15-09-09 Total, Europe's third-largest oil producer, is struggling to counter falling production as the economic slowdown erodes demand for energy and the Organization of Petroleum Exporting Countries limits output.
The Paris-based explorer pumps about one third of its output from OPEC members, a larger proportion than rivals such as BP partly because of France's links with the Mideast and Africa. It has also made finds off the Angolan coast and is investing in Venezuela, where President Hugo Chavez has expelled producers refusing to accept new contract terms.

"Total's portfolio is great, but it may also carry great risk," Irene Himona, a London-based oil and gas analyst at Exane BNP Paribas, said. "They have the biggest exposure to OPEC and have suffered nationalizations in Bolivia and Venezuela."
Total Chief Executive Officer Christophe de Margerie will meet with analysts in London to give an annual mid-year outlook, including on the company's oil and natural gas output, which he said will be "close to flat" in 2009 excluding the effect of OPEC cutbacks. That forecast reversed a February prediction of production growth this year and came after the Paris-based company reported output fell to the lowest in at least nine years in the second quarter as the recession offset gains from new projects in Nigeria and the Gulf of Mexico.

Declining production and crude prices will take a toll on Total's 2009 adjusted net profit, which is expected to be EUR 8.1 bn ($ 11.8 bn), according to the median estimate of 27 analysts, down 71 % from last year.
Explorers are scaling back on investment or scrapping expansion plans after crude futures slumped from last year's record and the credit crisis restricted access to funding. OPEC agreed to maintain output quotas at the same level they have been at since December. Crude was trading below $ 69 a barrel as higher US fuel stockpiles raised concern that gains in prices may have outpaced the recovery in the global economy.

"At the beginning of every year analysts expect Total to deliver 5 % production growth and for what have been understandable reasons this hasn't happened," Himona said. "Maybe by being incredibly conservative they have missed opportunities."
Since oil peaked at $ 147.27 a barrel on July 11 last year, Total has declined 17 % in Paris trading, underperforming rivals such as Shell, which has fallen 10 %, and BP, which has risen 1 % over the same period. The Dow Jones STOXX 600 Oil & Gas Index for Europe has dropped 19 %.

Output decline
The French oil company is likely to start all five projects it had scheduled this year, confirming its ability to carry them through on time, even if the full effect won't be felt until 2010, analysts say. These undertakings will add as many as 230,000 barrels of oil equivalent a day of output, the company has said.
Total reported second quarter output of 2.18 mm barrels of oil equivalent a day, down 7.3 % from the previous year after a 4.3 % first-quarter drop.

BP has forecast higher output this year compared with 2008, when production averaged 3.838 mm bpd.
Royal Dutch Shell, Europe's largest producer, has said it may pump less in 2009 for a seventh straight year, while forecasting output growth of between 2 and 3 % going into 2011 and 2012 as new projects in Qatar, Canada and the Gulf of Mexico come on line.

Heavy oil
Total's Akpo oilfield off Nigeria came on stream in March while the Tahiti venture in the Gulf of Mexico started pumping in May. Total said train B of the QatarGas 2 project started producing liquefied natural gas on Sept. 7 and the company along with Chevron reported the first oil production at the Tombua-Landana field off the coast of Angola. De Margerie has also said Yemen LNG would ship its first cargo in October.
Total's projects this year "should provide encouragement to investors jaded by the company's failure to deliver significant headline volume growth over recent years," Citigroup analyst David Thomas said in a report.

While all of thoseprojects indicate progress, Total is absent from giant reserve finds announced offshore Brazil and the Gulf of Mexico, where Chief Financial Officer Patrick de la Chevardiere has acknowledged the company has a gap in its portfolio.
De Margerie has said heavy oil from Canada and Venezuela will make up about 10 % of its output and 15 % of reserves within 15 years. It made an unsuccessful C$ 830 mm ($ 765 mm) bid for Canadian oilsands developer UTS Energy earlier this year, pulling it in April after failing to get the minimum number of shares required.

Bolivian gas
Total wants production from Canada to reach about 250,000 barrels of oil equivalent a day by 2020, de la Chevardiere told analysts May 6. Last year's production in Canada was 8,000 bpd, according to the company's annual report.
The French company has also decided to stay the course in Venezuela, saying there are more opportunities for it there as many other companies are already in Brazil. It has also identified investment in heavy oil as a long term strategy.

Bolivia's President Evo Morales said in February that Total had backed off investments in his country because its new constitution gives the government increased control over natural resources, including South America's second-biggest natural gas reserves after Venezuela. Total, along with Gazprom, agreed with Bolivian energy company YPF Bolivianos in September last year to form a joint venture to explore in south-eastern Bolivia.
Total is due to make final investment decisions next year on the Arctic offshore Shtokman project, Canada's oil sands and the Clov area of Block 17 offshore Angola. Information about output through 2014 will be "key," Jason Kenney, an Edinburgh- based analyst at ING Wholesale Banking, said.

Refining unit
Crimping profit this year is Total's refining business, which is suffering from weak margins and lower demand for petroleum products. The French company, Europe's biggest refiner, has announced the shutdown of a unit at its biggest French plant in Gonfreville, Normandy as well a temporary halt at the Flanders plant, both due to low demand.
"While perhaps not a near term driver for earnings integration, the downstream business offers strategic advantages for long term business opportunities," said ING's Kenney.