Posts Tagged ‘angola’

Total continues emerging markets investment & expansion

total-oil-logo1Total SA (NYSE – TOT), France’s largest company, announced the highest annual net profit in French corporate history last week, sounding a rare positive note in todays grim financial meltdown. In 2008 the firm made a profit of  €13.9 Bn ($18.0 Bn) thanks to record oil prices in the first half of the year, which helped offset the second half collapse in oil prices. Profits began to fall in the fourth quarter of 2008 as the credit crunch hit demand, sending crude prices tumbling. Total is now preparing for the future by investing in increased capacity in new fields, especially in Africa & the Middle East, whilst putting the brakes on production in Canada & the North Sea.

“Unprecedented volatility marked the 2008 market environment,” said Total chief executive Christophe de Margerie, noting that oil had peaked at about $150 a barrel last year before plunging to as low as $35

With regards to its North Sea operations, Total has reviewed its capital expenditure for 2009 due to the fall in oil prices. Senior vice president for Northern Europe, Michel Contie, remarked that an oil price of $40 per barrel was required to realistically develop new fields in the North Sea, as many new offshore discoveries are “not economic today.”  The Joslyn & Surmont heavy-oil ventures in the Canadian Athabasca project are among the “building blocks” for boosting output from 2016, the oil sands projects are expected to provide Total with almost 300,000 barrels a day of production capacity by 2020, as reported by Bloomberg : Total is “reevaluating costs, technologies, structure and timing of Canadian projects”

In a recent aggressive move, Total has offered to buy Canadian oil-sands explorer UTS Energy Corp for $ 617 million Canadian ($505 million), which rejected the bid as “inadequate.”  UTS has advised shareholders that the bid should be rejected, as the book value of the company is pegged at twice the unsolicited offer. Total reiterated today that oil sands need crude prices at $80 a barrel for investment, which to my mind displays that they are looking to bank up potential reserves for a time when oil demand will flip to the upside. Until then, Total looks as though it is banking on emerging markets to provide the spur to growth for the forseeable future.

In Nigeria, Total is the lead company in the Apko offshore oil field, where it is partnered with MSV’s favourite oil firm, Petrobras (NYSE – PBR) & state-owned Nigeria National Petroleum Corporation, the field is estimated to have reserves of up to 1.6 billion barrels of sweet crude in reserve. In order to help fund the project, the three existing shareholders agreed to auction off a 45% stake in the field to Indias state controlled ONGC for an estimated $2 Bn.

In Yemen, Total will soon start shipping liquefied natural gas from the Gulf of Aden, bringing into operation a $4 billion project begun less than four years ago. The shipments will make Yemen the newest member of the world’s small club of gas exporters & should earn the government as much as $50 billion in tax revenue over the next 25 years.

In Angola, as discussed in a previous post, Total is set to continue with a $9 billion investment to raise production, despite the huge drop in crude prices since July last year. In a joint venture with Chevron (NYSE – CVX) & others, the Tombua-Landana oil field is expected to come online, contributing a further 120,000 bpd to Totals existing operations. Meanwhile, Total’s third production hub in Angola’s offshore Bloc 17, is expected to begin pumping oil from depths of up to 1,200 metres,beginning in 2011, according to the company’s website. Presently, Total is the third biggest oil producer in Angola after Exxon & Chevron, pumping over 500,000 barrels per day.

During his presentation lat week, CEO  de Margerie stated that Total is also interested in entering the upstream sector in Brazil, particlualrly in offshore projects such as the Santos basin and is also eying new acreage in Venezuela.

“We have had discussions with Petrobras and told them officially that we would be interested either in entering existing discoveries or taking part in the next bids on new acreage,” de Margerie told reporters at a briefing in London.

He stressed that Petrobras needed financing to develop the reserves in the offshore basin, but that Total was not interested in merely becoming a financial partner in Brazil. De Margerie also said Total would be interested in bidding for new exploration acreage in the extra heavy crude oil Orinoco Belt in Venezuela.

“There is room for additional development  & we will be one of the companies to get access to the bid data, and we may bid,” he said. “We need to operate in Venezuela in good conditions, but it is an important target in terms of acreage” .

De Margerie said Total was right to stay in Venezuela despite the nationalization by President Hugo Chavez of large swathes of the country’s oil industry in 2007. Chavez nationalized oil fields when crude prices were on what looked like an unstoppable bull run, and as a result ExxonMobil and ConocoPhillips left Venezuela and are still runiing legal battles over disputed projects. It was reported earlier this year that Venezuela is now looking for new bids to develop fields from both global majors and state-run oil companies. Total which saw its stake in the Sincor project reduced from 47% to 30.3% in Chavez’s ambitious move remains committed to the project.

“We have to make sure our existing Sincor project delivers–this is still a real challenge,” he said.

Looking at Total from an independent viewpoint, it is obvious the management are playing a canny game. We have seen them exit or scale down high cost projects, such as Saudi Arabia, UK & Canada, whilst at the same time, investing heavily in emerging market prospects, as is clear from this article. What also impresses me about this company is its track record of working well with IOCs such as Chevron as well as local state entities & as long as it continues with this “nimble” approach along with a prudent focus on legacy operations, the future looks very bright indeed.

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Militants in Niger Delta … bad for Nigeria, could be good for Angola & Ghana

oilrig_1515_18918777_0_0_7306_300Like many developing nations with vast natural resources, Nigeria has seen a massive influx in Foreign Direct Investment (FDI), particularly in the energy sector. However, civil unrest, particularly in the Niger Delta, may be a catalyst for potential investors to look to other West African Nations as investment opportunities. Added to this are the ever present problems of ineptitude & “graft” within both state & federal government, which has brought some unwelcome news for Africa’s largest economy.

Last week, Russian giant Gazprom (OTC : OGZPY) announced that it was in discussions to inject up to $2.5 Bn into a joint venture enterprise with state owned Nigerian National Petroleum Corp (NNPC), with a view to developing domestic gas production, processing, and transportation.” Nigeria has an estimated 187 trillion cubic feet of natural gas reserves. Industry experts see the deal as a positive move by the federal government to utilize the country’s huge gas resources that have hitherto been wasted, it is estimated that Nigeria flares off as much as 14% (24 billion cubic feet) of global gas wasteage.

The Russian gas company is attempting to become involved with the Trans-Saharan gas pipeline (TSGP). The pipeline, which would connect the Niger delta in Nigeria and Niger, to existing gas transmission hubs to the European Union at El Kala or Beni Saf in Algeria’s Mediterranean coast, is expected to cost $10 billion, of which Gazprom will initially invest $2.5 billion. The project is due to commence in 2009 and isplanned to complete in 2015, when Nigeria hopes it will become one of the biggest sources of natural gas for continental Europe.

Livi Ajounuma, General Manager at NNPC, confirmed that “we have signed a Memorandum of Understanding [MOU]”. He commented further on the deal saying, “It’s a good thing. It means that a giant company like Gazprom can come to Nigeria.”

All is not as rosy as it may seem however, as the Russian Ambassador to Nigeria, Alexander Polyakov, staged a withering blow at Nigerian confidence this week. Polyakov has called on the Nigerian authorities to create a stable environment for foreign nationals who come to work in the country, to continue the flow of foreign investment and development of the economy. Over 200 foreigners and countless Nigerians have been kidnapped in nearly three years of rising violence across southern Nigeria. Some militants claim to be fighting for greater control over the Niger Delta’s oil wealth, however, other gangs of armed, jobless youths make money from extortion and kidnapping.

Polyakov urged prompt release of all hostages, including some Russians,currently being held by militants in Nigeria’s southeast Niger Delta region.”Everybody in the region and the government should play their role to ensure that all hostages are freed,” he said.

There are strong indications that investment inflow to the upstream sub-sector of the Nigerian oil industry has started dwindling as foreign investors now choose Angola and Ghana as preferred destinations over Nigeria. Which in turn, threatens Nigeria’s capacity to grow its crude oil reserves as planned, it is targeting 40 billion barrels proven reserves by 2010. Analysts have identified insecurity in the Niger Delta and weak fiscal policy as key reasons why investors are beginning to leave for more stable business opportunities in Africa. Recently due to militant activity Royal Dutch Shell (NYSE : RDS:A) has seen its production dropping from one million bpd to about 380,000 bpd at its Bonny terminal in the south of the Delta. Exxon has also experienced increased insurgent activity in its Nigerian operations.Last week, local union officials threatened to call a strike which would shut down crude exports from the River state, until such time as the issues are addressed by State & Federal officials. Nigeria is already suffering from production slow down due to militancy, currently the Niger Delta is only exporting 1.8 million bpd, compared with a targetted 2.2 million bpd.

Near neighbour Angola has now  begun to attract more investments from oil companies as International Oil Companies are making long term expenditure commitments in the African oil ventures. Total (NYSE : TOT) said last week that it would continue with a $9 billion investment to raise production in Angola, despite the huge drop in crude prices since July last year. Total plans to stick to its major investments in Angola, even as it expects crude prices to recover, the company’s top official in Angola said.

“We are living through a crisis that has pushed oil prices to very low levels. Therefore, we are being extremely strict with all our investments,” Olivier Langavant, Director General in Angola, was quoted as saying in an interview with Reuters. “But the big projects (in Angola) like the Pazflor, which is a $9 billion investment, will be maintained.”

Pazflor, Total’s third production hub in Angola’s offshore Bloc 17, is expected to begin pumping oil in 2011 from water depths of up to 1,200 metres, according to the company’s website. Total is the third biggest oil producer in Angola after Exxon Mobil Corp. and Chevron, pumping, on average of over 500,000 barrels per day.

Chevron, Total and Eni are currently developing a $4 to $5 billion liquefied natural gas plant in Soyo, Angola. Whilst in contrast, Nigeria’s flagship Olokola, Brass LNG and NLNG Train 7 projects are yet to take off. Because of the high spend of the oil majors in Angola, oil service companies have begun to win big contracts. BP has awarded Halliburton more than $600 million in contracts for up to four projects in Angola.

Meanwhile, in Ghana, offshore oil finds in 2007 have led analysts to look at the small nation as becoming an “African Tiger”. Three vast blocks off of the West Cape Three Points are believed to hold vast reserves that may well outshine those enjoyed by Nigeria. The Jubilee field, one of West Africa’s biggest oil strikes in years, likely containins recoverable reserves of at least 1.2 billion barrels of oil equivalent, with first output scheduled for the second half of 2010. IOCs are lining up to take advantage, as smaller independent firms such as Kosmos Energy struggle to find capital to devlop proven resources in the area. Kosmos is reputed to have a $3Bn stake in the area up for grabs, according to industry website Rigzone. The current breakdown of partnership/ownership across the three blocs which can be viewed here at AfDevInfo, also includes US independent Anadarko (NYSE : APC)  & the UK’s Tullow (LON : TLW), along with various Ghanaian government run corporations.
This at a time when foreign investors in the Nigerian capital market withdrew some $4 billion from the Nigeria Stock Exchange kick starting a decline of over 50% in three months, according to its Director General, Professor Ndidi Okereke-Onyiuke. Coupled with an ever rising inflation rate, the highest for more than 5 years, is a major setback for Nigeria’s hopes of becoming a local economic giant.

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