The soon-to-be-merged Total Fina group will make upstream its priority, as far as spending is concerned, says Total Chairman and CEO Thierry Desmarest.
This year, the upstream sector will account for 60% of the 4 billion euros earmarked for investments.
"The Middle East and Latin America is where we will invest most over the next 2 years," said Desmarest. Iran is a key focus for Total, with its heavy involvement in the Sirri A and E fields (OGJ, Apr. 5, 1999, p. 30).
The remaining 1.6 billion euros of Total Fina's capital spending budget will be apportioned equally between its refining/distribution and chemicals businesses.
Total Fina will maintain this spending emphasis on upstream until 2005, at which time production should increase to 1.5 million boed from the current 1.1 million boed.
This increase is aimed at reaching a balance between oil production and Total Fina's refining capacity of 1.5 million b/d.
Budget details
The 1999 exploration budget will be reduced by 20% vs. combined 1998 figures for Total and Petrofina SA, says Desmarest. The merged company will have reserves of about 6 billion boe, which equates to a reserves-to-production ratio of 15 years at 1998 production rates. Desmarest says this compares with an industry average of 9-10 years.Total Fina's consolidated reserve replacement rate is an estimated 190%. And this does not include the 1 billion boe in extra-heavy crude oil reserves attributable to its joint-venture operations in Venezuela's Orin- oco oil belt.
Combined finding, development, and operating costs for the firms averaged about $8/bbl in 1998. Total Fina aims to reduce that to $7/bbl, in constant dollars, by 2001-02.
All production start-ups-including Algeria's Tin Fouye Tabankort, Iran's Sirri A and E, and Indonesia's Peciko fields-have breakeven points of $9/bbl or less, says Desmarest.
In refining, breakeven points are about $2.10/bbl for Petrofina and $1.80/bbl for Total. Bringing Petrofina's breakeven point down to Total's would generate savings of $55-60 million/year, says refining/distribution manager Jean-Paul Vettier.
Other savings will come from 1,000 job cuts expected to result from the merger, most of which will occur in the refining/distribution sector. But there will be no site closures, say the companies.
Total Fina also plans divestments totaling about 1.5 billion euros over 2 years. This will probably involve Total's 8% interest in U.S. refiner-marketer Ultramar Diamond Shamrock Corp., Fina's 60,500 b/d refinery at Big Spring, Tex., a network of U.S. service stations, and onshore upstream assets in the U.S.
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