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Valot – Former CEO of Technip – France

12.03.2015 / Energyboardroom

Daniel Valot, CEO of Technip from 1999 to 2007 and now enjoying retirement, takes a look at the history of the French oil and gas sector, and how France has succeeded in establishing itself as a center of excellence status in the industry.



What can you tell us about the history of the oil sector in France?

During the First World War, which witnessed the beginning of military air force and motorization of troops transportation, consecutive French governments realized that oil was becoming a key success factor in war times. At the end of the war, they consequently adopted 3 major decisions:

1) Since oil exploration was about to begin in the Middle East, France obtained that, as a compensation for war damages, the share of the Deutsche Bank in the Turkish Petroleum Company would be transferred to France. (San Remo Treaty, 1920)

2) In order to manage this asset, the Government decided in 1924 to create an ad hoc Company called CFP, Compagnie Française des Pétroles. A series of discussions resulted in a smart compromise regarding the private or public nature of the company. The state would own 35 % of the stock, be granted 40% of the company’s voting rights, and in addition be granted a veto power on strategic decisions.

3) Wishing to monitor closely the oil supplies, French authorities enacted a law on the 30th of March 1928. Under this law, the French State was attributed monopoly of importation and refining of crude oil, but would “delegate” this monopoly to various companies, for a period of 10 years, providing that those Companies would each have to comply with a specific tonnage of imports (“quotas”), and assume various duties, such as maintaining strategic oil reserves. This compromise between state-led capitalism and free market competition remained unchallenged until the 1980’s.

With the breakdown of the Ottoman Empire, the Turkish Petroleum Company disappeared and was replaced in Iraq by the IPC (Iraq Petroleum Company), with the same ownership structure. IPC made in 1927 its first significant discovery at Kirkuk, followed by several others. By this time, IPC included Shell, BP, a consortium Esso/Mobil, and CFP, each one with a 23.75 percent interest, the remaining five percent being held by M. Gulbenkian, nicknamed “Mr. Five Percent”, who would quickly become one of the wealthiest men in the world. For the first time in history, French companies were becoming an important oil producer. During all the following years, until the first oil shock in 1973, the international oil and gas business would be completely dominated by seven US and British Companies, often called “the Seven Sisters” (Esso, Mobil, Gulf, Texaco, SoCal, Shell, BP), and CFP was depicted as the “Eighth of the Seven Sisters”.

Within the framework of the 1928 Law, and in light of France’s interests in the Middle East, what was then called “le régime pétrolier français” was born. The French government would grant A10 (10-year) authorizations to oil refining and importing companies. The Ministry of Industry was in charge of delivering these authorizations, and predictably favored French national champions such as Total or Elf over foreign companies. The state clearly aspired to build a major national oil industry and secure sovereign oil supply chains.

With the advent of the European Economic Union, the French oil “régime” came under the European Union’s scrutiny. Indeed the European Commission perceived this statist model as an infringement to its free and fair competition policy. For many years, French governments fought tooth and nail to preserve this system before eventually repealing the 1928 law under Brussels’ pressure on the 31st December 1992.


It was remarkable for this policy to be implemented during such a long period of time (about 64 years!) by all successive governments, irrespective of political affiliations.

Today, France has a powerful oil and gas company, Total, ranked fifth among oil majors. When you think of it, countries like Germany or Japan, which are ahead of France in many respects, do not have such a large oil and gas company.


France also boasts a well-known, and highly respected training and research center for oil and gas: the French Petroleum Institute IFP (now called IFP New Energies). Responsible for a post-graduate training program, one of its main missions was – and still is – to develop young and promising technological companies into national champions. The equivalent of a business angel specialized in oil and gas. This is how Technip was founded, in 1958. Take a look at the last two letters of the word Technip: I P, which stand for Institut du Pétrole. In 1975, another company was launched by IFP; Coflexip (I P, again) specialized in flexible steel pipes for the offshore oil and gas fields. Both companies navigated through life with the support of strong shareholders, notably IFP, Total, and Elf.

As a result, France has developed a very important and competitive oil services industry: with companies like Technip (which purchased Coflexip in 2001), a world leader in the engineering and construction of oil & gas facilities, onshore and offshore, or CGG, again a world leader in the geophysical industry.


How do you explain the state’s discontent towards the oil industry?


There is a trend in France, a very strange trend, which most foreigners, and especially American people, would not understand: we love losers and hate winners.

Oil is often portrayed as a very lucrative industry, which carries many negative externalities. For instance, most people don’t understand how France’s largest company, Total, has a very low tax burden in France. Of course, informed people just pretend they don’t understand, while they know that Total generates all its profits outside of France and pays very high taxes on those profits. The oil industry’s image was further shattered in 1999, when the tanker MV Erika sank off the coast of Brittany, causing considerable environmental damage.

The oil regime, which revolved around the 1928 law, vanished. Today many people consider oil as energy of the past, which pollutes, smells bad, and is a source of corruption. Oil and gas and even more so shale oil and gas are blamed for slowing down the development of renewable energies.


How did you get involved in the oil industry?


When I graduated from ENA (Ecole Nationale d’Administration) in 1971, I joined the General Accounting Office (“Cour des Comptes“). In 1973, the first oil crisis drew a lot of attention from the public. Oil prices went from three to ten dollars a barrel. All over the world, people got really worried about their national economies. Unemployment started to grow massively. Soon after, I was offered the job of Deputy Manager of the oil and gas division at the Ministry of Industry. The oil industry was at the center of attention, and I therefore immediately seized the opportunity. Looking back it amazes me how we were, in this Ministry, five or six 30-year-old guys managing France’s oil industry, thanks to the very large powers awarded to us by the 1928 law. Then, starting in 1981, I would go on to work 18 years for CFP (which later on was renamed Total): first in Paris, then in Singapore (1982-85), in Paris again at this time in the finance division, then in Denver as the head of Total Petroleum North America (1992-95), and finally in Paris again, as head of the E&P division from 1995 to 1999. At this time, I became chairman and CEO of Technip.

What are the most cherished memories of your career?


My father was a carpenter at the French railway company SNCF and my mother was a cleaning lady. After graduating from high school, I entered Sciences Po and while working on the side for the cabinet of a former prime minister. I studied for ENA’s entrance examinations, which I failed the first time. But when I found out, the following year, that an outcast from the suburbs like myself had been accepted to such a prestigious institution, I never felt so happy in my life. Back then, there were more opportunities for social mobility in France.

My second most memorable experience was when, as CEO of Technip, I went to New York with my team to convince the US shareholders of Coflexip that it would be good for them to support our take-over bid on this company. For this critical roadshow, we arrived in New York on the eve of September 11. Our roadshow was scheduled to last two weeks and came to an end after 25 minutes. We found ourselves witnessing the deadliest attack in the United States’ history. I was also stressed by the fact that my son was working in Manhattan for a reputed bank, and that I could not get hold of him for several hours. This day will indeed remain in my mind forever.


My third memorable event was the success of our take-over bid on Coflexip, which was at the time the world leader in production, and installation of flexible pipelines, a high tech and highly profitable segment of the oil and gas services business. Although at the time, most financial analysts did not understand or did not like this merger, they today realize how beneficial this operation was. Today the Coflexip business represents almost 50 percent of Technip’s revenues and some 80 to 90 percent of its profits. It had been a very long and challenging process to successfully finalize this acquisition, but it was worth it.


However the most cherished event in my career will remain the massive development of our human resources in Technip while I was at the head of the company. In 1998, before I joined, we were 6,000 employees. When I retired in 2007, we were 22,000, and most of us happy shareholders of this successful company.


What would you tell our audience about the French oil and gas sector?


When I was working in the Ministry of Industry, I remember having seen civil servants from various countries visiting us and trying to understand how a country, which possesses very small oil and gas reserves, managed to be home to a large oil and gas industry. The key for this success was a massive and continuous effort by successive French governments from 1920 to 1992 to build such an industry from scratch. Would it be possible to do the same now, in our globalized world, under the eyes of institutions like the World Trade Organization? Probably not, except for some extremely powerful countries like China.


To read more interviews from the French oil and gas sector, click here.





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