyanné stated that, given the resources available in the U.S., onshore renewables are more sensible than offshore wind, which he regards as a less efficient technology.
Why this story matters
- The conflict impacts global energy prices and stability, affecting both producers and consumers worldwide.
Key takeaway
- TotalEnergies is shifting its focus away from offshore wind to invest in domestic oil and gas production while navigating challenges stemming from international conflicts.
Opposing viewpoint
- Critics argue that moving away from renewable projects could hinder long-term sustainability and environmental goals.
