TotalEnergies 2024 Strategy & Outlook Day | Climate Transition Insights
TotalEnergies’ 2024 Strategy & Outlook reinforced its capital allocation strategy and commitment to renewables, but has placed greater emphasis on upstream production growth, and a higher share of gas in its power generation mix.
We estimate these updates will adversely impact its net carbon intensity outlook.
Our view:
TotalEnergies' 2024 Strategy and Outlook day amplified the ongoing limitations in its transition plan. While its low-carbon build-out is head and shoulders above peers, its medium-term oil and gas growth strategy to FY30 continues to hold it back from securing the top spot of transition strategies.
The company now surpasses Eni with the most ambitious oil and gas growth guidance among peers, raising its target from 13% to 20% by FY30. Gas appears to play a larger role in its power generation by FY30, with its share rising to 30%, up from the previous 23%-27%. These shifts lower our forecast for TotalEnergies' net carbon intensity reduction to -21% by FY30, down from -24%. The company is targeting a 25% reduction between FY15-30.
Priority questions ahead of 2025:
01 Can TotalEnergies ensure its aggressive LNG growth won’t lock in long-term fossil fuel dependence? With plans to grow LNG sales by 50% by FY30, the most among Euromajors, LNG is framed as a decarbonisation lever, but its potential is limited. Clarity is needed on how these investments align with long-term decarbonisation.
02 Will TotalEnergies commit to quarterly reporting for its Low-carbon molecules business? Regular disclosures are required to track progress toward TotalEnergies’ target of allocating 33% of group capex to Low-carbon energies.
Key takeaways:
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TotalEnergies has now taken the top spot among its European peers in oil and gas production growth, highlighting the ongoing limitations in its transition strategy.
The company has upgraded its oil and gas outlook from 2-3% CAGR between FY23-28 (~2.8 Mboe/d), to 3% CAGR between FY24-30 (~3 Mboe/d). This puts oil and gas production growth between FY23-30 at 20% (up from 13%), pushing it ahead of Eni (15%). This growth will be driven primarily by six major FIDs in FY24, including projects in Brazil (2x), Suriname, Angola, Oman, and Nigeria.
With this change, TotalEnergies now leads its European peers in both upstream production growth and LNG sales growth (+50% between FY23-30). The company reported signing 4 Mtpa of long-term LNG contracts so far in FY24, almost 20% of its FY30 target.
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TotalEnergies appears to be putting a greater emphasis on flexible gas generation, updating the generation mix of its >100 TWh by FY30. The updated mix now aims for 70% renewables and 30% gas, a shift from the previous guidance of 80-100 TWh from renewables and 30 TWh from gas, which implied a gas share of 23%- 27%.
The company reported it remains on track to achieve its renewable capacity targets - 35 GW by FY25 and 100 GW by FY30 - with 80% of its project pipeline already identified. By FY30, Total’s renewable portfolio will comprise ~50% solar, 30% onshore wind, 10% offshore wind, and 10% storage. 70% of this capacity will be in deregulated markets such as the US, EU, Brazil and India, leveraging their “integrated model,” which combines renewables with flexible gas generation assets.
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TotalEnergies announced it will extend its US$14-18bn net capex guidance (net acquisitions and sales) from FY24-28 through to FY30, of which $5bn will be in low-carbon. This will include ~US$18 bn p.a. of organic capex over 2024-2026, with the company claiming it has no need for large M&A due to its deep portfolio of growth opportunities.
The company also announced it will maintain buybacks at $8bn for this year, targeting $2bn per quarter in 2025.
