MOSCOW (MRC) -- Total, Europe’s third-largest oil company, called on peers to revise projects that require tens of billions of dollars of investment as costs escalate, said Hydrocarbonprocessing.
"Costs are becoming too high," Christophe de Margerie, CEO of the Paris-based company, said Friday in a Bloomberg Television interview from Davos, Switzerland. “
Total has vowed to lower capital spending even as it starts projects from Norway to Angola to increase output. Royal Dutch Shell, Europe’s largest oil producer, also has pledged to rein in costs after this month issuing its first profit warning in a decade. The companies have seen expenses climb as they search for crude and gas in more remote and complex areas.
"We have to redefine how we can develop some fields without spending as much money," De Margerie said.
Expenses also have been driven up by rising construction bills and currency changes. In Australia, such costs have hurt companies including Chevron, whose USD45 billion Gorgon project is among seven liquefied natural gas (LNG) ventures being built there at a cost of more than USD180 billion.
The pressure on producers has a knock-on effect for oil-service companies that help them find and pump crude and gas. Ayman Asfari, CEO of London-based oil engineer Petrofac, said Thursday that the company and its peers will feel the impact of belt-tightening among their clients.
"Our industry is facing a huge amount of cost pressure," he said. "More is being spent to produce less. Our clients are seeing the rate of return on capital dropping and they’re being challenged by investors who want them to be more disciplined."
As MRC wrote before, Total, Europe’s third-largest oil company, intends to invest EUR160m before 2016 to adapt its petrochemical platform in Carling, in the Lorraine region of eastern France, and to restore its competitiveness. Total plans indeed to develop new activities on the platform in the growing markets for hydrocarbon resins (Cray Valley) and for polymers, while shutting down the acutely loss-making steam cracker in the second half of 2015.
Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.