Energy Executive on the End of Oil: 'We Have to Save, Save, Save'

The world could run out of oil in 20 years. This grim scenario is not the prediction of environmentalists, but of Michel Mallet, the general manager of French energy giant Total's German operations. In an interview, Mallet calls for radical reduction of gas consumption and a tax on aviation fuel.

SPIEGEL ONLINE: Total earned profits of close to €14 billion ($18.5 billion) in 2008, a record in French economic history. Aren't you affected by the recession?

Mallet: Yes, we are. Our revenues are closely tied to the oil price, which has fallen. We are experiencing a slight decline at the moment. But we are in better shape than other industries. You can put off buying a car, but you need to fill up on a regular basis.

A Total oil platform off the coast of Angola: "Oil production will be technically complex in the future, which makes it expensive."
AFP

A Total oil platform off the coast of Angola: "Oil production will be technically complex in the future, which makes it expensive."

SPIEGEL ONLINE: Last summer, a barrel of crude oil cost $147. The price has dropped to $47 today. But that's still a lot, given that a barrel of oil cost only $9 a few years ago.

Mallet: Nine dollars was a catastrophe. We need reasonable prices, or else there is no incentive for investment.

SPIEGEL ONLINE: You have to say that. But is $47 enough?

Mallet: No. At that price, you can drain an old oil field. But the profit threshold for drilling new wells in the ocean, at a depth of 2,000 meters (5,300 feet), is $60, and the major producing countries want even more. Venezuela needs an oil price of $90 to balance its national budget, while Iran needs $80.

SPIEGEL ONLINE: And what price does Total want?

Mallet: For us, an oil price of between $50 and $90 a barrel would be reasonable. Let's say $80. In Germany, that would translate into prices of about €1.40 ($7 a gallon) for a liter of super and €1.25 ($6.30 a gallon) for a liter of diesel.

SPIEGEL ONLINE: You aren't exactly modest.

Mallet: Oil production will be technically complex in the future, which makes it expensive.

SPIEGEL ONLINE: Why?

Mallet: There are hardly any readily accessible oil fields anymore. The fields on the floor of the North Sea, for example, are practically empty. New reserves are only being found deep in the ocean, in remote regions like Kazakhstan or in the form of oil sands. None of this is cheap to produce.

SPIEGEL ONLINE: The International Energy Agency is warning of a new mega-crisis, arguing that because the oil companies are not investing enough in production, the price of oil could shoot up to $200 by 2013.

Mallet: A price of $200 would be dramatic for the world economy. If we were to gradually move in that direction, it would be okay. Then we'd have time to develop alternative technologies. But not by 2013. That's not enough time.

SPIEGEL ONLINE: What are you doing to avert this scenario?

Mallet: Total is investing $18 billion (€13.6 billion) this year. This is far more than our competitors, based on profits.

SPIEGEL ONLINE: Nevertheless, you are unable to increase production. In fact, it declined last year.

Mallet: The drilling licenses are the problem. The countries that have oil are behaving very restrictively. In the 1970s, the seven largest oil companies controlled 70 percent of reserves. Today it's only seven percent, with the lion's share now in government hands.

SPIEGEL ONLINE: What's so bad about that? Countries like Venezuela, Iran, Iraq or Russia can certainly produce their own oil.

Mallet: Of course. But the government-owned companies, to a large extent, lack the technical know-how we have accumulated in the last few decades. For that reason, they unable to produce as efficiently, especially in the new, difficult drilling areas.

SPIEGEL ONLINE: Total is also canceling projects because of the economic crisis, such as production from oil sands in Canada.

Mallet: No. All we are doing is delaying projects. In general, the crisis is even beneficial to us. Prices for drilling equipment have returned to normal again.

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