Total Slashes Investments, Reduces Production Forecasts
France-headquartered Total announced its intention to reduce capital expenditures to 23-24 B$ in 2015, from the peak of 28 B$ in 2013, adding that it will further reduce investment down to 20-21 B$ in 2016, before returning to a sustainable level of 17-19 B$ from 2017 onwards.
Total is the first oil major to announced this kind of cuts, signalling that it expects the drop in crude prices could be prolonged. Total’s announcement comes after a plunge in Brent crude to six-and-a-half year lows, below $50 a barrel.
The company also announced a 50% increase in Opex reduction target by 2017.
‘In 2014 Total was the first major to launch a global cost reduction program. In February 2015, as part of a robust response to lower oil prices, the Group reinforced the program to achieve 1.2 B$ savings in 2015… The Group is further increasing its Opex reduction target by 50% from 2 B$ to 3 B$ by 2017’ reads a note released on Wednesday.
This does not mean that the company expects a decrease in production. Indeed, it sees a sustained though decreasing growth due to last years’ investments.
‘Total achieved a production increase of 11% year on year during the first half of 2015. Production is planned to grow by an average of 6-7% per year between 2014 and 2017 and by an average of 5% per year between 2014 and 2019. Main drivers for production growth include twenty major start-ups, eight of which are in 2015, and increasing production efficiency.’
At the same time, Total delayed the start-up dates of three projects — Ichthys in Australia, Martin Linge in Norway and Tempa Rossa in Italy. In particular, Martin Linge, which was expected to start production in 2016, was postponed beyond 2017. Gas from the field should be exported to the UK via the FUKA gas pipeline.
Total holds a 51% interest in the project. Its partners are Petoro (30%) and Statoil (19%).
In general, Total cut its 2017 production target by about 200,000 b/d of oil equivalent (boe/d) to 2.6mn boe/d.
The French company also said it see the Kashagan project in Kazakhstan to come online in 2017 as of its previous projections.
In August, Total said that it would close its site in Dybvad, Denmark, adding that it will not perform hydraulic fracturing in the area because of technical reasons related to the geology of the site.
Dow Jones Business News reported on Tuesday that American regulators have accused Total SA of manipulating the price of natural gas in the U.S. southwest.