TotalEnergies’ tightrope transition: A talk with Patrick Pouyanné

INTERVIEW | Among oil and gas majors, TotalEnergies stands alone in its plans to shift a fifth of its business to renewable-led integrated power by 2030. It’s a tightrope walk for the company’s long-time CEO Patrick Pouyanné—essentially a strategy that’s not “enough oil and gas” for traditional investors nor “enough renewables” for green ones.

But after a decade in charge, the Frenchman is thinking about his legacy and remains confident his is a no-regret strategy that fosters innovation, has raised employee morale, and targets returns on an integrated-clean-power equivalent to what oil delivers through the price cycle.

Appointed after the tragic death of his predecessor in a plane crash, Pouyanné has led the business through turbulent times for the sector, including the decarbonization commitments in the Paris Agreement, the COVID-19 pandemic, and the war in Ukraine. While he counsels leaders to expect the unexpected, he has no doubt that the energy of the 21st century is electrons. He argues for both carbon prices and net-zero ambitions but also says the transition needs to be gradual, pragmatic, and affordable to bring society along.

Pouyanné recently spoke with Sandra Sancier–Sultan, a McKinsey senior partner, at TotalEnergies’ Paris headquarters. The discussion provides an important and timely perspective on the broader energy transition and its implications.

Today we’re seeing a slowdown in the energy transition—not in the commitments, but in the actual projects. What’s your view of this change?

What I see—and I’m a little surprised by it—is that for some people, having more pragmatism means backtracking on their commitments. But to me, pragmatism doesn’t mean renouncing the ambition. I don’t want to renounce the aspiration that TotalEnergies could achieve net zero by 2050, together with society, because it’s a big motivator for our employees and our strategy.

But there are challenges to reaching that goal, like we see today with the slowdown in electric-vehicle [EV] adoption in the US. What the US decides will be fundamental to the pace of the transition everywhere. Europe may go faster, but in other big markets of the world—China, India, South America—the transition won’t go faster than in the US.

We’re also seeing a backlash to going too far in the net-zero-above-everything approach, so we need to rebalance. That’s why I’m insisting that the targets we set for 2030 are pragmatic ones: reducing Scope 1 and Scope 2 emissions and continuing to grow via renewables. I don’t know if collectively we will be able to reach the COP28 [28th UN Climate Change Conference] target of tripling renewables, but it’s a bold objective. If we can make 2.5 times, we’re not yet on the trajectory to reach the 1.5° target, but at least we will have made strong progress.

In your view, what are the major misconceptions people have about the energy transition?

In 2015, when the Paris Agreement was signed, the target was well below 2°—if possible, 1.5°, which meant carbon neutrality around 2070. Then in 2017 or 2018, scientists said if you want to reach 1.5°, you need carbon neutrality in 2050. This was a huge acceleration. Immediately, a sense of urgency arose, and it ignored that a transition means gradual changes. Instead, it led to the belief that we could transform the energy system overnight. The change in target also led to the idea that we need to urgently go to the ultimate solutions—that we need EVs and e-fuels tomorrow morning instead of having some time for gradual solutions, like more fuel-efficient internal combustion engine cars. Suddenly we want the perfect solution, as if tomorrow morning we will be in 2050. But perfect solutions are expensive. We need to bring them to customers and society gradually. For example, we’re working with the marine industry to use liquefied natural gas [LNG] as marine fuel. It’s not the ultimate solution, but it decreases emissions by 20 percent. During the past five years, we lost time talking about e-methanol and ammonia, which are a perfect, final solution but aren’t available now, because they’re expensive. Now the marine industry is coming back to LNG, which is good for 15 years, giving us time to develop better solutions.

So you want to keep the ambition but be pragmatic about the way to reach it?

Yes. We won’t make this transition if we forget that the fundamental characteristic of energy is affordability, because it’s central to everybody’s lives and to economic development. If we don’t find a path for affordable energy, emerging countries won’t accept it. And it’s one of the difficulties for Europe, as well, which is the only continent where we have a significant price on carbon. And the desynchronization on carbon price with the other regions of the world has become a real problem for European competitiveness.

I signed the 2015 call for a carbon price. It’s good for the climate because it’s the right signal to influence economic choices; I’m absolutely convinced. But ten years on, Europeans haven’t convinced other big countries about carbon pricing. And in the new geopolitical context, this is a major question for Europe: Are we going too far? Should we be more pragmatic?

What about China’s carbon price?

It’s still low, and China will not change it quickly but gradually—it’s pragmatic. It’s ahead today in many low-carbon technologies because in 2010, when the price of oil reached $100, its bill was exploding. As the largest oil importer, China was fundamentally thinking of affordability but also of its own security of supply.

China was a strong believer in solar, wind, and batteries. It developed them very quickly, much earlier than the others. China has been super at driving costs down—which the rest of the world benefits from today. But it didn’t do it with a real carbon price but by driving its own technologies to be affordable. Today its EVs are the best, but it also has too much renewable energy and can’t cope with the intermittency. So it’s reintroducing a carbon price, but I’m sure it will keep the price at a level where it remains competitive with the US and the rest of the world.

Early in your tenure as CEO, you made a choice to expand the company from oil and gas to a multi-energy strategy that includes electricity. You talked about this as “walking a tightrope.” What do you mean when you say this?

We’re a successful oil and gas company. We restructured our portfolio to reach a $25 per barrel breakeven and have the highest profitability of the oil majors. At the same time, we observed the energy transition all around us, with society pressuring us to contribute to the new energy world. It wasn’t an easy decision, but we’ve done it for several reasons.

The first is that, historically, we were an energy supply company. Our strategy was to supply more oil and gas, knowing the market would buy it. Suddenly in 2015, a new realization came to us: Maybe we were wrong. Maybe oil demand won’t continue to grow proportionately to the population. So we needed to look at demand. And when we did so, there were many different scenarios. But in all of them, electricity was growing. There’s no doubt that the energy of the 21st century is electrons. Our strategy is led by demand planning, not just by supply capacities. We then considered if we could find a way to use our fossil fuel skills to develop an integrated electricity business. We decided yes, it made sense.

The other motivation was our people. In 2018, when the net-zero debate arose, I was having lunch one day with some young drillers. They asked me, “What will I become in ten years?” For me, it was obvious: They would drill. But for them, it wasn’t obvious. I realized we will have an issue if our own people, who are proud of the company and whose motivation is our best asset, begin to ask this question. So one key factor in our decision to move to the multi-energy strategy was to give our people a positive answer. And it’s working. In our surveys this year, 92 percent of our employees are proud of the company and are convinced that the strategy is right and that it will succeed. That’s much higher than ever before.

We’re walking a tightrope at TotalEnergies. The people who tell us we should only do oil and gas aren’t happy with us, because we invest 30 percent in renewables and electricity. And other people say to us, “You continue to put two-thirds into oil and gas; you aren’t good citizens for the planet. Why not put more in renewables?” So today, we think we’re doing well because we’re building a strong renewable-integrated-power business that delivers good profits. But it’s not enough for one, and it’s too much for the other.

However, I’m sticking to the strategy, even as some of my peers backtrack. Consistency of strategy in such a fast-changing environment is the best answer because the energy business is a long-term business. I’m convinced that by 2030, these electrons will represent nearly 20 percent of our mix. It’s a sizable transformation for us.

What fuels that conviction when you have stakeholders who question it?

It’s a no-regret strategy, and the board is unanimously supportive. Having said that, we face reality, too; we check our progress quarter after quarter. For me, it’s a no-regret decision, and the motivation it creates for our people confirms it. It would have been more comfortable to remain an oil-and-gas-only company even if we had to face criticism. But I thought that if we didn’t make that decision, our successors would regret it.

As a CEO, you also think about your legacy. I’m number ten in the series of CEOs of TotalEnergies over 100 years. I said to myself, “If you don’t move in this electricity segment, it will be difficult to catch up. With all that we’re doing this decade, we will learn, we will spend some money, and we will build teams and competencies. And yes, it will produce a legacy that will be different, and to be a little different from the others is also to differentiate in terms of business model. So why not?”

The topic of the energy transition is very politically charged. You have been challenged a number of times, especially in your own country. How do you navigate this? What’s your “true north”?

My true north is clear: It’s the interest of the company. When you become CEO, your life is driven fundamentally by the interests of the company, not personal interests. There’s a lot of politics and criticism. Yes, I’m frustrated by it. And strangely, it’s in my home country that we’re most criticized. It can have an impact on my children, sometimes, but not on me. It doesn’t mean I don’t question myself regularly. But if it’s what I believe is good for the company, I have to stick with it. That’s just part of the job.

You’ve told the media that your main competitors don’t like to take risk, so you do. What do you need to do as a leader to take that risk?

It’s boldness. I’m not a poker player, to be clear. I’m quite rational. But being too cautious is also not best for the future of the company. Again, my driver is: Will taking that risk be good for the company or not? It’s not an emotional decision, it’s intuition. But the intuition is also based on my experience, not on emotion.

We faced a lot of criticism when the war in Ukraine started because we didn’t immediately declare that we would leave Russia. But the company had $15 billion of assets in Russia. Emotionally, I could have said, “Let’s leave,” but it was in the interest of the company to take a little more time. I was quite heavily criticized in the newspapers at the time.

My team spent the summer of 2022 in a big exercise evaluating what we would do if we didn’t have assets in Russia. Part of the answer was in the diversification to electricity; another part was to invest more in the US. I said to my team, “The US has oil, gas, LNG, and renewables. So let’s redeploy the capital we were planning to spend in Russia and put it in the US instead.” We found a new road map for the company, and then the momentum came back. In the US today, we’re the largest LNG exporter and one of the top five renewable companies.

CEOs with a decade in charge are quite rare. What have you learned over the years?

I came young into the job. At the beginning, it was suddenly very different to be number one compared with number two or three. What’s fundamentally different is that everybody is looking to you permanently. I made some mistakes during the first few months because I didn’t realize I was no longer “normal” in the eyes of my colleagues.

In 2015, we faced some hard times because the price of oil dropped dramatically. Our breakeven was above $80 per barrel, and we had to reduce it to $25. It was a huge effort to convince my colleagues of that. You discover that you have to convince people; it’s not a given. It’s not because you are the CEO that they will follow you. You have to show them step by step. Of course, it’s also very important to have strong unity at the top of the company, but that doesn’t mean everybody has to be like you. Diversity is also good.

Year after year, I see what works and what doesn’t work. I can’t correct everything, but I think I’m a better CEO today than I was at the beginning.

Can you tell us a bit more about how you bring your people along with you?

People look to you as the CEO because, in the end, the CEO will decide. But at the same time, your decision is the result of exchanges with others. You need to be a sponge: to listen and to create debate. Then you can make better decisions, people will follow you, and the execution will be in the right direction.