PARIS - French oil company Total SA said it is working to overcome a 2% decline in its oil and gas production in the first quarter, in part by expanding investment in the North Sea, part of a broader resurgence of development in the area.
Total's performance underscores the growth challenges faced by all major oil companies. U.S.-based energy giant Exxon Mobil Corp. said Thursday its production fell 3.5% in the first three months of 2013, while Conoco Phillips reported a 1.6% drop.
Total said that it is on track to grow its oil and gas output by 3% a year on average between 2011 and 2015, with an acceleration of that pace after 2017.
Around 90% of the oil and gas projects Total needs to hit its 2017 production target have already started up or are in development, said the head of Total's Exploration and Production division, Yves-Louis Darricarrere, in an interview earlier this week.
The company plans to invest up to $20 billion over the next five years in the U.K. North Sea, and said it is on track to become the top oil and gas producer there by 2015.
A large part of Total's fall in output in the first quarter was due to the shutdown of its Elgin-Franklin gas field in the North Sea, underscoring the challenges it faces in achieving its target.
Elgin-Franklin did restart production last month and by early April was producing between 55% and 60% of its full capacity of 120,000 barrels of oil equivalent per day, Total said. A huge project of development will be set up around the field, with additional wells drilled, potentially reaching a new untapped reservoir.
Total is also developing the Laggan-Tormore gas off the west coast of the Shetland Islands, expected to come on stream in summer next year, and is looking to tap into surrounding reservoirs named for famous whiskeys such as Laphroaig and Glenlivet. Total isn't alone in hatching new development plans for the area. To the east, on the other side of the North Sea, Norway's Statoil ASA and Sweden's Lundin Petroleum have both been active in investing in the search for new reservoirs, with much success.
Total's ambitions for the North Sea contrast with its plans for Canada, where it took a EUR1.25 billion ($1.6 billion) loss after pulling out of a large oil sands project called Voyageur.
Total and its partner, Suncor Energy Inc., said the project was no longer commercially justifiable due to the abundance of light crude in North America because of the boom in shale oil production.
Group Chairman and Chief Executive Christophe de Margerie said Friday the sale of its interest in Voyageur demonstrated Total's "commitment to strict investment discipline."
The loss on Voyageur and the fall in production led to a 58% decline in the company's net profit for the first quarter to EUR1.54 billion from EUR3.67 billion a year earlier. Revenue fell 6% in the period to EUR48.13 billion.
Total says it has become more aggressive in terms of exploration, notably in more risky "frontier basins" such as the rough waters west of the Shetland Islands in the U.K. and in the Barents Sea, at the most northern tip of Norway.
"Accepting to take more risks and looking for larger projects are our new focuses," Mr. Darricarrere said, adding the group's potential resources has doubled in the last three years to six billion barrels of oil equivalent.
On Thursday, the company said it has made a significant oil discovery in deep waters off the Ivory Coast, nearby some significant oil discoveries offshore Ghana.
Total has the best exploration assets of any of the major oil companies, said analysts from Bernstein Research in a note. "We remain confident Total can hit guidance of 3% production growth this year," it said.
Total has 15 projects under development, four of which are located in the North Sea and the Barents Sea. In the second quarter of this year, it said it expects the start up of a liquefied natural gas project in Ghana, the Sulige gas field in China and the enormous Kashagan oil field in Kazakhstan.
Copyright (c) 2012 Dow Jones & Company, Inc.
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