By GERALDINE AMIEL
French oil major Total stopped buying Iranian crude oil for
its refineries and trading activities at the end of 2011, six
months ahead of the effective implementation of a European
embargo on Iran's oil, and has partly replaced it with oil from
Saudi Arabia, chief financial officer Patrick de la Chevardiere
Total's acknowledgement that it has substituted some Iranian
crude oil with Saudi oil is the first such public comment by a
major European oil company since the European Union decided
last month to embargo Iranian oil.
The company's previous Iranian crude oil supply had been "some
heavy oil that was well suited for our French refineries," and
the substitution crude oil the group has found since it stopped
buying from Iran is "a bit more complicated to process," de la
Chevardiere said in an interview with Dow Jones
Newswires and the Wall Street Journal.
Total has acted early to remove its exposure to Iran as the US
and Europe have tightened sanctions on
the Islamic Republic over its nuclear activities, which they
allege are aimed at developing nuclear weapons.
Iran denies the claim and says its activities are designed to
develop peaceful nuclear power capabilities for the
Iran, meanwhile, has warned its oil-exporting neighbors in the
Persian Gulf not to step in to make up any shortfall in Iranian
oil supply caused by enforcement of the sanctions, and Saudi
Arabia has said it is not actively attempting to seize market
share from its neighbor.
But Total said it has turned to Saudi Arabia to replace some
Iranian oil, even if the Saudi oil isn't as particularly suited
to French refineries.
"The Saudis are doing their bit" to compensate the loss of
Iranian crude on the oil market, de la Chevardiere said.
He declined to disclose the amount of oil Total had been
buying from Iran and wouldn't specify the amount of oil
provided to the company by Saudi Arabia.
Italy and Greece buy Iranian crude oil, the Total CFO said,
noting that Greece has bought the oil through generally looser
credit terms than other oil-exporting countries.
India is now buying extra Iranian
crude oil as others reduce their dependence on the Islamic
Republic, he said.
Speaking on a train to London, where he was to present the
group's fourth-quarter earnings to investors, de la Chevardiere
said that tensions affecting the oil market are likely to keep
oil prices high throughout this year.
These include the unrest in oil producers Libya and Syria,
but also the heightened rhetoric over sanctions on Iran, while
demand is still forecast to increase in emerging markets, he
"If one excludes a potential global economic recession, and if
OPEC [the Organization of Petroleum Exporting Countries] keeps
on reacting when prices weaken, I can say that the crude oil
price should stand well above $80 a barrel at the end of the
year," the Total CFO said.
Earlier Friday, Total reported a 12.8% increase in
fourth-quarter net income on high oil prices and in spite of
weak refining and chemical markets and
Total reported fourth-quarter net profit of 2.29 billion,
up from 2.03 billion in the same period a year
The group's adjusted net income, an earnings benchmark that
strips out non-performance-related inputs and is closely
watched by investors, came in slightly above
The company is still awaiting Russian authorities' decision on
a potential tax-rebate request for its Shtokman liquefied gas
project off the Arctic circle, and
Total now expects to make a final investment decision - already
postponed several times - with its partners in Russia at the
end of the first quarter, de la Chevardiere said.
Total, which is the third largest European integrated oil and gas
company, said Friday it plans to invest a net $20 billion in
2012, less than the $22.2 billion it invested in 2011.
The company's investments last year were 40% higher than in
2010. Eighty percent of its planned 2012 investment will be in
its oil and gas exploration activities.
The company's management forecast annual investment of $23
billion in 2012-2014 as it expects oil prices to remain
Total confirmed it targets a 2.5% increase in average annual
output in 2012-2015.
Total has given priority to exploration and production, as its
refining and marketing activities
are still being weighed down by severe weakness in European
refining margins, causing the group to lose "several hundred
million euros" in 2011, de la Chevardiere said.
He declined to provide the exact figure.
European margins rose in January to $30/ ton, from an average
of $15/ ton in each month last year, due to the unusually cold
weather in Europe and as Swiss-based refining group Petroplus
filed for insolvency and idled most of its European
But European refining margins will remain weak
until other companies cut their production capacities, de la
He noted that demand for refined oil products is on a
"constant downward path" as car engines become more efficient
and as carbon-emission policies in Europe grow more restrictive.
"We did our part; it's time others do theirs also," the CFO
said, referring to Total's idling of one of its six French
refineries, near Dunkirk, in 2009.
Dow Jones Newswires