Integrated oil and gas company TOTAL S.A. (TOT) teamed up with Japan’s INPEX CORPORATION to invest $34 billion in the Ichthys liquefied natural gas (LNG) project in Australia. This new venture expands TOTAL’s presence in Australia, which would also help the company to capitalize on the growing demand for LNG in the Asian markets.
TOTAL will have a 24% interest in this project. True to its long-term strategy, the oil major is working consistently to increase its global presence through acquisitions and partnerships. The current alliance with INPEX helped expand its operations just within a fortnight across three continents. In other developments, TOTAL struck a deal with Chesapeake Energy Corporation (CHK) to further its shale assets in the US and then moved on to ramp up its African footprint with two exploration licenses acquired from the Mauritanian government.
This Ichthys project will develop reserves of approximately 3 billion barrels of oil equivalent , including around 500 million barrels of condensate and is expected to start commercial production in the second half of 2016. The construction of this project will start from the second quarter of 2012.
The Ichthys project consists of the Ichthys gas and condensate field offshore North West Australia, lying in water depth of 853 ft (260 meter) and the construction of a 552.4 miles (889 km) gas transmission pipeline together with an onshore LNG plant near Darwin in the Northern Territory.
The project is likely to bring in huge benefits as the operators were successful to secure a 15-year contract for the 8.4 million tons per year production of this project. The majority of the production will be taken up by the third-party consortiums of Taiwanese and Japanese buyers including INPEX. Besides, TOTAL through its subsidiary Total Gas & Power Limited will purchase LNG from this project and sell it to its customers. We believe this project will act a cash churner for TOTAL in the years to come.
TOTAL has been an active operator in the LNG market and its fourth quarter LNG production is expected to surpass the 3.36 metric tons of LNG produced in the preceding quarter. The production growth in the Pazflor field in Angola and progressive recovery of production from the field in Libya are expected to boost TOTAL’s LNG production. We believe this new venture will allow the company to sustain its position in the LNG markets going ahead.
TOTAL S.A. currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
France-based TOTAL is one of the largest publicly traded, globally integrated oil and gas companies based on production volumes, proved reserves and market capitalization. The company has exploration and production operations spanning five continents.
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