TotalFinaElf to boost production in North and South America

TotalFinaElf sees North and South America as the keys to boosting its oil and natural gas production. About 10 % of Total's production comes from the Americas, although 25 % of its investments are in the region. The company invested $ 1.3 bn in the Americas during 2000, with $ 200 mm going to exploration.
"The large investment budget shows we have plans for the Americas," said Philippe Armand, Total's head of Exploration and Production for the America's zone. Total's operations in the region range from an exploration program to produce heavy oil in the Athabasca sands in Alberta, Canada, to a stake in oil and natural gas ventures in Tierra del Fuego, Argentina, at the southern tip of continent.
Total, based in France, will need to increase oil production for profits to grow if oil prices continue to drop from the 10- year high last year. The company's net income in 2000 rose to a record 7.6 bn euros from 3.35 bn in 1999, a result of higher oil prices.

TotalFinaElf's biggest project in the Americas is the $ 4.2 bn Sincor heavy-oil joint venture in Venezuela's Orinoco belt. TotalFinaElf owns a 47 % stake in the venture, while state oil company PDVSA has 38 %. Norway's Statoil owns the remaining 15 %.
Sincor began production in December and is producing 40,000 bpd. The heavy oil is mixed with lighter crude before being moved to the coast by pipeline. An upgrader is expected to enter service by the end of the year, allowing the oil to be refined to a more valuable synthetic crude. Production is expected to reach 200,000 bpd.
Sincor has an agreement with PDVSA that protects it from having to lower production when OPEC reduces output quotas for Venezuela, said Jean- Michel Gires, Venezuelan country manager for TotalFinaElf. The raw heavy oil is subjected to reduced production until the upgrader enters operation.
Sincor has the potential to produce 2.4 bn barrels over the project's 35-year contract, said Jean-Claude Soligny, Total's director for the project. Risky Business Operating in Latin America presents political risks that aren't a factor in its investments in the US, said Armand.
Venezuela, for example, now has as Energy Minister Alvaro Silva, who wrote the 1975 law that nationalized the country's petroleum industry and forced foreign oil companies to leave the country. "We are obligated to take some risks," said Armand. "We wouldn't do two projects the size of Sincor in a particular country. One big investment is enough."

Colombia also requires special considerations for foreign oil companies due to the country's four-decade civil war, which leaves about 3,000 people dead a year and costs the economy about 3 percentage points of lost growth a year. "Geologically, Colombia is very interesting for its potential, but security problems have limited our involvement there" he said.
Total has stakes in projects in the Colombia's Upper Magdalena Valley, including a site it bought from state oil company Empresa Colombian de Petroleos last year. Other Projects Total's other investments in the region include wells off the Louisiana coast in the Gulf of Mexico as well as a project in Bolivia that carries natural gas to Brazil by pipeline. The company also has explorations projects in Brazil and an agreement with the US's AES to acquire power-generating plants in Argentina.
Armand said Total would participate in the auction of 11 natural gas blocks in Venezuela that is expected to take place some time this year. The company is also interested in entering the natural gas market in Peru, possibly by buying a stake in an existing project, Armand said.
One place that Total doesn't have a presence is Mexico. The country's oil industry is run by Pemex and isn't open to private investment. "Every oil company's dream is to have access to Mexico's reserves," said Armand. "Now that Vicente Fox is president, I think there is a chance this could happen, especially in midstream operations."
Fox, perceived as being business-friendly, took office in December, raising hopes that foreign oil companies could be allowed to invest in Mexico.