fossilfuelopolis

Prospecting the academic grounds on global energies patterns

The French Oil Story

This article is based on the reading “A few strategic considerations concerning French Import of Oil products between 1946 and 2005” by R Nayberg and “The French Presidency, the National Companies and the First Oil Shock” by A Demagny-Van Eyseren.

Starting in 1945, French oil policy had emphasized the acquisition of national resources, and that priority wound up with the Saharan discoveries of oil and gas beginning in 1956. But in 1971, France lost control of that Algerian oil, and the imperatives of French oil policy, as resulting from the oil law of 1928 and reaffirmed in July 1971, created a twin challenge to the authorities: guarantee reliable supplies while maintaining competitive energy.

George Pompidou analysis of the Algerian nationalization highlights the permanence of oil related issues throughout the 20th century. He remarked to Chancellor Brandt in january 71:

“Algeria will eliminate the foreign companies’ role. If it were only the Algerians, I would tell them to do it right away and pay. But I don’t want to damage the Teheran conference and set an example for others. The solidarity of the consumers, and particularly of the Europeans, must be affirmed. America will be tempted to obtain supplies at home, in Canada, or in Venezuela, even in the Persian Gulf, and to console itself in the final analysis with the idea that Europe will wind up paying more for its energy. There is a serious problem that will lead us to promote the production of atomic energy. The latter is far from making up for oil, but it will be necessary all the same to try to avoid complete dependence on oil.”

The issue of the relations between the national companies and producing countries at the end of the G Pompidou’s presidency( from october 73 to march 74) experienced a major shift. A new energy policy, whose main lines were actually sketched out beginning in 1971 when the first sign of turnaround on the oil market were becoming perceptible, is launched.  The substitution of oil from coal that occurred in the 60s  had the very concrete result from France of raising the energy dependence rate from 35% in 1960 to 77% in 1973 above the average in the Europe and Economic Community. At that time three-fourths of the imports of crude oil came from the Middle East.

If CFP (compagnie française des Pétroles- future TOTAL) didn’t rely much on Algerian crude (1/4 of the group’s resources in 70) and quickly renegotiated its Algerian’s partnership, it was not the case for ELF, for whom Algeria symbolized ‘the roots of their development’. The young company still had many assets to be amortized in that country, with the end of Saharan oil, it was 80% of its crude resources that it had to reconstitute.

Following this Algerian step, French companies were encouraged to boost their exploration efforts in Europe and non-OPEC countries, as well as with respect to the new sources, oil shale and bitumous sandstone, or the very deep seas. Between 65 and 73, the French companies discovered more than an hundred oil deposits. 51% in the Middle East, 28% in Africa (Congo, Gabon, Tunisia), 14% in Europe, 5% in America. Some 55% of those reserves were discovered by CFP, 43% by ERAP-ELF.

CFP did not manage to diversify its resources, 87% of its new reserves were in Middle East. Moreover, in Iraq, the nationalization of the Irak Petroleum Company in June 72, forced CFP in feb 73 to sign a contract purchasing Kirkuk oil for 10 years following a Franco-Iraqi governmental agreement. This proximity and parternship of France with Arab oil producers might explain why France did not join the International Energy Agency created in established in the framework of the OECD  in 1974  in response to 1973 oil crisis.

Response to the oil crisis

The excessive prices of oil following the OPEC supply disruption in 1973 seriously undermined the French economy as well as other European countries: higher inflation, trade imbalances due to the share of energy products in imports, which increased from 12.2% in 73 to 22.6% in next year. [The trade surplus of 6.7 billions francs recorded in 1973 gave way to a deficit of 16.9 billion in 1974, the value of the crude purchases having increased from 15 to 48 billions francs], reduction of national income estimated at 2.5% of GNP, a rise of industrial cost prices, hence a slowdown of the economic growth rate.

The new priorities of the French Energy policy were then defined as Energy savings, diversification of supply sources, and the launch of the civilian nuclear energy.

  • The most decisive aspect was the civilian nuclear electricity plan, called Messmer Plan.
  • Jean Blancard, aimed for 1974-1975 at stabilizing energy consumption by improving energy efficiency and technology (growth rate of annual consumption should be reduced to 3% against 5% previously) (introduction of speed limit to 90km/h, public lighting regulation…)
  • increased participation of oil groups in world exploration and production effort (North Sea, North America and Africa)

The nuclear plan will be further adressed in the following post comparing Spain and France link between resources and economic performances.

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