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Interview

with Vincent Dutel, General Manager, Total Malaysia

07.05.2010 / Energyboardroom

Total surprised the industry when signing its first agreement with Carigali-Hess in 2001 and when signing its PSC agreement in 2008. What was the rationale behind the entrance in Malaysia at that point in time?

Elf – before it becomes Total – was an operator in Malaysia in the eighties, and drilled wells in Sarawak but without success. Malaysia has always been on the radar of Total, but as you know Malaysia is a mature country, and a lot of exploration has been done by other companies. Therefore for a new player to enter Malaysia, it is a question of availability of new acreage, of opportunity, and whether Total will find the opportunity interesting enough to enter this market. In 2001, we entered in Malaysia through a farming agreement with Hess, and took a significant non operated share – forty two point five percent – in a deep offshore block in Sarawak and continuously supervised what was going on in the country. We found a way to enter as Operator in Malaysia through the high pressure high temperature technology. For a mature country the possibility to make new discoveries relies on new concepts or application of new technologies. As you know PETRONAS is a well established and successful oil & gas company, both domestically and internationally, and for them, the added value of bringing in partners is to acquire new technology, find new concepts and new exploration plays. One example is the deep plays with high pressure and high temperature (HPHT), especially in the Malay Basin, below the existing producing fields. Drilling down to such plays requires a very special technology and experience. Total has a proven track record in this area, with the successful development of the HPHT Elgin-Franklin field in the UK. PETRONAS was interested by our experience as a possibility to find new resources. So we had direct negotiations with them to enter in Malaysia as operator.

What was your mission when you were appointed at the head of the operations in Malaysia?

First of all I have to take care of Total existing assets, being now the two blocks which we operate: PM303 and PM324. On these blocks, the commitments in terms of work program are seismic acquisition and reprocessing, and the drilling of two deep exploration wells on PM324. This requires us to carry out all the preparatory work for the exploration, to mature the prospects, to prepare for the challenging wells with the right technology in order to maximize the possibility to find oil or gas and to do it safely. In addition we need to achieve this while controlling the costs, in line with the approved budget. The last element is to make sure we strictly apply the rules published by PETRONAS. While working with Hess we were not operator and had less direct relationships with the regulatory body. We cannot operate in Malaysia like we do in other countries and we have to learn the rules and the culture. To develop the company based on our current assets, we have to recruit new people and sometimes to train them. Our headcount today is 35. We also have commitments in terms of technology transfer to PETRONAS, and have three secondees from PETRONAS integrated in our team. Apart from our two PM blocks, we would like to develop our activities in Malaysia either in Peninsular Malaysia or Sarawak and Sabah. We are currently evaluating other opportunities together with Total’s head office, and that will hopefully result in additional blocks operated by Total.

In your 2008 figures, Asia and the Middle East were representing about 11% of the production of Total. What is the importance of Malaysia to the APAC region and to the Total group in general?

As you mentioned Asia Pacific is not the biggest area for Total in term of equity production, as opposed to the North Sea, the Middle East and Africa. However we have some legacy assets in the region. For example Total has a strong presence in Indonesia where we have been for forty years with great success. As of today our operations in Indonesia are the biggest for Total worldwide in terms of gas operated production and also in term of drilling with about hundred wells per year. We are also present as operator and producer in Brunei and hope we will expand further there. In Thailand, we are partner with PTTEP in the Bongkot field and we have many secondees present in the country. The fourth country where we produce in the area is Myanmar, where we operate the Yadana gas field. Australia is a recent asset in the portfolio where we have a stake in the Ichtys gas and condensate field as a partner of Inpex and we will also soon operate exploration wells. We are looking to develop our presence in the region, eying at China obviously, where we are working on a tight gas development project with a Chinese company.. More recently we also established operations in Vietnam, and now Malaysia. Malaysia is a new country for Total, and we hope that it will be a great story in a book where we only have written the first chapter.

What are the main challenges of operating in Malaysia?

Generally speaking, the only challenge is when you are new as operator. To carry out our work program, we have to build up resources with both local new recruits and some experienced expatriates. These people have the experience and the skills needed. Still, the challenge is to make sure that these people will learn to do what they are good at but in a different and new environment. We all have had to “learn” how to work in Malaysia and with PETRONAS. There is of course a technical challenge linked to the specificities or our operations of two HPHT wells, but at the same time, this needs to be done while learning and dealing with the local rules and environment. This was greatly facilitated by all the discussions I had when I arrived in Malaysia with the other operators and of course with PETRONAS. All of them have been very supportive by giving feedback, sharing experience and best practices on how to operate and to work in Malaysia and with PETRONAS. Moreover, given the history of PETRONAS and Total, with the joint operation we had in Iran for example, all PETRONAS people provided a warm welcome and facilitated greatly our installation in the country.

Given that Malaysia is looking towards deepwater, and wants to develop smaller and technically challenging fields etc., where do you see opportunities for Total in Malaysia?

Most of the conventional exploitation has been done, and there will only be leverage for Malaysia if Total can bring experience and expertise to contribute to an increase in oil and gas resources in the country or for example helping to unlock gas presently stranded. This goes through the application of specific technology such as HPHT drilling, but also EOR issues, deep offshore, management of gas with CO2 which is a big issue in Malaysia. There are plenty of gas resources in Malaysia with a high CO2 content which are not yet developed; Total has experience in sour gas, in France and elsewhere, handling H2S and CO2. We have also launched a CCS pilot in the south of France etc. All these technologies can be valuable to Malaysia.

How do you intend to do this technology transfer and give the required knowledge in HPHT to the Malaysian workforce?

It is a day to day activity with PETRONAS since everything we do in terms of work programs, budget and procurement needs to be reviewed and approved by PETRONAS. All the specificities of HPHT wells are shared with them, such as the pore pressure evaluation, the well architecture, the type of material and equipment required for such wells, what is available in the market, the qualification process to be done etc… In terms of service companies we need to discuss a lot with service providers for these special wells. As regards deep wells, seismic imaging is also a challenge, since the deeper you drill the more difficult it is to see the seismic image. Total has good experience in this area, with specific imaging algorithm using one of the biggest computers in the world in our head office.

Do you think that Total can learn something from Malaysia, for example in terms of LNG?

Total is a very big LNG player worldwide, and of course Malaysia has a strong experience with the Bintulu plant. For the time being there is no special LNG cooperation between Total and PETRONAS in Malaysia, but why not in the future – with floating LNG for example – if we find gas in remote areas?

You have been working around the world for Total, how is working with PETRONAS different from other NOCs and how have you built a trustful relationship with them?

Even though we are small today in Malaysia, we are representing Total, a company which is a major IOC. This creates a justified expectation from PETRONAS which I sometimes need to communicate to our head offices. PETRONAS is developing its activities worldwide, like an IOC, and is keen to see how Total is organized. Not all the NOCs have such expectations and evolution. For example when I have a meeting with PETRONAS, I expect them to ask me questions about Total in Malaysia, but quite frequently, they expect me to reply for Total on a worldwide basis. It is very exciting to see their interest, and it is very different from working anywhere else in the world. Also the very positive point about working with PETRONAS is that most of my counterparts have been previously posted overseas, in other countries either as operators or as partners. It gives them a broader perspective, a common experience with us and it creates a lot of solidarity. When dealing with a regulatory body, I can tell you it is not so usual.

How will you use your presence in Malaysia and the relationship you are building with PETRONAS to further develop in the region and beyond?

We are establishing affiliates in the region, and the fact that we are established here gives us even more knowledge of the regional geological settings. It also gives us contacts with companies established in the region since Kuala Lumpur is a regional hub for many oil companies. This enables contacts and an awareness of potential business opportunities as opportunities often come from solid networking. As regards PETRONAS, it is obvious that being here facilitates the contacts and enables stronger relationships. Being also the representative of Total in Malaysia, when I see people from PETRONAS, at work or elsewhere, we can discuss about Malaysia but also about many other countries.

Given the importance of commitment to Asia cultures, how is Total demonstrating that it will stay in the country?

I am confident that we will remain in Malaysia. Still, we are doing exploration and this is by nature a risky activity. We will drill our PM324 wells next year, and hopefully they will be successful and lead to a development and a long term presence, which is of course Total’s objective. Also the best way to ensure a long term presence is to have several other exploration blocks presenting other geological setting and risks, for instance with new blocks in Sarawak or Sabah. This would maximize the possibilities to make one or several discoveries. So we look at all opportunities, we study the new blocks available and participate at all data rooms etc. Then if we see good prospectivity, we participate to the bid process.

Where do you want to bring Total E&P Malaysia in the coming five years?

Ideally by 2015 we will have made a discovery on our current blocks, and expanded our portfolio to other blocks. Again I would like to expand to Sarawak and Sabah. Once you have acreage in one area, it is a good starting point to expand in the area. Malaysia is a mature country but I think that there are still a lot of opportunities. Bringing new technology to the country will be the way to unlock additional resources and to support the oil and gas development of Malaysia. PETRONAS is a high quality company and is easy to deal with. Their combined experience of overseas and domestic activities gives an added value to the process. Therefore it is very positive to work in Malaysia and with PETRONAS.

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