Total S.A. 20-F 2011
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Commission file number: 1-10888
Republic of France
(Jurisdiction of Incorporation or Organization)
2, place Jean Millier
La Défense 6
(Address of Principal Executive Offices)
Patrick de La Chevardière
Chief Financial Officer
2, place Jean Millier
La Défense 6
Tel: +33 (0)1 47 44 45 46
Fax: +33 (0)1 47 44 49 44
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.
2,349,640,931 Shares, par value 2.50 each, as of December 31, 2010
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).**
Yes o No o
** This requirement is not currently applicable to the registrant.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
If Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Financial information included in this Annual Report is presented according to International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and IFRS as adopted by the European Union (EU) as of December 31, 2010.
Unless otherwise indicated, statements made in Item 4. Information on the Company referring to TOTALs competitive position are based on the Companys estimates, and in some cases rely on a range of sources, including investment analysts reports, independent market studies and TOTALs internal assessments of market share based on publicly available information about the financial results and performance of market participants.
This Annual Report on Form 20-F reports information primarily regarding TOTALs business and operations and financial information relating to the fiscal year ended December 31, 2010. For more recent updates regarding TOTAL, you may read and copy any reports, statements or other information TOTAL files with the United States Securities and Exchange Commission (SEC). All of TOTALs SEC filings made after December 31, 2001, are available to the public at the SEC Web site at http://www.sec.gov and from certain commercial document retrieval services. See also Item 10. Additional Information Documents on Display.
Unless the context indicates otherwise, the following terms have the meanings shown below:
TOTAL has made certain forward-looking statements in this document and in the documents referred to in, or incorporated by reference into, this Annual Report. Such statements are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the management of TOTAL and on the information currently available to such management. Forward-looking statements include information concerning forecasts, projections, anticipated synergies, and other information concerning possible or assumed future results of TOTAL, and may be preceded by, followed by, or otherwise include the words believes, expects, anticipates, intends, plans, targets, estimates or similar expressions.
Forward-looking statements are not assurances of results or values. They involve risks, uncertainties and assumptions. TOTALs future results and share value may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond TOTALs ability to control or predict. Except for its ongoing obligations to disclose material information as required by applicable securities laws, TOTAL does not have any intention or obligation to update forward-looking statements after the distribution of this document, even if new information, future events or other circumstances have made them incorrect or misleading.
You should understand that various factors, certain of which are discussed elsewhere in this document and in the documents referred to in, or incorporated by reference into, this document, could affect the future results of TOTAL and could cause results to differ materially from those expressed in such forward-looking statements, including:
For additional factors, you should read the information set forth under Item 3. Risk Factors, Item 4. Information on the Company Other Matters, Item 5. Operating and Financial Review and Prospects and Item 11. Quantitative and Qualitative Disclosures About Market Risk.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
ITEM 3. KEY INFORMATION
The following table presents selected consolidated financial data for TOTAL on the basis of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and IFRS as adopted by the European Union for the years ended December 31, 2010, 2009, 2008, 2007 and 2006. The historical consolidated financial statements of TOTAL for these periods, from which the financial data presented below for such periods are derived, have been audited by Ernst & Young Audit and KPMG S.A., independent registered public accounting firms, and the Companys auditors. All such data should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included elsewhere herein.
SELECTED CONSOLIDATED FINANCIAL DATA
For information regarding the effects of currency fluctuations on TOTALs results, see Item 5. Operating and Financial Review and Prospects.
Most currency amounts in this Annual Report on Form 20-F are expressed in euros (euros or ) or in U.S. dollars (dollars or $). For the convenience of the reader, this Annual Report on Form 20-F presents certain translations into dollars of certain euro amounts.
The following table sets out the average dollar/euro exchange rates expressed in dollars per 1.00 for the years indicated, based on an average of the daily European Central Bank (ECB) reference exchange rate.(1) Such rates are used by TOTAL in preparation of its Consolidated Statement of Income and Consolidated Statement of Cash Flow in its Consolidated Financial Statements. No representation is made that the euro could have been converted into dollars at the rates shown or at any other rates for such periods or at such dates.
The table below shows the high and low dollar/euro exchange rates for the three months ended December 31, 2010, and for the first three months of 2011, based on the daily ECB reference exchange rates published during the relevant month expressed in dollars per 1.00.
The ECB reference exchange rate on March 21, 2011, for the dollar against the euro was $1.42/.
(1) For the period 2006 2010, the averages of the ECB reference exchange rates expressed in dollars per 1.00 on the last business day of each month during the relevant year are as follows: 2006 1.26; 2007 1.38; 2008 1.47; 2009 1.40; and 2010 1.32.
The Group and its businesses are subject to various risks relating to changing competitive, economic, political, legal, social, industry, business and financial conditions. These conditions, along with TOTALs approaches to managing certain of these risks, are described below and discussed in greater detail elsewhere in this Annual Report, particularly under the headings Item 4. Information on the Company Other Matters, Item 5. Operating and Financial Review and Prospects and Item 11. Quantitative and Qualitative Disclosures About Market Risk.
A substantial or extended decline in oil or natural gas prices would have a material adverse effect on our results of operations.
Prices for oil and natural gas historically have fluctuated widely due to many factors over which we have no control. These factors include:
Substantial or extended declines in oil and natural gas prices would adversely affect our results of operations by reducing our profits. For the year 2011, we estimate that a decrease of $1.00 per barrel in the average annual price of Brent crude would have the effect of reducing our annual adjusted net operating income from the Upstream segment by approximately 0.13 billion (calculated with a base case exchange rate of $1.30 per 1.00). In addition to the adverse effect on revenues, margins and profitability from any fall in oil and natural gas prices, a prolonged period of low prices or other indicators could lead to reviews for impairment of the Groups oil and natural gas properties and could impact reserves. Such reviews would reflect managements view of long-term oil and natural gas prices and could result in a charge for impairment that could have a significant effect on our results of operations in the period in which it occurs. Lower oil and natural gas prices over prolonged periods may also reduce the economic viability of projects planned or in development, causing us to cancel or postpone capital expansion projects, and may reduce liquidity, thereby potentially decreasing our ability to finance capital expenditures. If we are unable to follow through with capital expansion projects, our opportunities for future revenue and profitability growth would be reduced, which could materially impact our financial condition.
Our business faces foreign exchange risks because a large percentage of our revenues and cash receipts are denominated in dollars, the international currency of petroleum sales, while a significant portion of our operating expenses and income taxes accrue in euros and other currencies. Movements between the dollar and euro or other currencies may adversely affect our business by negatively impacting our booked revenues and income, and may also result in significant translation adjustments that impact our shareholders equity.
Our long-term profitability depends on cost effective discovery and development of new reserves; if we are unsuccessful, our results of operations and financial condition would be materially and adversely affected.
A significant portion of our revenues and the majority of our operating income are derived from the sale of crude oil and natural gas which we extract from underground reserves discovered and developed as part of our Upstream business. In order for this business to continue to be profitable, we need to replace depleted reserves with new proved reserves. Furthermore, we need to accomplish such replacement in a manner that allows subsequent production to be economically viable. However, our ability to discover or acquire and develop new reserves successfully is uncertain and can be negatively affected by a number of factors, including:
Any of these factors could lead to cost overruns and impair our ability to make discoveries or complete a development project, or to make production economical. If we fail to discover and develop new reserves cost-effectively on an ongoing basis, our results of operations, including profits, and our financial condition, would be materially and adversely affected.
Our crude oil and natural gas reserve data are only estimates, and subsequent downward adjustments are possible. If actual production from such reserves is lower than current estimates indicate, our results of operations and financial condition would be negatively impacted.
Our proved reserves figures are estimates reflecting applicable reporting regulations as they may evolve. Proved reserves are those reserves which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Reserves are estimated by teams of qualified, experienced and trained earth scientists, petroleum engineers and project engineers, who rigorously review and analyze in detail all available geosciences and engineering data (e.g., seismic, electrical logs, cores, fluids, pressures, flow rates, facilities parameters). This process involves making subjective judgments, including with respect to the estimate of hydrocarbons initially in place, initial production rates and recovery efficiency, based on available geological, technical and economic data. Consequently, estimates of reserves are not exact measurements and are subject to revision. In addition, they may be negatively impacted by a variety of factors which are beyond our control and which could cause such estimates to be adjusted downward in the future, or cause our actual production to be lower than our currently reported proved reserves indicate. The main such factors include:
Our reserves estimates may therefore require substantial downward revisions to the extent our subjective judgments prove not to have been conservative enough based on the available geosciences and engineering data, or our assumptions regarding factors or variables that are beyond our control prove to be incorrect over time. Any downward adjustment would indicate lower future production amounts, which could adversely affect our results of operations, including profits as well as our financial condition.
We have significant production and reserves located in politically, economically and socially unstable areas, where the likelihood of material disruption of our operations is relatively high.
A significant portion of our oil and gas production occurs in unstable regions around the world, most significantly Africa, but also the Middle East, Asia-Pacific and South America. Approximately 32%, 22%, 10% and 8%, respectively, of our 2010 combined liquids and gas production came from these four regions. In recent years, a number of the countries in these regions have experienced varying degrees of one or more of the following: economic instability, political volatility, civil war, violent conflict and social unrest. In Africa, certain of the countries in which we have production have recently suffered from some of these conditions. The Middle East in general has recently suffered increased political volatility in connection with violent conflict and social unrest. A number of countries in South America where we have production and other facilities, including Argentina, Bolivia and Venezuela, have suffered from political or economic instability and social unrest and related problems. In Asia-Pacific, Indonesia has suffered some of these conditions. Any of these conditions alone or in combination could disrupt our operations in any of these regions, causing substantial declines in production. Furthermore, in addition to current production, we are also exploring for
and developing new reserves in other regions of the world that are historically characterized by political, social and economic instability, such as the Caspian Sea region where we have a number of large projects currently underway. The occurrence and magnitude of incidents related to economic, social and political instability are unpredictable. It is possible that they could have a material adverse impact on our production and operations in the future.
We are exposed to risks regarding the safety and security of our operations. In addition, while our insurance coverage is in line with industry practice, we are not insured against all possible risks.
TOTAL engages in a broad scope of activities, which include drilling, oil and gas production, processing, transportation, refining and petrochemical activities, storage and distribution of petroleum products, and production of base chemical and specialty products, and involve a wide range of operational risks. Among these risks are those of explosion, fire or leakage of toxic products, as well as environmental risks related to emissions and discharges into the air, water or soil and the management of waste. We also face risks, once production is discontinued, because our activities require environmental site remediation. In the transportation area, the type of risk depends not only on the hazardous nature of the products transported, but also on the transportation methods used (mainly pipelines, maritime, river-maritime, rail, road), the volumes involved, and the sensitivity of the regions through which the transport passes (quality of infrastructure, population density, environmental considerations).
Certain branches or activities face specific additional risks. In Exploration & Production, we face risks related to the physical characteristics of our oil or gas fields. These include the risks of eruptions of crude oil or of natural gas, discovery of hydrocarbon pockets with abnormal pressure, crumbling of well openings, leaks that can harm the environment and risks of fire or explosion. These events may cause injury or death, damage or destroy crude oil or natural gas wells as well as equipment and other property, lead to a disruption of activity or cause environmental damage. In addition, since exploration and production activities may take place on sites that are ecologically sensitive (tropical forest, marine environment, etc.), each site requires a risk-based approach to avoid or minimize the impact on human health, flora and fauna, the ecosystem and biodiversity. TOTALs activities in the Chemicals segment and the Refining & Marketing division also entail additional health, safety and environmental risks related to the overall life cycle of the products manufactured, as well as raw materials used in the manufacturing process, such as catalysts, additives and monomer feedstocks. These risks can arise from the intrinsic characteristics of the products involved (flammability, toxicity, or long-term environmental impacts such as greenhouse gas emissions), their use (including by customers), emissions and discharges resulting from their manufacturing process, and from recycling or disposing of materials and wastes at the end of their useful life.
If an event occurs leading to personal injury, death, property damage or discharge of hazardous materials into the environment, contractual terms may provide for indemnification obligations, either by TOTAL in favor of third-parties or by third-parties for TOTALs benefit. With respect to joint ventures operated by TOTAL, contractual terms generally provide that TOTAL assumes liability for damages caused by its gross negligence or willful misconduct. With respect to joint ventures in which TOTAL has an interest but that are operated by others, contractual terms generally provide that the operator assumes liability for damages caused by its gross negligence or willful misconduct. All other liabilities of any type of joint venture are generally assumed by the partners in proportion to their respective ownership interests. With respect to third party providers of goods and services, the amount and nature of liabilities assumed by the third party depends on the context and may be limited by contract. With respect to the Groups customers, TOTAL seeks to ensure that its products meet applicable specifications and that TOTAL abides by all applicable consumer protection laws.
To manage these risks, we maintain worldwide third-party liability insurance coverage for all of our subsidiaries. In addition, we also maintain insurance to protect us against the risk of damage to Group property and/or business disruption. Our insurance and risk management policies are described under Item 4. Other Matters Insurance and risk management. While we believe our insurance coverage is in line with industry practice and sufficient to cover normal risks in our operations, we are not insured against all possible risks. In the event of a major environmental disaster, for example, our liability may exceed the maximum coverage provided by our third-party liability insurance. The loss we could suffer in the event of such a disaster would depend on all the facts and circumstances and would be subject to a whole range of uncertainties, including legal uncertainty as to the scope of liability for consequential damages, which may include economic damage not directly connected to the disaster. The Group cannot guarantee that it will not suffer any uninsured loss and there can be no assurance,
particularly in the case of a major environmental disaster or industrial accident, that such loss would not have a material adverse effect on the Group.
We are subject to stringent environmental, health and safety laws in numerous jurisdictions around the world and may incur material costs to comply with these laws and regulations.
Our workforce and the public are exposed to risks inherent to our operations that potentially could lead to injuries, loss of life or environmental damage and could result in regulatory action, legal liability and damage to our reputation.
We incur, and expect to continue to incur, substantial capital and operating expenditures to comply with increasingly complex laws and regulations covering the protection of the natural environment and the promotion of worker health and safety, including:
In addition, growing public concerns in the EU and globally that rising greenhouse gas emissions and climate change may significantly affect the environment and society could adversely affect our businesses, including by the addition of stricter regulations that increase our operating costs, affect product sales and reduce profitability.
If our established financial reserves prove inadequate, environmental costs could have a material effect on our results of operations and our financial position. Furthermore, in the countries where we operate or expect to operate in the near future, new laws and regulations, the imposition of tougher license requirements, increasingly strict enforcement or new interpretations of existing laws and regulations or the discovery of previously unknown contamination may also cause us to incur material costs resulting from actions taken to comply with such laws and regulations, including:
As a further result of any new laws and regulations or other factors, we may also have to curtail, modify or cease certain operations or implement temporary shutdowns of facilities, which could diminish our productivity and materially and adversely impact our results of operations, including profits.
Security threats require continuous assessment and response measures. Acts of terrorism against our plants and offices, pipelines, transportation or computer systems could severely disrupt businesses and operations and could cause harm to people.
Our operations throughout the developing world are subject to intervention by various governments, which could have an adverse effect on our results of operations.
We have significant exploration and production, and in some cases refining, marketing or chemicals operations, in developing countries whose governmental and regulatory framework is subject to unexpected change and where the enforcement of contractual rights is uncertain. In addition, our exploration and production activity in such countries is often done in conjunction with state-owned entities, for example as part of a joint venture, where the state has a significant degree of control. In recent years, in various regions globally, we have seen governments and state-owned enterprises exercising greater authority and imposing more stringent conditions on companies pursuing exploration and production activities in their respective countries, increasing the costs and uncertainties of our business operations, which is a trend we expect to continue. Potential increasing intervention by governments in such countries can take a wide variety of forms, including:
Imposition of any of these factors by a host government in a developing country where we have substantial operations, including exploration, could cause us to incur material costs or cause our production to decrease, potentially having a material adverse effect on our results of operations, including profits.
We have activities in certain countries which are subject to U.S. and EU sanctions and our activities in Iran could lead to sanctions under relevant U.S. and EU legislation.
We currently have investments in Iran and, to a lesser extent, Syria, Myanmar, Sudan and Cuba. U.S. legislation and regulations currently impose economic sanctions on these countries.
In 1996, the United States adopted legislation implementing sanctions against non-U.S. companies doing business in Iran and Libya (the Iran and Libya Sanctions Act, referred to as ILSA), which in 2006 was amended to concern only business in Iran (then renamed the Iran Sanctions Act, referred to as ISA).
Pursuant to this statute, the President of the United States is authorized to initiate an investigation into the activities of non-U.S. companies in Iran and the possible imposition of sanctions (from a list that includes denial of financing by the U.S. Export-Import Bank, limitations on the amount of loans or credits available from U.S. financial institutions and prohibition of U.S. federal procurements from sanctioned persons) against persons found, in particular, to have knowingly made investments of $20 million or more in any 12-month period in the petroleum sector in Iran. In May 1998, the U.S. government waived the application of sanctions for TOTALs investment in the South Pars gas field. This waiver, which has not been modified since it was granted, does not address TOTALs other activities in Iran, although TOTAL has not been notified of any related sanctions.
In November 1996, the Council of the European Union adopted regulations which prohibit TOTAL from complying with any requirement or prohibition based on or resulting directly or indirectly from certain enumerated legislation, including ILSA (now ISA). It also prohibits TOTAL from having its waiver for South Pars extended to other activities.
In each of the years since the passage of ILSA and until 2007, TOTAL made investments in Iran in excess of $20 million (excluding the investments made as part of the development of South Pars). Since 2008, TOTALs position has consisted essentially in being reimbursed for its past investments as part of buyback contracts signed between 1995 and 1999 with respect to permits on which the Group is no longer the operator. In 2010, TOTALs production in Iran represented less than 0.1% of the Groups worldwide production.
ISA was amended in July 2010 by the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (CISADA), which expanded the scope of ISA and restricted the Presidents ability to grant waivers. In addition to sanctionable investments in Irans petroleum sector, parties may now be sanctioned for any transaction exceeding $1 million or series of transactions exceeding $5 million in any 12-month period for knowingly providing to Iran refined petroleum products, and for knowingly providing to Iran goods, services, technology, information or support that could directly and significantly either (i) facilitate the maintenance or expansion of Irans domestic production of refined petroleum products, or (ii) contribute to the enhancement of Irans ability to import refined petroleum products. The sanctions to be imposed against violating firms generally prohibit transactions in foreign exchange by the sanctioned company, prohibit any transfers of credit or payments between, by, through or to any financial institution to the extent that such transfers or payments involve any interest of the sanctioned company, and require blocking of any property of the sanctioned company that is subject to the jurisdiction of the United States. Investments in the petroleum sector commenced prior to the adoption of CISADA appear to remain subject to the pre-amended version of ISA. The new sanctions added by CISADA would be available with respect to new investments in the petroleum sector or any other sanctionable activity occurring on or after July 1, 2010. Prior to CISADAs enactment, TOTAL discontinued now-prohibited sales of refined products to Iran.
On September 30, 2010, the U.S. State Department announced that the U.S. government, pursuant to the Special Rule provision of ISA added by CISADA that allows it to avoid making a determination of sanctionability under ISA with respect to any party that provides certain assurances, would not make such a determination with respect to TOTAL. The U.S. State Department further indicated at that time that, as long as TOTAL acts in accordance with its commitments, TOTAL will not be regarded as a company of concern for its past Iran-related activities.
France and the European Union have adopted measures, based on United Nations Security Council resolutions, which restrict the movement of certain individuals and goods to or from Iran as well as certain financial transactions with Iran, in each case when such individuals, goods or transactions are related to nuclear proliferation and weapons activities or likely to contribute to their development. In July and October 2010, the European Union adopted new restrictive measures regarding Iran (the EU Measures). Among other things, the supply of key equipment and technology in the following sectors of the oil and gas industry in Iran are prohibited: refining, liquefied natural gas, exploration and production. The prohibition extends to technical assistance, training and financial assistance in connection with such items. Extension of loans or credit to, acquisition of shares in, entry into joint ventures with or other participation in enterprises in Iran (or Iranian-owned enterprises outside of Iran) engaged in any of the targeted sectors also is prohibited. Moreover, with respect to restrictions on transfers of funds and on financial services, any transfer of at least 40,000 or equivalent to an Iranian individual or entity shall require a prior authorization of the competent authorities of the EU Member States.
TOTAL continues to closely monitor legislative and other developments in France, the European Union and the United States in order to determine whether its limited activities in Iran could subject it to the application of sanctions. However, the Group cannot assure that current or future regulations or developments regarding Iran will not have a negative impact on its business or reputation.
The United States also imposes sanctions based on the United Nations Security Council resolutions described above, as well as broad and comprehensive economic sanctions, which are administrated by the U.S. Treasury Departments Office of Foreign Assets Control (referred to as OFAC). These OFAC sanctions generally apply to U.S. persons and activities taking place in the United States or that are otherwise subject to U.S. jurisdiction. Since August 16, 2010, transactions between Iranian entities and non-U.S. financial institutions holding U.S. bank accounts in the United States have been subject to OFAC restrictions. Sanctions administered by OFAC target Cuba, Iran, Myanmar (Burma), Sudan and Syria. TOTAL does not believe that these sanctions are applicable to any of its activities in these countries.
In addition, many U.S. states have adopted legislation requiring state pension funds to divest themselves of securities in any company with active business operations in Iran or Sudan. State insurance regulators have adopted similar initiatives relating to investments by insurance companies in companies doing business with the Iranian oil and gas, nuclear, and defense sectors. TOTAL has no business operations in Sudan and, to date, has not made any significant investments or industrial investments there. The Genocide Intervention Network (formerly known as Sudan Divestment Task Force) report states that TOTAL should be regarded as inactive in Sudan by the U.S. states that have adopted such divestment legislation. CISADA and the Sudan Accountability and Divestment Act, which was adopted by the U.S. Congress on December 31, 2007, support these state legislative initiatives. If TOTALs operations in Iran or Sudan were determined to fall within the prohibited scope of these laws, and TOTAL were not to qualify for any available exemptions, certain U.S. institutions holding interests in TOTAL may be required to sell their interests. If significant, sales of securities resulting from such laws and/or regulatory initiatives could have an adverse effect on the prices of TOTALs securities.
For more information on TOTALs presence in Cuba, Iran, Sudan and Syria, see Item 4. Other Matters Business Activities in Cuba, Iran, Sudan and Syria.
ITEM 4. INFORMATION ON THE COMPANY
TOTAL S.A., a French société anonyme (limited company) incorporated in France on March 28, 1924, together with its subsidiaries and affiliates, is the fifth largest publicly-traded integrated international oil and gas company in the world.(1)
With operations in more than 130 countries, TOTAL has activities in every sector of the oil industry, including in the Upstream (oil and gas exploration, development and production, LNG) and Downstream (refining, marketing and the trading and shipping of crude oil and petroleum products) segments.
TOTAL also has operations in Base Chemicals (petrochemicals and fertilizers) and Specialty Chemicals, mainly for the industrial market. In addition, TOTAL has interests in the coal mining and power generation sectors.
(1) Based on market capitalization (in dollars) as of December 31, 2010.
TOTAL began its Upstream operations in the Middle East in 1924. Since that time, the Company has grown and expanded its operations worldwide. Early in 1999 the Company acquired control of PetroFina S.A. and in early 2000, the Company acquired control of Elf Aquitaine S.A. (hereafter referred to as Elf Aquitaine or Elf).
The Companys registered office is 2, place Jean Millier, La Défense 6, 92400 Courbevoie, France. Its telephone number is +33 (0)1 47 44 45 46.
The length of the life of the Company is 99 years from March 22, 2000, unless it is dissolved or extended prior to such date.
TOTAL S.A. is registered in France with the Nanterre Trade Register under the registration number 542 051 180.
TOTALs worldwide operations are conducted through three business segments: Upstream, Downstream, and Chemicals. The table below gives information on the geographic breakdown of TOTALs activities and is taken from Note 5 to the Consolidated Financial Statements included elsewhere herein.
TOTALs Upstream segment includes the Exploration & Production and Gas & Power divisions. The Group has exploration and production activities in more than forty countries and produces oil or gas in thirty countries. The Groups Gas & Power division conducts activities downstream from production related to natural gas, liquefied natural gas (LNG) and liquefied petroleum gas (LPG), as well as power generation and trading, and other activities.
Exploration & Production
TOTALs Upstream segment aims at continuing to combine long-term growth and profitability at the level of the best in the industry.
TOTAL evaluates exploration opportunities based on a variety of geological, technical, political and economic factors (including taxes and license terms), and on projected oil and gas prices. Discoveries and extensions of existing fields accounted for approximately 46% of the 2,445 Mboe added to the Upstream segments proved reserves during the three-year period ended December 31, 2010 (before deducting production and sales of reserves in place and adding any acquisitions of reserves in place during this period). The remaining 54% comes from revisions of previous estimates.
In 2010, the exploration investments of consolidated subsidiaries amounted to 1,472 million (comprising exploration bonuses included in the unproved property acquisition costs). The main exploration investments were made in Angola, Norway, Brazil, the United Kingdom, the United States, Indonesia, Nigeria and Brunei. In 2009, the
exploration investments of consolidated subsidiaries amounted to 1,486 million (comprising exploration bonuses included in the unproved property acquisition costs). The main exploration investments were made in the United States, Angola, the United Kingdom, Norway, Libya, Nigeria and the Republic of the Congo. In 2008, exploration investments of consolidated subsidiaries amounted to 1,243 million (comprising exploration bonuses included in the unproved property acquisition costs) notably in Angola, Nigeria, Norway, the United Kingdom, Australia, the United States, Libya, Brunei, Gabon, Cameroon, Indonesia, China, the Republic of the Congo and Canada.
The Groups consolidated Exploration & Production subsidiaries development investments amounted to 8 billion in 2010, primarily in Angola, Nigeria, Kazakhstan, Norway, Indonesia, the Republic of the Congo, the United Kingdom, the United States, Canada, Thailand, Gabon and Australia. The Groups consolidated Exploration & Production subsidiaries development investments amounted to nearly 8 billion in 2009, primarily in Angola, Nigeria, Norway, Kazakhstan, Indonesia, the Republic of the Congo, the United Kingdom, the United States, Gabon, Canada, Thailand, Russia and Qatar. In 2008, development investments amounted to 7 billion, predominantly in Angola, Nigeria, Norway, Kazakhstan, Indonesia, the Republic of the Congo, the United Kingdom, Gabon, Canada, the United States, and Qatar.
The definitions used for proved, proved developed and proved undeveloped oil and gas reserves are in accordance with the United States Securities & Exchange Commission (SEC) Rule 4-10 of Regulation S-X as amended by the SEC Modernization of Oil and Gas Reporting release issued on December 31, 2008. Proved reserves are estimated using geological and engineering data to determine with reasonable certainty whether the crude oil or natural gas in known reservoirs is recoverable under existing regulatory, economic and operating conditions.
TOTALs oil and gas reserves are consolidated annually, taking into account, among other factors, levels of production, field reassessment, additional reserves from discoveries and acquisitions, disposal of reserves and other economic factors. Unless otherwise indicated, any reference to TOTALs proved reserves, proved developed reserves, proved undeveloped reserves and production reflects the Groups entire share of such reserves or such production. TOTALs worldwide proved reserves include the proved reserves of its consolidated subsidiaries as well as its proportionate share of the proved reserves of equity affiliates and of two companies accounted for under the cost method. For further information concerning changes in TOTALs proved reserves for the years ended December 31, 2010, 2009 and 2008, see Supplemental Oil and Gas Information (Unaudited).
The reserves estimation process involves making subjective judgments. Consequently, estimates of reserves are not exact measurements and are subject to revision under well-established control procedures.
The reserves booking process requires, among other things:
For further information regarding the preparation of reserves estimates, see Supplemental Oil and Gas Information (Unaudited).
In accordance with the amended Rule 4-10 of Regulation S-X, proved reserves for the years ended on or after December 31, 2009, are calculated using a 12-month average price determined as the unweighted arithmetic average of the first-day-of-the-month price for each month of the relevant year unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. The reference prices for 2010 and 2009 were respectively $79.02/b and $59.91/b for Brent crude. The proved reserves for the year ended December 31, 2008 were calculated using December 31 price ($36.55/b).
As of December 31, 2010, TOTALs combined proved reserves of oil and gas were 10,695 Mboe (53% of which were proved developed reserves). Liquids (crude oil, natural gas liquids and bitumen) represented approximately 56% of these reserves and natural gas the remaining 44%. These reserves were located in Europe (mainly in Norway and the United Kingdom), in Africa (mainly in Angola, Gabon, Libya, Nigeria and the Republic of the Congo), in the Americas (mainly in Canada, the United States, Argentina, and Venezuela), in the Middle East (mainly in Qatar, the United Arab Emirates, and Yemen), and in Asia (mainly in Indonesia and Kazakhstan).
As of December 31, 2009, TOTALs combined proved reserves of oil and gas were 10,483 Mboe (56% of which were proved developed reserves). Liquids (crude oil, natural gas liquids and bitumen) represented approximately 54% of these reserves and natural gas the
remaining 46%. These reserves were located in Europe (mainly in Norway and the United Kingdom), in Africa (mainly in Angola, Gabon, Libya, Nigeria and the Republic of the Congo), in the Americas (mainly in Canada, the United States, Argentina, and Venezuela), in the Middle East (mainly in Oman, Qatar, the United Arab Emirates, and Yemen), and in Asia (mainly in Indonesia and Kazakhstan).
As of December 31, 2008, TOTALs combined proved reserves of oil and gas were 10,458 Mboe (50% of which were proved developed reserves). Liquids represented approximately 54% of these reserves and natural gas the remaining 46%. These reserves were located in Europe (mainly in Norway and the United Kingdom), in Africa (mainly in Algeria, Angola, Gabon, Libya, Nigeria and the Republic of the Congo), in the Americas (mainly in Canada, Bolivia, Argentina, and Venezuela), in the Middle East (mainly in Oman, Qatar, the United Arab Emirates, and Yemen), and in Asia (mainly in Indonesia and Kazakhstan).
Changes in the price used as a reference for the proved reserves estimation result in non-proportionate inverse changes in proved reserves associated with production sharing and risked service contracts (which together represent approximately 30% of TOTALs reserves as of December 31, 2010). Under such contracts, TOTAL is entitled to a portion of the production, the sale of which is meant to cover expenses incurred by the Group. As oil prices increase, fewer barrels are necessary to cover the same amount of expenses. Moreover, the number of barrels retrievable under these contracts may vary according to criteria such as cumulative production, the rate of return on investment or the income-cumulative expenses ratio. This decrease is partly offset by an extension of the duration over which fields can be produced economically. However, the increase in reserves due to extended field life resulting from higher prices is generally less than the decrease in reserves under production sharing or risked service contracts due to such higher prices. As a result, higher prices lead to a decrease in TOTALs reserves.
For the full year 2010, average daily oil and gas production was 2,378 kboe/d compared to 2,281 kboe/d in 2009.
Liquids accounted for approximately 56% and natural gas accounted for approximately 44% of TOTALs combined liquids and natural gas production in 2010.
The table on the next page sets forth by geographic area TOTALs average daily production of liquids and natural gas for each of the last three years.
Consistent with industry practice, TOTAL often holds a percentage interest in its fields rather than a 100% interest, with the balance being held by joint venture partners (which may include other international oil companies, state-owned oil companies or government entities). TOTAL frequently acts as operator (the party responsible for technical production) on acreage in which it holds an interest. See the table Presentation of production activities by geographic area on the following pages for a description of TOTALs producing assets.
As in 2009 and 2008, substantially all of the liquids production from TOTALs Upstream segment in 2010 was marketed by the Trading & Shipping division of TOTALs Downstream segment. See the table Business Overview Trading & Shipping Supply and sales of crude oil.
The majority of TOTALs natural gas production is sold under long-term contracts. However, its North American production, and to some extent its production from the United Kingdom, Norway and Argentina, is sold on the spot market. The long-term contracts under which TOTAL sells its natural gas usually provide for a price related to, among other factors, average crude oil and other petroleum product prices, as well as, in some cases, a cost-of-living index. Though the price of natural gas tends to fluctuate in line with crude oil prices, a slight delay may occur before changes in crude oil prices are reflected in long-term natural gas prices. Due to the interaction between the contract price of natural gas and crude oil prices, contract prices are not usually affected by short-term market fluctuations in the spot price of natural gas. Some of TOTALs long-term contracts, notably in Argentina, Indonesia, Nigeria, Norway and Qatar, specify the delivery of quantities of natural gas that may or may not be fixed and determinable. Such delivery commitments vary substantially, both in duration and in scope, from contract to contract throughout the world. For example, in some cases, contracts require delivery of natural gas on an as-needed basis, and, in other cases, contracts call for the delivery of varied amounts of natural gas over different periods of time. Nevertheless, TOTAL estimates the fixed and determinable quantity of gas to be delivered over the period 2011-2013 to be 3,665 Bcf. The Group expects to satisfy most of these obligations through the production of its proved reserves of natural gas, with, if needed, additional sourcing from spot market purchases. See Supplemental Oil and Gas Information (Unaudited).
PRODUCTION BY GEOGRAPHIC AREA
The table below sets forth, by country, TOTALs producing assets, the year in which TOTALs activities started, the Groups interest in each asset and whether TOTAL is operator of the asset.
In 2010, TOTALs production in Africa was 756 kboe/d, representing 32% of the Groups overall production, compared to 749 kboe/d in 2009 and 783 kboe/d in 2008.
In Algeria, TOTALs production amounted to 41 kboe/d in 2010, compared to 74 kboe/d in 2009 and 79 kboe/d in 2008. This decline is mainly due to the termination of the Hamra contract in October 2009. The Groups production came from its direct interest in the TFT field (Tin Fouyé Tabenkort, 35%) and from its 48.83% interest in CEPSA(1), a partner of Sonatrach (the Algerian national oil and gas company) on the Ourhoud and Rhourde El Krouf fields. TOTAL also holds a direct 37.75% interest in the Timimoun gas project alongside Sonatrach (51%) and CEPSA (11.25%) as well as a 47% interest in the Ahnet gas project alongside Sonatrach (51%) and Partex (2%).
In Angola, the Groups production was 163 kboe/d in 2010, compared to 191 kboe/d in 2009 and 205 kboe/d in 2008. Production comes mainly from Blocks 17, 0 and 14. Highlights of the period 2008 to 2010 included several discoveries on Blocks 15/06 and 17/06, and progress on the major Pazflor and CLOV projects.
On the Girassol pole, production from the Girassol, Jasmim and Rosa fields was more than 190 kb/d in 2010.
On the Dalia pole, production was more than 240 kb/d in 2010.
On the third pole, Pazflor, comprised of the Perpetua, Zinia, Hortensia and Acacia fields, production is scheduled to begin in late 2011. This project provides for the installation of an FPSO with a production capacity of 220 kb/d.
The development of CLOV, the fourth pole, was launched in 2010 with the award of the main contracts. This development will result in the installation of a fourth FPSO with a production capacity of 160 kb/d. Start-up of production is expected in 2014.
TOTAL also has operations on exploration Blocks 33 (55%, operator) and 17/06 (30%, operator).
At year-end 2010, TOTAL sold its 5% interest in Block 31.
TOTAL is also developing in LNG through the Angola LNG project (13.6%) with the construction of a gas liquefaction plant near Soyo. The plant will be supplied in particular by the gas associated with production from Blocks 0, 14, 15, 17 and 18. Construction work is ongoing and start-up is expected in 2012.
In Cameroon, the Groups production was 9 kboe/d in 2010, compared to 12 kboe/d in 2009 and 14 kboe/d in 2008.
In November 2010, TOTAL finalized an agreement in principle with Perenco to sell the Groups 75.8% interest in its Exploration & Production subsidiary in Cameroon. The agreement is subject to the approval by the Cameroonian authorities.
In Côte dIvoire, TOTAL signed in October 2010 an agreement to acquire a 60% interest (operator) in the CI-100 exploration license. The transaction has been approved by the relevant authorities. The 2,000 km2 license is located approximately 100 km southeast of Abidjan in water depths ranging from 1,500 to 3,100 meters. Exploration work will include a new 1,000 km2 3D seismic survey, which will complete coverage of the block, and a first well is expected to be drilled in 2012.
(1) In February 2011, TOTAL signed an agreement to dispose of its 48.83% interest in CEPSA. The transaction is conditioned on obtaining all requisite approvals.
In Egypt, TOTAL signed a concession agreement in February 2010 and became operator of Block 4 (El Burullus offshore Est) with an interest of 90%. The license, located in the Nile Basin where a number of gas discoveries have been made, covers a 4-year initial exploration period and includes a commitment to carrying out 3D seismic work and drilling exploration wells. The seismic campaign started in November 2010 and ended in February 2011.
In Gabon, the Groups share of production was 67 kboe/d in 2010, compared to 71 kboe/d in 2009 and 76 kboe/d in 2008, due to the natural decline of fields. Total Gabon(1) is one of the Groups oldest subsidiaries in sub-Saharan Africa.
In Libya, the Groups production was 55 kb/d in 2010, compared to 60 kb/d in 2009 and 74 kb/d in 2008. Declining production was primarily due to the implementation of OPEC quotas and new contractual provisions for Blocks C 17 (75%)(2), C 137 (75%)(2), NC 115 (30%)(2) and NC 186 (24%)(2) on which TOTAL is a partner. The EPSA IV agreements (exploration and production sharing agreements) on Blocks C 137 and C 17 were ratified by the Libyan government in January 2010 and now extend to 2032.
Having regard to the security context in Libya in the first quarter of 2011, the Groups production in Libya has been significantly reduced since early March. Furthermore, the Group is reviewing the impacts on its operations and the measures to be taken for the projects mentioned below.
In Madagascar, TOTAL acquired in 2008 a 60% interest in the Bemolanga permit (operator), which contains oil sand accumulations. A first appraisal phase was launched to confirm the bitumen resources needed for a mining development. Drilling operations were carried out in two phases during the dry season between July and November 2009 and between April and July 2010.
In Mauritania, TOTAL has exploration operations on the Ta7 and Ta8 licenses (60%, operator), located in the Taoudenni Basin alongside Sonatrach (20%) and Qatar Petroleum International (20%).
In Nigeria, the Groups production amounted to 301 kboe/d in 2010, compared to 235 kboe/d in 2009 and 246 kboe/d in 2008. This increase is due in particular to improved security conditions in the Niger Delta. TOTAL has been present in Nigeria since 1962. It operates seven production licenses (OML) out of the forty-four in which it holds an interest, and two exploration licenses (OPL) out of the eight in which it holds an interest. The Group is also active in LNG through Nigeria LNG and the Brass LNG project. In 2010, TOTAL acquired a 45.9% interest in Block 1 in the Joint Development Zone governed by Nigeria and São Tomé and Príncipe and was awarded operatorship in this block.
(1) Total Gabon is a Gabonese company whose shares are listed on Euronext Paris. TOTAL holds 58%, the Republic of Gabon holds 25% and the public float is 17%.
(2) Interest held in the foreign consortium.
Improved security conditions in the Niger Delta region resulted in a substantial increase in the production operated by the Shell Petroleum Development Company (SPDC) joint venture, in which TOTAL owns 10%. The Soku processing plant resumed operations in 2009 and the Gbaran-Ubie development project was completed in 2010 with the commissioning of the 1 Bcf/d production facility.
In 2010, TOTAL disposed of the interests it held (10%) through the operated SPDC joint venture in the
OML 4, 38 and 41 licenses.
In the Republic of the Congo, the Groups share of production was 120 kboe/d in 2010, compared to 106 kboe/d in 2009 and 89 kboe/d in 2008.
In Sudan, the Group holds interests in an exploration license in the southern part of the country, although no activity is currently underway in this country. For additional information on TOTALs operations in Sudan, see Other Matters Business Activities In Cuba, Iran, Sudan and Syria.
In 2010, TOTALs production in North America was 65 kboe/d, representing 3% of the Groups overall production, compared to 24 kboe/d in 2009 and 14 kboe/d in 2008.
In Canada, TOTAL signed in December 2010 a strategic partnership with Suncor related to the Fort Hills and Joslyn mining projects and the Voyageur upgrader. This partnership allows TOTAL to reorganize around two major poles the different oil sands assets that it has acquired over the last few years: a mining and upgrading pole, which includes the TOTAL-operated Joslyn (38.25%) and Suncor-
operated Fort Hills (39.2%) mining projects as well as the Suncor-operated Voyageur upgrader (49%), and a SAGD(1) pole focused on Surmonts (50%) ongoing development. The Group also holds a 50% interest in the Northern Lights (operator) mining project and 100% of a number of leases (Oil Sand Leases) acquired through several auction sales. The Groups 2010 production amounted to 10 kb/d, compared to 8 kb/d in 2009 and 2008.
In the United States, the Groups 2010 production amounted to 55 kboe/d, compared to 16 kboe/d in 2009 and 6 kboe/d in 2008. This increase is due in particular to the acquisition of an interest in the Barnett Shale Basin at year-end 2009.
(1) Steam Assisted Gravity Drainage.
In Mexico, TOTAL is conducting various studies in cooperation with state-owned PEMEX under a technical cooperation agreement signed in 2003 which is in the process of being renewed.
In 2010, TOTALs production in South America was 179 kboe/d, representing 8% of the Groups overall production, compared to 182 kboe/d in 2009 and 224 kboe/d in 2008.
In Argentina, where TOTAL has been present since 1978, the Group operates a quarter of the countrys gas production(1). The Groups production was 83 kboe/d in 2010, compared to 80 kboe/d in 2009 and 81 kboe/d in 2008.
In early 2011, TOTAL acquired interests in four licenses located in the Neuquén basin in order to assess their shale gas potential. The Group acquired 42.5% interests in and the operatorship of the Aguada de Castro and Pampa las Yeguas II licenses, a 40% interest in the Cerro Las Minas license and a 45% interest in the Cerro Partido license.
In Bolivia, the Groups share of production, primarily gas, amounted to 20 kboe/d in 2010, stable compared to 2009, compared to 22 kboe/d in 2008. TOTAL holds interests in six licenses: three producing licenses San Alberto and San Antonio (15%) and Block XX Tarija Oeste (41%); and three licenses in the exploration or appraisal phase Aquio and Ipati (60%, operator) and Rio Hondo (50%).
(1) Source: Argentinean Ministry of Federal Planning, Public Investment and Services Energy Secretary.
In 2008, TOTAL entered into a cooperation agreement with Gazprom and Yacimientos Petrolíferos Fiscales Bolivianos to explore the Azero Block as part of a joint venture company. TOTAL and Gazprom will be partners with equal interests in this joint venture company.
In Brazil, TOTAL holds interests in three exploration blocks: Blocks BC-2 (41.2%) and BM-C-14 (50%) in the Campos Basin, and Block BM-S-54 (20%) in the Santos Basin.
In Colombia, where TOTAL has been present since 1973, the Groups production was 18 kboe/d in 2010, compared to 23 kboe/d in 2009 and 2008. Following the termination of the Santiago de Los Andes license, TOTAL relinquished the Cupiagua field, and its interest in the joint venture that owns the two remaining licenses (that cover the Cusiana field) decreased to 11.6% from 19%. TOTAL also has a 50% interest in the Niscota exploration license. TOTAL is also active in the country through its interest in CEPSA(1), which has operated the Caracara Block since 2008.
In French Guiana, TOTAL acquired a 25% interest in the Guyane Maritime license in December 2009. The acquisition is subject to approval by the French authorities. The license, located about 150 km off the coast, covers an area of approximately 32,000 km2 in water depths ranging from 2,000 to 3,000 meters. 3D seismic acquisition and interpretation work were carried out in 2009 and 2010. Drilling of an exploration well is expected in 2011.
In Trinidad & Tobago, where TOTAL has been present since 1996, the Groups production was 3 kb/d in 2010, compared to 5 kb/d in 2009 and 6 kb/d in 2008. TOTAL holds a 30% interest in the offshore Angostura field located on Block 2C. A second phase, for the development of gas reserves, is underway, with production expected to begin in the second quarter of 2011.
In Venezuela, where TOTAL has been present since 1980, the Groups production was 55 kboe/d in 2010, compared to 54 kboe/d in 2009 and 92 kboe/d in 2008. TOTAL holds interests in PetroCedeño (30.323%), Yucal Placer (69.5%) and in the offshore exploration Block 4, located in the Plataforma Deltana (49%).
In 2010, TOTALs production in the Asia-Pacific region was 248 kboe/d, representing 10% of the Groups overall production, compared to 251 kboe/d in 2009 and 246 kboe/d in 2008.
In Australia, where TOTAL has held leasehold rights since 2005, the Group owns 24% of the Ichthys project, 27.5% of the GLNG project and ten offshore exploration licenses,
(1) In February 2011, TOTAL signed an agreement to dispose of its 48.83% interest in CEPSA. The transaction is conditioned on obtaining all requisite approvals.
including four that it operates, off the northwest coast in the Browse, Vulcan and Bonaparte Basins. In 2010, the Group produced 1 kboe/d due to its interest in GLNG.
In Brunei, where TOTAL has been present since 1986, the Group operates the offshore Maharaja Lela Jamalulalam gas and condensates field located on Block B (37.5%). The Groups production was 14 kboe/d in 2010, compared to 12 kboe/d in 2009 and 14 kboe/d in 2008. The gas is delivered to the Brunei LNG liquefaction plant.
On Block B, a new drilling campaign started in July 2009 that includes a development well, which started production in April 2010, and two exploration wells drilled in 2010 in the southern portion of the field that discovered oil and gas. Development studies for these new reserves are underway.
On deep-offshore exploration Block CA1 (54%, operator), formerly Block J, exploration operations that had been suspended since May 2003 due to a border dispute between Brunei and Malaysia resumed in September 2010. Both countries reached a border agreement in 2009 that led to adapting the production sharing agreement signed in 2003, resulting in two new partners selected by the government of Malaysia farming into the exploration block. TOTALs share decreased to 54% from 60% and TOTAL remains the operator. A drilling campaign involving several wells is expected to start in the second half of 2011.
In China, the Group is present on the South Sulige Block, located in the Ordos Basin, in the Inner Mongolia province. Appraisal work was conducted on this block between 2006 and 2008, in particular seismic acquisition, the drilling of four new wells and tests on existing wells. The development plan proposed by TOTAL in January 2010, in partnership with China National Petroleum Corporation (CNPC), was then adjusted to take advantage of the synergies achieved with the development of CNPC-operated Great Sulige. It was adopted in November 2010 by both partners and the approval process with the authorities is ongoing.
Both partners agreed that TOTALs share in cofinancing the development would be 49% and CNPCs share would be 51% (operator). The development will be operated by CNPC where a number of specialists from TOTAL will be assigned.
In Indonesia, TOTAL has been present since 1968 with production of 178 kboe/d in 2010, compared to 190 kboe/d in 2009 and 177 kboe/d in 2008.
TOTALs operations in Indonesia are primarily concentrated on the Mahakam permit (50%, operator), which covers several gas fields, including Peciko and Tunu. TOTAL also holds an interest in the Sisi-Nubi gas field (47.9%, operator). TOTAL delivers most of its natural gas production to the Bontang LNG plant operated by the Indonesian company PT Badak. The overall capacity of the eight liquefaction trains of the Bontang plant is 22 Mt/y.
In 2010, gas production operated by TOTAL amounted to 2,488 Mcf/d. The gas operated and delivered by TOTAL accounted for nearly 80% of Bontang LNGs supply. In addition to gas production, operated condensates and oil production from the Handil and Bekapai fields amounted to 49 kb/d and 23 kb/d, respectively.
In October 2010, the Group signed an agreement with the consortium Nusantara Regas (Pertamina-PGN) for the delivery of 11.75 Mt of LNG over the period 2012-2022 to a re-gasification terminal located near Jakarta.
The Heads of Agreement that TOTAL, Inpex and state-owned Pertamina signed in 2009 with a consortium of LNG buyers in Japan (Western Buyers) came into effect in March 2010. As part of this agreement, the Bontang LNG plant is expected to deliver 25 Mt of LNG to Japan for the period 2011-2020. The gas supplied will come from the Mahakam permit.
In Malaysia, TOTAL signed a production sharing contract in 2008 with state-owned Petronas for the offshore exploration Blocks PM303, which TOTAL relinquished in early 2011, and PM324 (70%, operator).
A drilling campaign in high pressure/high temperature conditions is expected to be launched in the second half of 2011 on Block PM324.
TOTAL also signed in November 2010 a new production and sharing agreement with Petronas for the deep offshore exploration Block SK 317 B (85%, operator) located off the state of Sarawak.
In Myanmar, TOTAL operates the Yadana field (31.2%). Located on offshore Blocks M5 and M6, this field produces gas that is delivered mainly to PTT (the Thai state-owned company) to be used in Thai power plants. The Yadana field also supplies the domestic market via a land pipeline and, since June 2010, via a sub-sea pipeline built and operated by Myanmars state-owned company MOGE.
The Groups production was 14 kboe/d in 2010, compared to 13 kboe/d in 2009 and 14 kboe/d in 2008.
In Thailand, the Groups production was 41 kboe/d in 2010, compared to 36 kboe/d in 2009 and 41 kboe/d in 2008. The rise in production in 2010 is the result of sustained gas demand, driven by economic growth in the country. The Groups main asset is the offshore Bongkot gas and condensates field (33.3%). PTT purchases all of the natural gas and condensates production.
In 2009, three successful exploration wells were drilled on Bongkot that are expected to be developed subsequently to maintain plateau production. In 2010, an exploration well was drilled on Bongkot North and a second well was drilled on Block G12-48 (33.3%), which neighbors the
Bongkot field. The positive results from both wells are under interpretation.
In Vietnam, TOTAL holds a 35% interest in the production sharing contract for the offshore 15-1/05 exploration block following an agreement signed in 2007 with PetroVietnam. A 1,600 km2 3D seismic survey was shot in the summer of 2008 on this block. Two oil discoveries were made on the southern portion of the block, one in November 2009 and the other in October 2010. A new drilling campaign that involves five wells started in November 2010.
In 2009, TOTAL and PetroVietnam signed a production sharing agreement for Blocks DBSCL-02 and DBSCL-03. The onshore blocks, located in the Mekong Delta region, are held by TOTAL (75%, operator) and PetroVietnam (25%). A first 2D seismic survey was shot between November 2009 and April 2010.
In 2010, TOTALs production in the CIS was 23 kboe/d, representing 1% of the Groups overall production, compared to 24 kboe/d in 2009 and 26 kboe/d in 2008.
In Azerbaijan, TOTAL has been present since 1996 with production of 13 kboe/d in 2010, compared to 12 kboe/d in 2009 and 18 kboe/d in 2008. The Groups production is focused on the Shah Deniz field (10%). TOTAL holds a 10% interest in South Caucasus Pipeline Company, owner of the SCP (South Caucasus Pipeline) gas pipeline that transports the gas produced in Shah Deniz to the Turkish and Georgian markets. TOTAL also holds a 5% interest in BTC Co., owner of the BTC (Baku-Tbilisi-Ceyhan) oil pipeline, which connects Baku and the Mediterranean Sea.
In 2009, TOTAL and SOCAR signed an exploration, development and production sharing agreement for a license located on the Absheron block in the Caspian Sea. TOTAL (40%) is the operator during the exploration phase and a joint operating company will manage operations during the development phase. Drilling of an exploratory well started in early 2011.
In Kazakhstan, TOTAL has held since 1992 an interest in the North Caspian license that covers notably the Kashagan field where the substantial reserves may eventually allow production to reach more than 1 Mb/d (in 100%).
The Kashagan project is expected to be developed in several phases. The development plan for the first phase (300 kb/d) was approved in February 2004 by the Kazakh authorities, allowing work to begin on the field. Drilling of development wells, which began in 2004, continued in 2010. The consortium continues to target first commercial production by year-end 2012.
In October 2008, the members of the North Caspian Sea Production Sharing Agreement (NCSPSA) consortium and the Kazakh authorities signed agreements to end the disagreement that began in August 2007. Their implementation led to a reduction of TOTALs share in NCSPSA from 18.52% to 16.81%. The operating structure was reconfigured and the North Caspian Operating Company (NCOC), a joint operating company, was entrusted with the operatorship in January 2009. NCOC supervises and coordinates NCSPSAs operations.
In Russia, where TOTAL has been present since 1989, the Groups production was 10 kboe/d in 2010, compared to 12 kboe/d in 2009 and 8 kboe/d in 2008. Production comes mainly from the Kharyaga field (40%, operator).
In 2010, TOTALs production in Europe was 580 kboe/d, representing 24% of the Groups overall production, compared to 613 kboe/d in 2009 and 616 kboe/d in 2008.
In Denmark, TOTAL was awarded in June 2010 an 80% interest in and the operatorship for licenses 1/10 (Nordjylland) and 2/10 (Frederoskilde), following the approval by the Danish Energy Agency. These onshore licenses cover areas of 3,000 km2 and 2,300 km2, respectively, and are expected to be appraised for shale gas.
In France, the Groups production was 21 kboe/d in 2010, compared to 24 kboe/d in 2009 and 25 kboe/d in 2008. TOTALs major assets are the Lacq (100%) and Meillon (100%) gas fields, located in the southwest part of the country.
On the Lacq field, operated since 1957, a carbon capture and storage pilot was commissioned in January 2010. In connection with this project, a boiler has been modified to operate in an oxy-fuel combustion environment and the carbon dioxide emitted is captured and re-injected in the depleted Rousse field. As part of the Groups sustainable development policy, this project will allow the Group to assess one of the technological possibilities for reducing carbon dioxide emissions.
In 2010, TOTAL was awarded the Montélimar (100%) license to assess the shale gas potential of the area once authorizations to operate are given.
In Italy, the Tempa Rossa field (50%, operator), discovered in 1989 and located on the unitized Gorgoglione concession (Basilicate region), is one of TOTALs principal assets in the country.
Site preparation work started in early August 2008, but the proceedings initiated by the Prosecutor of the Potenza Court against Total Italia led to a freeze in the preparation work. New calls for tenders have been launched related to certain contracts that had been cancelled. Drilling of the Gorgoglione 2 appraisal well that started in May 2010 is ongoing. The partners on Tempa Rossa are expected to make the final investment decision in 2011 for this project that has an expected capacity of 55 kboe/d. The extension plan for the Tarente refinery export system, needed for the development of the Tempa Rossa field, was submitted to the Italian authorities in May 2010 for an approval expected in 2011. Start-up of production is currently expected in 2015.
In Norway, where the Group has been present since the mid-1960s, TOTAL holds interests in seventy-eight production licenses on the Norwegian continental shelf, fifteen of which it operates. Norway is the largest single-country contributor to the Groups production, with volumes of 310 kboe/d in 2010, compared to 327 kboe/d in 2009 and 334 kboe/d in 2008.
Between 2008 and 2010, exploration and appraisal work was carried out on various licenses. In the Norwegian North Sea, the oil discovery on Dagny (PL 048, 21.8%) and the Pan/Pandora (PL 120, 11%) discovery, made in 2008, substantially increased the potential of the Sleipner and Visund areas, respectively. Pan/Pandora is to be developed as a fast track satellite. The development project is expected to be launched in 2011 after receipt of approval from the Norwegian authorities. The Dagny project is scheduled for approval in 2012.
A number of discoveries were made in 2009, in particular on Beta Vest (PL 046, 10%) near Sleipner, Katla (PL 104, 10%), located south of Oseberg, and Vigdis North East (PL 089, 5.6%), located south of Snorre. Katla and Vigdis North East are expected to be developed as fast track satellites, with the approval of the projects by the partners on both licenses planned for the first half of 2011. In the Central North Sea, TOTAL (40% operator) made a gas and condensate discovery in 2010 on the David structure (PL 102C -Heimdal area). The structure could be developed through a tie-back to Heimdal via Skirne-Byggve. In the Barents Sea, TOTAL was awarded in 2009 a new exploration license PL 535 (40%) during the twentieth licensing round. On this license, a 3D seismic acquisition was completed in 2009 and drilling is expected to begin in 2011. In 2011, TOTAL was awarded four new exploration licenses, including one for which TOTAL is operator, during the 2010 APA (Awards in Predefined Areas).
In the Netherlands, TOTAL has been active in natural gas exploration and production since 1964 and currently holds twenty-four offshore production permits, including twenty that it operates, and an offshore exploration permit, E17c (16.92%) awarded in 2008. In 2010, the Groups share of production amounted to 42 kboe/d, compared to 45 kboe/d in 2009 and 44 kboe/d in 2008. In 2008, TOTAL acquired Goal Petroleum (Netherlands) B.V.
In late 2010, TOTAL disposed of 18.19% of its shares in the NOGAT gas pipeline and decreased its interest to 5%.
In the United Kingdom, TOTAL has been present since 1962 with production in 2010 of 207 kboe/d, compared to 217 kboe/d in 2009 and 213 kboe/d in 2008. 86% of this production comes from operated fields located in two major zones: the Alwyn zone in the northern North Sea, and the Elgin/Franklin zone in the Central Graben.
The Jura field (100%), discovered in late 2006, started production in May 2008 through two sub-sea wells connected to the oil pipeline linking Forvie North and Alwyn. The production capacity of this field is 50 kboe/d (gas and condensates).
Development studies were completed on Islay (100%), a second gas and condensates discovery made in 2008 and located in a faulted panel immediately east of Jura, and the development was approved in July 2010. Start-up of production is expected in the second half of 2011 with a production capacity of 15 kboe/d.
In late 2008, TOTAL increased its interest in the Otter field from 54.3% to 81%. An agreement to dispose of this interest was reached in 2010 and is expected to be completed under two phases between 2011 and 2012.
The development of the Elgin (35.8%) and Franklin fields (35.8%), in production since 2001, contributed substantially to the Groups operations in the United Kingdom. On the Elgin field, the infill well drilled between November 2008 and September 2009 came onstream in October 2009 with production of 18 kboe/d. Drilling of a second infill well was completed in 2010 with production of 12 kboe/d starting up in May. Drilling of such a well in a high pressure/high temperature highly depleted field is a significant technical milestone.
Additional development of West Franklin through a second phase (drilling of three additional wells and installation of a new platform connected to Elgin) was approved in November 2010. This phase is expected to result in the development of approximately 85 Mboe in 100%. Start-up of production is expected at year-end 2013.
As part of an agreement signed in 2005, TOTAL acquired a 25% interest in two blocks located near Elgin and Franklin by drilling an appraisal well on the Kessog structure. This interest was increased to 50% in 2009.
In 2010, the Groups interest in the P967 license (operator), which includes the Tobermory gas discovery, increased to 50% from 43.75%. This license is located north of Laggan/Tormore.
In early 2011, a gas and condensate discovery was made on the Edradour license (75%, operator).
TOTAL holds interests in ten assets operated by third parties, the most important in terms of reserves being the Bruce (43.25%) and Alba (12.65%) fields. The Group disposed of its interest in the Nelson field (11.5%) in 2010.
In 2010, TOTALs production in the Middle East was 527 kboe/d, representing 22% of the Groups overall production, compared to 438 kboe/d in 2009 and 432 kboe/d in 2008.
In the United Arab Emirates, where TOTAL has been present since 1939, the Groups production in 2010 was 222 kboe/d, compared to 214 kboe/d in 2009 and 243 kboe/d in 2008. The changes that have been recorded since 2008 are mainly due to the implementation of OPEC quotas.
In Abu Dhabi, TOTAL holds a 75% interest in the Abu Al Bu Khoosh field (operator), a 9.5% interest in the Abu Dhabi Company for Onshore Oil Operations (ADCO), which operates the five major onshore fields in Abu Dhabi, and a 13.3% interest in Abu Dhabi Marine (ADMA), which operates two offshore fields. TOTAL also has a 15% stake in Abu Dhabi Gas Industries (GASCO), which produces LPG and condensates from the associated gas produced by ADCO, and a 5% stake in Abu Dhabi Gas Liquefaction Company (ADGAS), which produces LNG, LPG and condensates.
In early 2009, TOTAL signed agreements for a 20-year extension of its participation in the GASCO joint venture starting on October 1, 2008.
In early 2011, TOTAL and IPIC, a government-owned entity in Abu Dhabi, signed a Memorandum of Understanding with a view to developing projects of common interest in the upstream oil and gas sectors.
The Group holds a 25% interest in Dolphin Energy Ltd. alongside Mubadala, a company owned by the government of the Abu Dhabi Emirate, to market gas produced in Qatar in particular to the United Arab Emirates.
The Group also holds a 33.3% interest in Ruwais Fertilizer Industries (FERTIL), which produces urea. FERTIL 2, a new project, was launched in 2009 to build a new granulated urea unit with a capacity of 3,500 t/d (1.2 Mt/y). This project
is expected to allow FERTIL to more than double production so as to reach nearly 2 Mt/y in January 2013.
In Iraq, TOTAL bid in 2009 and 2010 on the three calls for tenders launched by the Iraqi Ministry of Oil. The PetroChina-led consortium that includes TOTAL (18.75%) was awarded the development and production contract for the Halfaya field during the second call for tenders held in December 2009. This field is located in the province of Missan, north of Basra. The agreement became effective in March 2010 and the preliminary development plan was approved by the Iraqi authorities in late September 2010. Development operations have started. It plans for first production of nearly 70 kb/d of oil in 2012.
In Iran, the Groups production, under buyback agreements, amounted to 2 kboe/d in 2010, compared to 8 kboe/d in 2009 and 9 kboe/d in 2008. For additional information on TOTALs operations in Iran, see Other Matters Business Activities In Cuba, Iran, Sudan and Syria.
In Oman, the Groups production in 2010 was 34 kboe/d, stable compared to 2009 and 2008. The Group produces oil on Block 6 mainly and on Block 53 as well as liquefied natural gas through its interests in the Oman LNG (5.54%)/Qalhat LNG (2.04%)(1) liquefaction plant, which has a capacity of 10.5 Mt/y.
In Qatar, TOTAL has been present since 1936 and holds interests in the Al Khalij field (100%), the NFB Block (20%) in the North field, the Qatargas 1 liquefaction plant (10%), Dolphin (24.5%) and train 5 of Qatargas 2 (16.7%). The Groups production was 164 kboe/d in 2010, compared to 141 kboe/d in 2009 and 121 kboe/d in 2008. Production substantially increased with the start-up of Qatargas 2.
The Group also holds a 10% interest in Laffan Refinery, a 146 kb/d condensate splitter that started up in September 2009.
In Syria, TOTAL is present on the Deir Ez Zor license (100%, operated by DEZPC, 50% of which is owned by TOTAL) and through the Tabiyeh contract that became effective in October 2009. The Groups production for both assets was 39 kboe/d in 2010, compared to 20 kboe/d in 2009 and 15 kboe/d in 2008.
Three agreements were ratified:
For additional information on TOTALs operations in Syria, Other Matters Business Activities In Cuba, Iran, Sudan and Syria.
In Yemen, TOTAL has been present since 1987 with production of 66 kboe/d in 2010, compared to 21 kboe/d in 2009 and 10 kboe/d in 2008.
TOTAL has an interest in the Yemen LNG project (39.62%). As part of this project, the liquefaction plant built in Balhaf on the southern coast of Yemen is supplied with the gas produced on Block 18, located near Marib in the center of the country, through a 320 km gas pipeline. The two liquefaction trains were commissioned in October 2009 and April 2010. Overall production capacity from both trains is 6.7 Mt/y of LNG.
TOTAL also has interests in the countrys two oil basins, as the operator on Block 10 (Masila Basin, East Shabwa license, 28.57%) and as a partner on Block 5 (Marib Basin, Jannah license, 15%).
In 2010, TOTAL consolidated positions in onshore exploration through the acquisition of a 36% interest in Block 72 and by increasing its interest to 50.1% from 30.9% in Block 70. TOTAL also acquired 40% interests in Blocks 69 and 71 in 2007. Appraisal of gas discoveries on Block 71 is underway. The first well drilled on Block 70 discovered positive oil shows. The potential of this discovery has yet to be assessed.
(1) Indirect interest through the 36.8% share in Qalhat LNG owned by Oman LNG.
OIL AND GAS ACREAGE
NUMBER OF PRODUCTIVE WELLS
NUMBER OF NET OIL AND GAS WELLS DRILLED ANNUALLY
DRILLING AND PRODUCTION ACTIVITIES IN PROGRESS
INTERESTS IN PIPELINES
The table below sets forth TOTALs interests in oil and gas pipelines as of December 31, 2010.
The Gas & Power division is primarily focused on the optimization of the Groups gas resources. The division is active in transport, trading, marketing of natural gas and liquefied natural gas (LNG), LNG re-gasification and natural gas storage, liquefied petroleum gas (LPG) shipping and trading, power generation from gas-fired power plants or renewable energies, and coal production, trading and marketing.
The Gas & Power division is also developing new energies that emit less greenhouse gases to complement hydrocarbons so as to meet the increasing global demand for energy. For this purpose, the Group has three main focuses:
In these fields, TOTAL pursues and strengthens R&D in solar energy, gas, coal and biomass conversion processes, energy storage, carbon capture and storage and gas technologies.
A pioneer in the LNG industry, TOTAL today ranks second worldwide among international oil companies(1) and has sound and diversified positions both in the upstream and downstream portions of the LNG chain. LNG development is key to the Groups strategy, with TOTAL strengthening positions in most major production zones and markets.
From its interests in liquefaction plants located in Indonesia, Qatar, the United Arab Emirates, Oman, Nigeria, Norway and, since 2009, Yemen, TOTAL markets LNG mainly in Asia and Continental Europe, as well as in the United Kingdom and North America. In 2010, TOTAL sold 12.3 Mt of LNG, an increase of approximately 40% compared to 2009, due in particular to the start-up of the train 5 of Qatargas 2 and Yemen LNG. The start-up of the Angola LNG plant, which is currently under construction, and the Groups liquefaction projects in Australia, Nigeria and Russia are expected to result in ongoing growth for its sales.
The Gas & Power division is responsible for LNG operations downstream from liquefaction plants(2). It is in charge of LNG marketing to third parties on behalf of the Exploration & Production division, building up of the Groups LNG portfolio for its trading, marketing and transport operations as well as re-gasification terminals.
In Angola, TOTAL is involved in the construction of the Angola LNG liquefaction plant (TOTAL, 13.6%) that includes a 5.2 Mt/y train expected to start-up in 2012. As part of this project, TOTAL signed in 2007 a re-gasified gas purchase agreement for 13.6% of the quantities produced over a 20-year period.
In Nigeria, TOTAL holds a 15% interest in the Nigeria LNG plant (NLNG). The Group signed an LNG purchase agreement for an initial 0.23 Mt/y over a 23-year period starting in 2006, to which an additional 0.94 Mt/y was added when the sixth train came on stream.
TOTAL also holds a 17% interest in the Brass LNG project, which calls for the construction of two liquefaction trains, each with a capacity of 5 Mt/y. In conjunction with this acquisition, TOTAL signed a preliminary agreement with Brass LNG Ltd setting forth the principal terms of an LNG purchase agreement for approximately one-sixth of the plants capacity over a 20-year period. This contract is subject to the final investment decision for the project by Brass LNG.
In Norway, as part of the Snøvhit project, in which the Group holds a 18.4% interest, TOTAL signed in 2004 a purchase agreement for 35 Bcf/y (0.78 Mt/y) of LNG over a 15-year period primarily intended for North America and Europe. Deliveries started in 2007.
In Qatar, TOTAL signed purchase agreements in 2006 for up to 5.2 Mt/y of LNG from train 5 (TOTAL, 16.7%) of Qatargas 2 over a 25-year period. This LNG is expected to be marketed mainly in France, the United Kingdom and North America. LNG production from this train started in September 2009.
In Yemen, TOTAL signed an agreement with Yemen LNG Ltd (TOTAL, 39.62%) in 2005 to purchase 2 Mt/y of LNG over a 20-year period, starting in 2009, which are initially intended for deliveries in the United States and Europe. LNG production from Yemen LNGs first and second trains started in October 2009 and April 2010, respectively.
In 2009 and 2010, part of the volumes that were bought by the Group pursuant to its long-term contracts related to the LNG projects mentioned above were diverted to higher-value markets in Asia.
In China, TOTAL signed in 2008 an LNG sale agreement with China National Offshore Oil Company (CNOOC). This
(1) Based on publicly available information; upstream and downstream portfolios.
(2) The Exploration & Production division is in charge of the Groups natural gas production and liquefaction operations.
agreement, starting in 2010 for a 15-year period, provides for the supply by TOTAL of up to 1 Mt/y of LNG to CNOOC. The gas supplied comes from the Groups global LNG resources.
As part of its LNG transport operations, TOTAL is also the direct charterer of the Arctic Lady, a long-term 145,000 m3 LNG tanker that ships TOTALs share of production from the Snøvhit liquefaction plant in Norway.
The Group also holds a 30% interest in Gaztransport & Technigaz (GTT), which focuses mainly on the design and engineering of membrane cryogenic tanks for LNG tankers. At year-end 2010, 245 active LNG tankers were equipped with membrane tanks built under GTT licenses out of a world tonnage estimated at 367 LNG tankers.(1)
In 2010, TOTAL continued to pursue its strategy of developing its operations downstream from natural gas and liquefied natural gas production in order to optimize access for the Groups current and future production to traditional markets (with long-term contracts) and to markets open to international competition (with short-term contracts and spot sales). In the context of deregulated markets, which allow customers to more freely access suppliers, in turn leading to new marketing arrangements that are more flexible than traditional long-term contracts, TOTAL is developing trading, marketing and logistics businesses to offer its natural gas and LNG production directly to customers.
In parallel, the Group has operations in electricity trading and LPG and coal marketing. Teams of the Gas & Power division are located mainly in London, Houston and Geneva.
Gas and electricity
TOTAL has gas and electricity trading operations in Europe and North America with a view to selling the Groups production and supplying its marketing subsidiaries.
In Europe, TOTAL marketed 1,278 Bcf (36.2 Bm3) of natural gas in 2010, compared to 1,286 Bcf (36.5 Bm3) in 2009 and 1,240 Bcf (35.2 Bm3) in 2008, approximately 14% of which came from the Groups production. In addition, TOTAL marketed 27.1 TWh of electricity in 2010, compared to 35 TWh in 2009 and 38.5 TWh in 2008, which came mainly from external sources.
In North America, TOTAL marketed 1,798 Bcf (51 Bm3) of natural gas in 2010, compared to 1,586 Bcf (45 Bm3) in 2009 and approximately 1,652 Bcf (46.9 Bm3) in 2008, supplied by its own production or external sources.
TOTAL has LNG trading operations through spot sales and fixed-term contracts. Since 2009, new purchase (Qatargas 2, Yemen LNG) an