Big Moustache, Bigger Shoes

The death of Total’s boss Christophe de Margerie in a plane crash in Moscow late Monday night  has shocked everybody not only in France but in the global oil industry as well.  As the tributes poured in for the man many nicknamed Big Moustache – a term he seemed almost proud of – I read the same adjectives several times: charismatic, unique, larger-than-life, outspoken, funny, original, independent.  When people write of famous powerful men they often exaggerate, especially if writing after their death.

Not in this case.  Shortly after de Margerie became Total’s CEO in 2007 I was fortunate enough to sit at a dinner table with him following a seminar in Houston.  It was a large table and I was seated quite far away, but close enough that I could see that he was one of those people who, when they talk, can captivate an audience effortlessly.  In his grammatically perfect English yet stereotypically appalling French accent, the Big Moustache entertained everybody with serious and intelligent comments on the oil industry punctuated with amusing anecdotes that he clearly relished telling.  Afterwards I noticed that he was the guy everyone wanted to talk to; in such an environment de Margerie turned into a pure entertainer, something few of his peers could manage.  I spoke to him for about 15 minutes, none of which was about work.  I asked him how he managed to do so much business in Russia without liking vodka (something he had confessed earlier).  He told me his secret was to bring along a few bottles of a particular Scotch whisky which he could drink in vast quantities while remaining upright, which to all outward appearances left him relatively sober even though inside he was completely drunk.  The Russians didn’t object to the substitution of one hard liquor for another, and eventually his business contacts used to stock the whisky for him.  The man was instantly likeable: intelligent and funny, he was the type of person you would love to have at a party or even just have in your presence.

He was different from his non-French peers in many ways, one of which was his relatively low compensation of $3m Euros per year (Shell’s CEO is paid in the region of $3.7m, ExxonMobil’s $28m, and BP’s $13m).  This is mainly due to the French culture of excessive pay being frowned upon especially for captains of industry, but rumours were that he was independently wealthy by virtue of being born into the family which founded Tattinger champagne and as such shunned a hefty Total salary.  But Total’s main problem is that he was very different from his French peers.

There is no doubt that de Margerie was unique in Total.  Having experience working with French corporations, and having worked with Total on a partnership development in the past, I can assure you that anyone who is as outspoken, individualistic, and charasmatic as de Margerie is almost unheard of in Total.  Had he not been from a prestigious family and attended a Grande Ecole – if, for example, he’d been the extremely talented son of a Marseille dock worker – his career would unlikely have gotten beyond junior management, if that.  My opinion of Total was – and still is – that it needed far more people like de Margerie, strong-willed individuals who could make tough decisions and not be in constant fear of what others thought and their salaries.  Instead, like in most large corporations but particularly one of such size in a French environment, the Big Moustache came across as somebody who was a lone figure of sense and determination surrounded by intelligent yet completely uncharismatic and rather weak individuals who would sooner nod their head in agreement than say what they really thought.  I don’t think this was deliberate on his part – I am quite certain he relished the challenge of being contradicted, so strong were his own convictions, I just think it is a product of the French management culture.  I have seen this in many large organisations, but I don’t think I’ve ever seen such a large gap between the vision of the CEO and board and the ability of the senior and middle management to deliver it in a company of such size and importance as Total.

Consider this.  Large French corporations have traditionally recruited their senior management almost exclusively from the Grande Ecoles (de Margerie’s successor, Patrick Pouyanne, is no exception).  These are considered France’s best and brightest minds yet they head into companies best known in the global sense for providing job security over anything else.  Contrast this with the US: ExxonMobil’s Rex Tillerson went to the University of Texas; Lee Raymond, his predecessor, went to Universities in the mid-west; John Watson of Chevron did not go to an Ivy League university either.  The high-flyers from America’s elite universities do not join (by American standards) ancient, outdated businesses like oil and gas.  They go into hedge funds, internet startups, and investment banks in the hope of making a billion dollars before they’re 30 (ignore whether or not this is a good thing, I state this purely in order to illustrate the different mindsets).  They’re not interested in job security as they know they are good enough to earn money anywhere: they are about risk and enormous reward.  By contrast, the situation in France is equivalent to Mark Zuckerberg joining GM having been impressed by the notice period and holiday allowance.

The American elite have confidence and are prepared to back themselves; the US oil companies recruit those with a head for competence, delivery, decision-making, and technical and business skills over raw intelligence, money-making ambition, and background.   The French elite go into business with no such track record but also without the confidence to back themselves.  The result is, well, the French economy.

And so it is within Total, at least from what I’ve seen, heard, and read.  It is telling that Total did not seriously consider Yves-Louis Darricarrère, head of E&P since 2007 until recently, for  the CEO’s position.  Instead they’ve opted for the former head of Total’s Petrochemical division, albeit somebody who has held senior E&P positions in the past.  Unless it’s an age thing, I’m left wondering how the person who has headed E&P for 7 years is not an extremely strong contender for the CEO spot.  Much was made of Christophe de Margerie’s committment to Total’s business in Russia – which is all within E&P (Petrochemicals has no presence there whatsoever) – and his opposition to the western sanctions against the country.  In my opinion there were two reasons for this.

Firstly, the Big Moustache’s enormous character made him genuinely popular among the Russian leadership and it is no certainty that his successor will make the same impact in a country where personal relations count for so much.  It could well turn out that much of Total’s commitment to Russia was down to de Margerie personally.  Having not been involved in E&P in Russia, the new CEO might find it a cold and difficult place to do business.  That Darricarrère had more experience in this area, and other tough but critical E&P locations such as Nigeria, should have gone a long way to tip the balance in his favour.

And secondly, there was another reason for de Margerie’s enthusiasm to do business in Russia, one which is shared by BP’s Bob Dudley: they don’t have much choice.  Recently a change occurred in the upper levels of Total which was not given much attention: the long-term head of exploration, a Frenchman, was replaced by – wait for it – a foreigner.  Here’s what Arnaud Breuillac, who recently replaced Darricarrère as head of E&P, said:

Total is also planning a new exploration strategy under the guidance of Kevin McLachlan, who will take over as senior vice president of exploration in early 2015 from Marc Blaizot.

Breuillac described Total’s high risk-high reward exploration performance over the past three years as “disappointing”, and hopes McLachlan, formerly of Murphy Oil and Nexen, can help stimulate a better wildcatting success rate.

He said McLachlan’s appointment “is a major event for Total, to take somebody from outside the company at that (executive) level.”

Blaizot held the position for a considerable time, during which – in the words of Breuillac – results were “disappointing”.  In short, Total has failed to discover any oil commensurate with the exploration spending and have turned to an outsider – yet one who has not operated at a global level for a company the size of Total before.  If this smacks of a desperate move, that’s probably because it is.  The rumours around the bars and seminars was that Blaizot had built himself a cosy little empire, employing many of his old mates, and this setup within a naturally risk-averse and unchallenging French corporate culture led to failure of the exploration programme whilst smaller, more flexible independent oil companies were making huge discoveries under Total’s nose.

This has resulted in Total having few serious, operated projects to develop in the next few years while they wait for the new head of exploration to (hopefully) make some discoveries.  Although Yamal is non-operated, it represents one of the largest developments employing Total technical staff and is cited as one of the company’s flagship projects.  Little wonder the CEO opposed the sanctions against its major investor, Gennady Timoshenko.

Total has found itself going into 2015 with little by way of major projects, an untried and unusually foreign head of exploration with no experience working in France joining on the back of an expensive failed exploration programme, and a new CEO who seems on the face of it less like the old one and more like a run-of-the-mill French executive with no experience in a country deemed critical to the company’s future success.  Christophe de Margerie’s moustache was indeed big, but his shoes which must now be filled may prove to be much bigger.

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