Total ups clean investment, maintains upstream growth

Total has outlined plans to increase investment in renewables and electricity over the next decade without sacrificing growth in oil and gas production.

In a strategy update detailing its plans to transform into a broad energy company, Total said today that it will raise investment on renewables and electricity from $1.5bn/yr in 2015-20, representing around 10pc of its overall spending, to over $2bn/yr in 2021-25 and more than $3bn/yr in 2026-30. Renewables and electricity's share of overall investment will rise to over 15pc in 2021-25 and more than 20pc in 2026-30.

But the increased spending on renewables will not come at the expense of upstream oil and gas production growth, at least not in the shorter term. Total said it aims to boost oil and gas output by an average 2pc/yr in 2019-25, most of which will take place from 2022. This is in marked contrast to BP's energy transition strategy, which includes a 40pc cut in oil and gas production by 2030.

Total plans to increase its overall "energy production" — which includes power — by one third in the next 10 years to 4mn b/d of oil equivalent (boe/d). Half of the growth will come from LNG and half from electricity, most of which will be from renewables, the firm said.

Total is building up its renewables and power business, having outlined an ambition earlier this year to become a net-zero emissions company by 2050. Yesterday it announced a deal to buy London's largest electric vehicle charge points network.

Like many oil and gas firms, Total has been forced to reassess its energy transition plans in the wake of the oil price downturn and Covid-19 pandemic, which have thrown into question the long-term durability of oil demand. The firm today increased its 2025 renewables target to 35GW of gross capacity, up from 25GW previously. It said that 70pc of this is already in its portfolio and that it aims to add around 10GW/yr after 2025.

LNG is a key part of Total's strategy to deliver "profitable growth". It expects its LNG sales to double by 2030. At the same time, the firm plans to reduce oil product sales by 30pc over the next decade. "Total's sales mix will become 30pc oil products, 5pc biofuels, 50pc gases, 15pc electrons," the company said.

No peer pressure

Shell and BP have both announced plans to cut thousands of jobs as part of their structural shift towards a low-carbon future. But Total chief executive Patrick Pouyanne said his firm's priority is to optimise operations and reduce costs rather than cut jobs. The company already introduced a hiring freeze on new staff earlier this year after the Covid-19 pandemic hit oil prices.

Total has also played down concerns that it will follow BP and Shell in cutting shareholder distributions to conserve cash, saying that its dividend is supported in a $40/bl oil price environment. The company said it plans to be disciplined and flexible on spending, targeting $13bn-16bn/yr of net capital investment in 2022-25, assuming an oil price of $50-60/bl. Investment will remain below $12bn next year as a result of short-term uncertainty and the current low oil price environment. Net capital investment is organic capital expenditure plus acquisition spending minus disposal proceeds.

By Rowena Edwards and Konstantin Rozhnov