SANA, Yemen: It has been a tough first year for Martin Deffontaines in this arid, impoverished and secluded country on the southern tip of the Arabian Peninsula.
Since moving here 13 months ago as the local manager for Total, the French oil giant, Deffontaines has seen his main export pipeline damaged by terrorists, endured devastating flash floods and sent expatriate families back home because of security concerns.
Despite these challenges, Deffontaines, a lanky, 43-year-old Parisian, does not appear overly anxious. Indeed, Yemen is a showcase for Total, whose experience here shows how far an oil company will go these days to unearth fresh energy supplies.
Because of the endlessly complicated interplay of geology and geopolitics, access to petroleum resources is increasingly constrained, costs have soared and energy projects are becoming more complex.
Add the recent, dizzying collapse in oil prices to that picture, and you have a raft of companies from Asia to North America rethinking their investments and scurrying to cut costs.
So Deffontaines was philosophical, and a little amused, when he recounted some of the challenges the company had faced here, like negotiating with tribal leaders and sending actors to remote villages to stage a play about the hazards of natural gas pipelines. While meeting with government officials to thrash out problems, participants typically chew khat, a mildly narcotic plant that is widely consumed in Yemen but banned in many places around the world.
This is a country where tribes are often better armed than government troops, where piracy runs rampant along the coastline and where many of the trappings of modern life are absent.
The risks are so pervasive that Total employees cannot travel around town without an escort and are not allowed to leave Sana, the Yemeni capital, on their own.
But Total has still gained a strong foothold here. It will soon start shipping liquefied natural gas from the Gulf of Aden, completing a $4 billion project begun less than four years ago. Those shipments will make Yemen the newest member of the world's small club of natural gas exporters - and earn the government as much as $50 billion in tax revenue over the next 25 years.
"If we can build this here, we can do it anywhere," says Stéphane Venes, a construction manager at Total's natural gas plant in Balhaf, a coastal town. Building the plant required about 10,000 workers, a monumental endeavor in such an isolated place. It also meant building a 340-kilometer, or 210-mile, pipeline that had to snake through 22 different tribal lands and one of the world's most unforgiving deserts.
Such "audace," or boldness, is precisely what Christophe de Margerie, Total's chief executive, said he would like to instill throughout his company.
"I make a big distinction between being risky and being bold," de Margerie, 57, said during an interview at Total's headquarters in La Défense, the business district on the outskirts of Paris.
"If you're in a desert without water - that's not bold, that's dumb," he said. "If you storm out of the trenches with your sword drawn while machine guns fire at you, it's not bold, it's dumb. Times have changed."
Total does not have much choice but to charge ahead. Although it managed for many years to expand its hydrocarbon production - even as larger rivals like Exxon Mobil and Royal Dutch Shell struggled to keep output from falling - that run ended last year when it reported a production drop.
Like its competitors, Total faces one of the sharpest downturns in the history of the oil business, with consumption collapsing and oil prices shedding more than 70 percent of their value since peaking in July. At the same time, public opinion is sharply divided about oil companies themselves, as environmental concerns take an increasingly important place in debates about the future of the energy business.
With no domestic production but deep roots in the Middle East and Africa, Total - as well as its longtime domestic rival, Elf Aquitaine, which it acquired in 2000 - has always had to blaze or bully its way through faraway lands.
It has struck deals in countries where few wished to do business, like Sudan and Myanmar, or sailed against the tide when it saw lucrative opportunities, as it did in Iran in the 1990s. Such forays have come with complications. In separate investigations, French judges have been examining Total's role in the United Nations oil-for-food program in Iraq and whether it made secret payments to enter the Iranian market.
Total's appetite for risk has also turned it into the top-ranked Western oil company in Africa, and the second-largest in the Middle East, after Exxon. Total pumps an average of 2.3 million barrels of oil and natural gas a day, and it earned more than $15 billion last year.
While the company has operations throughout the Middle East, some of its biggest bets in the region have not yet paid off.
During the 1990s, Total executives negotiated with the government of Saddam Hussein and laid the groundwork for eventual development of Iraqi oil fields. But now, some Iraqi officials prefer U.S. companies to European ones and view Total with suspicion because of this past. In Iran, a political confrontation with the West has required a reluctant Total to walk away - at least for now - from a multibillion dollar investment to develop a huge natural gas field.
Total still has its eye on other targets. It is aggressively developing assets around the world, whether in Angola's deep offshore sites, the Libyan Sahara or the forests of Venezuela. And it has decided that part of its future lies in developing a new expertise in nuclear energy.
"They are very good at capturing deals," said J. Robinson West, the chairman of PFC Energy, a consulting firm based in Washington that counts Total as a client. "They are also prepared to ride through storms where American companies aren't. And they are more commercial and agile than others."
Total spends about $1 billion on research annually to find better ways to discover, squeeze or refine oil and natural gas.
Technological advantages are becoming crucial in the race for petroleum resources. The world's easy oil reserves have mostly been found, requiring companies to drill at ever-greater depths - sometimes exceeding 9,000 meters, or 30,000 feet - and to look for hydrocarbons in remote places, like the Arctic.
"I don't think we should be alarmed about reserves running out," said Manoelle Lepoutre, Total's vice president for research and development. "The potential is there. Engineers know how to extract resources. It's not a question of resources, but more of production capacity."
Yet there are increasing limits to oil exploration, which are worrying engineers and energy experts. At a conference in London two years ago, de Margerie shook up his colleagues and challenged the industry's consensus view when he warned that the world would not be able to pump enough oil to meet energy demands in coming decades.
At the time, most energy forecasters, including those at the U.S. Department of Energy, expected that supplies would rise above 120 million barrels a day by 2030, up from about 85 million barrels.
But for de Margerie, world production will struggle to rise to 95 million barrels a day, mostly because of geopolitical constraints but also because oil fields produce less and less as they mature.
"In a wine cellar, you know exactly how much wine you have," says Jean-Jacques Mosconi, Total's director of strategy. "For oil, it's different. You only know your final reserves once you run out."
More recently, Total has warned that a "major oil supply crisis" will emerge if oil prices remain at the lower levels of today and companies cut their investments.
Total has long been accustomed to provoking the status quo. After buying Petrofina of Belgium in 1999, Total surprised the French establishment when it started a hostile takeover bid for Elf. Total prevailed after a corporate battle by paying about $50 billion for the company, which was nearly twice its size.
Overnight, the hard-fought merger propelled Total into the small club of "supermajors," pitting it directly against much larger U.S. companies.
Total recently outplayed its rivals when it grabbed a piece of a huge offshore natural gas field in Russia, beating out Chevron and ConocoPhillips to snare 25 percent of the project. The field, Shtokman, in the Barents Sea, about 560 kilometers northeast of Murmansk, will cost $20 billion to $25 billion to develop. It is likely to be one of the biggest energy projects of the next decade.
While that deal was a success, the company suffered a setback more recently in Saudi Arabia's treacherous Rub al-Khali desert, where the kingdom in 2001 had taken the rare step of allowing foreign investors to look for natural gas.
The new policy initially generated great enthusiasm among Total and other foreign oil companies, which saw it as the kingdom's first step toward reopening its oil sector after nationalizing Aramco in the early 1980s.
But the excitement quickly waned after the Saudis imposed strict limits on its foreign partners, including mandates that all oil discoveries belonged solely to the kingdom and that all natural gas found there had to be sold on the Saudi market at a cut-rate price. Total left Rub al-Khali early last year, after its program there ran seriously over its budget and its teams drilled three wells that came up dry. Shell, another shareholder in the venture, has decided to stick with the project.
No hard feelings, however. After Total left Rub al-Khali, Aramco renewed its commitment to build a refinery with the French company in the Red Sea port town of Jubayl, said Michel Bénézit, Total's president for refining and marketing.
The refinery is expected to be completed by about 2013.
In a conference room at Total's headquarters, de Margerie lingered with a visitor recently, joking, stretching his schedule after an already long day and straining the nerves of his assistants, who complain that the boss is always late.
A few years ago, after arriving nearly two hours late for a meeting with the Qatar oil minister, Abdullah al-Attiyah, de Margerie fell to one knee to apologize for his tardiness.
Such bonhomie has endeared him to colleagues, clients and analysts since his days as Total's chief for the Middle East in the 1990s. But it also made him an unlikely choice to replace Thierry Desmarest as chief executive two years ago.
Desmarest, who was seen as cold and reserved, is nonetheless widely credited with the success of the merger with Elf, and he remains the company's chairman.
De Margerie, a gregarious talker with a taste for fine whiskey, can be alternately humorous, rambling or serious and single-minded. He is a bon vivant who enjoys long lunches, preferably with a good bottle of wine and pleasant company.
For his part, de Margerie said he had issues that demanded his attention.
At a time when national oil companies - like Aramco, Petronas in Malaysia, Petrobras in Brazil and Gazprom in Russia - control large shares of the world's reserves, and nationalistic governments tighten the screws on foreign companies, the traditional role of Western oil companies is under threat.
"Being accepted simply means being able to perform your job even in the most hostile environments," de Margerie said.
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