Total betting on LNG strategy in emerging economies

The French energy major Total is aggressively moving to diversify and scale its liquefied natural gas operations to reach seemingly every corner of the global market — with exports from the U.S. Gulf Coast a central part of that strategy.

Total executives visited Houston on Thursday to give business strategy presentations and, until Tropical Storm Imelda had a say, provide tours of their facilities along the Gulf Coast at Port Arthur and Cameron LNG.

The company said it was “monitoring the situation,” but declined to comment further on the status of its Port Arthur and Beaumont refining and petrochemical facilities during the storm, although they’re operating at reduced productions volumes, according to an S&P Global Platts analysis.

Even as the ongoing U.S.-China trade war gets in the way of projected growth in developing Asian nations, Total executives said they’re not planning to slow down, including major investments with LNG firms such as Houston’s Tellurian and Freeport LNG, as well as San Diego-based Sempra Energy.

Total’s “ambition” is to become the No. 1 LNG exporter in the U.S. by the end of 2020 through Sempra’s Cameron LNG project in Louisiana and other efforts.

And, farther around the globe, Total also is in the process of paying $8.8 billion for Anadarko Petroleum’s Africa assets, including the massive Mozambique LNG project that started heavy construction recently. Total is buying the assets from Houston’s Occidental Petroleum, which just acquired Anadarko.

Developing countries are expected to one of the largest consumers of LNG in the coming years. But, geopolitical and economic uncertainty tends to dissuade major energy corporations, such as Exxon Mobil, from taking the same investment risks in these countries as Total. Executives dismissed those concerns during the presentation Thursday, stating that Total has expertise in operating in unstable, sometimes dangerous markets.

“We are in Venezuela. We are in Argentina. We have this expertise compared to other players that go from safe point A to point B,” said Laurent Vivier, Total senior vice president of gas. “This is something we are used to doing.”

Total’s U.S. LNG ‘ambition’

Total currently claims 10 percent of the world’s LNG market share, second to Royal Dutch Shell. And Total has made aggressive moves to claim a stake of the U.S. LNG export market in recent years, even as rival Houston-based Cheniere Energy still holds the top spot for U.S. LNG exports.

In August, the first production unit at the Cameron LNG export terminal in Louisiana, for which Total claims a 16.6 percent stake, started commercial operations. Total projects its export capacity from the U.S. could be more than 10 million tons by the end of 2020, and wants to grow it to 15 million by 2025 with expansions at existing facilities, such as Cameron LNG.

“We do feel in the long run that U.S. energy will be competitive worldwide,” Vivier said. “We have the potential of growth in the future starting with a solid portfolio.”

Total will build it

Vivier also spoke about the company’s LNG strategy to build large facilities throughout the world and further integrate the company’s supply chain. He said Total is well-positioned to take advantage of a growing market for LNG in the future due to the company’s size.

“The cost of the infrastructure is absolutely massive (for LNG), and in order to absorb the cost, you need to be integrated on the energy chain, and you need to be global,” Vivier said. “You need to have the size to be able to absorb this very high investment cost.”

Part of that strategy is investing in developing countries such as Benin, a small West African country that agreed in July to sign a gas supply agreement with Total. The French energy major will develop a liquefied natural gas terminal in the country. More investments like this will likely come, Vivier said, as the company aims to capitalize on the growing demand for energy in emerging markets. This may take the form of developing both LNG terminals and in some cases, the power generation in emerging countries.

“It’s bringing us outside of our comfort zone, more downward in the energy chain,” he said. “It’s usually easier for us to do it than the countries themselves. And when they need it, (we will build) power generation as well.”

The trade factor

With significant LNG demand growth from China projected in the future, the trade war is a concern among energy companies. In Houston on Thursday, executives said Total is relatively well-positioned to ride out the trade talks, and accustomed to mitigating the risk for uncertainty.

In the meantime, they said, the company is able to supply China with energy from other sources than the U.S. because they have investments globally.

“Are we in favor of more open discussions? Yes.” But, he said, “We mitigate it by scale. We are not marketing a single-source energy, and we are not attaching the supply to one single point within a shifting environment.”

Source: Houston Chronicle