Total’s President for Exploration and Production Arnaud Breuillac said that the French major is actively moving towards a final investment decision as early as end-2017 for its onshore oil project in Uganda.
Breuillac’s statement comes on the backdrop of three production licences granted to Total E&P Uganda BV (Total’s subsidiary) by the government of Uganda for Exploration Area 1 of Uganda’s oil-rich Albertine valley alongside partner Tullow.
Tullow which is the operator of Exploration Area 2 was granted five production licences.
The 25-year production licenses clears a major hurdle as Uganda carefully walks the talk about fast-tracking oil production before 2020.
The licences also require $8 billion in investment from the two companies together with their partner China National Offshore Oil Company (CNOOC) to drill an expected 500 wells.
When first oil begins to flow in 2020 (ceteris Peribus), Uganda anticipates the production of 230,000 barrels of crude oil per day. The three companies; Tullow, Total and CNOOC had 18 months to decide if they will continue with the investments according to the government communique. Total has moved quickly to break its silence as the ‘ever willing’ CNOOC and the skeptical Tullow buy time.
Analysts say, Total looks beyond oil production in Uganda. The oil major is reportedly on mission to expand its frontiers in Africa by establishing a broad based strategic position East Africa, One of the world’s freshest oil producing regions.
Through the first half of 2016, African production accounted for roughly 25% of Total’s 2.4 million barrels of oil equivalent per day (BOE/D) worldwide. That production has been relatively flat for the past year even as overall production has increased by 200,000 BOE/D. Through 2019, the company expects its production to increase by 5% every year as it seeks to maintain its market value.
“Total’s decision to expand into Africa is based on its objective to add high-quality, low-cost assets to its portfolio while continuing to reduce the breakeven point of its positions” wrote Industry analyst David Lettis.
Patrick Pouyanné, Total’s chief executive, said last week that will pursue the “strategy that has kept the company in the black for most of the time since oil price collapsed in the second half of 2014: cut investment, lift operating efficiency and boost oil and gas output” the Wall Street Journal reported.
“In the short term, we will continue to be disciplined on capex and on cost-saving and focus on raising production,” he told investors. “We focus on cash flow.”
Even though the Total strategy to deal with an oil barrel worth less than half what it was two and half years ago is far from original, the French company has been more successful than most of its peers to carry it out. The company managed to keep booking billion-dollar profits in 2014 and 2015.
During his presentation, Pouyanné said the company plans to cut its investment to between $15 billion and $17 billion a year in 2017, down from an expected $18 billion to $19 billion this year and set up a target to cut costs by more than $4 billion in 2018, up from more than $2.4 billion expected this year and more than $3 billion targeted in 2017.