WATCHING THE WORLD POLITICS NO DETERRENT FOR ELF IN AFRICA

The flak Royal Dutch/Shell has taken for operating in Nigeria since the country's military regime executed nine antigovernment activists last month shows how African politics creates problems for oil producers.

But it's possible to manage those problems, says Elf Aquitaine SA, which takes 60% of its 1 million b/d total oil production from West Africa. Frederic Isoard, head of Elf's oil and gas division, says Africa's political risks have been overstated.

"West Africa's prospectivity is good," Isoard recently told journalists, "and the political risk has existed throughout the last 50 years."

Elf's experience shows Africa is not the only place with problems.

Elf spends about $620 million/ year on exploration-one third in Europe, one third in West Africa, and one third in other regions.

NEW AREAS

"Elf is mostly established in the North Sea and West Africa," Isoard said, "but we are trying to develop production in other areas, particularly the Middle East, Latin America, and former Soviet Union."

In the Middle East, Elf has 65,000 b/d of production from Syria and 8,000 b/d from Oman. In Qatar, Elf intends to place Al- Halish offshore field on stream in 1997. It is pursuing projects in Iran, said Isoard. "Elf's last investment in Iran ended with bad feelings, but we need to go where the oil is."

In Iraq, Elf hopes to win development of Majnoon field. "But we cannot tackle such a large project alone. We're speaking of $3-4 billion in costs. Majnoon is onshore, so drilling costs are small, but the need to build pipelines and partially rebuild har- bor facilities makes this a major development. And the field is mined because it is near the Iranian border."

In the politically calm North Sea, Elf has problems too. Isoard said his company's production is expected to hold steady for the next few years, but U.K. output will fall with the decline in Piper field.

"We are eager to develop U.K. Elgin and Franklin discoveries," he said. "The problem is to find a profitable market for the gas. We will have to look outside the U.K. for this." Elgin and Franklin first were slated for development as early as 1998, but U.K. producers recently placed on stream a glut of gas fields ahead of market liberalization.

The later fall in gas prices means Elgin and Franklin development now depends on the Interconnector gas pipeline from the U.K. to Belgium. So earliest gas from these fields has been postponed to 2000.

LOGICAL APPROACH

Jean-Luc Vermeulen, Elf's head of E&P for Africa, said production has potential to expand in Nigeria, Congo, and Gabon. Elf also has production in Angola and discoveries in Cameroon.

Yet Elf's attitude toward a potential development in Chad, where it holds a 40% share in a large oil find operated by a unit of Exxon Corp., may best show why the company feels at home in Africa.

Vermeulen said Exxon hopes to have the discovery on production by 2000, with oil exported to Cameroon through a 1,100 km pipeline.

Antigovernment groups in Chad may attempt to destroy oil company installations, and the line would travel 150 km in Chad.

"We are not particularly concerned about the political situation in Chad," Vermeulen said. "The pipeline will be buried."