French Senate Report Targets TotalEnergies’ Operations in Azerbaijan

The article was published in the World Energy Weekly (July 1, 2024 issue), a publication of Petrostrategies, a French think-tank specializing in energy issues.

TotalEnergies took center-stage in France’s Senate during the first five months of 2024, as a commission of inquiry of France’s upper house of parliament held more than forty hearings between January and May, investigating the means at the government’s disposal to ensure that the TotalEnergies Group complies with its environmental commitments and with French foreign policy targets. The Senators interviewed representatives of NGOs, pressure groups, banks, and TotalEnergies itself, including its Chairman and CEO, Patrick Pouyanné.

Upon conclusion of the inquiry, a report with thirty-three recommendations was approved almost unanimously by eighteen out of nineteen members of the commission representing all major French political tendencies. The French Senate has very limited powers under the country’s Constitution, and this can at times encourage its members to adopt somewhat outlandish positions, safe in the knowledge that this won’t have any actual consequences. But the political consensus on the issues raised by the inquiry is worthy of note and will doubtless have an impact on the looming French parliamentary elections.

The report of the Senate’s commission of inquiry, which runs to more than 1,000 pages, was published in Paris on June 12. It acknowledges that TotalEnergies has made greater efforts to foster the energy transition than the other oil and gas majors, especially in the US and UK. However, some NGOs rued the Group’s lack of commitments to reducing its indirect emissions, as well as its involvement in a score of highemission oil and gas projects. The report therefore recommends that the government pressure TotalEnergies to make more of an effort to truly become a world leader in renewable energies and carbon capture and storage. Another recommendation is to harmonize the doctrines of all the entities involved in France’s economic diplomacy when backing economically significant projects abroad, to ensure that environmental best practices are duly applied.

The French Senate is scrutinizing TotalEnergies’ strategic priorities

On the topic of projects abroad, the report focuses on two countries where TotalEnergies operates, Azerbaijan and Russia, for a number of reasons. The commission’s tenth recommendation proposes that France raise its game and take the lead among European nations, by advocating for inclusion of Russian LNG in the list of energy products sanctioned by the EU, and that it should also be the first EU member-state to ban all imports of Russian LNG, as soon as possible. The next recommendation, which deals with Azerbaijan, calls upon France to foster the quest for a peaceful solution to the geopolitical disputes in the South Caucasus by advocating for a moratorium on new projects or new phases of existing projects involving French companies in Azerbaijan’s oil and gas sector, pending a peaceful resolution of the conflict between Armenia and Azerbaijan. TotalEnergies is directly involved, as it is developing the Absheron gas field in the Caspian Sea, which Azerbaijan is counting on to increase its gas exports. The field, which came onstream in July 2023, has a capacity of around 1.5 bcm/annum, but the Azeri authorities have asked the French oil and gas major to invest in increasing its production. It is thought that the Absheron field can produce around 5 bcm/annum of gas and around 40,000 b/d of liquid hydrocarbons.

Most of the report’s recommendations appear to have gone unnoticed by the main media outlets, which have tended to focus on the first recommendation, to reintroduce a golden share in the ownership structure of TotalEnergies, in light of the ever-shifting threats to the energy security of both France and Europe as a whole, recent changes to TotalEnergies’ shareholding structure and the need for the government to exercise more oversight over Europe’s leading oil and gas major as part of the overarching energy transition. During its proceedings, the commission of inquiry noted with concern that nearly 40% of the TotalEnergies Group is currently held by US investors, up 13 percentage points since 2010, whereas the proportion held by French shareholders had fallen by more than 7 percentage points since that year, to a mere 26.7%. According to the report, in light of these figures, the prospect of a change of nationality of the Group in the mid to long term can no longer be ruled out should current trends continue. The existence of a golden share would enable the government to appoint a non-executive representative to the board of directors, to have the final say on asset sales and to have a power of veto over the crossing of a pre-defined shareholding threshold in TotalEnergies. Moreover, giving the French government a power of oversight over the Group would mean that it could exercise greater influence on the decisions of its board of directors.

The French government would like to exercise greater influence over TotalEnergies’ decisions

This far-reaching recommendation runs counter to the trend for deregulation witnessed across Europe over the past decades. It arose from concerns in French political circles that TotalEnergies might come to be primarily listed on the New York Stock Exchange, a prospect that the Chairman and CEO of TotalEnergies, Patrick Pouyanné, evoked on April 26, 2024 in an interview with Bloomberg, in which he stated that his company was facing a situation in which the European shareholders were holding or selling its stock at a time when US shareholders were buying it. Pouyanné commented that a corporation such as Chevron, listed in New York, that is of a comparable size to TotalEnergies, was worth twice as much. The prospect of TotalEnergies moving to the NYSE led to a general outcry in French political circles. Bruno Le Maire, France’s Minister for Finance and the Economy said that it was crucial to keep TotalEnergies French, with both its registered headquarters and its main listing in France. He said he would fight for that aim, because it was in the public interest. This comes as the relationship between the French governnment and TotalEnergies is seen as increasingly fractious. A few days ago, Bruno Le Maire announced plans to implement a retroactive tax on share buy-backs by companies by the end of 2024. It so happens that TotalEnergies is extensively involved in share buy-backs. In 2023, the Group bought back 8.2 billion shares, accounting for 27% of all share buy-backs by French companies last year. The fate of the planned tax announced by Mr. Le Maire will depend, of course, on the make-up of France’s Parliament after the July 7 elections. Nevertheless, the very fact that such a tax is being considered in France by the center-right government of Prime Minister Gabriel Attal, is an additional source of concern for a group such as TotalEnergies, drawn between its French origins and culture, and its increasingly Anglo-Saxon shareholding structure.

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