TotalEnergies CEO Patrick Pouyanné Discusses Geopolitical Impacts on Energy Markets and Strategic Shifts in US Operations

In an exclusive interview with CNBC, Patrick Pouyanné, Chairman and CEO of energy giant TotalEnergies, provided a comprehensive overview of the company’s current operational landscape, particularly in light of escalating geopolitical tensions. Pouyanné revealed that approximately 15% of TotalEnergies’ global production is currently offline as the conflict with Iran nears its one-month mark. However, he emphasized that surging oil prices have more than compensated for the volume of lost production, a sentiment echoed across the broader energy sector.

While much of the public and market focus has been on the price of crude oil, with Brent crude trading comfortably above $100 a barrel, Pouyanné highlighted that the more significant impact of the crisis is being felt in the prices of refined products. He stated, "The Brent market is ok, but the products market, which is the one which impacts customers… is much higher than Brent." Pouyanné noted that the world has "never experienced" refining margins for products, including Asian jet fuel, at the current elevated levels. Beyond petroleum products, the geopolitical instability is also creating significant challenges for global agriculture, with approximately 30% of the world’s fertilizer moving through the Strait of Hormuz, a critical chokepoint whose disruption jeopardizes the upcoming spring planting season.

TotalEnergies, a major participant in the global Liquefied Natural Gas (LNG) market and the largest exporter of U.S. LNG, is actively managing its supply commitments. Pouyanné assured that the company is capable of fulfilling its customer orders in Europe and Asia due to its diversified global portfolio of assets and supply routes. This diversification has proven crucial in navigating the current volatile environment.

The situation in the LNG market has been particularly acute. Last week, QatarEnergy announced that its Ras Laffan plant sustained "extensive damage" following drone attacks attributed to Iran, effectively taking 20% of global LNG supply offline. This significant disruption has led to a sharp surge in natural gas prices across both European and Asian markets. Pouyanné expressed concerns that prices could escalate further if the conflict persists through the summer months. This period typically sees a rise in Asian demand for energy, coinciding with Europe’s efforts to replenish its natural gas storage facilities in preparation for winter. He projected that European natural gas prices, which were trading around $18 per million British thermal units (MMBtu) on Tuesday, could potentially reach $40/MMBtu over the summer if the conflict continues to escalate.

Beyond the immediate impacts of geopolitical events, Pouyanné also addressed TotalEnergies’ strategic decisions and investments within the United States. In a significant development announced on Monday, the company reached an agreement with the U.S. administration to abandon its offshore wind projects on the East Coast in exchange for $1 billion. TotalEnergies has committed to reinvesting this capital into U.S. oil and gas projects, signaling a strategic pivot in its energy development priorities within the country.

Pouyanné explained the rationale behind this decision, citing the critical role of the federal government in offshore wind permitting and the current administration’s vocal criticisms of the offshore wind industry. He stated that TotalEnergies chose to approach the administration with a negotiated deal rather than engage in lengthy litigation concerning its offshore wind leases, which were initially acquired under the previous administration. Furthermore, Pouyanné articulated that, from the company’s perspective, U.S. offshore wind projects are no longer economically viable, especially when compared to more cost-effective energy alternatives available in the United States.

"In the specific situation of the U.S., where you have a lot of land, you have a lot of gas, you have a lot of coal, you have a lot of land to build onshore solar, onshore wind, batteries, we don’t need to have offshore wind," Pouyanné asserted. He characterized offshore wind as a "marginal technology, which is not affordable" in the current U.S. context. Pouyanné reiterated his preference to "allocate my capital to technologies which are more efficient, which give affordable electricity to customers."

In line with its expanding U.S. portfolio and commitment to more efficient energy solutions, TotalEnergies has recently entered into a 15-year agreement with Google to supply renewable power for the tech giant’s data centers. Pouyanné revealed that other major hyperscale cloud computing companies, including Amazon and Microsoft, are now directly engaging with TotalEnergies for similar energy supply agreements. He believes that these large technology firms recognize the value of partnering with an established energy company like TotalEnergies, which possesses not only the capacity to invest and build but also extensive land holdings and trading expertise. "These hyperscalers have understood that an energy company – like TotalEnergies – because we have also capacity, not only to build, to invest, to have land, to trade, we were quite a good partner for them," Pouyanné concluded.