By Pratap John/Chief Business Reporter

Oil price will come back to $100 a barrel in the medium term as the global demand grows and fossil fuels dominate the world energy scene for the foreseeable future, says Patrick Pouyanné, Total’s global CEO.
“Forecasts show fossil fuels will still meet 75% of the world’s energy needs in 2030,” Pouyanné said in an interview with Gulf Times here.
“We rediscover that oil is a commodity and that the oil price is volatile…It is not clear how long a period of low price could be. But, in the medium term, it is commonly accepted that fossil fuels will dominate the world energy scene for the foreseeable future, forecast to still be meeting 75% of world energy needs in 2030. This is good news for the Middle East because, as a region rich in hydrocarbons, it looks certain to continue having a key role in meeting world demand,” Pouyanné said.
Oil price, he said, would go back to higher level because even if unconventional oil from the US was bringing new production on the market, satisfying the demand medium and long term would be “extremely challenging”.
“Total is reacting, but not over reacting. We have launched reduction programmes before the Brent started to decrease. We are now looking at further short term flexibility to get through this weaker environment period. Don’t forget that those kind of periods can also be seen as beneficial for robust integrated companies like Total as cost saving programmes will make us more stronger, more lean and also because opportunities can always emerge from low tides,” Pouyanné said.
On the factors that have led to the current low oil price, Pouyanné said, “Different elements have led to low prices: less demand in the world than anticipated, more supply in the world than anticipated, psychology of the markets, Opec position to defend its market share at 30mn barrels a day, and Russia willingness to maintain its production as well.
“We still keep the view that on the medium term, price should come back to $100/b because we will need to put into production more complex fields in order to meet the world demand.”
Total, Pouyanné said, would obviously prefer to see oil prices higher than they currently are and reflecting more the actual cost of producing marginal barrels.
“Low prices naturally have an impact on our revenues but we see no reason to over react because Total is in a very good financial shape and has a strong balance sheet. We have gone through cycles before and are used to adjusting and managing our way around the situation.
“In addition, although there can be a time-lag, low oil prices should ultimately translate into lower production costs which have been spiraling out of control in recent years.”
To address this issue of rising costs, Total has already launched a multibillion-dollar cost reduction programme because, one way or another, there must be some industry movement to restore margins and profitability necessary to launch new projects. This cost saving plan will be achieved with absolutely “no compromise on safety”, Pouyanné stressed.
He said, “It must also be underlined that Total works on a long-term strategic horizon. While short term fluctuations in the oil price may create temporary inconveniences, past experience shows that they must not distract us from our longer-term goals or prompt any knee-jerk changes in direction.”