French connection

Word that BP PLC has stamped its Helios on plans to inject $900 million in capital expenditures (capex) into the UK North Sea this year-and the same again in 2001-confounded the old newspaperman's adage. Good news was news nonetheless, especially for Offshore Europe. Coming from a supermajor of the first order, the announcement looked to be one of the stoutest olive branches offered in some time to the beleaguered oil and gas province.

Word that BP PLC has stamped its Helios on plans to inject $900 million in capital expenditures (capex) into the UK North Sea this year-and the same again in 2001-confounded the old newspaperman's adage. Good news was news nonetheless, especially for Offshore Europe. Coming from a supermajor of the first order, the announcement looked to be one of the stoutest olive branches offered in some time to the beleaguered oil and gas province.

The attention paid by UK industry observers to moves by the two London-headquartered members of the Big Oil triumvirate is understandable-between them Royal Dutch/Shell and BP hold reserves amounting to nearly 37 billion boe. Yet in a year of post-merger fatigue, this singlemindedness overlooks the combine that, though measurably smaller, might be disproportionately helpful to Offshore Europe: TotalFinaElf.

CEO Thierry Desmarest's group has combined reserves of 10.5 billion boe distributed almost evenly across Europe (26%), Africa (29%), and the Middle East (21%), with the remainder largely in South America and the Asia-Pacific region. Group production stands at 2.1 million boe/d.

Weighing up

France's entry in the consolidation race clearly runs a distant fourth when compared with the other two and ExxonMobil Corp. by production, refining capacity, or reserves, but there are three facts that will likely contribute to it hitting above its weight-and lend longevity to maturing North Sea sectors.

One, with reported finding costs of less than $1/bbl and reserve replacement costs under $4/bbl, the group strikes a balance between growth and cost and is stable when much else isn't. Two, its "controlled growth" production targets of an added 700,000 b/d by 2005 means the group has to put its shoulder to the exploration wheel-focusing, with the rest of the oil industry, on deepwater fields, but specifically Offshore West Africa-while boosting output from existing fields. Three, TotalFinaElf has a geographic spread of reserves that Desmarest notes is "only equaled by Shell."

To fuel further exploration of frontier regions in its "spread," such as Block 17 off Angola, where TotalFinaElf as an operator has had nothing but clover with discovery of Girassol, Dalia, Rosa, and Lirio fields, it needs revenue from the regions where it has steady output. The North Sea, for one.

Exploration fuel

As another report, this one from UK analysts Douglas-Westwood, forecasts 1 more year of rising capex before the "long, slow decline" in investment begins, it is worth attending to TotalFinaElf's president of E&P, Jean-Luc Vermeulen, who says the group will "carefully manage [its] existing [North Sea] assets with a view to optimizing production...[to] help finance exploration campaigns in other parts of the world."

As one example, on its admittedly mature Alwyn development, TotalFinaElf has managed to bring the Trias reservoir below the Alwyn reservoir into production, so that remaining reserves are greater than total reserves estimated at the start of the project.

Should this scenario sound initially melancholic to the North Sea ear, it at least augurs well for the possibility that, if the likes of TotalFinaElf-which has 25% of its proven reserves in Northern Europe-has its way, the life left in the province might run much longer than is currently reckoned by consensus.

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