Total in deal-making mode could add to Abu Dhabi shareholding

The French oil major was the first to take a stake in the new Abu Dhabi Company for Onshore Oil Operations concession at the beginning of 2015, when it paid US$2.2 billion for a 10 per cent stake and lead on two of the biggest oilfields.

Patrick Pouyanné, the chairman and chief executive of Total, says Abu Dhabi is a core region in the company’s portfolio. Mona Al Marzooqi / The National

Total has started to pursue deals more aggressively as oil prices stabilise and could acquire more assets in Abu Dhabi, including an increased stake in its onshore oil concession.

"We had two years where we were under constraint because of the oil price," said Patrick Pouyanné, Total's chief executive an interview with The National. "We are now out of this period and have more margin to manoeuvre."

The French oil major was the first to take a stake in the new Abu Dhabi Company for Onshore Oil Operations (Adco) concession at the beginning of 2015, when it paid US$2.2 billion for a 10 per cent stake and lead on two of the biggest oilfields, even as it led a wave of industry-wide cost-cutting amid slumping oil prices.

After BP’s share-swap deal last month and earlier stakes by Japan’s Inpex and a GS Energy of Korea, the final 12 per cent of Adco open to foreign buyers has been expected to go to a consortium of Chinese companies, with state-owned China National Petroleum Corp, as a technical partner and CEFC China Energy, a conglomerate, as a financial partner.

But last minute haggling over the terms of the $2.66bn deal has meant it remains competitive, giving Total the potential to increase its stake, according to well-placed industry sources.

Abu Dhabi is one of the most important areas in Total’s portfolio, one of its “core” regions, said Total’s chief executive, in Abu Dhabi for the Atlantic Council Global Energy Forum. “So, I am always looking for opportunities and we are there to be the partner, to bring our technology. We have many ideas to develop our business here.”

Total in the past two months has signed a spate of deals, including a new partnership with Brazil’s state oil company, Petrobras, which has been weakened by a corruption scandal. Total’s deal, for an initial $2.2bn, gives it two offshore fields in Brazil’s Santos Basin, as well as infrastructure assets, while Petrobras joins as an investment partner in Total’s Gulf of Mexico prospect.

Last week, Total paid $900 million to nearly double its stake to 55 per cent in the giant Uganda Lake Albert oil project, which is moving into development phase that will require $8bn in infrastructure spending.

Those deals followed Total’s controversial move to be the first Western oil major to sign with Iran since its nuclear sanctions were lifted, committing $2.2bn to help develop a new phase of the South Pars gas mega-complex. Most large oil companies have opted to stay away not only because of the uncertainty over sanctions but also because they wanted to avoid riling Iran’s Arab neighbours, with which Iran has a number of conflicts.

But Mr Pouyanné said the time is right to make bold moves.

“Our strategy is basically to benefit from these low prices,” he said. “We have done some deals – like in Brazil, like in Uganda, in Qatar and in Iran – because we think that is the right timing. You make the business when the price is low because the costs are low.”

Total has set a capital expenditure target of between $15bn and $17bn a year through 2020 but is flexible.

“Our balance sheet is even stronger so now it is time to stay disciplined, because the [oil] price is not very high, but at the same time we can use our balance sheet and our strength in order to have access to new deals,” said Mr Pouyanné.

In the region, Total also acquired a 30 per cent share of Qatar Petroleum’s 25-year Al Shaheen oil concession, which commences this July and commits Total to invest $2bn through 2022 to maintain its 300,000 barrels per day output.

Mr Pouyanné said Total would be interested in Iraq but only if the government makes radical changes to its contracts.

“Total was born in Iraq, you have huge resources there, so of course Total would love to do that but the contracts have been quite poor.

“I am open to see if there are more opportunities in Iraq but … today what was offered in Iraq was not at the level of our expectations on what we have obtained in Abu Dhabi, or Iran or Qatar.”

Iraq’s oil minister, Jabbar Al Luaibi, said in Abu Dhabi last week that he didn’t expect new contracts to be resolved until the end of the year.

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