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New trends will lead future for Oil & Gas global investments

Loik Le Floch Prigent / Alexandre Katrangi


By Todd Marsh

10th July 2020

Investments in the fossil fuel sector (oil, gas and coal) in 2018 were $1.6 trillion, the trillion is a billion! This is of course colossal since 85% of the energy consumed on the planet is of fossil origin and the population is growing every year. if debate rages about the long-term value of crude in the wake of its collapse and quick recovery; some thinks the bust will set in motion a boom as being involved in mergers & acquisitions, they predicts a bright future following lack of investment for 3 consecutive years and a mid-term recovery at 100$ and above.

After years of cooperation and investment in the oil sector, Loïk Le Floch Prigent, former Adviser and sherpa to President François Mitterrand for oil and energy affairs, who remains one of the most influential man in the French oil and industrial galaxy for the last 40 years, gives us in this interview with his partner Alexandre Katrangi; considered by the American press as the doyen of business relations between France and the Gulf countries; their vision of what seems to be taking shape for the oil industry and its investments over the next 10 years

The IPCC, which, under the auspices of the United Nations, has been monitoring the evolution of the climate for years, has been pointing out global warming by indicating the culprits, the men and women who consume fossil fuels and who send the famous greenhouse gases into the atmosphere (we end up talking only about the simplest, carbon dioxide or CO2, forgetting methane and nitrogen peroxides). Hence the frenetic search for decarbonation, or the dream of living in a decarbonated world whose deadline for European politicians is set for 2050. In the meantime, entrepreneurs are trying to match their production to a "green" economy whose definition evolves with the personality of investors and their hopes of making big profits.

With all this anticoal, anti-oil and anti-gas rhetoric, one might have expected a drop in oil and gas investments, but this is far from being the case, they are rather progressing and the decrease observed in 2020 will be more due to the coronavirus and the resulting fall of the world economy than to the willingness to respect the rules of conduct orchestrated by the UN authorities.

“Even if one or another important player declares to stop programs considered as useless, the figures are there and show a beginning of diversification on the part of the major players, but the profitability of fossils remains good and they remain indispensable in a world that wants to maintain a lifestyle based on growth” precised President Loik.

 For example, the idea of an economy based on hydrogen (immediately qualified as green) seems to ignore the fact that this gas is almost exclusively derived from fossils, gas and oil. The ode to degrowth is thus essentially a posture to make recognize a virtue which is only very rarely imposed. Let us look at the causes.

First of all today there are still a little less than a billion people who, when night comes, live in the dark or by candlelight. They do not know electricity. Another one to two billion people experience what is known as load shedding, i.e. periods when electricity is cut off because of the gap between supply and demand. Electricity is indispensable for life, for study, for communication... “About 3 billion people continue to cook or heat themselves with wood or individual charcoal. The countries that have coal mines, and some others, therefore favour the construction of coal-fired power plants which pollute more than all other types of power plants and still emit a lot of greenhouse gases, but this is an improvement compared to individual consumption (around 90%)” expressed Alexandre Katrangi; whose firm Licorne Gulf, based in Saudi Arabia, Paris, Bahrain and Houston, acts mainly as an Intermediary holding company for all investments made by sovereign wealth funds, private banking and Gulf’s Private individual and Member of Royal Families into assets in European and American energy, media, sports, health and industrial companies trough debt/equity or M&A/

For countries that have oil and gas deposits or can afford products sold by their neighbours, gas-fired power plants are therefore considered to be virtuous, emitting about half as much as their coal-fired counterparts. As for President Loil Le Floch Prigent, “We are therefore witnessing an effort by countries that have the ambition to be self-sufficient in the exploration, exploitation and use of oil and gas, which are the only ones likely to maintain a certain level of development”. Being constantly in close contact and consultation by the leaders of these countries; President Loik knows the challenge these leaders faces in where they can very well promise everything they want in UN meetings, their citizens want energy, and in particular electrical energy, and they will do everything to satisfy them, whether the regimes are democratic or not because, of course, while wanting to respect international standards, these leaders know that the future of an entire generation rests on them by trying everything possible and unimaginable ways to help people gain access to cheap, quality energy with the ultimate goal to develop electricity and local access to it.

Apart from the supply of electrical energy for the populations, oil and gas, taking over from coal for a large part, explain the development of the world over the last fifty years, its industry and its progress in agriculture (and therefore food) as well as health (hygiene and care). An important part of these fossils also appears as raw material for industry, of the order of 20 to 25%, plastics industry, chemistry, fertilizers to cosmetics and bitumen.

A large part of this production has finally been used to revolutionize transport, individual cars, heavy goods vehicles, ships and planes. Today we live in a world that communicates, particularly through the Internet and videoconferencing, but also in a nomadic world where products and people cross the universe daily.

A favorable trend towards the reduction of greenhouse gas emissions could therefore be accelerated by the abandonment of the individual use of coal and wood, the generalized construction of gas power plants, but the effect would be essentially in non-solvent places, so investors do not rush there, 15% of energy investments for 40% of the world population!  On the other hand, since in the richer and less populated areas opinions are afraid of the end of the world, one invests in expensive alternatives with high financial return because in all developed countries guaranteed by the States (wind and solar). There is therefore an appearance, especially in Europe, of a transfer of investments towards alternatives to fossils, but this is an optical illusion which is contradicted by the figures, coal, oil and gas continue to grow, especially coal which has increased by 2% in 2018, mostly with the continuation of Chinese investments.

However, the major private oil companies are showing a willingness to temper their fossil activities and are communicating about their commitments to alternative, so-called "green" sources, but they now represent only a small part of oil and gas production now in the hands of the oil states. If investments sometimes seem to be melting, it is because some states are in political imbalance, such as Venezuela, whose crisis is still going on. 

What about alternatives?

First of all, there is nuclear energy, which was vigorously opposed by the political ecology of the 1980s because of the Chernobyl disaster. The defenders of the climate are more reserved than their predecessors and note that the decarbonized character of electricity production is not so bad. So there is a small gap in the ecological movement and Chinese and Russians are taking advantage of it to propose their solutions to a good number of countries. A part of the energy investments is therefore going to Nuclear Power Plants.

"We at Licorne Gulf have an investment ethic in all areas with the short, medium and long term goal of being globally involved in the research, development and investment that we bring to the table," said Irina Duisimbekova, Licorne Gulf's Associate Founder and President; adding: “the contribution that Loik is making is precisely this industrial knowledge and expertise in the fossil fuel sector to support the dialogues we have with our Gulf investors’ fears following the several downturns in the recent past energy environment. Our model shows them adaptation and resilience”.

Irina Duisimbekova – 2020 – Getty

Associate Founder & President of Licorne Gulf Holding

Hydropower is, by nature, decarbonated and, in principle, ecological, or at least favorable to the climate. However, it is fought against because of the relocation that it implies of agricultural populations which must give way to artificial lakes. “Investments are still low despite the enormous possibilities offered, particularly in Africa” precised Loik Le Floch Prigent.

 In any case, there is one variable that must absolutely be taken into account, and that is that Africa, which today represents around one billion people, will be a continent that will double in 50 years' time and reach 2 billion people... “This is a fact, a reality in progress, and a historical cycle, whatever the international policies decided upon, will not change; Some African countries will have in 30 to 40 years more population than the United States ... So we must realize that investments in the energy sector, oil, infrastructure and everything related to civil society such as sports, health and education will make that for these investors the return on investment will be stable and substantial in the medium term”.

Renewable energies, solar and wind energy are undergoing intense media development with permanent images throughout the world of farms occupying an enormous territory for a reduced activity. Investors are thus giving themselves both a good conscience and high financial returns, but for the last two years the real world investment has been trampled underfoot because intermittent production disrupts the networks and countries are no longer rich enough to envisage a complete overhaul of their electricity system, we are therefore witnessing more postures than realities.

It is therefore on oil and gas that the maintenance of world growth depends, no one is mistaken, and the search for new countries and new territories is still setting the world of oil research ablaze. The big companies are no longer showing up, it is the medium and small companies that are taking risks and investing in new programmes. As soon as discoveries are made, the national or private companies come to buy the deposits thus discovered and continue discreetly to produce oil and gas to satisfy both the countries that need to develop and, above all, a competitive industry. It is abundant and cheap products that the economy needs, and these remain the best vectors of prosperity for the next fifty, one hundred years.

Media contact:

Tod Marsh – Prysma London

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