Total to Proceed With Angola Ultra-Deepwater Project
LONDON — After more than a year’s delay, the French oil company Total said on Monday that it had found the cost savings needed to move ahead with the giant ultra-deepwater Kaombo project off the coast of Angola, setting a start date of 2017.
The Agreement will most likely bolster Total’s leading position in the southwestern African country, which has been one of the world’s hottest exploration targets in recent years. Africa is already Total’s highest-producing region, and Angola was its fifth-largest producer last year, behind Nigeria, the United Arab Emirates, Norway and Russia.
The Agreement will most likely bolster Total’s leading position in the southwestern African country, which has been one of the world’s hottest exploration targets in recent years. Africa is already Total’s highest-producing region, and Angola was its fifth-largest producer last year, behind Nigeria, the United Arab Emirates, Norway and Russia.
Investors have been pushing oil companies to slash soaring costs, which have sharply reduced returns in the industry. The Kaombo project’s estimated price tag, $16 billion, came in at about $4 billion less than earlier projections. The reduction helped lift Total’s stock price by about 2.9 percent in trading in Paris.
Oswald Clint, an analyst at Bernstein Research in London, said in an interview that investors were cheered by Total’s announcement about cost savings, although they remained skeptical about whether the trims could actually be made.
Other companies, including Royal Dutch Shell, are also trying to appease investors through delaying or abandoning expensive projects and stepping up asset sales. Late last year Shell scuttled a plan to build a plant in Louisiana that would convert natural gas to liquid fuels; company estimates said that it could cost as much as $40 billion. Earlier this year the company sold its struggling Australian gas station and refining network to the trading house Vitol for $2.6 billion and said it would not drill in Alaska in 2014.
“The industry is taking some of the fat out of project development costs,” Mr. Clint said.
The Kaombo project, about 160 miles off the coast of Angola, will eventually produce 230,000 barrels a day, Total estimated, amounting to about 13 percent of Angola’s daily production.
It is a highly complex project involving six oil fields, both heavy and light oil, and 59 wells that will need to be connected by about 185 miles of piping underneath as much as 6,200 feet of water.
Total said the reduced costs would come from a reworking of the project. The changes include using two converted supertankers as floating platforms to produce and store oil instead of building storage containers from scratch.
The company also said it would save $1 billion by reducing the amount of construction and other work done in Angola — where there is a sophisticated oil supply industry — by almost half, to a still very large number of 14 million hours of work.
“While continuing our commitment to develop the Angolan oil industry, Total has significantly optimized the project’s design and contracting strategy in recent months,” Yves-Louis Darricarrère, president of Total’s exploration and production unit, said in a statement. Total has a 30 percent stake in Kaombo.
The company is the leading operator in Angola, responsible for almost 600,000 barrels per day — about one-third of Angolan production in 2013. Total has various partners in existing ventures in the country. For Kaombo, its partners include Sonangol, the Angolan national oil company; Exxon Mobil; Sinopec, a Chinese state-owned oil company; and the Portuguese oil company Galp Energia.
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