TotalEnergies CEO Patrick Pouyanne stated on Wednesday that European energy companies should negotiate for a free trade guarantee on liquefied natural gas (LNG) from the United States. He also urged Europe to press the U.S. to lower the cost of its LNG exports, which are currently higher than those of other global suppliers. Pouyanne made these remarks while his company reported its fourth-quarter earnings. The French oil giant posted a profit of 1.38 billion euros ($1.55 billion), a significant improvement from a loss of 1.23 billion euros the previous year, driven by higher oil and gas prices. Its oil and gas production increased by 1% during the period, reflecting the ramp-up of projects initiated the year before.
Total also signed non-binding heads of agreement to support the development of Tellurian’s Driftwood LNG terminal in Louisiana, including a purchase agreement for up to 2.5 million tonnes per annum of LNG on a free-on-board basis at a price based on the Platts Japan Korea Marker (JKM). This is the first deal that Total has concluded that is priced off JKM, which is a fast-growing Asian benchmark for spot cargo.
The agreements also include a non-binding letter of intent to invest in Driftwood’s equity capital fund and a common stock purchase agreement for about 20 million shares of Tellurian. Including its original $207 million investment in Tellurian in 2017, Total’s total investment in the project now amounts to $907 million. The projects are subject to relevant regulatory approvals and a final investment decision by Driftwood, which is expected in the first half of 2019.
Earlier Wednesday, Denmark scrapped an ongoing 3-GW offshore wind auction for redesign while progressing plans for green hydrogen pipeline exports to Germany. The country’s grid operator, Energinet, said it would delay its timeline for the “Lower T” segment to 2031 and move to more attractive terms for developers.
European industrial players face a dilemma: They must balance economic imperatives with climate commitments. On the one hand, they must ensure that their business can remain competitive in a world shifting to renewables and other low-carbon energy sources. On the other hand, they must meet their own long-term carbon pricing targets and abide by EU climate action regulations.
Pouyanne noted that if the United States continues to push for protectionist policies, such as its Inflation Reduction Act (IRA), the EU will have difficulty encouraging businesses to invest in green infrastructure. He said that the IRA is a clear political decision by the United States that shows it does not believe in the multilateral trading system based on World Trade Organization agreements. He said it would affect the EU’s ability to compete in green industries and lead the global shift to a low-carbon economy. For example, he noted that investments in Europe for sustainable aviation fuels compete with cheap imports from China, which produces them at much lower costs. This makes it difficult for the industry to make money on these investments.