Sector News

Total says costs still unacceptably high in oil and gas

April 7, 2016

Oil and gas companies must make further serious cost cuts and should work together to generate further savings to weather the current difficult downturn, Total’s executive Arnaud Breuillac said on Tuesday.

Costs are still unacceptably high and cost reduction was necessary to sustain businesses, Breuillac, President for Exploration & Production at the French oil and gas major, told an industry event in Pau, southwest France.

Oil prices have plunged since 2014 due to global oversupply concerns, hitting profits in the sector and forcing companies to cut costs and find savings.

Speaking in century-old Palais Beaumont while some 200 environmental activists protested outside, Breuillac said oil and gas was still needed despite progress in renewable energies.

“To ensure the right level of profitability, oil companies and services companies must work together to find innovative ways to bring cost down,” Breuillac told industry experts meeting for 2016 MCE Deepwater Development conference.

“We need to increase our collaboration, to find better ways to share risks and to collectively find a new balance,” Breuillac said.

He added that oil and gas companies could only to manage the downturn through cost reductions.

“We cannot control the oil price, so we have to excel in what we can control … our capacity to deliver projects, operational excellence, new technology innovation and of course to lower opex and capex,” he said.


Breuillac said Total has cut operating costs by 1.5 billion euros in 2015 with an objective to gain 2.4 billion in 2016 and 3 billion more in 2017.

“These efforts combined with a more efficient exploration and a new production will enable us to maintain the lowest technical cost among our peers below $24 per barrel,” he said.

“This means that above $10 per barrel we can generate positive cash flow from our operations and above $25 per barrel, we generate positive results,” he added.

He said the company was also cutting investments and holding back final investment decisions on some projects until oil prices recover.

“Let me tell you that we will be patient before sanctioning new projects if costs remain high,” Breuillac said, adding that the company was coming out of an intensive investment phase with nine project startups last year and five more this year, but no major project was sanctioned in 2015 and 2016.

By Bate Felix

Source: Reuters

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