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Interview

with Roland Festor, Managing Director, Total E&P UK

05.08.2008 / Energyboardroom

Before going into TOTAL E&P UK, what are the main lines of the company’s upstream development on a global level?

Total’s growth is primarily based on its exploration activity, which has been developed over a long period of time around the world. The company’s core areas are the North Sea, West Africa, Southeast Asia and the Middle East, in all of which Total has had exploratory success and is developing large new growth projects which will drive future growth.

More recently, Total has become involved in the heavy oil business in Canada, primarily through acquisitions. The company is providing its expertise and capital in order to develop that business, on the back of the experience acquired in Venezuela in the late 1990s and early 2000.

What does the UK’s oil and gas output represent for Total, and how is the production profile expected to evolve in the coming years?

The UKCS represents 10% of Total’s worldwide production, with approximately 250 000 barrels of oil equivalent per day (boepd). Currently our production in the UKCS is declining, in line with what is happening with many other operators in the area. However, based on recent discoveries, we are looking at a horizon in which there is not only the possibility of stabilizing production, but actually making it rise again.

Which are the main areas in which Total is developing its UK operations?

Total has three main areas of development in the UKCS, all of which we are very proud of. The first to mention would be Alwyn, which came on stream in 1987 with an initial production profile of 10 years. Now we are in 2008, over 10 years beyond that initial estimation, and are actually looking forward to another 20 more years of production from Alwyn, with a good chance of totalling 1.5 or 1.6 billion barrels of oil and gas processed through those facilities.

We recently celebrated Alwyn’s 21st anniversary, knowing today that its story is far from over. The key to this longevity has been Total’s continued success in regularly making new discoveries through its exploration efforts in the area. This has allowed us to extend the life span and production plateau to a degree that nobody could have imagined several years ago.

The second major area for Total in the UKCS is the Elgin/Franklin development. The main achievement there has been in terms of dealing with high pressure / high temperature conditions without equal anywhere else in the world.

Total’s third area of development in the UK is expected to be in the area West of Shetlands. We are looking to launch a new project there, where a considerable amount of gas reserves have already been discovered. Total is already sitting on two gas discoveries there, Laggan and Tormore, which are yet to be developed. They are the biggest gas discoveries in West of Shetlands to date, and Total is the operator. We are hoping to move into the development phase in the near term, in order to be able to bring those fields into production.

Which are the main obstacles companies are facing with regard to taking discoveries in the West of Shetlands to the development phase?

The main challenge in the West of Shetlands is that we would need to build completely new infrastructure allowing us to deliver gas to the market, as none exists in the area today. Our two discoveries are very close to each other and contain enough gas to build a stand-alone project, but they are not big enough to left the construction of a large regional infrastructure development.

West of Shetlands is going to require what we already have in the rest of the North Sea: hub infrastructure which allows several fields and satellites to be connected through pipelines into one export line. This is what has enabled us to continue expanding the life of Alwyn, for example. And for new entrants, the existing infrastructure in the North Sea has made it possible to explore the area and develop smaller fields, which they can easily tie back and take to the market quickly.

What role can the UK government play in terms of helping to find a solution for the infrastructure bottleneck in the West of Shetlands?

The government is very interested in seeing what type of infrastructure is finally developed in the West of Shetlands. On the one hand, they would like to see production come as quickly as possible, but on the other they are also thinking about what is best for the long term. It is not proving easy to find one solution that takes into account these two objectives.

The government is very much involved in the discussions about the West of Shetlands, but if it was to decide to make a contribution to the project itself to enlarge the export system, it would have a big impact. Today there are no prospects of monetizing West of Shetlands discoveries in the short term. Smaller companies have no real incentive today to explore the area even if they know it has good potential, because there is no large pipeline system available today which they could count upon to bring the fields on stream. If companies knew that there would be infrastructure in the area, it would probably bring a great boost to exploration investments.

What is your view on the trend of smaller and independent oil companies taking over assets in the UKCS, and do you feel it is fair to label them as dynamic while the major companies are considered as being rather still?

I consider it to be a positive trend which in the end is good for everybody. The government benefits because ultimately they will get as much oil and gas out of the ground as possible. For the small companies, they are taking over assets that may no longer be interesting for majors, but can make a huge difference to them. As for the majors in all of this, it is good to know that life will go on in the fields once we have decided to move on. It is like a story in which everyone benefits.

That said, it is not right to consider that the only dynamic companies are the small independents. Having worked in several subsidiaries around the world, I can say that Total E&P UK, after 40 years, remains very dynamic. There is a great atmosphere and a desire to stop the decline and get production growing again. We have had incredible success in exploration, with our last five wells drilled turning into discoveries. There is still a lot of potential in the UKCS, even for the major oil companies.

The new entrants and independents in the North Sea are very active and working very well, but they do not have the capacity to go to an area like West of Shetlands today, where the conditions are very difficult. Only a massive investment in infrastructure, of which they are not capable, would make it possible to open up the opportunities there. Somebody has to start at some point, even if it is not the ideal type of infrastructure the government would like. At least this initial development would attract additional exploration, technological innovations and growth opportunities for the industry.

Consequently, it is a matter of national interest to find a solution for the implementation of infrastructure West of Shetlands.

What does Total offer young graduates so as to attract and retain them, in the midst of a very competitive market for talent throughout the industry?

It is an extremely competitive market for young talent in the industry, and it can also be frustrating when you lose someone after having trained him for several years within the company. As a big and financially strong company, Total offers an attractive package to new recruits and the opportunity of a truly international career. In this moment there are around 180 locally recruited engineers working in different Total subsidiaries around the world. We make a real investment in our people, training and developing them throughout different areas of the Group. This company has created a real long-term career building environment.

Total E&P UK also offers both young graduates and experienced people the chance to work on some of the world’s most challenging fields in terms of technology like Elgin/Franklin. The company is at the cutting-edge regarding high pressure / high temperature reservoirs, subsea technology and other areas that we develop together with our suppliers.

You have worked in developing countries like Indonesia, Angola and Colombia for many years. How does the approach to CSR change in a developed country like the UK?

Total is very active in a number of different initiatives with the local community in Scotland and the rest of the UK. The needs are of course different from what you find in developing countries, but with a little imagination there are many ways to contribute. For example, Total is sponsoring the Royal Scottish National Orchestra (RSNO), in particular the TOTAL Denève concert series. In addition to an educational programme involving the Total French school pupils and local secondary school, Torry Academy, we also took RSNO musicians offshore to Elgin/Franklin where they performed a recital for the crew.

There are countless other examples of how we engage with the community in the UK. In particular, we work a lot on education, going to the local schools on road shows in order to present the basics of the industry and explain all the interesting things that we do.

What are your expectations for Total E&P in the UK over the next five years?

I expect the next five years for Total E&P in the UK to be fantastic. The main drivers will continue to be our bold but successful exploration strategy around existing hubs, and of course developing the West of Shetlands discoveries. Throughout our different projects and levels of management, the priority will remain to ensure that all our facilities are safe.

This subsidiary is going through a very exciting period, despite the smaller size of our prospects and the technological challenges of the North Sea. But with oil prices at where they have been these recent times, we will be able to continue investing a lot in the future of Total in the UKCS and show that even the majors are very dynamic.

What is your final message to the readers of Oil & Gas Financial Journal?

Total E&P UK has a great future in front of it. We have exploration successes to develop, existing fields to maintain, and new provinces West of Shetlands to bring on stream, which will all make it an exciting several years. Such a combination of different and exciting opportunities at one same time had not been seen for years.

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