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Total says oil price fall will not halt big energy projects

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By Peggy Hollinger in Paris and Andrew Jack in London

Published: November 6 2008 02:00 | Last updated: November 6 2008 02:00

Total yesterday set itself apart from some of its international rivals, saying the recent collapse in the oil price had not called into question its plans to invest in big energy projects.

“We have time to assess how the environment may adjust and determine how we might capture the benefits,” said Patrick de la Chevardière, finance director. “If our analysis indicates that we should delay a project we will, but at this time there is no significant risk of a long-term project being delayed.”

He said all of Total’s current projects would “create significant value at $50 or $60 a barrel”.

Mr de la Chevardière, announcing a forecastbeating 35 per cent jump in third-quarter net profits to €4.1bn ($5.3bn), also gave a timetable for the French oil group’s withdrawal from pharmaceuticals business Sanofi-Aventis.

The 12.4 per cent stake, worth about $10bn, would be sold “progressively” until 2012, he said, further bolstering the group’s financial flexibility.

The group also remained open to the possibility of acquisitions, he said.

The market remains attentive to Total’s investment plans, particularly after several industry rivals recently postponed big projects.

Royal Dutch Shell last week said it would defer a decision on expansion of an oil sands project, while investments have also been put on hold by Britain’s BG and Norway’s StatoilHydro.

For many companies, the sharp drop in oil prices and rising service costs have made it more difficult to justify investment in complex and costly deep water and oil sands fields.

Total has budgeted $18bn in capital expenditure for this year and, though the budget for 2009 had not yet been set, “most of the spending has already been committed”, Mr de la Chevardière said. The big decisions on new projects would not have to be made for at least a year, he added.

Though Total’s results were above expectations, setting it on track to return the highest profits this year of any French company, the market was disappointed by the 5 per cent drop in third-quarter production.

Mr de la Chevardière said this was mostly due to technical issues that would be resolved in the fourth quarter or early next year, though there had been significant disruption in Nigeria.

He confirmed that the group was reviewing its refining business, while recalling that Total had “sold refining in the UK”.

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