Total to spend EUR 12.6 bn in 2010

Dec 05, 2009 01:00 AM

Total, Europe's third-largest oil producer, plans to keep investment stable at about $ 18 bn (EUR 12.6 bn) next year as it seeks to work more closely with Chinese, Russian and Brazilian competitors to raise output.
"We have a strategy of partnerships and joint ventures with national oil companies and we are ready to develop them," Yves-Louis Darricarrere, Total's head of exploration and production, said. The French producer is already working with China's biggest energy companies and Russia's LUKoil and Gazprom, and is seeking a role in Brazil, he said.

Total has pumped less oil and gas this year after the recession cut energy use and the Organization of Petroleum Exporting Countries imposed stricter limits on output. The Paris-based company plans to restore production growth next year as it integrates new projects and adds joint ventures abroad.
"If there is a way to develop a partnership with Petrobras in Brazil we would of course wish to do this," Darricarrere said. "The discoveries in Brazil will need big financing and technical expertise and the scale of the resources to be developed will leave room for international oil companies."

Brazil's oil fields, which include Tupi, the biggest find in the Americas in three decades, have attracted global producers such as Spain's Repsol-YPF and the UK's BG Group. Repsol, betting on Brazil to counter production declines elsewhere, intends to spend $ 10 bn (EUR 700 mm) to $ 15 bn (EUR 10.5 bn) in the country over the next decade, while BG has earmarked $ 20 bn (EUR 14 bn).
"Most of the capital expenditure for next year will be on existing projects," Darricarrere said. The company targeted $ 18 bn in investment in 2009, of which three-quarters was for exploration and production, he said, adding that next year's spending will be "about the same."

Total is studying partnerships with LUKoil in the Black Sea and Colombia after agreeing this year to sell a 45 % stake in its Dutch Vlissingen refinery to the Russian oil producer.
"We have a real partnership with LUKoil," Darricarrere said. The French company has also developed ventures with China National Petroleum Corp., China Petroleum & Chemical Corp. and China National Offshore Oil Corp. in China, Iran, Nigeria, Qatar and Yemen, pooling expertise to tap oil and gas resources in areas previously too costly or complex to develop.
"What is fundamental for a major is to be technological and gain partnerships with companies that have the resources," Darricarrere said.

"Easily achievable"
Total's plan to maintain spending and achieve output growth next year is "easily achievable," Mark Gilman, an analyst at The Benchmark Co. in New York, said. "They have one of the strongest portfolios in the industry."
Next year will be "good" for production growth, Darricarrere said. While Total continues to look for "targeted acquisitions," it's focusing on developing its own discoveries, he said.

Total's C$ 830 mm ($ 795 mm, EUR 525 mm) hostile bid for Calgary-based UTS Energy, a developer of oil sands in Alberta, failed in April after a four-month contest that included a sweetened offer.
"I don't absolutely need to grow my oil-sands portfolio," Darricarrere said of potential Canadian acquisitions. "If opportunities present themselves we will look, but what we need is to prepare for the next wave of projects."

Canada, Angola, Britain
The company plans to make final decisions in the coming months on whether to invest in the Surmont Phase 2 oil-sands project in Canada, the Clov oil complex in Angola and the Laggan-Tormore gas fields off the UK, Darricarrere said.
Total began operations this year at six projects: the Akpo oil field off Nigeria, the Tahiti field in the Gulf of Mexico, Angola's Tombua-Landana deposit, the Tyrihans field off Norway, and liquefied natural gas plants in Qatar and Yemen. The company's share of these ventures will add 70,000 barrels of oil equivalent a day to production this year and as much as 220,000 bpd in 2010, according to Darricarrere.

Production growth in the coming years will come from about 50 projects that Total plans to start between now and 2014, he said.
The largest ventures are the deep offshore fields of Pazflor in Angola, due to start at the end of 2011; Usan in Nigeria in early 2012; and Kashagan in Kazakhstan at the end of 2012 or start of 2013, he said.

Earnings slump
Total's third-quarter profit fell 54 % as the recession eroded energy demand, dragging down crude and gas prices, the company said earlier. Total said in September it expects production to drop this year, reversing an earlier forecast. Output will then grow by about 2 % a year through 2014 as new projects ramp up, it said.
Other oil companies are also seeking to revive production growth. Output at Repsol's exploration and production division, excluding Argentine unit YPF, fell 1.2 % last quarter from a year earlier, according to the Madrid-based company. In Argentina, output dropped 12 %.

Production at BG Group was 2 mm barrels below the company's expectations last quarter. In July, the company delayed its 680,000-bpd output target for this year into the first quarter of 2010 because of lower demand for fuels. Repsol and BG are investing in Brazil, whose Tupi deposit, the biggest discovery in the Americas since Mexico's Cantarell field in 1976, may hold 5 bn to 8 bn barrels of recoverable reserves.
Total holds interests in two blocks in Brazil's Campos basin, which Darricarrere said are too small for a company the size of Total.

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