French major Total impresses with Argentina's shale

French company says conditions are right to start making new investment decisions.
By Daniel J. Graeber  |  April 28, 2017 at 8:48 AM
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April 28 (UPI) -- At a time when volatility is an emerging trend in the energy sector, French supermajor Total remains an attractive player, an investment profile read.

A floor price for crude oil at around $50 per barrel meant the market is primed enough to sanction the first major project in three years, the French company said this week. The company, the first of the big oil companies out with earnings, said net profit for the first quarter roughly doubled year-over-year to $2.6 billion, meaning it could now move forward with the development of the Vaca Muerta shale deposit in Argentina.

The Royal Bank of Canada said Total's move was against the tide. This week, the International Energy Agency warned that, outside of the United States, the low price of oil was curbing spending on new projects that would satisfy future demand, though RBC said the capital intensity of new projects is moving lower.

"Total remains an attractive proposition within an uncertain sector," RBC analysts said in a profile emailed to UPI.

RBC said shale reservoirs in Argentina may have development costs that are considerably higher than their U.S. counterparts, but higher productivity could offset some of the expense.

Vaca Muerta, located in Neuquen province, is considered one of the best shale basins in Latin America. Analysis from consultant group Wood Mackenzie found parts of the basin are producing on average 646 barrels of oil equivalent per day, representing a mix of oil and natural gas. The study from Wood Mackenzie found production increases will be slow, but advances should accelerate by 2020.

The lauding for the Vaca Muerta shale, however, follows an expression of concern from a safety regulator in Norway about development issues for Total at a production facility being built in South Korea for the Martin Linge oil and gas field in the North Sea.

The Petroleum Safety Authority of Norway said the results of a late March audit found serious deficiencies that could impede the start of operations next year, deficiencies that could present "big challenges" for the start of operations at Martin Linge.

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