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Financial Times: Total cuts oil output targets

By Peggy Hollinger in Paris and Dino Mahtani in London
Published: September 6 2007

Total’s ability to resist the pressures on production facing its international rivals was called into question on Wednesday as the French oil major cut output targets by 20 per cent for the four years to 2010.

Christophe de Margerie, the new chief executive who took over in February, said on Wednesday that Total expected only 4 per cent growth between 2006 and 2010, against previous forecasts of 5 per cent.

It is the second time in three months that Total has been forced to rein in production forecasts and prompted a bitter reaction from some analysts, even though the group still expects to outpace rivals BP and Shell.

“We are very disappointed,” said one who refused to be named. “In the end it shows they are just like BP and Shell. They may be less present in declining zones, and have a better cost structure, but they too are losing growth.”

Most majors have been forced to scale back production targets, faced with maturing oil fields, skyrocketing costs, and the growing readiness of oil-rich nations to demand a higher price for access to resources.

A recent study found that while worldwide spending by oil companies had reached record levels, reserve volumes had increased by only 2 per cent.

However Total’s focus on less mature regions and its recent exploration successes had buoyed hopes it would be able to resist some of the pressures facing rivals, which are forecasting production growth of about 2 per cent.

Jason Kenney, head of research for oil and gas at ING, remained confident the group’s profile would deliver results. “They have quite a robust set of assets . . . particularly in deep water, west Africa and Angola,” he said.

Mr de Margerie defended the group’s decision to cut its targets as “transparent and explainable”. He said the high oil price accounted for about half of the reduction in his group’s output forecast, which in future would be based on a price of $60 a barrel, against the $40 used previously.

Higher oil prices mean Total takes less oil from production-sharing contracts, which more or less fix revenues

The group has also been hit by problems in Nigeria, where work has been halted by militant attacks, and in Kazakhstan, where the oil groups are in dispute with the government.

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