The French Connection II

What does the signing of the Shah Deniz II final investment decision (FID) in December 2013 mean for Total?

It means, first of all, that the full development of Shah Deniz as a resource of condensed gas for the future has been made possible. This is a highly complicated project because it encompasses technology-intensive equipment, including sub-sea developments that have to take place in the Caspian Sea. Similar projects have been carried out in other parts of the world, but this is a first for the Caspian Sea. It also encompasses infrastructure developments in order to transport the gas to customers in Turkey and further into Europe. For Europe, there are two main pipeline projects, namely the Trans-Anatolian Pipeline (TANAP) and the Trans-Adriatic Pipeline (TAP). This all means that the logistical challenges to turning Shah Deniz II into a profitable project have been overcome. Furthermore, the infrastructure that will be built for this project will be used for future projects, which is important for the development of the energy sector post-Shah Deniz II. The same will hold true for the network of service providers that will develop around this project, who will acquire know-how to be channeled into future projects. Therefore, this is a foundation stone for the future and will have a meaningful impact on the country and the private companies that will work on the project.

What does the project entail for Total specifically?

There will be 26 wells drilled at the field. Then, there are two platforms, gas and condensate lines, and an extension of the Sangachal Terminal to be built. From a pure upstream point of view, it is a large-scale project. After that there will be some de-bottlenecking to do, which means laying more pipes and developing sections of the South Caucasus Pipeline (SCP) in Azerbaijan and Georgia. Subsequently, the TAP and the TANAP, the construction of which will start from scratch, will have to be built from the border of Turkey and Georgia to several kilometers inland in Italy. We currently hold a 10% equity stake in Shah Deniz and SCP, a 10% share in TAP, and a 5% share in the Baku-Tbilisi-Ceyhan (BTC) pipeline. For Total, it will, therefore, be a significant investment over the years to come. The BTC is not yet running at full capacity, so the condensate from the Shah Deniz II field could contribute to increasing the capacity utilization. For Total, as an operator, the Absheron block is a new element in which our future development could be shaped. Shah Deniz, to some extent, paves the way for Absheron as a future resource. However, our project is not yet mature enough for an FID.

Azerbaijan is already a transit point for oil from other CIS countries to Europe. To what extent can it become a similar transit point for gas?

Our presence in the BTC pipeline is, in a way, linked to this concept of using Azerbaijan as a hub to access international markets. We did consider the possibility of exporting oil from our fields in Kazakhstan through the BTC. I do not foresee major challenges in setting up gas export infrastructure from Central Asia to Europe through Azerbaijan. However, the main constraint before making a significant investment in infrastructure is how to make the exports economically feasible given the great distance and the different gas infrastructure it would have to pass through in order to reach the European market. If every operator along the chain of distribution were to capture too much value, the initiative would no longer make economic sense, which would kill the project. Therefore, even if Azerbaijan becomes a transit point for gas from the CIS to Europe, it would have to not retain too much value to allow enough netback to upstream operators.

What role do you anticipate emerging markets playing in Total’s growth?

In 2014, we expect some start-ups, and at the same time, we are trying to tame our investment. We still have to turn our previous discoveries into production and to make some new discoveries through our exploration strategy.