Total sees Angola as prime alternative

Aug 03, 2006 02:00 AM

by Kambiz Foroohar and Tom Cahill

In a patch of peacock-blue, shark-filled Atlantic Ocean 149 km off Angola, Total technicians turn valves the size of truck tyres on a floating storage platform six storeys high.
The 120-person crew is preparing for a shutdown that will enable the world's fourth-largest oil company to bring on line a new field 2.5 km below, adding four more years of production of 250,000 bpd of crude oil.

Behind fire doors, Jacques Saint-Jean monitors a television screen in the control room for the Girassol field. A robotic arm is changing a chokehold on a pump 1.3 km down, as deep as four Eiffel Towers, as the light from a remote-controlled mini-submarine illuminates the blackness. To get to oil may mean drilling another 1.2 km through the sea bed.
"I remember when we did this 30 years ago at 60 m and we thought that was deep," Saint-Jean says. "We are still at the beginning of this kind of technology. It's like the astronauts at the beginning of space travel."

Africa is the petroleum industry's new frontier as prices top $ 78 a barrel (R 3.41 a litre) and oil grows tougher to find and pump out. Companies plan to spend $ 20 bn in the next five years exploring for oil and gas off Africa -- double what they spent from 2000 to 2005.
They have to. Output is declining in 33 of the 48 biggest producing countries, the US and UK among them; Iran and Russia are curbing Western access to the world's largest reserves; Venezuela is raising taxes as high as 50 % for Western producers; and Bolivia is taking control of its natural gas fields and threatening to boot out foreigners.

All of that makes Angola, where 70 % of the 12 mm people live on less than a dollar a day, a prime alternative even as the International Monetary Fund seeks greater disclosure of where the $ 10 bn in oil revenue the country took in last year is going. Angola's deep waters are vital to a world short on energy. As much as 10 % of the planet's petroleum reserves, or about 100 bn barrels, lies in depths exceeding 500 m. That's enough oil to power the US for the next 12 years.
"West Africa is strategically important to global oil markets and to the US," says former US assistant secretary of energy David Goldwyn, who now heads his own political consulting firm in Washington.

In the past two years, half of the discoveries by Texas-based ExxonMobil, the world's biggest oil company, have been in Africa.
"There is a lot of oil in this area," says Bill Cummings, Exxon's spokesperson for Angola. Paris-based Total is a top contender in the global oil hunt. Created by the French government after World War 1, Total gained deep-water technology from experience in the North Sea. That has made the French company a leader in Africa, allowing it to beat ExxonMobil by two years in offshore Angola.

Total is the biggest oil and gas producer on the continent, with 751,000 bpd last year, ahead of Exxon's 660,000.
"They are the most technologically advanced company out there," says Gerard Kreeft, the managing director at Netherlands-based oil consulting firm Energywise, who was in Luanda in February for a conference on offshore oil exploration. "Normally, when you're trying a new technology like they did in Girassol, you try it at 60 m, where it's comfortable," Kreeft adds. "They did it in 1 km plus; that's what's gutsy about them."

Seven years ago, Total was a medium-size oil company and the second largest on its own soil after Paris-based Elf Aquitaine. Total had a market value of $ 30 bn and produced 840,000 barrels of oil and gas a day. Exxon pumped triple that even before its 1999 combination with Mobil.
Beginning in 1998, Thierry Desmarest, who had become Total's chief executive three years earlier, engineered a double merger. First, Desmarest spent $ 12.8 bn to buy Belgium's Petrofina. Six months later, he went after Elf.

Total won its rival after raising its bid to $ 54 bn in Europe's biggest hostile takeover. The combinations have made Total the largest refiner in Europe and added lucrative production fields in Africa and the Middle East.
"Total didn't have good acreage," says Jason Kenney, an analyst at ING Financial Markets, a unit of Amsterdam-based ING Groep. "That's what Elf brought."

Elf had a history of investing in sub-Saharan Africa, finding oil in Angola, Congo, Gabon and Nigeria. One of the most promising areas was off the northern coast of Angola. Engineers discovered the Girassol field in 1996 after exploring along the Congo River, which forms Angola's northern border and flows into the Atlantic.
It took five years to develop a three-dimensional seismic appraisal covering 1,100 sq km of ocean and then narrow it to a production field of 140 sq km, slightly larger than the city of San Francisco. Then Total had to install well-head and gathering systems in 1.4 km of water and connect the pieces without the aid of divers.

It added riser towers, 1.25 km-high structures made of four production pipelines, to bring the oil to the platform. It also installed two pipelines to pump water or gas back into the well, feats never accomplished at such depths.
In 2001, the Girassol field started production. The platform, two football fields long and weighing 343,000 tons, is painted an easily visible bright yellow. Girassol is Portuguese for sunflower. Rivals are circling in the once empty expanse of the Atlantic Ocean.

ExxonMobil pumps 550,000 bpd from its two Kizomba fields off Angolan shores, which came on line in 2004. BP is planning to spend $ 8 bn in Angola and expects to pump its own oil in 2007. In June, China Petrochemical Corporation, known as Sinopec, offered $ 2.2 bn to explore in two offshore locations even though it has little deep-water experience.
Total may help operate the fields with China, which is the biggest consumer of oil after the US, says Andrew Hayman, a Geneva-based analyst for IHS, a consulting firm in Colorado.
"Angolans recognise that the Chinese don't have the experience and expertise to go that deep yet," Hayman says. "Total certainly does."

In Africa, Total's offshore production requires even more extreme measures. One challenge is to keep the oil temperature at more than 40 degrees Celsius so it flows smoothly through as much as 7 km of flow line from the wellheads to the platform. That's not easy when the sea bed water temperature is only 4 degrees Celsius.
With standard non-insulated steel tubing, the oil temperature would fall 18 degrees Celsius for every kilometre of flow line, turning the oil semisolid.

Total devised synthetic foam that withstands water pressure of 140 bar and offers an insulation capacity 500 times greater than steel.
"At those depths, you come to the limit of equipment," says Olivier de Langavant, the head of Total's Angolan operations. "You don't have to reinvent the wheel, but you have to stretch the limit of material."

By the end of the year, another massive vessel will float to the east of the Girassol field's platform. Total plans to start production from Dalia at depths of 1.5 km to bring in about 240,000 bpd. The company has two more fields to bring on stream by 2013, adding another 500,000 bpd.
"Unconventional is now conventional," De Margerie says. "Being a big company helps because we can take risks."

As the West's grasp on the petroleum-rich Middle East and Latin America grows more tenuous, Total and its rivals are spending billions of dollars in the most inhospitable regions of the globe.
Whether such risk taking yields increasing profits depends on the world's continued addiction to oil and its willingness to pay stratospheric prices for it.

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