World has ‘never experienced’ refining margins like this
TotalEnergies CEO Patrick Pouyanné recently provided exclusive insights in an interview with CNBC, shedding light on the impact of the ongoing war with Iran on the company’s production and the global energy market as a whole.
Pouyanné revealed that approximately 15% of TotalEnergies’ production is currently offline due to the conflict, which has been ongoing for close to a month. Despite the lost barrels, surging oil prices have compensated for the decrease in production. With Brent crude surpassing $100 per barrel, much attention has been directed towards oil prices. However, Pouyanné emphasized that the crisis has had a more significant impact on product prices.
He highlighted that the products market, which directly affects customers, is experiencing unprecedented price levels, surpassing those of Brent crude. The soaring prices are particularly affecting petroleum products, with refining margins reaching unprecedented highs. Additionally, the disruption in the Strait of Hormuz, through which about 30% of global fertilizer is transported, poses a threat to the upcoming spring planting season.
TotalEnergies, a key player in the global LNG market and the largest exporter of U.S. LNG, remains resilient in fulfilling customer orders in Europe and Asia due to its diversified global portfolio. However, the recent drone attacks on QatarEnergy’s Ras Laffan plant have caused extensive damage, leading to a 20% reduction in global LNG supply. This has resulted in a surge in natural gas prices in Europe and Asia.
Looking ahead, Pouyanné anticipates that prices could escalate further if the conflict persists through the summer, as Asian demand typically rises during this period. He warned that European natural gas prices could potentially reach $40 per million British thermal units if the war continues.
In a strategic move, TotalEnergies recently reached an agreement with the Trump administration to abandon its offshore wind projects in exchange for a $1 billion investment in U.S. oil and gas projects. Pouyanné justified the decision by citing the abundance of land in the U.S. for onshore solar and wind projects, making offshore wind a less cost-effective option.
Furthermore, TotalEnergies secured a 15-year deal with Google to supply renewable power for data centers, signaling a growing interest from tech giants in partnering with energy companies. Pouyanné revealed that other major players like Amazon and Microsoft are also exploring collaborations with TotalEnergies due to its capacity for investment, trading, and land ownership.
Overall, TotalEnergies remains adaptable and forward-thinking in navigating the complex and volatile energy landscape, forging strategic partnerships and investments to ensure sustainable growth and resilience in the face of geopolitical challenges and market dynamics.
