Total-ly Chinese

Via The Wall Street Journal, an article reporting that Total SA is looking to expand its cooperation with China’s leading oil producer on a range of fronts, including a multibillion-dollar natural-gas project in northern China and prospective overseas deals in Iran and Venezuela.  As the report notes:

“…The French oil-and-gas company has been aggressive about cooperating with China, although some of its efforts have stumbled or failed. The cooperation reflects Chief Executive Christophe de Margerie’s belief that Total is better off trying to forge partnerships with rising competitors from the world’s most populous country than strictly trying to compete.

Total’s advanced technology and international experience, along with China’s rising clout in the energy sector, mean “there is a real opportunity for Chinese companies and Total to work together,” Mr. de Margerie said Monday in Beijing, where he and a team of executives are accompanying French Prime Minister Fran[ccedil]ois Fillon on a visit. “In countries where we have experience, like in Africa, in Latin America, definitely we are better together than separately,” Mr. de Margerie said in an interview.

Total’s cooperation with China National Petroleum Corp., or CNPC, the country’s biggest oil producer, has extended into several geopolitically sensitive regions where it is often difficult to get deals done.

Mr. de Margerie said Total aims to make a joint bid with CNPC to develop a heavy-oil block in Venezuela’s Carabobo region. He declined to estimate timing or investment for that possible project. Several heavy-oil blocks are expected to be auctioned next year in the eastern Orinoco region of Venezuela, with each block costing as much as $10 billion to $20 billion, and the project could include construction of facilities to upgrade the tar-like crude into lighter oil.

Total and CNPC, in partnership with Petronas, Malaysia’s state-owned oil-and-gas company, won the rights to the relatively small Halfaya oil field in Iraq earlier this month. But Total and CNPC lost out in their joint bid to develop Iraq’s giant Majnoon oil field; Mr. de Margerie said competing bids were too high to make the project cost-effective for Total.

Total also is talking to CNPC about possibly joining it in developing part of Iran’s giant South Pars gas field and exporting liquefied natural gas from it, Mr. de Margerie said. But Total’s involvement in that project has been complicated in part by disagreements with CNPC and Iran over how to proceed.

In June, Iran and CNPC signed a contract to work on extracting gas from part of the South Pars field, known as Phase 11. CNPC in effect replaced Total, which had long been in negotiations with Tehran about the huge gas field but which has pushed for an integrated project that includes the extraction of gas, its transformation into liquefied natural gas and the export of that LNG.

“We have been always favoring the full integrated project” in South Pars, Mr. de Margerie said. “CNPC and Iran separated the two, upstream from LNG, and we’ve said that was not our cup of tea,” he added.

Total continues to talk to CNPC about the possibility of an integrated LNG project in South Pars, Mr. de Margerie said. But any deal would require Iranian-government approval, and “Iran, for the time being, has stopped” discussing LNG.

Total and Mr. de Margerie have come under fire in the past for their involvement in Iran, primarily from U.S. politicians critical of the country’s government. Mr. de Margerie said Monday he thinks Total must continue to talk to governments such as Iran’s because energy investments are long-term and politics change. “If you just say, ‘OK, there is a problem today, so I will never look at it anymore,’ then you never do anything,” he said.

The French executive, who took the helm at Total nearly three years ago, voiced optimism regarding a joint project with CNPC to develop part of China’s biggest gas field. The two companies have been researching the technically difficult South Sulige gas field in northern China’s Ordos Basin for several years and must decide by the end of January on terms for a project that would cost more than $1 billion initially and cost several billion dollars during the project’s 20- to 25-year lifetime.

Mr. de Margerie said he is confident the two will move forward with the project, which would still require final approval from China’s government. Gas production would start in 2013 at the soonest.

CNPC also is cooperating with other foreign oil giants. In October, for example, CNPC and Chevron Corp. got approval from the National Development and Reform Commission for the first phase of a $4.7 billion, 30-year pact to develop a gas field in central China’s Sichuan province.”

This entry was posted on Tuesday, December 22nd, 2009 at 8:08 am and is filed under China, China National Petroleum Corporation, Total.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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