Total to Reap Rewards of Low Carbon, Efficiencies
French major Total sees energy demand growth benefiting mainly gas and electricity, and LNG and renewables will grow the fastest, it said in its strategy update September 24.
Total will increase its LNG sales to 50mn metric tons/year by 2025, supporting growth in integrated LNG of 2.5 times between 2018 and 2025. The acquisition of Anadarko’s African assets from Occidental Petroleum, which includes Algerian and Mozambican gas, "fits perfectly into the strategy and improves visibility on the group’s future," it said.
It did not mention however another major growth engine, the series of Novatek-operated LNG projects in Russia's far north; or the possible equity and offtake agreement if US Tellurian takes final investment decision on the Driftwood LNG project.
In low carbon electricity, Total will invest $1.5-2bn/year, notably in Europe, as a power producer from renewables and natural gas and distributor, targeting 8mn customers by 2025.
Its strong financial position – its debt gearing is to be kept below 20% – means it can reward investors with a hike in the dividend from 5% to 6%/yr. This reflects the board’s confidence in the ability of the company to deliver sustainable and profitable growth for the coming years, it said. More than 11bn boe of resources will have been added to its asset base between 2015 and 2020 at less than $2.5/boe.
Total has a large portfolio of profitable projects to fuel its future growth post 2023 and is sanctioning more than 800,000 boe/d of new production, "leveraging a favourable oil service cost environment" – and sometimes this has led to friction with the service companies in the UK North Sea.
Renewing reserves is based on two engines: exploration with recent discoveries in North Sea, South Africa and Guyana and access to discovered resources.
Total will generate production growth of more than 5%/year between 2018 and 2021, then after a stable period between 2022-23, growth will resume at more than 3%/yr driven mainly by LNG project start-ups. Capital discipline will be maintained with $16-18bn/yr capital investment over 2019 to 2023. Cash flow will increase by more than $5bn by 2025 in a $60/b environment, an average increase of around $1bn/yr, it said.