Total puts on a sustainable jacket, but oil comes first

A new name, a new colorful logo and above all: a new strategy. At least, that was the promise when the French oil and gas company Total changed its name to TotalEnergies more than a year ago, to emphasize the transition to a ‘world-class player in the energy transition’.

A year before the name change, Total set itself the goal of being carbon neutral by 2050. This is in line with competitors Shell (2018) and BP (2021). After pressure from investors, ExxonMobil and Chevron also promised that they would emit ‘net zero’ CO2 by the middle of this century, although these American oil companies do not count the emissions of sold products such as gasoline and diesel.

“TotalEnergies is now also feeling the pressure of some of its shareholders and society,” says analyst Elif Binici of the French research agency AlphaValue. She points to a group of investors, including the Dutch pension fund PMT, who demanded at a shareholders’ meeting in May that Total set more concrete climate targets. Binici: „I expect critical voices about this again on Wednesday [als het bedrijf een investeerdersdag organiseert, red.]. But not as firmly as before, due to today’s major concerns about energy.”

TotalEnergies has been investing more in cleaner fuels in the last two years. The French multinational no longer sees itself as a classic oil company and is steadily building a greener portfolio. Think of green hydrogen in India, a battery factory in Dunkirk in Belgium and charging stations in Paris and Amsterdam. The company also took a 50 percent stake in US renewable energy company Clearway in May. Binici: „But the return on these investments is not that high for TotalEnergies. Most investments in clean energy come from start-ups.”

At the end of 2021, TotalEnergies’ gross renewable electricity production capacity was 10.3 gigawatts, almost doubling compared to 2020. In comparison, for 2018, that capacity was virtually zero. Nevertheless, the share of renewable energy in the total investments made by TotalEnergies is still marginal at about 10 percent. “TotalEnergies is more likely to be ahead rather than behind,” says energy analyst Jilles van den Beukel of the Center for Strategic Studies in The Hague. “Their investments in renewable energy are higher than at Shell. Total has a clear focus on solar energy, while a competitor like BP opts for wind energy.”

Meanwhile, TotalEnergies continues to search for oil and gas. “They enjoy a good reputation in the sector in the field of oil exploration,” says Van den Beukel. “They dare to take risks and are active in countries such as Angola, Suriname and Uganda. Top man Patrick Pouyanné is a real oiler: no-nonsense. He doesn’t care much for political correctness. According to him, the pumping of oil is simply necessary for the time being and this will otherwise be done by state oil companies, which do it less neatly than Total.”

Like Shell, TotalEnergies is taking full advantage of the high prices caused by the war in Ukraine this year. In the second quarter, Total made a record profit of $9.8 billion. However, it had to write off 3.5 billion dollars on its interest in the Russian gas producer Novatek after the Western sanctions against Russia. The company lost $7.6 billion on that stake. Furthermore, Total withdrew in August from a Russian gas field it controlled with Novatek, after media outcry that some of the gas would be converted into kerosene for Russian warplanes. TotalEnergies still owns a 16.5 percent stake in Novatek, according to research firm FactSet.

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