September 5, 2007
Total disappointment
Hubris and nemesis department. On Tuesday, I sat in a hall at the Offshore Europe conference hearing Xavier Preel of Total waxing lyrical about the French oil major’s superior project execution and host country relationships; on Wednesday morning, his boss Christophe de Margerie was admitting that Total’s production growth projections have been over-optimistic.
As the FT story explains, it is not all Total’s own fault. Higher oil prices mean more oil goes to Total’s partners in production sharing contracts, which accounts for about half the cut in projected output. And a slowdown from 5 per cent to 4 per cent average annual volume growth during 2006-10 is hardly devastating: Total will still comfortably beat BP and Royal Dutch Shell over that period, and perhaps even ExxonMobil. (FT stories may require subscription.)
And yet, Total’s admission is an important piece of news. It is yet more evidence of the severity challenge facing the oil majors, and shows how difficult it is to buck the trend, however good you may think you are. It is also another reason why there will be a few barrels more missing from forecasts of oil supply out to the end of the decade, and another reason why - barring a global economic downturn - prices are likely to stay high.
UPDATE: Total has some good documentation and a webcast presentation on its website.
