Total to lower investments starting in 2014, could cut refining capacity


French oil company Total on Monday reiterated its hydrocarbon production targets for the medium term, thanks to a strong investment push over the past years which should start to trend down from next year.

In a presentation to investors, Total said it anticipates a strong increase in cash flow from the start-ups of major oil and gas extraction projects, as well as from the restructuring of its downstream businesses -- refining and chemicals, and marketing and services.

The world's fifth largest nonstate oil company by output, Total has embarked upon an ambitious plan to restore profitability for its loss-making refining businesses, at the same time as making a huge investment push to search for new oil and gas, which is now more difficult to find as it is rarer and lodged in remote areas such as deep offshore or off the Arctic circle.

The plans highlight the French group's intensive efforts to maintain and even reinforce its global position, as competition around the world has grown fierce over the past few years against a background of rising costs to produce oil and gas, the race for new hydrocarbon sources to address growing emerging markets' appetite, while facing the decline of crisis-hit Europe.

In the coming months, the group should start-up numerous production projects such as Laggan-Tormore in Western Shetlands, and reiterated it expects to reach production of 2.6 million bpd of oil equivalent in 2015 and a potential for 3 million bpd in 2017.

The restructuring of refining and chemicals "has begun to bear fruit," as profitability is increasing towards the target of 13% return on average capital employed set for 2015, Total said.

In a briefing with media ahead of a meeting with investors and analysts, Total's Chief Financial Officer Patrick de la Chevardiere noted that the group is considering cutting capacities at some refineries. "We're going to adapt our footprint to European demand," he said, without elaborating.

In an earlier interview, Total's head of the marketing and services unit Philippe Boisseau said that thanks to the reshuffling of the distribution activities, the second leg of the restructuring of its declining downstream activities, Total expects to substantially boost the unit's free cash flow -- a key gauge of a company's health -- to reach $1 billion in 2017 from around $400 million last year, a level around which it had stagnated for years.

Total's CFO also said that "the first [vessel] is arriving at Jubail this morning to [load] some production" of fuel oil. Jubail is a refining and petrochemical complex in Saudi Arabia where Total is a shareholder and the arrival of the tanker will mark its first export.

Dow Jones Newswires

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