Total Withdraws Investment from Nigerian oil exploration venture

French oil company Total SA intends to unload its 20% oil investment in an African oilfield. Sources say China’s Sinopec is buying it for a price of $2.5 billion.

Said oilfield is located in Usan, Nigeria and has an oil output capacity of 180,000 barrels per day and reserves of up to 2 million barrels.  Reports indicate, however, that more recent output was a mere 130,000 barrels a day.

The operation of the oilfield commenced just this year, but Total’s decision to withdraw from the venture with National Petroleum Corporation (NPC) appears quite premature.  Officials from the oil firm said they have new projects in the pipeline that needs to be financed.  The sale will form part of its medium-term plans to convert some $20 billion in oil assets into cash which, in turn, will be allocated for new projects.

Still, Total’s move was a bit surprising as it had, in the past, unloaded oil assets that were more or less exceedingly aged. Past sales included TIGF gas storage equipment and its Cameroon property – both mature assets sold to Perenco SA two years ago.

Other stakeholders in the NPC oil venture consist of Chevron and ExxonMobil – each holding a 30% interest, as well as Nexen Petroleum Nigeria Limited, which holds 20% interest.

Total, which holds the remaining 20% for sale, is still waiting for the Nigerian government’s “go” signal.

Some analysts of the oil and gas industry have expressed doubts as to whether Total could really come up with a hefty $20 billion for investing in oil ventures. The company is reportedly selling its stake in NPC to China’s Sinopec in order to suppress these doubts. China, on the other hand, is expected  to actively participate in auctions on Nigeria’s oil blocks after successfully acquiring major stakes in U.K.’s North Sea  and the U.S.’ Devon Energy Corporation.

Total had a very difficult year.  The gas leak in the North Sea pipeline, damage in Yemen, the crises in Syria and Nigeria – all these had a major blow on Total’s performance.  This year, the picture isn’t rosy either as production volumes are down to levels lower than those a year ago.

Despite these setbacks, Total is set to take on high risk oil investments albeit with high returns.  Its next investment target includes Uganda and Angola.  It also plans to compete in the shale and oil sands business – a move that will certainly call for huge cash outlays due to higher oil exploration and production costs.