Criticism fails to deter French oil giant

Toronto Star January 3 2003

PARIS—French energy giant TotalFinaElf hasn't been deterred by controversy in its aggressive search for new oil fields. The Paris-based oil and gas company has provoked outrage in certain quarters by doing business with countries such as Iran and Myanmar. And the world's fourth-largest oil producer has positioned itself to profit when Iraq is free of United Nations sanctions.

"We have to go where the oil and gas is," says Christophe de Margerie, executive vice-president in charge of exploration and production, "though not at any cost."

The company's assertive stance has allowed it to surpass its larger competitors. While industry giants ExxonMobil, Royal Dutch/Shell and BP PLC have downgraded oil production targets amid tumbling profits, Total says it's on track to lift 2002 output by 10 per cent. "TotalFinaElf has been able to expand production and, above all, do it profitably," said John Parry, analyst at U.S.-based petroleum consultancy John S. Herold.

The company posted net profits of $4.65 billion (U.S.) in the first nine months of 2002, down from the same period in 2001 but still in line with expectations. TotalFinaElf's expansion into politically sensitive countries has angered the United States and human rights groups.The company brushed aside U.S. objections and invested heavily in Iran during the mid-1990s, then insulated itself from the threat of U.S. sanctions by selling its American subsidiaries.

At the same time, it opened negotiations with Saddam Hussein's government to develop two vast oil fields under the Iraqi sands once the United Nations lifts sanctions imposed after the Gulf War. Elsewhere, Total has angered separatist rebels in the disputed Western Sahara by signing a contract with Morocco to develop an offshore oil rig.

While Total has pushed ahead with its investments in some politically sensitive countries, Canadian oil and gas giant Talisman Energy Inc. has bowed to pressure from human rights activists over its involvement in an oil project in war-torn Sudan. The Calgary company announced in October that it had sold its 25 per cent interest in the controversial Greater Nile oil project in the east African country for $1.2 billion (Canadian).

The sale to a subsidiary of India's national oil company is expected to be completed by the end of January, a month later than previously expected. Does expanding into unstable countries not leave Total more vulnerable to Third World political risks such as coup d'etats, nationalization or terrorism?

De Margerie, who sees Total's diversity as one of its greatest assets, says no. "We split our risks," he said in an interview at Total's headquarters just outside Paris. "No one country has such an exposure that it would put our company at stake."

Furthermore, de Margerie said rising demand over the next 20 years means oil companies will need to find much more oil but "it's not easy to find new opportunities. ``It's a big fight. When we see new opportunities, we are very aggressive," he said. "But we will never operate in a country unless we are certain we can uphold our rules of conduct and respect the laws." According to the labour movement, that wasn't the case in Myanmar, formerly known as Burma. A group of unions has lodged a complaint in a French court alleging the company used forced labour during the construction of a pipeline. Total denies any wrongdoing.

De Margerie rejected calls by some rights groups for Total to leave the country because of the ruling junta's poor human-rights record, citing the company's commitments to local communities in Myanmar. Asked about Iran, de Margerie said Washington's decision to bar U.S.companies from doing business there did not apply to Total.

Now the company is focused on Iraq. It is anxious to develop vast new energy deposits in a post-Saddam Iraq. But it also fears that tw tentative agreements it has signed with Saddam's regime could be voided by U.S.-led military action. "We would like to develop those fields as soon as possible," de Margerie said.