Total Share Discussion Threads

[waldron] 21/8/2007 05:54

Total to Buy 35 Percent Stake in Offshore Oil Block in Vietnam

By Beth Thomas

Aug. 21 (Bloomberg) -- Total SA, Europe's third-largest oil company, will buy a 35 percent stake in an offshore oil block in Vietnam as the Southeast Asian country seeks to halt a slump in crude production.

Total received approval from the Vietnamese government to develop Block 15-1/05, in conjunction with PetroVietnam Exploration & Production Co., which will have a 40 percent interest, the Paris-based company said in a statement yesterday. South Korea's SK Energy has the remaining 25 percent.

Initial exploration in the 3,840 square kilometer (1,483 square mile) block will start by the end of the year, Total said.

Southeast Asia's third-biggest oil producer after Indonesia and Malaysia, Vietnam had output last year of about 355,000 barrels a day, according to Vietnam Oil & Gas Group, the country's state-owned producer.

The country's oil production has fallen in the past two years, and is running behind target this year, as output slumps from the nation's biggest field after more than two decades in operation.

Vietnamese crude oil production totaled 17.3 million tons last year down 8 percent from output of 18.8 million tons, or about 386,000 barrels a day in 2005, according to Vietnam Oil & Gas, known as PetroVietnam.

To contact the reporter on this story: Beth Thomas in Tokyo at [e-mail]

Last Updated: August 20, 2007 21:59 EDT

[waldron] 15/8/2007 13:51

Oil prices higher on storm fears; gains capped by weak European equities UPDATE
Date : 15/08/2007 @ 11:47
Source : TFN


Oil prices higher on storm fears; gains capped by weak European equities UPDATE


(Updates headline, recasts lead, updates prices, adds detail)
LONDON (Thomson Financial) - Oil prices were higher on fears a gathering
storm in the Gulf of Mexico could affect production.
But gains were capped by falling European equities, with global markets
continuing to be shaken by the fallout from the US subprime mortgage crisis.
Speculators have been exiting the oil market in recent weeks, as funds look
to cash in on commodities to cover losses elsewhere in their portfolios,
stripping away support from crude.
"The prices are being affected by the number of storms going through the
Gulf right now," said CMC Markets analyst Adrian Bingham-Walker. "However, a lot
of funds have come out of oil and other commodities recently as they have had to
cover their losses in equities, so no-one's really driving it right now."
At 11.17 am, London's benchmark Brent crude contracts for September delivery
were up 40 cents at 70.91 usd per barrel, while New York crude contracts for
September delivery rose 41 cents to 72.79 usd per barrel.
Energy companies are monitoring the development of the tropical depression
in the centre of the Gulf of Mexico, home to around a third of domestic US crude
production.
Shell has already chosen to evacuate non-essential personnel because of the
strengthening storm.
Traders will also be watching the movement of Tropical Storm Dean, which
formed between Africa and the Lesser Antilles on Tuesday.
Dean is forecast to become the first Atlantic hurricane this year, with
maximum sustained winds currently at around 50 mph. The National Weather Service
in the US predicts the tropical storm will strengthen over the next 24 hours as
it continues to move west.
"This is the first real hurricane threat of the season, and with the peak of
the season one month hence, this is where the market will focus its attention,"
said Dennis Gartman, editor of the Gartman Letter trading note.
Storm activity during hurricane season adds a premium to oil prices, as
market players fear the impact a hurricane may have on US refining or production
capability.
Elsewhere, the news US hedge fund Sentinel had asked the Commodity Futures
Trading Commission if it could stop allowing withdrawals reignited subprime
fears.
Markets remain nervous about a global credit crunch, with fears liquidity
may dry up in the wake of the US subprime debacle.
With many banks still to calculate losses, and fears end-of-year results may
be worse than predicted, global markets remain jittery with European equities
showing further declines today.
Analysts predict funds could liquid more positions in oil to meet margin
calls, weighing on crude prices. Added to this is the fear oil demand may ease
should the current crisis precede a general economic slowdown.
Aside from potential hurricane activity and the problems in the wider
financial world, market players will be keeping one eye on the weekly snapshot
of US energy inventories, released at 3.30pm London time today by the Energy
Information Administration.
Industry analysts are predicting a fall in crude oil stocks of 2.45 mln
barrels and gasoline to drop by 300,000 barrels, while distillate inventories --
which include heating oil -- are expected to rise by 1 mln barrels in the week
to Aug 10.
However, despite the predictions for a fall in crude and gasoline
inventories, which would generally be seen as bullish for prices, analysts
expect the report to be overshadowed by broader concerns.
"Similar to last week, we think these will be more of a sideshow to the
continued turmoil we are seeing in the bond and equity markets. In the current
atmosphere, we think the inclination will be to sell first and think about
buying later," said MF Global analyst Ed Meir.
Elsewhere, natural gas for September delivery on the Intercontinental
Exchange rose to 26.00 pence per thermal unit from 25.49 pence per thermal unit.
Natural gas for September delivery in New York on the Nymex exchange rose to
7.120 usd per million British thermal units (mmbtu) from 6.940 usd per mmbtu.
[e-mail]
ds1/ds1/ejp/ds1/ms1

[waldron] 08/8/2007 10:35

Total discovers new oil well in Congo; average output of 5,600 barrels per day


PARIS (Thomson Financial) - Oil giant Total said it has discovered a new oil
well 170 km off the coast of the Republic of Congo, with a production capacity
of 5,600 barrels per day.
The well, named Cassiopee Est Marine, is the fourth oil discovery under the
ultra-deep offshore block (Mer Tres Profonde Sud or MTPS), Total said in a
statement.
The other three wells are called Andromede, Pegase Nord and Aurige Nord.
According to Total, tests have shown the new well can produce 5,600 barrels
per day, but the evaluation of reserves is still underway.

[e-mail]
vb/rfw

[waldron] 07/8/2007 19:19

Galp Energia says Total-led consortium strikes oil again in Angola's block 32


LISBON (Thomson Financial) - Galp Energia SGPS said that a Total-led
consortium of which it is part has struck oil again in block 32, which is
located in ultra-deep Angolan offshore waters.
In a statement, Galp said initial test drills are producing 2,130 barrels of
oil per day in the Colorau 1 well, in the northeastern part of block 32.
Galp said that ultra-deep exploration work in block 32 in the last few years
has led to several oil discoveries and "confirmed the major potential of the
block".
Galp Energia holds 5 pct of the consortium, with the operator Total holding
30 pct, Marathon Oil 30 pct, Exxon Mobil Corp 15 pct and state-owned oil group
Sonangol holding the remaining 20 pct.
Galp Energia will release second quarter results tomorrow after the market
close.
[e-mail]
lm/gp

[waldron] 02/8/2007 17:40

Total Fails to Boost Profit, Hurt by Refining, Dollar (Update6)

By Tara Patel


The Total SA company headquarters Aug. 2 (Bloomberg) -- Total SA, Europe's third-largest oil producer, failed to boost second-quarter profit because of lower refinery output and the dollar's decline. The shares fell on concern the company will struggle to raise production.

Net income was 3.41 billion euros ($4.7 billion), or 1.50 euros a share, compared with 3.44 billion euros, or 1.48 euros, a year earlier, the Paris-based company said today. Profit excluding its Sanofi-Aventis SA stake fell 8 percent to 3.1 billion euros, in line with analyst estimates. Total declined to give a production target for the year.

Profit and output at Total's refining unit dropped as maintenance at five of its 26 plants kept the company from fully benefiting from crude above $68 a barrel and record gasoline prices in the U.S. Bigger European competitors Royal Dutch Shell Plc and BP Plc last month posted increased earnings because of higher fuel prices.

``Total was penalized by five refineries that weren't available,'' said Matthieu Bordeaux-Groult, who helps manage $5 billion at Richelieu Finance in Paris. ``There are fears the company could lower its production growth target this year.''

Shares of France's second-largest company by market value fell 1.33 euros, or 2.3 percent, to 56.06 euros in Paris. The stock is up 2.6 percent this year, less than the 3.8 percent advance in the Dow Jones Stoxx 600 Oil & Gas Index, an equity benchmark.

Production Concern

The company reported 3 percent lower refinery output in the quarter and said net adjusted operating income in the downstream division fell 4 percent to 755 million euros.

Total's second-quarter sales declined 4 percent to 39.1 billion euros. The euro's rise over the year hurt profit and sales since crude is priced in dollars. The euro traded at an average of $1.35 in the quarter compared with $1.26 a year earlier.

The company said in May that output growth will average more than 5 percent a year for 2006 to 2010. Chief Financial Officer Robert Castaigne said at the time the company couldn't meet an earlier target of 6 percent production growth this year because of cutbacks by the Organization of Petroleum Exporting Countries and slow progress in starting a project in Azerbaijan.

Castaigne today declined to give a production target for this year, saying the company will specify the goal next month. ``New production start-ups will have implications in the second- half but it is hard to assess production in Nigeria or OPEC quotas,'' he said in a conference call with analysts.

`Bullish'

For longer-term forecasts, he said adjustments will take into account oil prices around $60 a barrel and a new production-sharing agreement in Venezuala. Castaigne described Total as ``bullish'' on oil prices, which would remain at between $50 and $60 a barrel in coming years as global demand outstrips output growth.

The results ``could be a sideshow to an emerging risk'' on 2007 production forecasts, and could ``weigh on the share price in the near term,'' Credit Suisse said in a note today. ``We see a risk that the company will reduce expectations again.''

Output in the second quarter averaged 2.32 million barrels of oil equivalent a day, 1.4 percent higher than what Total called a ``low point'' in production of 2.29 million barrels a day in the year-earlier quarter.

Production was curbed by a fire at its N'kossa site in the Republic of Congo, lost output in Nigeria and cuts by OPEC. N'kossa production resumed yesterday, the company said.

Bucks Trend

Output averaged 2.43 million barrels of oil and gas a day in the first quarter and 2.40 million barrels a day in the final three months of 2006. Total's gain in output compared with production declines at Shell, BP and Exxon Mobil Corp. as the biggest oil companies struggle to boost energy supplies. Total's crude outlook may be boosted by its Dalia field in Angola.

Chief Executive Officer Christophe de Margerie has described the start of pumping at the Dalia field, which reached a peak in April of 240,000 barrels a day, as one of the highlights of 2007.

The latest quarter ``is the beginning of a rebound in terms of production growth,'' Castaigne said with the startup of new fields including Dalia partially offsetting a drop in production in Nigeria and Venezuela.

Total began production at the end of June at its Rosa deep- water oilfield off the coast of Angola, which is designed to keep output of the Girassol platform at 250,000 barrels a day ``until early in the next decade.''

Angola Prospects

Angola, which joined OPEC this year, is a growth area for international oil companies, which are finding it harder to expand in other resource-rich countries such as Russia and Venezuela.

Another future growth area for Total would be Kazakhstan, where the company has an 18.5 percent share of the Eni SpA-led Kashagan project, the world's biggest oil discovery in 30 years. Kazakhstan said this week that costs for the project have more than doubled to $136 billion.

Kashagan is ``very difficult'' and Total needs ``good conditions'' to proceed, Castaigne said. The Kazakh government now wants 40 percent of the profit from Kashagan compared with an original 10 percent.

In the latest period, Total, which is Europe's largest oil refiner, said gains from converting crude oil into gasoline, diesel and other products rose 12 percent. The average margin rose to $42.80 a ton from $38.30 a year earlier. The margin was $33 a ton in the first quarter.

Since the start of the third quarter, refining margins have ``fallen sharply,'' Total said today.

The company's Donges, Antwerp, Vlissingen and Flanders refineries were partially shut down during the quarter, while the plant in Rome was totally halted. In the same three-month period last year, only the Provence refinery was closed for maintenance.

To contact the reporter on this story: Tara Patel in Paris [e-mail]

Last Updated: August 2, 2007 11:56 EDT

[waldron] 01/8/2007 06:14

Total "hold"

Tuesday, July 31, 2007 9:22:20 AM ET
Dresdner Kleinwort Wasser.

LONDON, July 31 (newratings.com) - Analysts at Dresdner Kleinwort maintain their "hold" rating on Total SA (PFP.PSE). The target price is set to €60.

In a research note published this morning, the analysts mention that the company is expected to report its 2Q EPS and net income in-line with the consensus. Total is unlikely to have generated significant production growth in the quarter, the analysts say. Although the performance of the company's downstream business is likely to have been healthy in the quarter, it was not at record levels, Dresdner Kleinwort adds.

[waldron] 31/7/2007 13:01

Total, Bouyges express interest in Turkmenistan projects


ASHGABAD (Thomson Financial) - Total board member Yves-Louis Darricarrere
and Bouygues vice president Oliver Bouygues met with Turkmen President
Gurbanguly Berdimuhamedov to express their interest in cooperating with the
gas-rich nation on future projects, Interfax reported.
"As two old partners, Total and Bouygues could work successfully on the
Turkmen market in their own kind of tandem," Bouygues said.
Darricarrere added that Total could take part in introducing the newest
technology and training qualified staff in the country.
[e-mail]
amk/gp

[waldron] 31/7/2007 10:32

Total acquires 100 pct of 2 offshore blocks after winning Australian tender


PARIS (Thomson Financial) - Oil giant Total said it has acquired 100 pct of
two exploration permits off the northwest coast of Australia after winning a
government tender.
Financial details were not disclosed, nor were the identities of any other
bidders.
The blocks covered by the permits comprise 5,150 and 5,685 square
kilometers, and both are about 200 kilometers offshore. The area is known for
its abundant gas reserves.
[e-mail]
mjs/dca

[waldron] 30/7/2007 11:24

Total acquires 36 pct stake in Chevron-operated oil lease off Nigeria


PARIS (Thomson Financial) - Total said its Nigerian subsidiary, Elf
Petroleum Nigeria Limited (EPNL), has acquired a 36 pct interest in deep
offshore Oil Prospecting Lease (OPL) 247, located around 150 km off the coast of
southeast Nigeria.
OPL 247 is operated by US oil company Chevron.
The French group did not give any financial details regarding its
investment, but said it operates five deep offshore blocks near OPL 247.
Total explained that 3D seismic data has been collected on OPL 247 and is
being interpreted to prepare drilling of an initial well.




[e-mail]
gt/rfw

[waldron] 30/7/2007 08:08

Total Kazakhstan threatens to revise Eni's Kashagan oil field deal UPDATE


(updates with other stakeholders, background)
FRANKFURT (Thomson Financial) - Kazakhstan may revise Eni SpA's contract to
develop the massive Kashagan oil field in the Caspian Sea after the Italian oil
company last week said it would delay the start of production by two years,
Prime Minister Karim Masimov said.
Now that Eni has said it will postpone production until 2010, "we are
reviewing how to change the entire contract," Interfax quoted Masimov as telling
a government meeting in Astana.
"Our action will be adequate ... a contract must be respected by both
sides."
No one was immediately available for comment at Eni.
Eni is the operator of Kashagan with an about 19 pct stake. Other western
stakeholders include Total SA, Shell and ExxonMobil with 18.52 pct each.
ConocoPhillips holds 9.26 pct.
The Italian company last week told the Kazakh government it would delay the
production launch to 2010 from 2008. The field was initially scheduled to come
on stream in 2005.
Kashagan is viewed as one of the largest oilfield discoveries of the past 30
years, with minimum recoverable reserves estimated at between 7-9 bln barrels of
oil equivalent, and total reserves at around 38 bln.
In February, Eni estimated capital expenditure to achieve first oil
extraction from the field at 19 bln usd.
It also estimated initial output at 300,000 boe per day, with peak daily
production reaching more than 1.5 mln boepd within nine years.


[e-mail]
amk/rfw/jms

[ariane] 26/7/2007 12:09

Total acquires 40 pct stake in licence for Nigeria's OML 136 offshore field


PARIS (Thomson Financial) - Total announced that its operating subsidiary in
Nigeria, Elf Petroleum Nigeria Limited (EPNL), has signed an agreement to
acquire a 40 pct interest in offshore Oil Mining Lease (OML) 136, alongside
local oil company Conoil Producing Limited which will hold the remaining 60 pct
stake.
Total did not disclose any financial terms but stated that the agreement has
been approved by the Nigerian authorities.
EPNL is to act as technical advisor, with Conoil remaining the operator of
OML 136, Total said.
The French group explained that a total of 14 wells have already been
drilled in OML 136, producing two large natural gas discoveries, Toju and
Akarino.
Total did not give any production forecasts, stating that appraisal of Toju,
possibly followed by Akarino, will determine the block's development potential.
The oil group said the acquisition of the stake in OML 136 is "in line with
an integrated strategy of developing upstream natural gas resources that can be
monetized via downstream projects, in particular liquefied natural gas
production projects."
In Nigeria, Total is present in liquefied natural gas through its
participations in Nigeria LNG (15 pct) and in the Brass LNG (17 pct) project, as
well as Obite and Afam power generation projects.



[e-mail]
gt/slm

[waldron] 22/7/2007 09:18

August 2 Second Quarter & First Half 2007 Results
September 5 2007 Mid-Year Review
October 16 Individual shareholders' Meeting in Tours
November 7 Third Quarter 2007 Results
November 16 & 17 Actionaria Investor Fair in Paris
November 27 Individual shareholders' Meeting in Grenoble

[grupo guitarlumber] 20/7/2007 10:59

Oil steadies as traders pause for breath, Total lifts force majeur in Angola
Date : 20/07/2007 @ 09:51
Source : TFN


Oil steadies as traders pause for breath, Total lifts force majeur in Angola


LONDON (Thomson Financial) - Oil steadied as traders paused for breath after
betting crude near record levels, and as Total announced it has lifted force
majeur on oil exports from its oil platform in Angola.
Prices rallied yesterday after Total said a problem with a generator at its
its 220,000 bpd Dalia oilfield in Angola had shut in around 50 pct of output at
the field.
The news added to traders concerns over tightening supplies globally,
especially in the US where gasoline supplies remain tight amid the peak demand
summer season.
Kevin Norrish, an analyst at Barclays Capital, said while the price rally
over the last few days was probably a bit overdone, it is difficult to see why
prices shouldn't close strongly today.
"Fundamentals are very strong ... we've had the IEA making some fairly
significant noises about need for increased OPEC production so there's been a
swift turnaround in attitude from one where people thought crude was well
supplied to one where even though inventories are high expectations are that
they will tighten and fall," he said.
At 9.30 am, London's benchmark Brent crude contracts for September delivery
were up 7 cents at 77.74 usd per barrel. The August contract had struck 78.40
dollars on Monday, close to Brent's historic high of 78.65.
Meanwhile, New York crude contracts for August delivery, which expire later
today, were down 7 cents at 78.85 usd per barrel, having hit a fresh 11 month
high of 76 usd in intraday trades yesterday.
[e-mail]
ma/lam

[grupo guitarlumber] 19/7/2007 17:10

Total halves output at Dalia, offshore Angola due to technical problem UPDATE


(Updating with further details of output, repair schedule)
PARIS (Thomson Financial) - Total said it has halved output at its Dalia oil
field off the Angolan coast because of a problem with an electrical generator.
A spokesman for the group told Agence France-Presse that it has informed
clients that delivery problems may result.
Since Wednesday, the Dalia field has been producing 120,000 barrels of oil
per day, down from 240,000 under normal conditions, the company said.
It added that the problem, which has slowed the facility's pumping rhythm,
would be fixed in one or two days.
Dalia, located 150 kilometres off the coast of Angola, entered production in
December. In May, Total said the start-up of the Dalia field was a key element
in its guidance for "substantial" growth in output in 2007.
Total turns out more than 500,000 barrels a day from its Angolan sites,
representing about 10 pct of its total output.
[e-mail]
har/rfw

[grupo guitarlumber] 17/7/2007 13:46

Algeria plans 12 bln usd petrochemical complex; Total, Almet win orders UPDATE


(Updates with more details of Sonatrach plant, Total jv, Almet consortium's
contract and jv, other details)
ALGIERS (Thomson Financial) - The Algerian government has awarded contracts
to Total SA and an international consortium, Almet, worth a combined 4 bln usd,
to build two new petrochemical plants as part of a 10-unit petrochemical complex
with an estimated investment of 12 bln usd.
"These two plants are part of a programme of about 10 petrochemical units
with a total cost of 12 bln usd, of which five are still to be built", said the
vice-president of Algerian state oil company Sonatrach's downstream activities,
Abdelhafid Feghuli, last night after the two contracts were signed.
French oil company Total signed a contract worth 3 bln usd (2.18 bln eur) to
build an ethane cracker at Arzew in western Algeria to manufacture various types
of polyethylene and ethylene destined for domestic and international markets,
Sonatrach said.
A joint venture will be formed for the ethane cracker plant, in which Total
will hold 51 pct and Sonatrach will hold 49 pct. Total was competing with Saudi
group Sabic for the order, but the French group won the order as it offered
Sonatrach a 70 pct share of the profits, while Sabic only offered 55.12 pct.
The Almet consortium comprises Kuwaiti company Qurain, German company Lurgi,
Trinidad's PPSL, Japan's Mitsui, and Algerian company Sotraco. Sonatrach awarded
Almet the contract to build a methanol production facility at the Arzew
industrial zone. The amount of the investment is estimated at 1 bln usd, and
annual production is estimated at 1 mln tonnes of methanol, destined for the
international market.
A joint venture will also be formed for this plant, in which Sonatrach will
hold 49 pct and Almet 51 pct. Almet has offered Sonatrach a 76.09 pct share of
the profits.

[e-mail]
afp/cmr/rfw

[grupo guitarlumber] 17/7/2007 10:49

Total wins 2.18 bln eur contract from Sonatrach to build ethane cracker UPDATE


(adds value of contract)
ALGIERS (Thomson Financial) - Total said it has won a 2.18 bln eur contract
from Algerian state-owned gas and oil producer Sonatrach to build an ethane
cracker in Arzew in western Algeria.
The order was announced earlier by Sonatrach, which did not indicate the
financial terms.
In a separate contract, Sonatrach has awarded an order to Almet -- a
consortium consisting of Qurain (Kuwait), Lurgi (Germany), PPSL (Trinidad),
Mitsui (Japan) and local company Sotraco -- to develop a methanol production
facility in Arzew.
[e-mail]
gt/jfr/mjs/cmr

[grupo guitarlumber] 16/7/2007 12:42

Total Refining Margins Gain on U.S. Plant Maintenance (Update1)

By Bill Murray

July 16 (Bloomberg) -- Total SA, Europe's largest oil refiner, said profit from converting crude oil into gasoline, diesel and other products rose 12 percent in the second quarter.

The average margin increased to $42.80 a ton from $38.30 a year earlier, Paris-based Total said today on its Web site. The margin was $33 a ton in the first quarter.

Unplanned maintenance and shutdowns at U.S. refineries in the past three months have led to the lowest second-quarter refinery utilization since 1991, driving up the price of gasoline and the profits of refiners in Europe and the U.S. The Paris-based company halted its sole U.S. refinery, located in Port Arthur, Texas, on June 18 for maintenance. The plant can process 240,000 barrels of crude oil and condensate a day.

Brent crude oil averaged $68.80 a barrel in the period from $69.60 a year earlier, Total said. The sales price of petroleum liquids fell 0.8 percent to $65.70 a barrel in the quarter from $66.20 a barrel. Average natural-gas prices fell 14 percent to $4.94 million British thermal units, from $5.75 a year earlier, Total said.

The company has spent 550 million euros ($758 million) installing a distillate hydrocracker unit at its Normandy refinery that can produce 1.3 million tons of sulfur-free diesel. The unit has been operating since late last year.

The company is spending 300 million euros to raise low-sulfur diesel output at its largest refinery in the U.K., the Lindsey plant in northeast England. Production will begin in 2009.

Total refines more than 2.7 million barrels of oil a day and is set to release financial results on August 2.

To contact the reporter on this story: Bill Murray in London at [e-mail]

Last Updated: July 16, 2007 04:17 EDT

[grupo guitarlumber] 16/7/2007 10:31

Total CEO says Shtokman shows new type of cooperation; has more plans for Russia


PARIS (Thomson Financial) - Total chief executive Christophe de Margerie
said his group is planning other projects in Russia in addition to the
partnership signed last week with Gazprom to develop the Shtokman gas field.
In an interview with daily Le Figaro, de Margerie declined to give any
details on his group's plans, but said that "it all takes time".
He noted that Total also works with Rosneft.
De Margerie argued that the Shtokman deal showed producer countries can
protect their interests while cooperating with international companies.
"The period of 'I come, I produce, I leave' is over for oil companies," he
said, explaining that investments now involve "a social, even a cultural
dimension."
De Margerie repeated that Total will invest 4-5 bln usd in the development
phase of the Shtokman project. He also reiterated that the fact the French group
does not have any share of the operating licence is not a problem.
"We have been accustomed for a long time to operate fields which belong
entirely to national companies or to states," he said.
[e-mail]
gt/ajb

[grupo guitarlumber] 15/7/2007 15:39

If you're in a hole, merge. But is it too late for BP and Shell?
With reserves running dry in non-Opec countries, rumours of a marriage could finally come true. Even a combined group, though, might struggle in its quest for more black gold. David Strahan reports
Published: 15 July 2007
BP and Shell are finally set to merge. That's if you believe the tittle-tattle in the Square Mile.

Of course rumours that the energy giants might unite are hardly new and have been the stuff of bankers' fevered imaginations for years. But there is now an increasingly compelling case for the two to integrate.

At 4.5 million barrels per day, the oil output of a combined Shell-BP would dwarf that of American behemoth ExxonMobil and even major oil-producing countries such as Iran. Some analysts make a positive case for such a merger on the basis of massive economies of scale, claiming it could save $5bn (£2.5bn). But if and when it happens, the real motivation will be far darker: desperation.

Both companies have suffered a variety of troubles in recent years - Shell in Nigeria, BP in the US, both in Russia - but their fundamental problem is identical: the inability to replenish the oil they produce with fresh reserves. This matters because the replacement ratio is one of the most important factors affecting an oil company's stock market valuation, and a rough-and-ready guide to how long it can survive. Shell's difficulties here are well known - in the five years to 2005 its reserve-replacement ratio was just 67 per cent - but BP is also struggling. Although its own ratio is still positive, it has fallen every year since 2002, and without the contribution of the fabulously risky Russian joint venture, TNK-BP, the figure last year would have been just 34 per cent.

Shell and BP's troubles are neither unusual nor surprising, but they are exacerbated by these groups being some of the biggest fish in a shrinking pond. The fact is they are substantially excluded from Opec countries, which control 75 per cent of the world's proven reserves. And their plight is worsening as resource nationalism takes hold from Russia - where Gazprom has just wrested control of both Shell's Sakhalin II project and BP's Kovykta field - to Venezuela, where international oil interests have simply been expropriated.

So the supermajors - ExxonMobil, Chevron, Shell, BP and Total - are largely restricted to operating in non-Opec countries where oil production is generally already in decline. Speaking in London recently, ExxonMobil chief executive Rex Tillerson (pictured) admitted that continued growth of non-Opec production was now "very challenging" and unlikely to continue past 2010. And last week the International Energy Agency (IEA) predicted a global oil supply "crunch" within five years, driven in part by the crawling pace of non-Opec growth.

In these circumstances, the outlook for the world's biggest oil companies looks dismal. In a recent interview with Le Monde, the IEA's chief economist, Fatih Birol, said: "The supermajors will be in difficulty. They will no longer have access to new production capacity. They must redefine their strategies, or otherwise, if they remain concentrated on oil, they will have to be satisfied with niche markets."

The respected Houston-based consultant Henry Groppe puts it even more bluntly: "The major, publicly traded oil companies are in long-term liquidation."

Shell recently announced the start of a major drilling programme in the Beaufort Sea north of Alaska in the Arctic Ocean. The move raises the stakes in its strategy, post reserves scandal, of trying to explore its way out of trouble. But recent history suggests this plan is likely to fail. In the past decade it has been the companies "drilling for oil on Wall Street" - replacing reserves simply by taking over other companies - that have managed to increase their oil production; those that have relied solely on exploration have got into trouble.

Consolidation was always likely to be the more effective strategy since global annual oil discovery has been falling for 40 years. It was precisely Shell's failure to find a partner in the late 1990s - when Exxon merged with Mobil, BP took over Amoco and Arco, and Total snapped up Fina and Elf - that led to the pressures that produced the reserves scandal of 2004, when Shell admitted it had overstated the proven oil and gas on its books by billions of barrels.

The company cannot have failed to learn the lesson; it admits to having conducted "scenario planning" with BP.

The problem with growing by acquisition is that it is addictive, and BP needs another fix. The initial impact of the TNK-BP deal is evidently wearing off - the group has admitted that in 2007 its oil and gas production will fall for the second year running. It claims output will pick up marginally by 2009, but according to brokers Dresdner Kleinwort, even that would mean average growth for 2005 to 2009 of just 1.4 per cent - against BP's previous target of 4 per cent.

So it looks as if BP and Shell are made for each other, and if and when it happens, the deal will be lauded for busting all stock market records. But it should also be seen for its real significance: a warning light for the imminent peak of non-Opec oil production.

Of course the situation could be transformed, temporarily, if peace were to break out in Iraq and its parliament passed the hydrocarbon law granting access to international oil companies. In his interview with Le Monde, Mr Birol made it clear that Iraq is the only country on the planet with the potential capacity to save the world from the IEA's predicted supply crunch: "If by 2015 Iraqi production does not increase exponentially, we have a very big problem - even if Saudi Arabia fulfils its promises. The figures are very simple; there's no need to be an expert."

This, of course, explains much recent history, but given the chaos and butchery of post-invasion Iraq, the country's full oil potential is likely to remain untapped for the foreseeable future.

The IEA insists its predicted crunch is driven by factors above ground, such as the conflict in Iraq and does not amount to "peak oil" - the geologically determined onset of terminal decline in worldwide production. But that distinction may come to feel academic. As Mr Birol put it: "The oil industry will be facing a very serious test by 2015... the gap between supply and demand will widen significantly."

At which point mega-mergers between the likes of BP and Shell will be exposed as powerless to combat the global energy crisis, whatever its cause.

David Strahan is the author of 'The Last Oil Shock: a survival guide to the imminent extinction of petroleum man' (John Murray, £12.99
Source: The Independent

[grupo guitarlumber] 14/7/2007 09:22

Russian energy

Behind the Gazprom-Total deal
Jul 13th 2007 | MOSCOW
From Economist.com

Beware Russians bearing gifts

Jupiter
ON THE eve of Bastille Day Russia's president, Vladimir Putin, handed a royal present to the newly elected president of France, Nicolas Sarkozy, by allowing a national French company into Russia's mightily tempting energy sector. After years of deliberations, Gazprom, Russia's state-controlled energy behemoth that doubles up as the Kremlin's foreign-policy arm, has chosen France's Total to develop a giant offshore gas field in the Arctic.

There is little doubt that the deal was struck personally between Mr Putin and Mr Sarkozy. A day before it was announced the two presidents discussed it by phone. Mr Sarkozy must understand that it was not a gift made lightly. For the past five years Gazprom had pondered what to do with the $20 billion Shtokman project, rich enough to supply the entire world's demand for gas for a year. It negotiated with several foreign firms and made them supply detailed bids; it announced a shortlist of companies which included Norway's Statoil and Norsk Hydro and America's Chevron, then last autumn, in a fit of energy nationalism, rejected them all in favour of working alone.

Now it has agreed to give Total a 25% stake in the infrastructure company that will develop the field and share the profit. A further 24% could still be doled out to Norwegian or American companies, while Gazprom will retain 51% of the infrastructure company and 100% of the actual reserves. So why a sudden turn-around, just when Russia's relationship with the West is so cool? One obvious reason is that Gazprom needs foreign expertise and money to develop deposits which lie more than 300 metres under the surface of the Barents Sea, 600km off the coast of Murmansk. Gazprom has limited experience with offshore fields, particularly in such treacherous conditions.

Gazprom needs to compensate for falling production in its other giant fields in western Siberia. If it does not develop Shtokman fast (its target is 2013) the much-trumpeted Nord Stream pipeline now being built across the Baltic Sea to Germany will be empty. Nor would Gazprom's ambition to get a share of the liquefied natural gas market in America-another destination for Shtokman gas-be fulfilled.

Yet this does not explain why Gazprom chose Total, which had been considered the least likely winner. The answer is politics. The decision fits in with the Kremlin's tactic of striking bilateral energy deals within European countries and converting their national energy companies into fervent lobbyists for Moscow's commercial and political interests. The expansion of Gazprom and other national champions into Western markets has long been a Kremlin ambition, but direct and often clumsy approaches have not worked. Now it has powerful agents in the European Union.

The deal with Total completes a set of joint ventures that Gazprom has built in Germany, Italy, Britain and now France. In Germany, Gazprom has a joint venture with BASF and a close relationship with Ruhrgas which owns about 7% of Gazprom and has a seat on its board. Germany's former chancellor, Gerhard Schröder, is the boss of a joint Russo-German consortium that is building the Nord Stream pipeline to Germany. He is one of the Kremlin's most vocal advocates.

In Italy, Gazpom has a warm relationship with ENI and Enel. This year the two Italian companies (also after Mr Putin held a phone conversation with the country's prime minister, Romano Prodi) got a bit of Russian gas reserves. ENI is Gazprom's partner to build an extension of the Blue Stream pipeline across the Black Sea. And just as the relationship between Russia and Britain reached a nadir, BP agreed to form a joint venture and swap assets with Gazprom in exchange for receiving compensation for the loss of the Kovykta gas field. Gazprom may still give BP its 25% in Kovykta back, but it plainly expects favours in return.

The Kremlin's deal with Total is more of the same but it has an additional political dimension. Mr Sarkozy's predecessor, Jacques Chirac, was one of Mr Putin's staunchest supporters in the EU. Many observers have suggested that Mr Sarkozy might take a tougher line. By offering a lucrative deal to Total, Mr Putin has made a pre-emptive strike and has suggested that Mr Sarkozy should emulate his predecessor in his relationship with Russia. The timing is particularly sensitive as the EU and Russia head towards a collision over Kosovo. As Mr Sarkozy celebrates the deal he helped to secure for Total, he may ponder what Moscow expects from him in return.

[waldron] 13/7/2007 10:50

Total CEO de Margerie says co to invest 4-5 bln usd in Shtokman gas field UPDATE


(adds full detail of agreement signed today)
MOSCOW (Thomson Financial) - Total's chief executive Christophe de Margerie
said the oil group is to invest 4-5 bln usd in the Shtokman gas field in Russia.
The comments were made as Total signed an agreement today with Russian gas
monopoly Gazprom to develop the giant gas field located in the Barents Sea.
The agreement was signed in Moscow by de Margerie and Alexandre Ananenkov,
deputy chairman of Gazprom, who was standing in for the group's chief executive
Alexei Miller.
In a joint press release following the signing, Total and Gazprom said they
will set up a special company to finance, construct and operate infrastructure
at the Shtokman field.
Gazprom will hold a 75 pct stake in the new unit, and Total will take 25
pct, while other foreign partners may be brought in to share up to 24 pct, with
a corresponding reduction in Gazprom's stake.
Under the agreement, joint work on the project will begin as of this month.



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[waldron] 13/7/2007 08:43

Russian press gives Sarkozy credit for Total-Gazprom deal
Date : 13/07/2007 @ 08:17
Source : TFN
Stock : Total (PFP)
Quote : 62.8 0.42 (0.67%) @ 08:26

[waldron] 12/7/2007 10:52

Gazprom chooses Total as Shtokman gas field partner UPDATE


(Adds details of the deal and additional information)
MOSCOW (Thomson Financial) - Russian gas monopoly Gazprom has chosen French
oil major Total to help develop its giant Shtokman gas field, Gazprom CEO Alexei
Miller said in a statement Thursday.
"Gazprom has decided on a foreign partner for the implementation of the
first phase of developing the Shtokman field: it is the French company Total,"
Miller said.
Under the deal, Total will receive 25 pct of a company set up to develop the
project's first phase, while other foreign partners may also be brought in to
share up to 24 percent, Miller said.
Gazprom will maintain 51 percent of the management company and 100 percent
of the company that controls the license for the project.
Gazprom "will remain owner of all of the extracted hydrocarbons", the
statement said.
The Shtokman field, one of the world's few known giant gas reserves yet to
be tapped, is estimated to contain 3.7 trln cubic metres of gas, and lies in the
Russian section of the Barents Sea above the Arctic Circle.
It is a major potential energy source for Europe and the United States.
The project's future has been cloudy since Gazprom rejected its entire
shortlist of potential foreign partners in the Shtokman project -- US Chevron
and ConocoPhillips, Total and Norway's Hydro and Statoil -- in a surprise
announcement in October.
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