George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here

Less Ads, More Data, More Tools Register for FREE
George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’
George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’View Video
Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America
Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin AmericaView Video

Latest Share Chat

FOCUS-Oil major Total plans biggest exploration drive in years

Tue, 29th Jan 2019 08:41

* Total aims to drill 23 wells in 2019 - exploration chief

* In Mauritania, Senegal, Namibia, S.Africa, Guyana, Brazil

* Turnaround plan sees shift from 'frontier' exploration

* Main focus now on proven basins, in lower-risk strategy

* Drilling drive focused on deep and ultra-deep offshore

By Bate Felix and Wendell Roelf

PARIS/CAPE TOWN, Jan 29 (Reuters) - Total islaunching its biggest exploration campaign for years in 2019 aspart of a turnaround plan that is ditching the company's focuson risky long-shots in favour of areas known to containcommercial levels of oil or gas.

The French major aims to drill 23 wells this year, itssenior vice president for exploration, Kevin McLachlan, toldReuters, in waters off Mauritania, Senegal, Namibia, SouthAfrica, Guyana and Brazil.

While the company declined to say how many wells it drilledin 2018, McLachlan said 2019 would be Total's largest programmein years. The 23 wells planned represent about a trebling of thelevels of 2017 and 2016, and is higher even than the 20 drilledin 2013, before the oil price crash.

The company's new game plan is to concentrate efforts onemerging and mature basins, which offer a greater chance ofexploration success. It is moving away from its higher-risk,higher-reward strategy of targeting "frontier" areas that havenot been commercially exploited, an approach which yielded scantrewards and saw outlier Total fall behind rivals.

As a result the proportion of its exploration capital theAfrican-focused company is spending on frontier areas hasdropped to 15 percent, from 40 percent five years ago."We were spending a lot of money in frontier," saidMcLachlan, a Canadian geophysicist who joined Total in 2015 tolead the five-year revamp of its exploration strategy. "Now wewant balance."

Most of the wells it aims to drill this year will targetknown giant fields, he added.

Total has broken ranks with some rivals in recent years andlargely ignored the rush to U.S. shale. It is looking to eke outconventional resources, particularly in Africa where it has thebiggest industry presence. The strategy carries risks though,and has left the company exposed to the kind of politicalinstability that has deterred others.

McLachlan said Total's exploration budget would remainbroadly in line with 2018, when it was $1.2 billion, and 2017,when it was $1.1 billion. That is still less than half the levelof 2014, when the price crash forced all majors to cut spending.

LAGGING IN DISCOVERIES

Appraisals of discoveries in 2018 could offer signs thatTotal's shift in exploration strategy is paying off.

The company announced a 1 trillion cubic feet gas discoveryoff Shetland in the North Sea last year. Appraisals are ongoingfor the Ballymore discovery in the Gulf of Mexico with Chevron, and Calypso in Cyprus with Eni.

A major discovery in 2019 could cement the turnaround aftera drought between 2009 and 2014 when it spent billions inexploration with little barrels to show for it, while rivals EniExxon Mobil and BP, racked up successes.

Yet there is still work to do in terms of convertingexploration dollars into commercial success.

Energy consultancy Wood Mackenzie said Total hadaggressively snapped up exploration blocks in 2017 and 2018,which took it to the top of the industry table with over 189,000square km added since 2015 - around 70,000 higher than itsnearest competitor.

But in terms of discoveries since 2015, Total still lagssome peers, said Wood Mackenzie analyst Andrew Latham.

"It is clearly behind Exxon Mobil. Exxon's success in Guyanamarks them out as industry leader," said Latham, adding thatEni's Zohr gas discovery in Egypt was the next top find.

"Thereafter, it is competing well with the other majors, ithas been involved in a string of multi-hundred million barrelbig new finds, whereas in the previous four years it would havebeen one of the weaker or weakest of the majors."

As part of its turnaround plan, Total has created fiveregional exploration hubs with a concentration of geoscientists,instead of teams spread out in 38 countries.

A new, central 10-person leadership team reviews and choosesprojects, compared with decisions being made locally before,while people with exploration track records have been placed inexecutive positions for the first time.

S.AFRICA RESULTS EXPECTED 'IN DAYS'

Like some competitors, including Exxon and BP, Total islooking to deepwater exploration at a time when technologicaladvances - particularly in 3D digital seismic imaging - isaiding a comeback in that area following a decade when industryadvances have been focused on onshore shale.

Of the 23 wells in Total's drill programme this year, it hasalready started work at the deepwater Brulpadda field off SouthAfrica. Two industry sources close to the project say thepotential for a discovery is high and could signal agame-changer not only for Total, but also for the country.

"We are expecting the results in the coming days," Total'sChairman and Chief Executive Patrick Pouyanne said.

While Total has said the field could hold between 500million to over 1 billion barrels of oil equivalent, one of itspartner in the project is more upbeat.

"The outlook for finding hydrocarbons is extremely high. Thequestion is whether it is gas or oil, and whether it is agood-quality reservoir," Keith Hill, CEO of Africa Oil Corp, a minority stakeholder in the field, told Reuters,adding that the field could hold 1.5 to 3 billion barrels.

Other oil companies and South African authorities are likelyto be watching closing.

"Any potential discovery will ultimately result in theattraction of other oil companies and the growing of the oil andexploration and production industry in South Africa," saidViljoen Storm, acting chief executive of the country'sstate-owned Petroleum Agency.(Reporting by Bate Felix and Wendell Roelf; Editing by PravinChar)

Related Shares

More News
24 Apr 2024 19:30

Trans Mountain oil shippers raise concerns about risk of delay to full service

April 23 (Reuters) - Some shippers on Canada's Trans Mountain expansion project are raising concerns that the long-delayed oil pipeline will not be ...

24 Apr 2024 13:24

Pressure on gas and LNG prices to help switch from coal, says J.P. Morgan

LONDON, April 24 (Reuters) - Global natural gas prices will come under pressure through the end of the decade as supply and shipping infrastructure ...

24 Apr 2024 09:58

Aker BP Q1 beats forecast as costs fall, Tyrving to start sooner

OSLO, April 24 (Reuters) - Norwegian independent oil company Aker BP on Wednesday posted higher-than-expected net profit for the first quarter as co...

24 Apr 2024 05:38

Aker BP Q1 beats forecast on record output, lower cost

OSLO, April 24 (Reuters) - Norwegian independent oil company Aker BP on Wednesday posted a higher-than-expected net profit for the first quarter as ...

18 Apr 2024 14:45

BP's gas and renewables boss steps down, as CEO shrinks leadership

LONDON, April 18 (Reuters) - BP said on Thursday its head of natural gas and low carbon energy Anja-Isabel Dotzenrath will step down after just over...

Login to your account

Don't have an account? Click here to register.

Quickpicks are a member only feature

Login to your account

Don't have an account? Click here to register.