London (Platts)--16Sep2009/758 am EDT/1158 GMT

French oil major Total indicated Wednesday that its oil and gas production would rise next year, after a dip in 2009, despite faster-than-expected output declines from its mature oil and gas fields.

According to graphics in a mid-year strategy presentation posted on its website, Total sees its upstream production rising through 2016 and cash flow next year benefiting from 2009 field startups and cost reductions.

In July, Total posted a 54% year-on-year fall in adjusted net income for the second quarter, hit by a nine-year low in production volumes and weaker oil and gas prices.

Total blamed the fall on its heavy exposure to OPEC production cuts and security related shut-ins in Nigeria, together with field declines and maintenance work.

According to the slides, Total now expects the underlying production decline rate from its oil and gas fields to average about 5%/year, up from a 4%/year assumption given in February.

Based on its 2008 production, the higher underlying decline rate means the major would need to produce an additional 23,400 b/d of oil equivalent this year to offset an expected output loss of 117,000 boe/d from mature fields.

"The view that Total's portfolio is less mature, and in any way less exposed to declines is now firmly consigned to history, although the equity market had already reached this conclusion," Credit Suisse said in a note.

In the mid-year review due to be formally presented later Wednesday in London, Total indicates that its upstream development spending has fallen 12% this year, and the major flagged further cost reductions and delay of some projects "if needed."

Total said it expects capital expenditure this year to remain within its $18 billion budget.

In the slides, Total said its operational spending per barrel fell by 14% during the first half of 2009 compared to 2008.

In February, Total said average oil and gas production would likely not grow this year despite five new upstream projects coming onstream.

The company said it expects Yemen LNG, Qatargas II train B and Tombua Landana in Angola to begin production before year-end. With the ramp-up of the Akpo field in Nigeria and Tahiti in the Gulf of Mexico, Total sees some 200,000 b/d of oil equivalent from the five fields in 2010.

LNG GROWTH KEY

Last September, Total estimated its annual oil and gas production growth would average 2%-3% to around 2.75 million b/d by 2013, as higher oil prices crimp its volume entitlements on projects held under production sharing contracts. That estimate was based on $100/b oil.

Previously, Total had projected an average production rise of 4%/year in the 2006-2010 period, based on $60/b.

In its mid-year review, Total said its base case oil price scenario for production stands at $60/b for 2010, rising to $80/b thereafter.

Looking ahead, Total said it expects its LNG capacity to grow by an average of 7%/year through 2020, according to the slides, with long-term growth potential concentrated in Nigeria, Iran, Australia and Russia.

Downstream, Total said current European refining margins remain "severely affected" by recession-hit demand for fuels and new capacity coming onstream in Asia. The company, Europe's biggest refiner, said the impact of OPEC output cuts on the supply of heavy/sour crudes also continues to damage conversion and desulfurization margins.

At the end of July, Total said it was considering further reducing crude throughputs in its European refining network and shutting down some processing units to help mitigate the impact of a structural slump in refining margins.

The major is to shut its 140,000 b/d Dunkirk refinery on September 12 due to poor market conditions and has extended the shutdown of a distillation unit its 340,000 b/d Gonfreville refinery, according to French unions. --Robert Perkins, robert_perkins@platts.com