Since the 2011 Fukushima Daiichi nuclear disaster and the 2012 presidential elections, French dependence on nuclear energy has been under the spotlight and has been set to be diluted in favour of renewables. President Hollande has restated a goal of reducing nuclear generation from 75% to 50% of the electricity mix. This also leaves the door open for gas to play a larger role. However, given the influence of the nuclear lobby in France, Hollande's cabinet is likely to struggle to achieve these targets. Overall, the future of energy growth is uncertain and the outlook for refiners and fuel distributors remains poor.
The main trends and developments in the French oil and gas sector are:
- President Hollande in July 2013 reiterated France's moratorium on hydraulic fracturing (fracking), which effectively bans exploration for shale oil and gas and dashed industry hopes that he might soften his stance. This was in line with previous declarations and he has insisted on the fact that this would be his policy throughout his term in office. Another key aspect of Hollande's energy policy is his ambitions of reducing nuclear generation from 75% to 50% of the electricity mix, although his cabinet might struggle to achieve this target given the weight of France's nuclear lobby.
- After a disappointing 2012-2013 drilling programme in French Guiana, Tullow and its partners have no planned drilling for 2014. Instead they plan to interpret 3D data in addition to exploration results in the hopes of identifying new targets. Tullow has said it would shift its focus from French Guiana to Suriname, with exploration director Angus McCross noting that the company's mid-term focus would be Suriname 'but we are not giving up on French Guiana... the prospectivity there is too rich, too strong, so we will be back.'
- On April 16 2013, the tribunal of Rouen rejected the offers made by Panama's NetOil and Libya's Murzuq Oil for the 161,800 barrels-a-day (b/d) Petit-Couronne refinery which used to be owned by now insolvent Petroplus. These were the only remaining offers. Although Murzaq Oil has said that it remains interested in the plant, alongside two other potential bidders - Luxembourg's GTSA and another unknown bidder - the plant's liquidator, Beatrice Pascual, affirmed that these were 'groundless letters of intent'. With no positive denouement in sight, a social plan is currently being implemented for the plant's 448 employees and we see it likely that the facility will be converted into an oil storage terminal.
- Operations at LyondellBasel's Berre-l'Etang refinery were suspended in January 2012. The US firm initiated a programme to mothball the 105,000b/d facility in south-eastern France after announcing on May 31 2011 that it was looking for a buyer. The company has given itself until the end of 2013 to sell the plant. In November 2012, the Ministry for Productive Renewal asserted that Indonesia's Pertamina had shown interest for the plant.
- Gas demand is expected to rise more quickly than oil demand, with new sources of supply being lined up by GDF Suez, which has signed import agreements with Egypt in addition to those already signed with Russia, Norway, Algeria and the Netherlands. Gas consumption is forecast to reach 49.6bn cubic metres (bcm) in 2017, climbing further to 54.6bcm by 2022, subject to revisions in French energy policy. Nearly all of the country's gas demand is sated through imports.
- In May 2011, EDF and Total confirmed that they would proceed with the US$2.2bn Nord-Pas-de-Calais Liquefied Natural Gas (LNG) project at Dunkirk, which is expected to add 13bcm of import capacity when it comes on stream by end-2015. There are also plans to expand capacity at the Montoir-de-Bretagne terminal to 16.5bcm.
- Thanks to improved energy efficiency and efforts to reduce oil dependency, oil demand is now expected to remain mostly flat over our 10-year forecast period to 2022. We forecast oil consumption reaching 1.83mn b/d by 2017, edging higher to 1.90mn b/d in 2022. Nearly all of the country's oil demand is sated through imports.
The global oil and gas market having moved away from the cycle of tight global supply we saw in 2011 and the first half of 2012, and with global production now comfortably meeting demand, we believe OPEC basket oil prices will decrease from an estimated US$109.5 per barrel (bbl) in 2012 to US$105.0/bbl in 2013. This fall in prices should cause France's import bill to fall, despite the country's growing oil and gas demand. Therefore, we see the country's oil and gas import bill falling from an estimated US$94.5bn in 2012 to US$91.9bn in 2017, before rising back to US$95.9mn by 2022.