The Future of Energy Lyrics

RUBENSTEIN: So, welcome, everybody. This is another in a series of our CEO series at Council on Foreign Relations. And today our topic is going to be energy, the future of energy. And we have some very distinguished guests.
And the way we're going to proceed is that we'll have a conversation among us, and then we will at 1:30 -- it's about 1:00 now -- we will invite questions from our members here. And there are possible member questions that might come in from people who are listening around the world who might send questions, as well. So there will be an opportunity, I hope, for as many of you as possible to speak and to answer -- have your questions answered.

So for the record purposes, I am David Rubenstein. I'm vice chairman of the Council on Foreign Relations. And our chairman emeritus just came in, Pete Peterson. Thank you very much, Pete, for coming. And I have on my immediate left an energy expert, Paolo Scaroni, who is the CEO of Eni, which is one of the largest energy companies in the world, with a market value of about $84 billion. And he's been the CEO since 2005 and had a distinguished career in many other businesses, as well. This is the fourth company he's been the CEO of, and this is a company which is a global company, though it's obviously based in Italy.

To his left is the CEO of Total, Christophe de Margerie, who is -- like Paolo -- a member of the Council on Foreign Relations Global Board of Advisers. They both are members of that. And we're pleased that they're doing that. Christophe is the CEO of Total and has been the CEO since 2007 and the chairman and CEO since 2010. That's a company with a market cap of about $132 billion and has about 97,000 employees, I believe. And he is, obviously, running one of the largest energy companies in the world, a so-called super-major.

To his left is a person who has the affliction of the name the David Rubenstein Senior Fellow in Energy at the council, but he's overcome that handicap, and he has become in the last seven-and-a-half years an extremely value member of the Council on Foreign Relations staff. He is our internal expert on energy, climate change, the environment, and has written a number of very good books on the subject, most recently "The Power Surge," which I highly recommend if you want to know what's going on in the energy world.

So if we could get started, the question I'd like to ask all of you is -- and I -- how frequently do you get asked, where are oil prices going? Do you get asked every hour on the hour or every day, where are oil prices going? And what do you usually say to people when they ask you where oil price is going?

SCARONI: Well, I am asked every day, I always give an answer, and I always say that I'm always wrong, so don't listen to me.

RUBENSTEIN: OK. But just tell us what you might think is a wrong answer.

(LAUGHTER)

SCARONI: Oil prices are going down. That's my view.

RUBENSTEIN: Oh, really? OK?

SCARONI: Down meaning -- I'm talking about the brands (ph) in the region of $90 per gallon.

RUBENSTEIN: OK.

And, Christophe?
DE MARGERIE: Well, to avoid -- to be honest, I also have before being asked, so we in Total on a regular basis what is our view on the oil and gas price. We always make it part of our presentation, so we have a clean and clear message, which is by definition it cannot for long below $100, so I'll answer before you ask me. And why? I can explain, and without taking all the geopolitics into account, so more than $100. And in any case, why? Because it's what we need to make sufficient profit to develop sufficient energy for our clients.

So, no, I always preferred to say that's what we think and then we can be challenged. I prefer it like this.

RUBENSTEIN: OK.

DE MARGERIE: But the result is the same.

RUBENSTEIN: Michael?

LEVI: So I tend to think that it's in the long run somewhere near where it is now, a bit lower, a bit higher. But one of the things that I've been saying to people lately is that there's a real chance of it dipping considerably lower in, let's say, the medium term, three to five years, not on a sustained basis, because of what Christophe says, you need high prices in the long run to sustain production, but things can get out of whack for a year or two in the meantime.

RUBENSTEIN: OK. But let me ask you all this question. It seems as if oil prices have been relatively in a narrow band for the last couple years, of around $100 a barrel, up or down 5 percent or 10 percent. And do you think that's because the Saudis are basically -- are manipulating the price, if that's the word, or just controlling the price by determining how much they want to produce, going from 8 million barrels a day to 10 or so million barrels a day? Are they really the control force in keeping energy prices roughly around $100 a barrel?

SCARONI: Yes, they have more flexibility than anybody else. They can -- their flexibility around 4 million barrel a day out of 90, more or less, so they can move this number up and down following the market, which they do most of the time.

RUBENSTEIN: And do you agree with that?

DE MARGERIE: I mean, first, I will disagree with Michael for one reason. You know, you've always been told, you know, the price will go down. And it's just like those being bearish or bullish. They always want to be right, but if they're right five years too early or five years too late, they're wrong. And I've been told now for really more than five years it will be $60.

So (inaudible) 10, and exactly (inaudible) than 10, and (inaudible) than 10 is because of OPEC (ph), which means only Saudi Arabia today. But today, it's nothing to do with only the market. It's a physical market. Today, Libya has lost more than 1.2 million. Iran is 2 million below. And in Saudi Arabia, we now have successfully and brilliantly increasing production to an historical level of 1.3 million barrels per day. Today the price will be 200, and that's not me deciding if I am against it. So I think you have to be very careful in what you say and take everything into account.

RUBENSTEIN: OK, so it's not...

(CROSSTALK)
DE MARGERIE: The problem -- the problem is not only Saudi Arabia, but the problem is not only the American view, and the problem probably of Michael is too much living in America.

RUBENSTEIN: All right, OK.

(LAUGHTER)

Well, Michael, so have you considered moving out of America to get a better perspective?

DE MARGERIE: Sorry, but you challenged me. I have to answer.

RUBENSTEIN: Michael, your view is, the Saudis have a disproportionate amount of influence or they don't have as much as they used to have?

LEVI: I think they still have influence, but not as much as they used to. They have similar levels of spare capacity to what they did sometime ago, but we have a much larger world oil market. I think that they're able to move oil on or off up to a degree to stabilize the market, but they've been operating in a world where there have been offsetting changes. We've had surprisingly low production from Libya, surprisingly low production -- or exports from Iran, disruptions elsewhere in the world, but offset by surprisingly high production from North America, from the United States in particular. And so Saudi Arabia has had to manage that sort of residual net impact.

RUBENSTEIN: All right. So the big story in energy in the last couple years has not been the story that it was in the 1970s or '80s, which is the United States is energy-dependent on OPEC and Saudi Arabia in particular, and oil prices are going to skyrocket and so forth. The big story has been that we are going to be energy independent, so-called, and we have the shale revolution, so-called.

So to what extent do you think that shale revolution in gas and oil has changed the dynamic in global energy? And do you think that's for good or bad?

SCARONI: Well, two things are different. Shale gas has created many effects all over the world, but one for me is particularly interesting, that is that while we speak today, gas prices in Europe are three times as high as in America, and electricity prices are twice as high as in America, both for consumers and for industry, which means that for me it's very hard to imagine how Europe can recover and start again a process of re-industrialization with such a differential in the cost of electricity and gas. This is going to be a major issue for Europeans, and I don't know what is the answer, or I have a few answers, but that's the first problem.

Now, on shale oil, two things. First of all, it has just started, the production of shale oil. It's not yet a significant number. And in any case, shale oil is going to be expensive, not cheap. That is if oil prices will go to, I don't know, $70, shale oil will be hardly competitive. So it needs to have relatively high prices in order to be exploited, which gives a limit to the amount of shale oil, which...

(CROSSTALK)

RUBENSTEIN: And do you think the world is better off or worse off that the United States is so-called energy-independent or...
(CROSSTALK)

SCARONI: Well, Europe is worse off as far as industrial competitiveness is concerned, no doubt about that. And Japan, as well, because to have as a competitor in terms of cost America is very different than having as competitor Qatar or, I don't know, Iran. America is already very competitive, in terms of labor, in terms of market, in terms of business-friendly environment, et cetera. If on top of that you add a huge differential in energy, I hardly can imagine anybody making an energy-intensive investment in Europe.

RUBENSTEIN: OK. Christophe, in France, there was recently a film on TV that basically talked about the dangers of shale production and that it -- it pollutes the water and things like that. Is that the reason why there isn't much shale oil or shale gas production in Europe? Or do you think it will happen in the next couple years?

DE MARGERIE: Well, first (inaudible) if you talk about microeconomy, who cares about France? No, I'm serious. No, no, I'm serious. I mean, you talk about changing the world and revolution, and we always are mixing and making the problem of, is it a revolution in the U.S.? Or is it a revolution worldwide? I would say shale oil is not a revolution worldwide. It's a revolution in the U.S.

Are you going to be net exporter? I actually don't know. And I would probably think no. And people today are moving from there was nothing, now there is a reason (ph). The proof is the price of oil is still where it is. It is different between gas, because the U.S. is just like a bottle of gas, so until you keep it in the bottle, you control the price. And (inaudible) benefit for the states is certainly not to export more than its percent of the gas production to keep the price under control.

To keep the price under control, you keep the rent under control. And as Paolo said, it's not only for the benefit of the upstream sector, but for the benefit of all the industry, especially as well as being intensive in electricity, which means energy-intensive.

And today, when you look at the industries, you take the benefit of this low energy not at the level of upstream, but you keep it at the level of the part which is getting the benefit of cheap energy. And we should -- we look at this and think, what is the real impact of cheap energy?

Going back to France and to Europe, because France, again, it's not important, the main difference between Europe and the States is, first, the legal structure. In the U.S., you have those getting the wealth in their garden (ph). They get the benefit of it (inaudible) so they have a share of the profit. In Europe, you don't have it. So it makes it really much more sexy in the U.S. than in France (inaudible) that's very important.

And, second thing, do we have the technology in Europe to develop wells like this and rigs in such a way where you can change every day almost the production in moving rigs from one place to another? When in Europe, it will take years, years and years. So do we have, first, reserves in Europe? Nobody knows, because we didn't drill, so we don't know what it is. Second, will it be more expensive than in U.S.? Yes. Does it mean that it cannot and shouldn't be done? No, at the opposite. It should be, because, I mean, it's part also of something which is not only low price, but balance of trade.

And I think people are mixing everything. Today when you talk about gas in the U.S., the benefit is cheap energy and, of course, balance of trade. When you talk about oil, it's only balance of trade, because the price of oil is still the same. So if you want to buy oil within the U.S., you will not pay cheaper because you produce it in the U.S. But at the state level, they will have an improvement in your trade balance deficit, which means today reduced it.

Now, just a small word for Michael about Saudi Arabia.

RUBENSTEIN: OK.

DE MARGERIE: Do you know the problem in the U.S.? You will be producing oil as a maximum, so you will not have spare capacity. And what you don't like (inaudible) consumers. You don't like ups and downs. And I can tell you today, there will no more (inaudible) believe me or no. You will suffer. You will suffer of instability. And then you (inaudible) where is Saudi Arabia?

LEVI: I think you're absolutely right.

DE MARGERIE: I'm not a supporter, huh?

LEVI: OK. I think you're absolutely right about this. So we're coming up in a week on the 40th anniversary of the 1973 oil crisis. And we tend to remember that as the time when we went from being self-sufficient to importing, and so it's imports that are this big threat. What it really is, at least to me, is the time where we understood that we no longer had that swing capacity to influence the price of oil.

In 1967, there was a similar effort out of the Middle East to push up oil prices, and we responded -- the Texas Railroad Commission responded by pushing up production to offset it. But by 1972, we were producing full-out, and so when we had this crisis in 1973, we no longer control the price. The price quadrupled and then you had these economic consequences.

And so we still have -- we still live in that world today four decades later. That's where the real influence over the global market comes from is why I don't like -- it's one of the reasons I don't like the term energy independence, because I still think that we will continue to ask a lot from the rest of the world, including Saudi Arabia, to create stability in markets.

RUBENSTEIN: But the Saudis seem to feel that politically it's OK to have oil prices at roughly $100 a barrel. If it went to $200 a barrel, they think there might be political consequences to them. So they kind of love it around it $100 a barrel. Would you agree with that? They're kind of comfortable around $100 a barrel, there's no political problems at that price level, so they kind of keep it there more or less?

SCARONI: Yes.

RUBENSTEIN: OK. All right.

SCARONI: I think...

(CROSSTALK)

DE MARGERIE: With one thing is, you don't control the world.

RUBENSTEIN: Yes, they don't control...

DE MARGERIE: I mean, Libya is important, because, I mean, we've always been shocked, especially the two of us, because we are operating in Libya, and when they decided not to stop producing, because the exports are stopped, not the production. Production cannot be continuing because, I mean, they don't export, so you cannot store the production. It was done in one single day. One single day, you have 1.4 million barrels missing.

And I can tell you, if you don't have the equivalent of Saudi Arabia, you will not make it. It could have been really moving to the sky. And that's not good for us, so I'm not saying it's good or not good. I'm just trying to say, let's be careful. Let's talk with the Saudis. I do talk with them. It's not $100. They never will tell you it's $100. They will never tell you $110. And sometimes it's true, as you said, they don't want that the rest of the world will be at stake because of them, because of the image, even if I do strongly believe that the $100 of today is not anymore a burden for the industry on this.

RUBENSTEIN: Now on another country that's had some challenges, Iran. Is Iran producing oil and kind of shipping it in ways they're not supposed to? Are people buying it? Or is it they're not just producing it and that's...

(CROSSTALK)

DE MARGERIE: No, it's producing.

RUBENSTEIN: They're producing it. But how are they getting it out?

DE MARGERIE: Shipping to China, shipping to India. It's shipping to many other countries.

RUBENSTEIN: They have...

(CROSSTALK)

RUBENSTEIN: They are countries that have exemptions from the various...

DE MARGERIE: No, exemptions. They -- I mean, they always said no to the embargo from day one, so it is cheaper oil, because it has a discount for this reason, but they continue to produce. Now, of course, Iran could produce much more of what it's producing today. I think today it's producing less than 2 million, more or less.

RUBENSTEIN: Right.

DE MARGERIE: It can be producing 4.5 million, probably even 5 million or 6 million. And for the time being, this production is missing. Iraq could produce much more what it is producing today. So there is a lot of potential capacity around.

RUBENSTEIN: Michael, in the United States, we predicted in the 1970s and '80s that we were going to be dependent on foreign oil and so forth, and we missed the shale revolution. So what are we maybe missing over the next 5 or 10 years? What technology might be there that might make it possible to get even more oil and gas? Or is there something coming alongside that's bad for us? What do you think we're missing? Or what you most worried about, in terms of changes in the oil market and gas market in the United States?

LEVI: So I wouldn't put this in the category of worries, but I -- I think that as we look at big technologies that could have widespread consequences over the next, let's say, decade or two, I would look in two places. On the production side -- and this is at the far end of the two-decade period -- methane hydrates, and I've be very curious about what other panelists think...

RUBENSTEIN: Explain what that is to everybody.

LEVI: So methane hydrates are an extraordinarily vast store of natural gas that are in a form that we haven't been able to commercially produce to date. And I tend to think that there are large barriers to producing them, but I recall a conversation I had with a journalist recently who said he got taken out to various places about 10 years or so ago where people wanted him to write a story about shale gas. And he -- and he went and talked to all the experts, and they said this is nonsense, it's not going to amount to anything, and he went and killed the story. And so he now says he's going out and being a little more open to possibilities.

The other thing I'd say is on the demand side of the equation. We're talking a bit before about storage, about batteries. And the broader world of vehicle electrification, particularly, again, on this 10- to 20-year time scale, we're talking about these changes on the supply side, but big changes on the demand side of the equation could really shake things up, too.

RUBENSTEIN: All right. So let me ask you, each of you, if you were to leave your company tomorrow, which you're not going to do, and somebody gave you $1 billion to invest and you wanted to make a large amount of money with that billion dollars, where would you invest it in the energy world?

(LAUGHTER)

SCARONI: Well, no, it depends on the amount of risk we want to run. Now, if you want to do a risky investment, I will bet all my money on batteries. I'm convinced that the future of renewables depend on the future of storing electricity, which we are not capable to do today, at least considerable amount, and therefore renewables and batteries go together. The renewables are progressing. The batteries, not enough. That's one thing.

Now, if I wanted to make a more safe investment, I would bet -- particularly in the U.S. -- on transportation, tracks, cars, ships, moving from oil into gas, into natural gas. A molecule -- in terms of calories, a calorie coming from gas in the U.S. costs 20 percent a calorie coming from oil. Since, in fact, we buy calories, if we can move transportation from gas to oil, it will be a phenomenal saving and relatively easy. Technology's there. Nothing to be invented. It is there. It's only a problem of how to implement it.

RUBENSTEIN: So, all right. Christophe, where would you invest your billion dollars?

DE MARGERIE: Yeah, I was...

SCARONI: In Eni shares, probably.

(LAUGHTER)

It will be the best.

DE MARGERIE: By the way -- by the way (inaudible) I mean, I agree on batteries, et cetera, but it all depends on when you say, why would you invest? Will you invest for R&D? Would you invest for quick return, not on only talking about risk or you (inaudible) long-term sustainable position to say I am one of those on the planet who needs to be doing things for the very long term? Even in the short term, it will not bring real quick money and return.

Then I would say battery, I agree, except that I disagree on will it give you quick return? No.

SCARONI: No.

DE MARGERIE: And especially at a time where we all are told about cash flow, cash flow per share. It's not anymore profit per share now. It's cash flow per share. You know, it's a drama, I mean, this world, because, I mean, it's three years' time in front of us.

So going back to this, I would say if I -- but I cannot say it, so I will say it's a company starting by T and ending by L. And I will say, can you find -- can you find a share, AA (inaudible) AA, giving you yield of close to 6 percent and where you can have only an upside on the share value? Which means today you buy bonds which are -- for instance, I was looking at this newspaper. Spain, do you know what Spain is on 10 years?

SCARONI: Four percent.

DE MARGERIE: 4.8. Well, we give six for AA, plus the share. Well, that's all. So I'm just thinking of, depending of what you want, I still think today the market is very strange, because it doesn't take any benefit of long term. It wants to take benefit of very short term.

RUBENSTEIN: In other words, your stock is undervalued?

DE MARGERIE: Well, just like Eni. And all of us. But that was not the message. The message was short term versus long term much more than risk and no risk. And I think a company like us, because we also are investing, not as individual -- I mean, as investors, we need to invest in long term, including some things which are being raised by Michael, for just being part of the energy world, and not only oil and gas...

(CROSSTALK)

RUBENSTEIN: Michael, speaking not only of oil and gas, are we going to have more nuclear power in the United States 20 years from now or less?

LEVI: Probably roughly the same. But if I had to bet, I would actually say a bit less, rather than a bit more. Most of these nuclear power plants are going to come up for re-licensing over a, you know, sustained period of time. And right now, they're being challenged by cheap gas for peak power prices and by subsidized wind for making their money at night. So between those, you're seeing some companies find it better to shut down than to pay for safety upgrades.

I think the big game-changer for nuclear power in the United States could be a strict, broad carbon policy, because the big advantage nuclear power has is zero emissions. And if you made other sources pay for their emissions, nuclear would become considerably more competitive.

RUBENSTEIN: All right. There's a theory that you might get to Heaven more quickly if you use renewable energy. But it hasn't been all that economically attractive to people. Do you think we'll have a higher percentage of renewable energy in 5 or 10 years than we do today? Or do you think a lower percentage, because oil and gas are pretty plentiful and pretty cheap?

SCARONI: Where?

RUBENSTEIN: Well, let's say in Europe or the United States.

SCARONI: Well, Europe is difficult, because we have a -- you know, it's difficult to predict, because, in fact, Europe, which has been pushing very hard, the 20, 20, 20, you know, all this reduction in CO-2 emissions, in fact, is emitting today a lot of CO-2 simply because the coal, which used to be burnt in America, is moving into Europe, and all the coal firepower stationed in Europe are running at full capacity.

America, which essentially didn't have any law around CO-2 reduction, has been reducing CO-2 quite dramatically in the last couple of years as a result of replacing coal with gas. So not necessarily what you want to happen, at the end of the day, it happens.

In general, I think renewables are going to grow, but very limited, not big numbers.

RUBENSTEIN: So do you invest in renewables in your company very much?

SCARONI: No, we are not, because we believe -- we personally believe that the kind of renewables which we have today intermittent, so they give you electricity when they want and not when you need them, this creates a major problem, not a solution. And we need to have batteries. If we don't find a way of storing electricity, then renewables are not a solution.

RUBENSTEIN: Do you believe global warming is a result of human activity over the last 100 years or so? Or do you think it's just unrelated to that?

SCARONI: Well, listen, this is a very complex question. Now, in history, temperature went up many times. There is -- I've been reading that the time of Daltaligere (ph) -- you might not know who's Daltaligere (ph), but he's a famous Italian poet -- was 1,200. At 4,000 meters in the alps, there were cows eating grass, which today would be unthinkable.

Having said that, what makes this temperature hike new, totally new is the rapidity, the speed at which temperature is moving up. So I tend to believe that the global warming is there and is the result of a lot of CO-2 emissions, mostly from man.

RUBENSTEIN: OK. Christophe, what about renewables? Do you think renewable is a good thing to do or not realistic?

DE MARGERIE: Well, first off, I will have the same reaction than Paolo, who said instead of talking about renewables, can't we talk about global warming or climate change, globally, and force our leaders -- supposedly leaders -- to just start any G-20, G-8, whatever with this problem, because if it is, as we're told -- and I strongly believe it's true -- we are facing a real problem, for instance, of water getting higher and higher, which means a real concern for a lot of countries and population.

Why don't we start with this? We cannot say at the same time, that is a priority, because, I mean, the world is at stake and it comes second -- we talk first about euro, about this, about that. Everything is important, but life comes first. And I'm surprised that we cannot open the debate except in being, as you said, OK, what we do about our coal? We sell it to the Germans, but Germany is not in the U.S. (inaudible) be responsible for the emissions.

And I'm really thinking that it needs to be put on the table as, what do we do with all sources of energies, not only with renewables? Who cares about renewables? We care about energy and life.

Now, if with renewable we can really do something better, which I think we can, even if, as Paolo said, it's small, let's do it. And as for Total, it is important to be part in this reflection, vision of the long term in seeing with our money -- because we are maybe a little bit richer -- but, I mean, our shareholders are not like we spend money for nothing, but we tell them, yes (inaudible) especially the one we've acquired, Silicon Valley, the most, I would say, advanced technology in the world, in the Silicon Valley, we spent $1 billion. Our capital employed are 140. It's one out of. And today the share value was 23. It went back to four. It's now 28. So, I mean, our (inaudible) really don't care anymore. We have to continue to work on this, even if it's a small part.

Now, again, I insist it's not renewables versus fossils. It's the print of everything on the environment, and if we cannot one day agree on this, we will still be fighting against what is real subsidy. If you pay different taxes, is it subsidies? If you are able to sell your electricity which is coming from renewables as a -- and with a priority, it is subsidies. Can't we agree on words? Today the answer is no. And that is my problem. It's not renewables.

RUBENSTEIN: Michael, is there anything that humans today can do that will improve the global warming situation while we're alive? In other words, I know maybe in 100 years from now, but for people today, is there anything we can do today that we will actually see the benefit of while we're still alive?

LEVI: Yes, but it's not an alternative to taking actions that will play out over the longer term. Look, carbon dioxide stays in the atmosphere for a long time. The global climate system has a lot of inertia, and so that means that cutting CO-2 emissions today has impacts that play out over a very long timescale.

But there are other greenhouse gases and other heat-trapping materials that don't stay in the atmosphere as long. Methane is one example. Black carbon, so soot, essentially, is another example. And if you reduce your emissions of those, you cut down that trapping of heat much more quickly.

And, by the way, some of these things we do that create emissions of these short-lived forces (ph), is the sort of technical term for it, also are terrible for human health. So black carbon is produced by using inefficient cook stoves around the world. They kill people from air pollution, indoor air pollution, and at the same time heat the planet and drive climate change. So we can tackle those things with a nearer term impact, but they're not a substitute for tackling the carbon dioxide emissions. You can't sort of delay the effort on carbon emissions just by taking these other steps.

RUBENSTEIN: Does the United States really need the Keystone pipeline? Or is it really superfluous? What would you say?

SCARONI: Listen, I will not answer this question.

(LAUGHTER)

RUBENSTEIN: OK, all right. You won't answer. Does the United States need the Keystone pipeline? Or is it just not necessary?

DE MARGERIE: Canada needs it.

RUBENSTEIN: Canada needs it, OK.

DE MARGERIE: And we are in Canada.

RUBENSTEIN: All right. Michael, is it going to get done? Is the Keystone pipeline going to be approved by the president or not?

LEVI: I gave up my prediction license in 2011 after I was wrong.

RUBENSTEIN: Do we need it? Do we need it?

LEVI: I don't think we need this one particular pipeline. I don't think you should go after climate change by rejecting pipeline after pipeline after pipeline. I think it's an ineffective way of curbing emissions, and it's an expensive way of getting very limited results.

So I think one individual pipeline, whether it's for security or climate, is pretty inconsequential, but we're basically having a debate much more broadly.

RUBENSTEIN: Yes, Christophe?

DE MARGERIE: Just because, I mean, we need it, add a little bit of geopolitics, and that's the relationship between Canada and the U.S. Today, in the U.S., you get the benefit of this huge gas quantities and you have an internal market. The problem is today, Canada cannot sell any more its gas to the U.S., because you don't need any more.

Second, they need that Keystone pipe. They need it to export (inaudible) everybody knows it. There will be a time where Canada will feel frustrated (inaudible) by their former best ally (inaudible) benefit of their gas for so many years.

So I (inaudible) the American government -- I would take into account the fact that Canada needs it seriously, and that's part of the decision of the country, especially to know how to live with their neighbors. So, frankly -- and it's not only because we like it -- I will think that, on the top, Michael said that the impact on the environment is really nothing, but impact for Canada is big and, in my opinion, is worth thinking about it, not only as the green part, but what it is in terms of global politics.

RUBENSTEIN: For related reasons, would you rather do business in Africa or Russia? Which is easier?

SCARONI: Listen, we should look at the profit per barrel per country.

RUBENSTEIN: OK.

SCARONI: That is, the profit per barrel per country is very different. We don't make the same amount of money in each country in which we operate, OK? And therefore, it depends on the contractual terms, et cetera.

Generally speaking, for us probably Africa is easier, because we know Africa very well. We have been there for many, many years, while our presence in Russia is relatively new, so we are learning. But you can work everywhere. That's the truth.

RUBENSTEIN: Christophe, what about Total? Would you rather be in Russia or Africa?

DE MARGERIE: Well (inaudible) I mean, first, Africa, if I'm correct, is 53 countries. And between Libya and South Africa, it's still Africa, but it's not Africa. So Russia is Russia from one part of the other. So that's the main difference. I'm sorry to be nasty.

(CROSSTALK)

DE MARGERIE: In Africa, there are many parts in which I would love to invest. Andin Russia, we have to invest.

RUBENSTEIN: Michael, do you think our country's better off for having a Department of Energy? If we didn't have one, would we be better off or worse off?

LEVI: I think the Department of Energy does a lot of important things. But it's mostlya technology development operation. I do think we would -- and it does important support for early-stage technology development.

I do think we would be better off if we rationalized our sort of energy policy and foreign policy. And there's, in some ways, increasing split between the -- how the energy crowd thinks about this intersection and how the foreign policy crowd thinks about it. And we have a lot of duplication there.

RUBENSTEIN: When you are driving your own car, do you pump your own gas? When you're driving, do you actually go along and -- when you go to see what your stations are like, do you go into your stations and pump the gas?

SCARONI: I do all of that. I do all of that.

RUBENSTEIN: OK. Do they know who you are when you show up or...

SCARONI: Not necessarily. I disguise myself.

(LAUGHTER)

And I -- and then I particularly look at the men's room, to be sure they are in proper conditions.

RUBENSTEIN: I mean, reasonably clean, not perfectly...

SCARONI: Reasonably. I cannot go to the ladies' room. But the men's room, I will check.

RUBENSTEIN: All right.

SCARONI: Because this is important, huh?

RUBENSTEIN: Christophe, do you pump your own gas...

(CROSSTALK)

DE MARGERIE: Well, I mean, just to show that we have a few small differences, I would say, first, I mean, I try to hide myself, I cannot. That's true.

(LAUGHTER)

Because in France, wherever I go, I'm big moustache, so I cannot. I cannot. And even -- even...

(CROSSTALK)

RUBENSTEIN: Have you always had that mustache? Or how long have you had that?

DE MARGERIE: Well, no, I did it when I thought that my career would be slow and (inaudible) it's a good investment. But more seriously, going back to do I go to Total station? Yes. Do I talk with people? Yes. And on public do I visit the toilets? Yes, but I go and visit the woman ones, for one reason. We always have a problem, because we usually have the same numbers of (inaudible) on both sides, and it takes more time for a woman than for a man. So definitely -- I'm very serious.

RUBENSTEIN: I've heard that.

(CROSSTALK)

RUBENSTEIN: I've heard that. Yes, I've heard that.

DE MARGERIE: We've been spending a lot of time to redefine our service station and to make it much more, especially during the summertime, because what's happening today? Most of women, they go to the men side, and, first, it's not good. Second, it's not allowed by law. And I'm not sure I'm happy with it.

RUBENSTEIN: OK.

DE MARGERIE: The last part is not real.

RUBENSTEIN: OK, so we're going to now have some questions. Please, these are all on the record.

DE MARGERIE: (inaudible) go to men's room.

RUBENSTEIN: Please stand up, identify yourselves, your name and your organization, and ask a question. Please don't make a statement, just a question, and the most concise question will be, I think, rewarded, so -- yes, right here first. Name, identification, concise question.

QUESTION: Ralph Buchens (ph), New York University. I was struck by the fact that China was not mentioned at all, not a single word about China. What is the impact of the second-largest economy of the world going to be on the future of energy?

SCARONI: Want me to answer -- to try to answer this question?

RUBENSTEIN: Yes, go ahead.

SCARONI: Now, we could say many things about China, of course, in many detail. But let me just say one thing. Chinese want to replace coal with gas, but they will never do it if they don't find gas domestically at, say, 70 percent of their needs. So their idea that China will repeat what Europe did, that is to depend from imports for 70 percent or 60 percent of their needs for me is unthinkable.

Now, in order to do that, they explore for shale gas. And in our view, it is a very promising area, shale gas in China. They also look for conventional gas. And they -- in terms of oil, I don't think China will ever be a very promising country, so they continue to invest outside of China to make sure that the resources they need are property of the larger Chinese companies, particularly in Africa, particularly in Africa.

RUBENSTEIN: OK. Another comment on China?

SCARONI: Would you agree, Christophe?

DE MARGERIE: Yeah. Very quick to add, but it's not in opposition, the opposite, is, first -- and that goes to Michael's point on environment and environment, environmental health and environment for global warming. Even if, thank God, there is a link between the two and when you fight the environment for health, you also have a positive impact on the global warming being CO-2, other sources of gases.

And today in China, they're really threatened by what's happening in terms of health, being in Beijing or elsewhere. So it's not global warming here. It's health. Can they continue with coal? No. Do they have to find a solution for coal? Yes, they are not stupid. And, you know, we always says they don't care, they don't care about human life. No, no, China is changing and, thank God, for the good.

So what we can say on the top of what has been said, we see Chinese are very good partners for Total outside of China, because they know they don't have the same technology, they know that often they are not so much (inaudible) they would like it to be, especially in Africa, that we have Total as their partner in Africa operating for them and having access to the crude. That's also a nice way to, I would say, combine being more efficient, cleaner, and bring them in a world where they have to accept a code of conduct (inaudible)

RUBENSTEIN: We also didn't mention the Arctic. I'm just curious, do any of you really think that the oil and the gas there, supposedly a very large amount of undiscovered...

SCARONI: In the Arctic?

RUBENSTEIN: Yes, in the Arctic. Is that really worth the money to go get in our lifetime? Or is it too hard to get?

SCARONI: We are investing a lot in the Arctic, particularly the Barents Sea, both on the Norwegian and on the Russian side. We are going -- we are investing billions in exploration over there.

RUBENSTEIN: OK.

SCARONI: We have -- we are investing in Alaska. I mean, we believe that the Arctic is a new frontier for oil and gas. It's going to be relatively expensive oil and gas, nothing cheap over there. But if you think that the oil prices are going to be around $90, $100, it's still competitive.

RUBENSTEIN: OK, Christophe, are you doing anything in the Arctic or...

DE MARGERIE: No. Well, I've been quite vocal on this without (inaudible) but, you know (inaudible)

SCARONI: (inaudible) remember.

DE MARGERIE: Yeah. By the way, I still keep my mind like this to say the first company which will have leak of oil on the (inaudible) a drop (inaudible) is a dead company. And I have shareholders, and I think win-win is important. You cannot do anything because it exists. And we know that even with the best technology, we cannot say.

So in Total (inaudible) we are not against the Arctic, as such, but we are against certain parts of the Arctic, where it's always in the ice, and especially then we will only for gas and not for oil. And I am adamant to say this, and I don't want this to happen like it happened to another country, which we'll not mention, but which has huge problem because of this problem in the Arctic.

So don't say there is no risk, because there are risks, nothing to do with technology, but risk-reward is important. And, again, I insist, especially after Macondo, that people don't understand that any black oil, even one barrel of black oil on (inaudible) will kill the company. I'm not ready to have my company killed.

RUBENSTEIN: (inaudible) but OK. Michael?

LEVI: I think a lot of companies are thinking the way that Christophe is describing, in particular because they have a host of other opportunities for investment these days. And, again, I think you have to differentiate between different parts of the Arctic, with different infrastructure, with different experience in handling these.

But very quickly to the China question, because China influences the world of energy in a host of different ways. I still think the biggest one is its increasing demand for energy. And we can look at its investments. We can look at its diplomacy. But the reality is that we wouldn't have $100 barrel oil today had we not had huge increases in Chinese demand over the last decade. We wouldn't have the same level of emissions had we not had these big increases in demand. And they drive everything, from development in oil-rich countries to geopolitics.

RUBENSTEIN: OK. Question, yes, right here? So stand up, and identify yourself and your organization, and quick -- quick question.

QUESTION: My name is Andrew Gunlock (ph) (inaudible) I'd like Mr. Scaroni to go back to his previous thoughts on how Europe and Japan can compete in the re-industrialization with America. It implies in a certain way that you can divorce the international gas price from the international oil price, which it already has done in this country, and I'm just curious how you see that happening, if it can happen.

SCARONI: Let me speak for a second about Europe. Now, I told you that today the price of gas in Europe is three times the price in America. Even if we think that America will become a big exporter of gas, the gas will land in Europe at a price double the price in the U.S. So, say, $4 medium btu (ph) landed in Europe $8.

So the differential will move from three times to two times. Is it sustainable? No. In my view, no, or at least, yes, you can sustain everything, but you are suffering a lot. So what has to be done?

First, live in Europe, the shale revolution, as well as America did. Now, I will not enter into this, because Christophe has already said everything. The only thing I would add, I am waiting to see what happens in the U.K., which is the only one country that really is going forward on the shale gas. We see what happens there. They are the most pragmatic of all the Europeans. Europeans love to discuss theory. Brits like to do practice. So let's see what happens there.

Now, if we -- either we don't have shale gas in Europe or we cannot exploit it, the only thing I'm looking very much forward, no, so 20 years from now, is to think that our Texas will be Russia. Now, why I'm saying that? Because we have Russia next to us with unlimited resources of gas, unlimited. And they need to have a big customer.

We have a big customer for Russian gas. We need to have a big supplier. This is next to us. Russia and Europe have a long history together. And there are a lot of synergies between these two areas.

Now, don't think about Putin, about -- I'm not -- I'm not talking about that. I'm talking 20 years from now, just looking at where the resources are, where the consumption is, no? So there is a certain amount of -- a kind of force of gravity which will bring the two sides one close to the other. Otherwise, to imagine Europe living with such a differential in energy costs seems to me really quite dramatic. I think there is a real emergency on that point.

RUBENSTEIN: OK. So you think Putin will be gone in 20 years?

(LAUGHTER)

SCARONI: Maybe.

RUBENSTEIN: All right. OK, right here.

QUESTION: Thank you. Daniel Arbess from Perella Weinberg Partners. I wanted to

ask you about oil shale and its potential, which is a different concept from shale oil.

SCARONI: (OFF-MIKE)

DE MARGERIE: (OFF-MIKE)

LEVI: You guys (OFF-MIKE)

DE MARGERIE: Michael, you'll help me, because you're good for the...

LEVI: You have an investment in oil shale, don't you?

DE MARGERIE: Yeah, I know. I know. We have the two. But you're quite good for the energy of the future, so this is an energy of the future. But today, when you see what is available in terms of shale oil, of shale gas, liquids coming from shale gas, and all of those things, definitely -- and even if I am still favoring at least the way we continue to think about longer term, but it's true that for the short term it's probable that it's not anymore as attractive, and it could have been even recently.

So we'd have to continue to work on this, because it's a long-term source of energy. We can do it in acceptable way. I mean, the new treatment to produce this oil from the shale, but definitely what's happening today in the U.S. is making the investment less attractive, at least in terms of timing. But, you know, just like a lot of things, it takes the time, and we keep it, and we will see.

RUBENSTEIN: OK.

LEVI: So for those of you who aren't familiar with the technology, shale oil is like shale gas. You use horizontal drilling and hydraulic fracturing to extract it. Oil shale is a rock that you have to somehow heat or apply chemicals to in some way in order to extract the oil. We haven't had commercial production from it. It's one of these things that's been the holy grail. I spoke to someone in the industry out in Colorado. This is a resource as big as the Saudi resource in principle, though not necessarily economic.

And I said -- I asked him about the sort of great rush for shale oil -- for oil shale after the first oil crisis, and then the bust. There was a bust in the early '80s when prices went down. And I said, how is that -- how's that? And he said, well, this wasn't the first time. This was the third time that we'd had this rush and it had -- and it had crashed.

And I think it's burned a lot of people. And so now you see very small-scale efforts to understand it and also to figure out environmentally sound ways to extract it. But I think the economics don't push you pretty -- very far that way right now.

RUBENSTEIN: Michael, would -- would you be willing to drink the water from a well that was coming from water over an aquifer that had oil shale kind of -- or gas shale exploration right below it? In other words, would you be worried about the water that you were drinking that was above that technique?

DE MARGERIE: Yes.

LEVI: I would be a bit worried about the water in general. I would drink that water.

RUBENSTEIN: You would drink that water?

LEVI: Sure.

RUBENSTEIN: And, Christophe, you wouldn't?

DE MARGERIE: Of course I would. I thought it was the opposite way. I mean, those aquifers are almost next to the surface. The rest we're talking about -- I mean -- you know, this debate is -- I mean, frankly, I know it exists. And I'm ready to answer with technical words, et cetera.

But if the question is just would you drink the water? The answer is yes.

RUBENSTEIN: OK. I thought your answer would be nothing would be better than Perrier anyway, so you just would drink that, right?

DE MARGERIE: Perrier is the same with bubbles, and the bubble is gas. So without gas, you don't have -- it's CO-2, by the way.

(CROSSTALK)

RUBENSTEIN: OK, I got it.

(LAUGHTER)

Right here? Right here, question?

QUESTION: I'm David Fenton of Fenton Communications. And I want to talk about what the intergovernmental panel...

RUBENSTEIN: (OFF-MIKE) you want to ask a question?

QUESTION: Yes, I do.

RUBENSTEIN: All right. OK.

QUESTION: I heard your admonition.

RUBENSTEIN: All right.

QUESTION: But you have to set up the question.

RUBENSTEIN: OK, go ahead.

QUESTION: The Intergovernmental Panel on Climate Change a week-and-a-half ago said that the world has a carbon budget that we can't burn past in order to keep the temperature from going beyond two degrees centigrade. And when you go beyond that, it keeps going, and it becomes very uncontrollable, so it's a serious physical limit. And at current rates of fossil fuel use, it's used up in 22 years. And, by the way, for the financial people in the room, that translates into a financial bubble of $20 trillion to $25 trillion in assets that cannot be used, it must be left in the ground.

So my questions for you two very progressive European oil company directors, compared to ours, believe me, is, how is this going to affect your business? How are you planning for the post-carbon bubble, post-carbon budget era?

DE MARGERIE: Well, again, I'm sorry, I might not answer to your question the way you like, but, I mean, the way it has to be. Now, the problem is not, again, Europe or United States or -- you know, in France today, OK, if you are against nuclear, by definition you (inaudible) what I'm going to say, but France is the country in Europe which is the country with the smallest print on the planet, because we don't have a lot of CO-2 emissions, and at the top even for other sources of gases. Everybody knows this. But today, as far as people willing to reduce the nuclear share, by definition, we will become less, quote, unquote, "clean."

So, I mean, that's where I have a problem with all of those things. I mean, everybody's seeing something in the opposite. It's antagonism based on not only (inaudible) politics, and, frankly, as a person in charge, I worry sometimes (inaudible) myself a little bit lonely, sad and desperate.

But, frankly, we talk about Africa, we talk about China, we talk about India, and we bring all of this to Europe and to the problem we have with the Greens and everything, and are we serious in this? We are not serious. And I'm sorry to say this, because if we were serious, we would calculate, as you said, worldwide, and then we see what we can do, and then bring a European company, international company.

I will not say, you know, I don't care, because (inaudible) no, we can participate, and we have to participate. But let's have rules, not in terms of finance, even if we need to make profit, but in terms of what is it and why. And are we spending the money for the real thing? And aren't we doing something totally stupid, because it's spend money for nothing?

And that's where I am really, really finding myself not in an easy situation, if you ask me, because, frankly, billions of dollars we could do a lot. And when you tell this to people, and when you tell in China, OK, you want best coal, I understand, you want also freedom. So it means people they have to move where they -- where they were -- whatever -- sorry, they want to go, which means moving to the coast, moving to the big city.

We all know that moving to big city means increasing the CO-2 emissions. We all know this. But at same time, we say, no, no, no, no, they have the right to move. It's -- for this I could give you 200 examples, but then we will all try on our stupidity. And I'm not saying it's not an important subject, but when are we going to open the subject on something which is just those are the facts, that is impact, how do we control it?

Nobody wants to do this. So the blame goes back (inaudible) we accept it. We will try to do our best to be cleaner and to prove it. But unfortunately, we are too small, even the two of us together, and there is no message. We are too small to have a real impact. We'll do our best and prove we can do it, an ugly oil and gas company can be efficient and reduce emission, but at the end, it will be a drop of water in a river.

And I'm sorry for this. Why don't we take into account the river?

RUBENSTEIN: OK. Yes, right here.

QUESTION: (inaudible) with Al Hayad (ph). Could you take a look at the landscape -- geopolitical landscape that you see in the Middle East, given your disappointment in Libya, your expectations -- it's not being met in Libya, after intervention, and given that, of course, Russia is winning Syria, and while the United States and Saudi Arabia are feeling at odds with what's going on, how is that going to translate itself from both your points of view, in terms of the landscape of the region, oil, gas included, as well as the geopolitics?

SCARONI: Well, maybe I will tell you something about North Africa, maybe, and then maybe you are more expert than me on Syria, because he's in Syria, I am not. No, while in North Africa, probably we are bigger than you are, no, unfortunately, right now.

Well, in any case, in North Africa, well, Algeria, so far, so good. Personally, I'm confident that Algeria -- there are strong institutions, very strong institutions. By the way, very strong French institutions. And the memory of the civil war 10 years ago, 15 years ago is still present. We'll go ahead relatively smoothly. So far, we have not lost one dollar of production. I would say everything fine, because I remember it's (inaudible) so -- but I am optimistic.

Now, on Egypt, on Egypt, yes, the impression is that there is a move towards all times in Egypt from a political point of view. But this seems to me heading towards stability. We have never lost one barrel of oil production all along this period. We are the biggest producer of oil and gas in Egypt, which makes me think that the people are aware that they need desperately to continue to produce oil and gas. Otherwise, the country which is already in trouble will become even more in trouble.

Libya is the big issue, no? Libya is coming from 42 years of dictatorship, and I always remember that Mussolini was only 20. So twice the period -- now, it's a long period of time. And Gadhafi destroyed all the institutions of Libya. So before the Libyans can build again a country from scratch, it will take some time, and I'm expecting, let's say, trouble to continue up and down that.

I always make the conclusion that the Libyans are a very pacific population, because in a country where there is no army and every family has at least two or three weapons, the fact that the country's still relatively peaceful is a miracle, is a miracle.

And at the end of the day, the reason of me being optimistic, apart from the fact that we produce almost 300,000 barrels of oil in Libya, so I had to be optimistic. But apart from that, I cannot believe that the Libyans, who are wise, will -- will throw away the wealth they have. Because 5 million of Libyans, in large country with 3,000 kilometers of coasts on the Mediterranean, and 2 million barrels of oil, they cannot be -- destroy all this. They will find a way -- they'll find a way of exploiting their resources. That's the kind of picture I'm making to myself.

You have been in Syria for many years.

DE MARGERIE: Yeah, I was wondering if I don't pass to Michael, though. I think -- it's more and more difficult in our word to split countries and even regions. So to say you have the problem of Northern Africa, you have the problem of Middle East, you have the problem of United States, Europe, it's all now based on what the -- what we call the superpowers wants to do or not to do.

And I think, again, unfortunately, I mean, what can Libya do at its own level? Almost nothing, especially with what's happening in Egypt, what's happening elsewhere. So all of this now is becoming more and more -- not one single element will be too easy. But at the same time, to split it (inaudible) because it gives a feeling that we can solve those issues one by one. We cannot. We all see today that all the debate is back now on Iran, as it started, as what is happening, in fact, in Iraq, in terms of un-security, is linked with Syria. So, yeah, the problem is not oil and gas. It's very small country in oil and gas.

So if everybody's focused on this, it's not because of this. It's because, first, it's really insane, and (inaudible) support what's happening, but now all the problem is, as you said, Russia, China, United States, France, all the U.N. countries, plus others. And none of them can say it's because of the other. And I'm -- I know that -- I know what here is the feeling in the U.S. (inaudible) feeling in Europe (inaudible) I have a feeling which is probably different, which is a feeling of being from inside. At least I can tell you what people from there, which also are important, because (inaudible) think about this, and they think that we have a great responsibility.

And it's not Saudi. But (inaudible) that's a difference. We continue to work in any of those countries, where we have been present for so many years. For the benefit, believe it or not, of the people who are there, we cannot leave. I will certainly not invest today in Libya if I were not be present, but being in Libya, we stay. That's a small difference. And that's the end, if we cannot just make sure that all of our people, being national people or expatriates, are at stake, then we will leave, because that is our priority.

But unfortunately, I don't think it's the same for you. I don't think that Total can tell to anybody, "You should do this or you should do that." We don't have this (inaudible)

SCARONI: (inaudible)

RUBENSTEIN: A final question -- we're out of time -- a final question, as an Italian and a businessman, are you worried about the state of the Italian government?

SCARONI: No, no. Listen, we -- let's say I consider the stability of a government is a plus, is not a minus. So I think we have a government there to stay. No, we have a government who's going to stay at least for a couple of years.

RUBENSTEIN: So as a Frenchman, are you worried about -- and a businessman, are you worried about the state of the French government?

DE MARGERIE: Yes.

(LAUGHTER)

RUBENSTEIN: All right. And as an American, are you worried about the state of the American government?

(LAUGHTER)

LEVI: I think the laughter answers that question, so...

RUBENSTEIN: All right. Thank you all very much. I just want to remind everybody, thank you all. I want to thank our guests for a terrific performance. Wednesday, we have a "History Makers" series, HBO "History Makers" series (inaudible) and you're all invited to that. Thank you all very much.

(APPLAUSE)

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