Sector News

Total Names Patrick Pouyanné CEO

October 22, 2014
News
Total SA ’s board of directors on Wednesday named refining and chemicals head Patrick Pouyanné as its new chief executive, installing a company veteran to navigate the oil major through a period of sliding oil prices and uncertain politics in Russia, where it has made a large bet.
 
The move follows the sudden death of the French company’s Chairman and CEO Christophe de Margerie in a Moscow plane crash late Monday.
 
Total’s board, meeting in an emergency session Wednesday morning, approved a plan to separate the roles of chairman and CEO and to bring back former chairman Thierry Desmarest to resume that post.
 
The swift installation of new management represents an effort to steady the French oil giant after the death of Mr. de Margerie, who in his seven-year tenure as CEO moved Total away from the aging oil fields of Europe toward resource-rich nations, often with political risk.
 
Total follows rival Royal Dutch Shell PLC by elevating an executive from the oil-and-gas processing side of the firm as CEO.
 
Over the last decade, big oil companies saw spending money to find and exploit new fields—Mr. de Margerie’s specialty—as the key to boosting profit. But rising development costs have eaten into profit margins, prompting a shift from the oil giants in the past 18 months.
 
Energy firms have refocused their efforts on cutting costs, backed away from some new developments and tried to ditch low-margin businesses and improve operational efficiencies. While Mr. Pouyanné does have some exploration and production experience, he has led Total’s efforts to restructure its chemical and refining business, with a strong focus on reining in spending.
 
Following the tradition at Total—only broken by Mr. de Margerie—the 51-year old Mr. Pouyanné was trained as an engineer at two prestigious French schools—École des Mines de Paris and École Polytechnique in Paris.
 
In his nearly 18-year career at Total, he acquired operational experience in oil fields in Angola and Qatar before coming back to Paris first as a senior executive in exploration and production and then in refining and petrochemicals.
 
Unlike the other five members of the management board, Mr. Pouyanné also has experience in the French government. Total said he would eventually take on the chairman’s role as well because Mr. Desmarest, 68, will encounter age limits in late 2015.
 
Mr. Pouyanné has “very much the type of pedigree you’d expect,” said Jason Gammel, an oil analyst at Jefferies. His appointment is a “strong statement of the depth of the bench at Total.”
 
The challenges facing Mr. Pouyanné are lofty. Oil prices have fallen sharply over the past few weeks, eating into its earnings. Every one dollar shift in the price of crude has a $300 million impact on Total’s operating profit, according to analysts at French bank Natixis .
 
The company has recently launched a cost-cutting plan, mainly centered on refining and petrochemicals units.
 
Mr. Pouyanné will also have to navigate the political landscape in Russia, where Mr. de Margerie leveraged his personal relationship with Russian officials, including President Vladimir Putin to gain access.
 
Total owns a stake in Russia’s second-largest gas firm OAO Novatek and the companies are working on a liquefied-natural gas project in Russia’s Arctic. But the plans have been complicated because Novatek founder Gennady Timchenko has been sanctioned by the U.S. amid the political tensions in Ukraine.
 
Total acknowledged Wednesday the central role of its late CEO, saying Mr. de Margerie’s “exceptional human and professional qualities…were largely responsible for the success of the group.”
 
—Justin Scheck and Andrew Peaple in London contributed to this article.
 
By Inti Landauro
 

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