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KEY FIGURES 2006
u2 u6 u8 u 10
QUESTIONS FOR CHRISTOPHE DE MARGERIE CORPORATE GOVERNANCE*
— — — — — — —
Board of Directors Directors’ Charter Board Meetings Audit Committee Nominating & Compensation Committee The Executive Committee and the Management Committee Organizational Chart
CORPORATE SOCIAL RESPONSIBILITY** 58
— — — — — — Ethics Industrial safety Human resources Local development Environment The future of energy
Exploration & Production Gas & Power
Refining & Marketing Trading & Shipping
Base Chemicals Specialties
u 68 CORPORATE PHILANTHROPY u 70 SHAREHOLDER NOTEBOOK* u 72
RESEARCH AND DEVELOPMENT
Research and development costs
Share performance Strengthening relationships with individual shareholders Relationships with institutional shareholders and financial analysts
* For further information, please consult TOTAL’s “Registration Document 2006”, which is available in print or by accessing in the Group’s web site www.total.com ** Further information on TOTAL’s 2006 social responsability achievements and policy can be obtained by consulting or downloading the Corporate Social Responsability Report, “Sharing our energies”. www.total.com/csr
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Statutory auditor’s report on the consolidated financial statements Consolidated statement of income Consolidated balance sheet Consolidated financial information for the last five years
o TOTAL IN 2006
I SELECTED FINANCIAL INFORMATION
Consolidated data in M€, except earnings per share, dividends, number of shares and percentages. 2006 Sales Operating income Adjusted operating income from business segments (a) Adjusted net operating income from business segments (a) Adjusted net income (Group share) (a) Fully diluted adjusted earnings per share (euros) (a)(b)(d) Dividend per share (euros) (c)(d) Net-debt-to-equity (as of December 31) Return on Average Capital Employed (ROACE) Return on equity Cash flow from operating activities Expenditures Divestitures at selling price
(a) Excluding special items, inventory valuation effect and TOTAL’s equity share of amortization of intangible assets related to the Sanofi-Aventis merger.
2005 137,607 24,169 23,468 11,912 12,003 5.08 1.62 32% 29% 35% 14,669 11,195 1,088
2004 116,842 17,026 17,039 9,126 9,131 3.76 1.35 31% 26% 33% 14,662 8,904 1,192
153,802 24,130 25,166 12,377 12,585 5.44 1.87 34% 26% 33% 16,061 11,852 2,278
(b) Based on the weighted-average number of common shares outstanding during the period. (c) 2006 dividend subject to approval by the May 11, 2007 shareholders’ meeting.
(d) 2004 and 2005 amounts are restated as per the four-for-one stock split that took place on May 18, 2006.
I OPERATING AND MARKET DATA
2006 Brent price ($/b) (€/$) TRCV European refining margins ($/t) Hydrocarbon production (kboe/d) Liquids production (kb/d) Gas production (Mcf/d) Refinery throughput (kb/d) (a) Refined product sales (kb/d) (b)
(a) Including share of CEPSA. (b) Including Trading activities and share of CEPSA.
2005 54.5 1.24 41.6 2,489 1,621 4,780 2,410 3,792
2004 38.3 1.24 32.8 2,585 1,695 4,894 2,496 3,771
65.1 1.26 28.9 2,356 1,506 4,674 2,454 3,786
ADJUSTED NET INCOME (GROUP SHARE)
ADJUSTED NET OPERATING INCOME FROM BUSINESS SEGMENTS
ADJUSTED FULLY-DILUTED EARNINGS PER SHARE
G Upstream G Downstream G Chemicals 11,912
DIVIDEND PER SHARE
G Upstream G Downstream G Chemicals G Corporate 11,195
* Subject to approval by the shareholders’ meeting on May 11, 2007.
o TOTAL IN 2006
I LIQUIDS AND GAS RESERVES
G Europe G Africa G North America G Asia G Rest of world 2,489 G Liquids G Gas 11,106 11,120
REFINED PRODUCT SALES INCLUDING TRADING
REFINING CAPACITY AT YEAR-END
G Europe G Rest of world 3,792
G Europe G Rest of world 2,708 2,700
2006 NON-GROUP € SALES: 19 B€
63% Base Chemicals
2006 ADJUSTED NET € OPERATING INCOME: 0.88 B€
56% Base Chemicals
10% Individual shareholders
SHAREHOLDER BASE BY REGION*
2% Rest of world
4% Group’s employees
26% North America
86% Institutional shareholders
23% Rest of Europe
15% United Kingdom
* Estimates as of December 31, 2006, excluding treasury shares.
* Estimates as of December 31, 2006, excluding treasury shares.
HEADCOUNT BY BUSINESS SEGMENT*
1% Corporate 16% Upstream
HEADCOUNT BY REGION*
32% Rest of world
28% Rest of Europe
* Consolidated subsidiaries’ employees as of December 31, 2006: 95,070. * Consolidated subsidiaries’ employees as of December 31, 2006: 95,070.
b: cf: /d: /y: €: $ and/or dollar: t: boe: kboe/d: kb/d: Btu: LNG: M: B: MW: MWp: TWh: TRCV: barrel cubic feet per day per year euro US dollar metric ton barrel of oil equivalent thousand boe/d thousand barrel/d British thermal unit liquefied natural gas million billion megawatt megawatt peak terawatt hour Topping Reforming Cracking Visbreaking. Refining margin indicator after variable costs of a theoretical average refinery located in Rotterdam which processes a variety of crude oil representing the average supply in the area to provide main products quoted in this same area. International Financial Reporting Standards American Petroleum Institute
1 boe = 1 barrel of crude oil = approx. 5,500 cf of gas in 2006 1 b/d = approx. 50 t/y 1 t = approx. 7.5 b (for a gravity of 37° API) 1 Bm3/y = approx. 0.1 Bcf/d 1 m3 = approx. 35.3 cf 1 t of LNG = approx. 8.9 boe = approx. 48 Mcf of gas 1 Mt/y of LNG = approx. 133 Mcf/d
The terms “TOTAL” and “Group” as used in this present document refer to TOTAL S.A. collectively with all of its direct and indirect consolidated subsidiaries located in, or outside of France. The terms “Company” and “issuer” as used in this document refer only to TOTAL S.A., the parent company of the Group.
© TOTAL S.A. April 2007
o TOTAL IN 2006
During 2006, the oil and gas industry once again enjoyed generally favorable conditions. TOTAL’s adjusted net earnings per share in dollar terms rose by 8%, benefiting from a favorable oil market environment and in spite of pressure on costs and a 5% fall in production. Return on capital employed by the Group’s business segments came to 29%, reflecting the quality of our portfolio of activities and the discipline applied to investment. During the year, the Group made investments totaling $14 billion (excluding acquisitions), of which 75% was in the Upstream segment. The successful production start-up of the Dalia field in Angola at the end of the year confirmed that we can now look forward to a renewed period of sustained oil and gas production growth. At the same time, our exploration successes and our new partnerships in Nigeria’s Brass LNG and Australia’s Ichthys LNG projects strengthen TOTAL’s potential for long-term growth. The return to our shareholders, in terms of both dividends and share buybacks, was equivalent to nearly 6.5% of the Group’s stock-market capitalization at the end of 2005. The Arkema spin-off added a further 1.5% to this return. Present in 130 countries, TOTAL pursues a policy of social responsibility and sustainable development, the guidelines for which are set out in a Code of Conduct that is now published in some 20 languages. We report on our achievements in this area to our various stakeholders, not just in an annual Corporate Social Responsibility Report but also whenever we have direct contact with civil society representatives or with our shareholders.
In the Upstream segment, TOTAL is pursuing a strategy of profitable internal growth that should allow us to increase our production of hydrocarbons by more than 5% per year on average over the period 2006-2010. The increase in production should be particularly strong in our LNG sector, which is expected to post average yearly growth of 13%. Looking beyond 2010, TOTAL’s portfolio of projects has good visibility, largely thanks to our numerous exploration successes in the last few years as well as major new projects in LNG and heavy crude. During 2006, TOTAL’s exploration teams discovered a record 1.2 billion barrels, and we must now bring these new discoveries into production as quickly as possible. They are mostly located in zones – particularly the North Sea, Angola and Nigeria – where the Group already has a strong presence. Our geographic diversification of activities is one of the Group’s strong points, allowing us to balance risks and opportunities. At the same time, we have begun to apply this same policy of diversification in the area of human resources, aiming to internationalize harmoniously and sustainably all of TOTAL’s main managerial levels. 2006 also saw major advances achieved by our gas businesses, with production start-ups (the commissioning of liquefaction trains 4 and 5 at the Bonny plant in Nigeria), progress on a number of other major projects (Yemen LNG and Snøvhit) and new production records (in Indonesia Group production reached 2.6 billion cubic feet per day). The Groups’ portfolio was also
bolstered by the addition of several major projects (Brass LNG in Nigeria, Qatargas II, Ichthys in Australia). These projects strengthen our potential to increase production over the long term and improve the geographic diversity of our portfolio. In the Downstream segment, the Group is moving to enhance the positioning of its refining assets via new projects involving conversion and sweetening units as well as ongoing modernization programs to make our refineries even more reliable. At the end of 2006 we brought onstream a new distillate hydrocracker at the Normandy refinery. In North America, our refining teams continued to study the possibilities for supporting and synergizing with the Group’s Upstream activities for valorizing heavy crudes in Canada. In the Asia/Middle East zone the Jubail refinery project was initiated in synergy with the Petrochemicals activities.
Christophe de Margerie Thierry Desmarest
On the Marketing side, TOTAL’s up-market brand positioning in France’s motor-fuels market is proving successful and our distribution networks in Germany and the United Kingdom have both been restructured. In Africa, following a series of acquisitions in 2005, we now have a well-diversified portfolio of assets and our market leadership is solidly established. In Asia, TOTAL’s networks in Pakistan, Cambodia and the Philippines are expanding and we are strengthening our presence in China via two joint ventures. In Petrochemicals, TOTAL will continue to increase its production of polymers, particularly in Asia and the Middle East, while also moving to make our activities in mature markets more competitive. Our Specialties segment also continues to grow, largely thanks to acquisitions in businesses such as adhesives and electroplating and also Hutchinson. One of the key issues in today’s energy industry is research and technological innovation. TOTAL is working to improve the efficiency and to reduce the cost of renewable energy systems, we are developing bio-energies and also looking at ways to derive energy from biomass. In a move to help curb global warming, the Group has launched a project involving capture and geological storage of CO2 at our Lacq site in southern France. This pilot project is a world first on such a scale and the results will be of great interest to all industrial sectors that consume large quantities of fossil fuels: refineries, petrochemicals plants, thermal power plants, cement plants, clean-coal developments, etc. Between 2002 and 2007, we will have doubled the Group’s annual capital investments, which are expected to come to $16 billion in 2007, of which 75% will be in the Upstream segment. Since the merger that created TOTAL in 2006, the dividend paid to our shareholders, in dollar terms, has increased by an average of 20% per year, which is stronger growth than any of the Group’s main rivals. The Board of Directors has proposed to increase by 15% the dividend payable for 2006, showing how confident the Group is that it can pursue successfully its strategy of profitable growth.
TOTAL is determined to remain one of the most dynamic and successful energy groups in the world today: • by paying careful attention to safety and environmental protection, which allows us to improve the reliability of our industrial plant; • by pursuing an investment strategy aimed at profitable organic growth; • by leveraging our top expertise in high-growth sectors (deep offshore, LNG, heavy crudes); • by maintaining good geographic diversity of both reserves and production; and • by implementing a wide-ranging human resources program with the emphasis on diversity at the managerial level. In today’s volatile business environment, the most important thing for TOTAL is to ensure continuity and coherence in its activities. These two elements must also underpin all our efforts to build a secure future. I decided recently to initiate the transfer of operational power in the Group by proposing to separate the functions of Chairman and Chief Executive Officer. The Board of Directors agreed to appoint Christophe de Margerie as CEO of TOTAL with effect from February 14, 2007. During the many years we have worked together at TOTAL, he has amply demonstrated that he possesses the qualities necessary to lead the Group to long-term success. As Chairman of the Board of Directors, I will continue to ensure that the rules of corporate governance are observed at all times and I will contribute to strategic thinking on the future directions for the Group, devoting all my experience to ensuring TOTAL’s successful growth. In view of the quality and commitment of the Group’s employees, our broad portfolio of projects, our healthy financial situation and the full backing of our shareholders, I have every confidence that TOTAL has the ability to maintain for many years to come its leading position as one of the largest and most profitable energy groups in the world.
Thierry Desmarest Chairman of the Board of Directors
o TOTAL IN 2006
QUESTIONS FOR CHRISTOPHE DE MARGERIE
Chief Executive Officer
The energy environment has completely changed in the last few years. TOTAL is posting excellent results, but will this be enough to maintain the Group’s position as a leader over the long term?
We are certainly seeing some major changes in the oil and gas environment, with the emergence of new players, crude prices going up or staying high, energy markets being deregulated and access to resources becoming more difficult in some countries. Our Group does business in 130 countries throughout the world. We are active in the OECD zone and particularly strong in nonOECD countries. It gives us a real competitive edge to be present both where the energy resources are found and where future demand for them will be stronger. Our position as a leader is due to the good geographic balance of our activities and the diversity of our project portfolio, but also to our sound financial situation and to our ability to resist today’s environment while seizing new opportunities and growing stronger. Today, we invest more than $1 billion every month, targeting Refining, Petrochemicals and above all the Upstream segment. For the period 2004-2006, our renewal rate for proved plus probable reserves (so-called «2P» reserves) stands at nearly 200%. Our stronger reserves portfolio is largely the result of our exploration efforts, but we have also been negotiating access to existing reserves that can be valorized over the long term. New gas projects in Qatar, Yemen and heavy oil projects in Canada have made significant contributions here over the last three years. Between 2006 and 2010, our target is to increase our production by more than 5% per year on average. In order to maintain its ranking as one of the leading international oil companies, the Group is building a long-term position. We are currently working on projects that will bear fruit in 2015-2020. Success will depend on our willingness to listen to our partners’ concerns, our capacity for adaptation and inventiveness and above all our ability to manage risks and uncertainties. We will need all of these skills if we are to remain among the leaders.
Given this situation, what we have to do is show producing countries that our know-how and technology can help them go beyond this to valorize the oil and gas deposits that were long considered unproducible. Mind you, our proposals cannot be based solely on our ability to produce reserves that are difficult to access or at the frontier of current technological expertise; the experience amassed by TOTAL is certainly an asset, but it is not enough on its own to convince producing countries to form partnerships with us. We also have to persuade them that we can help to develop their resources in a sustainable manner. In other words, I would say that a group like ours must contribute to the socio-economic development of producing countries while still ensuring that our business there is profitable. Two important elements here are education and vocational training. It is essential that we help build up know-how in the countries where we do business. We must continue to recruit local workers, ensure that they have skilled local technicians and engineers to supervise them, and insist that all our employees comply with the strict standards of behavior that are part of our ethics and set forth in our Code of Conduct. In the future, we will undoubtedly have to invest more in training schemes in certain countries, and this will mean working out innovative partnership solutions that can be implemented rapidly.
Today there is uncertainty about energy prices and about the role to be played by different energy sources, particularly oil and gas, which are TOTAL’s core business. What is your position on the future of energy?
Uncertainty is something that the energy industry has to live with, and the question of finding a balance between the different energy sources is a fundamental one for us – simply because hydrocarbons are non-renewable resources. First of all, «peak oil» could be reached 20 or 30 years from now depending on just how fast world consumption grows and how much non-conventional reserves we can valorize. But our research and development (R&D) efforts will allow us to find solutions to the environmental issues and to overcome new technological challenges – including development of alternative energy sources for the future. TOTAL is an energy group and we do not limit our activities to oil and gas. Each energy source has its advantages and its most suitable applications.
How can TOTAL hope to devise a long-term strategy when the commercial, environmental and technical contexts are changing all the time?
For many years we have been forging win-win partnerships with hydrocarbon-producing countries and today we are working to strengthen them. With the rise in oil and gas prices, producing countries have become aware of the value of their untapped reserves and just how necessary it is to optimize management of those reserves if they are to achieve long-term economic development. This approach is being given more or less emphasis depending on each country’s needs, the political forces in play and the difficulties involved in accessing and valorizing the reserves in place. It is not enough for TOTAL to offer to develop a country’s reserves more economically, arguing that we possess the appropriate technology. With crude prices at about $60 a barrel, national companies have the means to benefit from all the best solutions offered by research and development (R&D) teams.
TOTAL already mines coal and you recently announced that you were interested in becoming involved in nuclear energy. Does this mean a change in strategy?
The Group has had coal mining assets in South Africa for many years, but although mining is one of our businesses and uranium is a mineral resource, nuclear energy is not one of our businesses. This being said, TOTAL can hardly take an interest in the future of energy or discuss the equilibrium between energy supply and demand without including in that discussion nuclear energy, which meets part of that demand. Naturally, TOTAL’s priority is still hydrocarbons. But we are an energy group, and we want to
QUESTIONS FOR CHRISTOPHE DE MARGERIE
of the role played by this segment, particularly in countries where we are already active in Upstream, Refining and Petrochemicals activities. In general terms, we try to ensure that coordination between our Upstream and Petrochemicals activities enhances the Group’s visibility in countries where we do business. In Qatar, for example, where all of our business segments are present, TOTAL acts as a fully integrated market player.
You mentioned a changing legal and economic environment, with more difficult access to increasingly rare resources. Do you think TOTAL has the human resources needed to rise to all these challenges?
The way to ensure that we are in a position to carry out all our major industrial projects is by identifying well in advance the kinds of men and women we will need. In general terms, the projects we are looking at will require a wide range of skills, hard-working and efficient people at all levels and often in jobs requiring mastery of very complex technologies. Our project teams will usually also include engineers from host countries, whom we will have to train. To succeed in this, it will be vital to pursue the ongoing internationalization of our staffing base, with the emphasis on managerial positions. To achieve our aims here, we will also have to take the necessary steps to recruit and retain the teams of people we need. Being experts in our traditional oil and gas disciplines is no longer enough today. We must also have top behavioral skills. By that I mean giving our employees the vital ability to communicate and to empathize with others so that they can be more efficient in implementing our strategy. Today’s companies are finding it indispensable to tell the outside world what they are doing. Certainly we must communicate in France, where our roots are, but we must also communicate in all the other countries where we do business. We must get closer to the local population and become TOTAL United Kingdom, TOTAL Nigeria, TOTAL Indonesia…. It is vital to be seen by both the authorities and the citizens of the countries where we do business as a responsible and competent local company. As part of this effort, each employee must help to create TOTAL’s identity and to raise awareness of our Group’s scope and diversity. The recent launch of our corporate advertising campaign in China, the Middle East and Canada is part of this approach, whose final aim is to raise awareness of TOTAL and help us conclude more development partnerships with national companies, not only to valorize their own resources but also to carry out joint projects in other countries.
Christophe de Margerie
become involved in all the different forms of energy where there are opportunities for further business growth in future. We at TOTAL have always maintained that nuclear power and hydrocarbons were not so much competing as complementary energies. As for renewable energies such as solar power, wind energy and biomass, they each have a role to play but I am afraid that they will not be able to provide enough energy to make up the fossil-fuel shortfall if demand keeps on growing. Nevertheless, TOTAL is playing an active part in developing economical renewable solutions. We also have a duty to find other solutions to the shortfall problem, and we must help find ways to curb energy consumption.
You are coming from the Upstream segment, which makes the greatest contribution to the Group’s financial results. Will you be giving priority to this segment?
We are an integrated group, where all segments – Upstream, Downstream, Chemicals – have their advantages and their place in the company. The main thing is to ensure that they are all integrated and work together as well as possible. Only then can we retain our competitive edge. We invest in all our business segments so that each contributes as much as it can to the growth of the whole. Today, the Downstream segment enjoys a favorable environment, with consistently high refining margins and ongoing strong demand for refined products, particularly in Asia. Our Jubail refinery project in Saudi Arabia is right in line with this. We are now investing strongly in Refining, and between now and 2010 we expect to commit more than €1 billion per year on average (not counting major maintenance shutdowns). Projects include construction of desulfurization units able to process larger volumes of high-sulfur crudes and produce more diesel motor fuel to meet market demand, and we have a coker project in the United States. The Group is also investing in the ongoing upgrade of our European refining assets so as to maintain them at the highest level of efficiency and reliability. As for Marketing, the Group has made a number of changes recently: we have repositioned ourselves in the European market and also in Africa, where we are market leader. Marketing is one of our businesses and we are the first to recognize the usefulness
Christophe de Margerie Chief Executive Officer
o TOTAL IN 2006
o TOTAL IN 2006
Members of the Board of Directors are appointed by the Shareholders’ Meeting for a three-year term. In case of the resignation or death of a Director, the Board may appoint a replacement Director on a temporary basis and this appointment must be ratified by the next Shareholders’ Meeting. The terms of office of the members of the Board are staggered to more evenly space the renewal of appointments. In 1995, TOTAL established two special committees of the Board of Directors: the Nominating & Compensation Committee and the Audit Committee. In February 2007, the Board decided to split the Nominating & Compensation Committee into two separate committees: the Nominating & Governance Committee and the Compensation Committee (see p.15). In 2003, the Board of Directors amended the corporate governance rules initially adopted in 1995 and in 2001 to take into account recent developments in this area, including the recommendations contained in the AFEP-MEDEF (French Employers’ Federation) report published in September 2002. In 2004, the Board of Directors adopted a Code of Financial Ethics that, in the overall context of the Group’s Code of Conduct, details the obligations of the Chief Executive Officer as well as the Group’s senior managers responsible for financial and accounting matters. The Board has made the Audit Committee responsible for ensuring compliance with this Code. In 2005, the Board of Directors amended the Audit Committee’s charter to clarify its role in supervising the Group’s statutory auditors and the criteria governing the independence of the Committee’s members. The Board also set up an Audit Committee alert process governing irregularities in accounting, internal accounting controls or auditing matters. In 2006, at the end of Mr. Jacques Friedmann’s term of office as Director, Mr. Antoine Jeancourt-Galignani, an independent Director, was designated to succeed Mr. Friedmann as member and Chairman of the Audit Committee and as that committee’s financial expert. In February 2007, the Board decided to separate the functions of Chairman of the Board of Directors and Chief Executive Officer of the Company (see pp.15 and 16). Furthermore, since 14 May, 2004, the Board includes a Director (Mr. Daniel Boeuf) designated to represent employee shareholders and elected by the Shareholders’ Meeting. The mode of functioning of the Group’s administrative and managerial bodies has been defined in accordance with the corporate governance practices generally followed by companies whose shares are listed on a regulated stock market.
Board of Directors
The following individuals were members of the Board of Directors of TOTAL S.A. in 2006: Thierry Desmarest 61 years old. Chairman and Chief Executive Officer of TOTAL S.A. from May 31, 1995 to February 14, 2007, then Chairman of the Board of Directors of TOTAL S.A. since February 14, 2007. Chairman and Chief Executive Officer of Elf Aquitaine since February 15th 2000. Director of Sanofi-Aventis and of Air Liquide. Member of the Supervisory Board of AREVA. Daniel Boeuf 58 years old. Director of TOTAL S.A. representing employee shareholders since 2004. Responsible for training and skills management in specialties within the Refining & Marketing division. Daniel Bouton 56 years old. Independent Director. Director of TOTAL S.A. since 1997 Chairman and Chief Executive Officer of Société Générale. Director of Schneider Electric S.A. and Veolia Environnement. Bertrand Collomb 64 years old. Independent Director. Director of TOTAL S.A. since 2000 Chairman of the Board of Directors of Lafarge. Director of Atco. Paul Desmarais Jr 52 years old. Independent Director. Director of TOTAL S.A. since 2002. Chairman of the Board and co-Chief Executive Officer of Power Corporation of Canada. Vice-Chairman and Deputy Managing Director of Pargesa Holding S.A. Vice-Chairman of the Board of Directors and member of the Strategic Committee of Imerys. Member of the Board of Directors and Executive Committee of The Great-West Life Assurance Company, of Groupe Bruxelles Lambert S.A., of London Insurance Group Inc and of Mackensie Inc. Director of Suez. Jacques Friedmann 74 years old. Independent Director. Director of TOTAL S.A. since 2000 to May 12, 2006. Director of LVMH. Bertrand Jacquillat 62 years old. Independent Director. Director of TOTAL S.A. since 1996. University professor. Chairman and Chief Executive Officer of Associés en Finance. Member of the Supervisory Board of Klepierre and of Presses Universitaires de France (PUF).
For further information, please consult TOTAL’s “Registration Document 2006”, which is available in print or by accessing in the Group’s web site www.total.com
BOARD OF DIRECTORS
Antoine Jeancourt-Galignani 69 years old. Independent Director. Director of TOTAL S.A. since 1994. Former Chairman of Assurances Générales de France (AGF). Chairman of the Supervisory Board of Euro Disney SCA.Director of Gecina, of Société Générale, of Assurances Générales de France and of Kaufman & Broad S.A. Member of the Supervisory Board of Oddo et Cie. Anne Lauvergeon 47 years old. Independent Director. Director of TOTAL S.A. since 2000. Chairman of the Management Board of AREVA. Director of Suez and of VODAFONE Group Plc. Vice-President and Member of the Supervisory Board of SAFRAN. Peter Levene of Portsoken 65 years old. Independent Director. Director of TOTAL S.A. since 2005. Chairman of Lloyd’s, of International Financial Services London and of General Dynamics UK Ltd. Maurice Lippens 63 years old. Independent Director. Director of TOTAL S.A. since 2003. Chairman of Fortis and of Compagnie Het Zoute. Director of Groupe Bruxelles Lambert and of Belgacom. Christophe de Margerie 55 years old. Director of TOTAL S.A. since May 12, 2006. Member of the Executive Committee of TOTAL since 1999. President Exploration & Production, TOTAL, until February 13, 2007. Chief Executive Officer of TOTAL S.A. since February 14, 2007 Michel Pébereau 64 years old. Independent Director. Director of TOTAL S.A. since 2000. Chairman of BNP Paribas. Director of Lafarge, of Saint Gobain and of Pargesa Holding S.A. Member of the Supervisory Board of Axa. Chairman of the European Banking Federation. Thierry de Rudder 57 years old. Independent Director. Director of TOTAL S.A. since 1999. Acting Managing Director of Groupe Bruxelles Lambert. Director of Suez and Imerys. Jürgen Sarrazin 70 years old. Independent Director. Director of TOTAL S.A. since 2000.
Serge Tchuruk 69 years old. Independent Director. Director of TOTAL S.A. since 1989. Chairman of the Board of Alcatel-Lucent. Director of Thalès. Pierre Vaillaud 71 years old. Independent Director. Director of TOTAL S.A. since 2000. Chairman Former Chief Executive Officer of Elf Aquitaine and of Technip. Director of Technip. Member of the Supervisory Board of Oddo et Cie.
The Committee proposed to the Board a list of independent directors based on generally recognized corporate governance principles. The Nominating & Compensation Committee proposed that the Board consider a director to be independent when that director has “no relationship, of any nature, with the Company, group or its management which could compromise the independent exercise of his judgment”, pursuant to the AFEP-MEDEF (French corporate associations) report of 2002. At its meeting on February 13, 2007, the Board, acting on a proposal from the Committee, determined that, as of December 31, 2006, the following directors were independent: Messrs. Bouton, Collomb, Desmarais, Jacquillat, Jeancourt-Galignani, Levene of Portsoken, Lippens, Pébereau, de Rudder, Tchuruk and Vaillaud. These directors meet the independence criteria contained in the AFEP-MEDEF report of 2002, with the exception of Mr. Tchuruk, who has been a director of the Company for a period exceeding the twelve years recommended by the report. The Board, taking into account the nature of the Company’s industry, with the associated long-term investments and activities, considered that service as a director over a long period corresponds to certain experience and authority that strengthens the independence of a director. Upon this basis, the Board concluded that Mr. Tchuruk was an independent director. In evaluating the independence criteria under the report related to material client, supply, banking or investment banking relationships between a director and the Company, the Board considered that the business dealings between Group companies and the banking institutions where Messrs. Bouton and Pébereau are members of the administrative or management bodies are not material since these dealings represent less than 0.1% of their net banking income. The Board concluded that Messrs. Bouton and Pébereau were independent directors. Under this evaluation, 73.3% of the members of the Board of Directors are considered to be independent. The Board also noted that there were no potential conflicts of interest between the Company and its directors.
o TOTAL IN 2006
The Directors’ Charter specifies the obligations of each director and sets forth the roles and working procedures of the Board of Directors Obligations of Directors Each director is committed to maintain the independence of his analysis, judgment, decision and action as well as not to be unduly influenced. When a director participates in and votes at Board meetings, he is required to represent the interest of the shareholders and the Company as a whole. Directors must actively participate in the affairs of the Board, specifically on the basis of information communicated to him by the Company. Each director must inform the Board of conflicts of interest that may arise, including the nature and terms of any proposed transactions that could give rise to such situations. If he is opposed to a project brought before the Board, he is required to clearly express his opposition. Directors must hold at least the minimum number of registered shares specified by the Company by-laws and comply strictly with provisions regarding the use of material non-public information. Board of Directors’ role The Board of Directors’ role is to determine the strategic vision for the Group and supervise the implementation of this vision. With the exception of the powers and authority expressly reserved for shareholders and within the limits of the Company’s legal purpose, the Board may address any issue related to the operation of the Company and take any decision concerning the matters falling within its purview. Within this framework, the Board’s duties and responsibilities include, but are not limited to, the following: • appointing the officers responsible for managing the Company and supervising their actions; • defining the Company’s strategic orientations and, more generally, those of the Group; • considering major transactions to be pursued by the Group; • receiving information on significant events related to the Company’s affairs; • monitoring the quality of information supplied to shareholders and the financial markets through the financial statements that it approves and the annual report, or when major transactions are conducted; • convening and setting the agenda for shareholders meetings; • preparing, for each year, a list of the directors it deems to be independent under generally recognized corporate governance criteria; and • conducting audits and investigations as it may deem appropriate. The Board, with the assistance of its specialized committees where appropriate, ensures the following: • that authority within the Company has been properly delegated before it is exercised, and that the various entities of the Company respect the authority, duties and responsibilities they have been given; • that no individual is authorized to both contract and reimburse obligations of the Company without proper supervision and control; • that the internal audit function operates properly and that the independent auditors are able to conduct their audits under appropriate circumstances; and • that the committees it has created duly perform their responsibilities. Functioning of the Board The Board regularly (at least every three years) conducts an evaluation of its own practices. Each year it also discusses its performance.
The Board of Directors convenes at least four times each year and more often should circumstances require it. The Board held seven meetings in 2006, with an average attendance of 86.2%. The agenda for these meetings included, but was not limited to, the following subjects: • 2006 Budget; • Group insurance policy; • summary of Ethics Committee activity; • 2005 accounts (consolidated financial statements, parent company accounts); • Group finance policy; • evaluation of the independence of directors and discussion of the Board’s performance; • approval of the Arkema spin-off and related terms; • convocation of the shareholders’ meeting and approval of the documents related to this meeting; • strategic outlook for the Chemicals division, for the Gas & Power division, for the Exploration & Production division and for the Refining & Marketing division; • earnings for the first quarter 2006 and information on adjustments under IFRS to the 2004 accounts; • update on CEPSA developments; • award of stock options and restricted share grants; • presentation of final earnings for the first half 2006 and mid2006 outlook; • presentation of the Jubail (Saudi Arabia) refinery construction project; • Group strategy and five-year plan; • earnings for the third quarter 2006; • distribution of an interim dividend.
For further information, please consult TOTAL’s “Registration Document 2006”, which is available in print or by accessing in the Group’s web site www.total.com
ADMINISTRATION & COMMITTEES
The Audit Committee’s role is to assist the Board of Directors in ensuring effective internal financial control and oversight and appropriate disclosure to shareholders and the financial markets. The Audit Committee’s duties include: • recommending the appointment of independent auditors, their compensation and ensuring their independence; • establishing the rules for the use of independent auditors for non-audit services; • examining the accounting policies used to prepare the financial statements, examining the parent company annual financial statements and the consolidated annual, semi-annual, and quarterly financial statements prior to their examination by the Board, after regularly monitoring the financial situation, cash flow statement and obligations of the Company; • reviewing the implementation of internal control procedures and the evaluation of their effectiveness with the assistance of the internal audit department; • reviewing the creation and activities of the disclosure committee, including reviewing the conclusions of this committee; • approving the scope of the annual audit work of internal and external auditors; • keeping regularly informed of completed audits, examining internal audit reports and other reports (independent auditors, annual report, etc.); • examining the appropriateness of risk oversight procedures; • examining the choice of appropriate accounting principles and methods; • examining the Group’s policy for the use of derivative instruments; • giving, if requested by the Board, its opinion regarding major transactions contemplated by the Group; • annually reviewing significant litigation; • implementing and monitoring compliance with the Financial Code of Ethics; • proposing to the Board, for implementation, a procedure for complaints or concerns of employees, shareholders and others, related to accounting, internal accounting controls or auditing matters; and • examining the procedure for booking the Group’s proved reserves. The Committee is made up of at least three directors designated by the Board of Directors. During 2006, the members of the Audit Committee were: Mr. Jacques Friedmann (Chairman until May 12, 2006) then Mr. Antoine Jeancourt-Calignani, as well as Messrs. Bertrand Jacquillat and Thierry de Rudder, all independent Directors. The Committee meets at least four times a year to examine the consolidated annual and quarterly financial statements. The Committee may also meet with the Chairman or the Chief Executive Officer, perform inspections and consult with managers of operating or non-operating departments, as may be useful in performing its duties. The Committee meets with the independent auditors and submits written reports to the Board of Directors regarding its work. The Audit Committee met six times during 2006.
Nominating & Compensation Committee
This Committee performs the following specific tasks: 1. With respect to nominations: • assists the Board in the selection of directors, corporate officers, and Directors as Committee members; • recommends annually to the Board the list of directors who may be considered as “independent directors” of the Company; and • proposes methods for the Board to evaluate its performance. 2. With respect to compensation: • makes recommendations and proposals to the Board regarding: (i) compensation, pension and insurance plans, in-kind benefits, and other compensation, including severance benefits, for the Chairman or the Chief Executive Officer of TOTAL S.A.; and (ii) awards of stock options and restricted share grants, including specific awards to the Chairman or the Chief Executive Officer; • reviews the compensation of members of the Executive Committee, including stock option plans, restricted share grants and equity-based plans as well as pension and insurance plans and in-kind benefits. The Committee is made up of at least three directors designated by the Board of Directors. The members of the Committee are: Messrs. Bertrand Collomb, Michel Pébereau and Serge Tchuruk, all independent directors. The Committee is chaired by Mr. Michel Pébereau. The Committee meets at least twice a year and met three times during 2006. The Committee invites the Chief Executive Officer of the Company to present recommendations. The Chief Executive Officer may not be present during deliberations regarding his own compensation.
Recent Corporate Governance Developments
At its meeting on February 13, 2007, the Board of Directors, acting on a proposal by the Nominating & Compensation Committee, enacted certain changes related to the Group’s corporate governance, effective as of February 2007. The Board amended the Directors Charter, subsequently renamed the Rules of Procedure of the Board of Directors, mainly to take into account the fact that separate individuals would serve as Chairman and as Chief Executive Officer and to create a separate Nominating & Governance Committee and Compensation Committee to divide the duties of the former Nominating & Compensation Committee. The Board also adopted charters for these committees. Also on February 13, 2007, the Board of Directors appointed Mr. Christophe de Margerie as Chief Executive Officer of the Company. Mr. Thierry Desmarest remains Chairman of the Board of Directors.
o TOTAL IN 2006
THE EXECUTIVE COMMITTEE & THE MANAGEMENT COMMITTEE
Meeting of the Executive Committee on 13 February, 2007 (from left to right): Bruno Weymuller, François Cornélis, Christophe de Margerie, Thierry Desmarest, Michel Bénézit, Yves-Louis Darricarrère, Robert Castaigne.
Composition of the Executive Committee after February 13, 2007 On February 14, 2007, Christophe de Margerie was appointed Chief Executive Officer of TOTAL S.A., with Thierry Desmarest continuing to serve as non-executive Chairman of the Board of the Company. From February 14, 2007, Christophe de Margerie is the President of TOTAL’s Executive Committee and of TOTAL’s Management Committee. Yves-Louis Darricarrère replaced Christophe de Margerie as President of the Exploration & Production division of the Group. Jean-Jacques Guilbaud, President of the Human Resources & Communications department of the Group was appointed as a member of the Executive Committee on February 19, 2007.
THE EXECUTIVE COMMITTEE & THE MANAGEMENT COMMITTEE
THE EXECUTIVE COMMITTEE
is the primary decision-making body of the Group. It implements the strategy formulated by the Board of Directors and authorizes related investments.
THE MANAGEMENT COMMITTEE
of the Group facilitates coordination among the divisions and monitors the operating results and activity reports of these divisions.
THE EXECUTIVE COMMITTEE (COMEX)
THE MANAGEMENT COMMITTEE (CODIR)
The following individuals were serving as members of TOTAL’s Executive Committee as of December 31, 2006:
Thierry Desmarest (a) Chairman of the COMEX (Chairman and Chief Executive Officer); François Cornélis Vice-Chairman of the COMEX (President of the Chemicals division); Michel Bénézit (President of the Refining-Marketing division) Robert Castaigne (Chief Financial Officer) Yves-Louis Darricarrère (President of the Gas & Power division); Christophe de Margerie (b) (President of the Exploration & Production division); and Bruno Weymuller (President of the Strategy & Risk assessment department)
(a) Until 13 February 2007. (b) Chairman of the Executive Committee (Chief Executive Officer) since 14 February 2007.
In addition to the members of the COMEX, the following 23 individuals from various non-operating departments and operating divisions were serving as members of TOTAL’s Management Committee as of December 31, 2006: Holding Jean-Pierre Cordier, Yves-Marie Dalibard, Jean-Michel Gires, Jean-Jacques Guilbaud, Peter Herbel, Ian Howat, Jean-Marc Jaubert, Patrick de La Chevardière, Jean-François Minster Upstream Philippe Boisseau, Jean-Marie Masset, Charles Mattenet, Patrick Pouyanné, Jean Privey Downstream Alain Champeaux, Alain Grémillet, François Groh, Éric de Menten, Jean-Jacques Mosconi, André Tricoire Chemicals Pierre-Christian Clout, Françoise Leroy, Hugues Woestelandt
Statutory auditors • Ernst & Young Audit 41, rue Ybry, 92576 Neuilly-sur-Seine Cedex G. Galet - P. Diu • KPMG Audit Département de KPMG S.A. 1, cours Valmy, 92923 Paris-La Défense R. Amirkhanian Alternate auditors • Jean-Luc Decornoy 2 bis, rue de Villiers, 92300 Levallois-Perret • Pierre Jouane 41, rue Ybry, 92576 Neuilly-sur-Seine Cedex The terms of office of the statutory auditors and of the alternate auditors expire at the conclusion of the shareholders’ meeting called to approve the financial statements for the fiscal year 2009.
• The Upstream segment includes the exploration and production of hydrocarbons, gas, power and other energies activities. • The Downstream segment includes refining and marketing activities along with trading and shipping activities. • The Chemical segment includes Base Chemicals and Specialties. The Holding Division includes all the usual functional and financial activities as well as the financial interest in Sanofi-Aventis.
o TOTAL IN 2006
February 14, 2007
Strategy & Risk assessment
Sustainable Development & Environment
Information Technology Telecommunications
Exploration & Production
Gas & Power
Europe North Atlantic
Renewable Energies, Strategy, Human Resources & Communications
Technology Development Operations & Pau Unit
South America Africa Middle East Asia
Finance & Administration
Strategy Business Development & R&D
Trading & Marketing
Liquefied Natural Gas
Finance & Information Technology
Asia & Far East
Human Ressources & Internal Communications
Continental Europe & Central Asia
Board of Directors Chief Executive Officer
Humans Resources & Corporate Communications
Executive Career Management
Refining & Marketing
Trading & Shipping (a)
Africa Middle East
Specialties Crude Oil Trading Marketing Europe Asia
(Bostik, Cray Valley, Sartomer, Atotech) Fertilizers (Grande Paroisse)
Human Resources & Communications
Rubber processing Products Trading Specialities Administration
(Hutchinson, Mapa Spontex)
Products & Derivatives Trading
Human Resources & Internal Communications
Strategy Development Research
(a) The Trading & Shipping division reports to the CFO.
o TOTAL IN 2006
o TOTAL IN 2006
HIGHLIGHTS OF 2006
Confirmation of the potential of the Gengibre discovery on Block 32 in the ultra-deep offshore. The exploration well tested at 4,540 barrels of oil per day from the Miocene objectives and 5,100 barrels per day from the Oligocene objectives. Production start-up on BBLT (Benguela Belize Lobito Tomboco) on Block 14 in Angola’s deep offshore zone (TOTAL, 20%)
TOTAL receives the first cargo of LNG from train 4 of the Nigeria LNG (NLNG) liquefaction plant, in which the Group has a 15% interest. This shipment is part of the sales and purchase agreement between TOTAL Gas & Power Ltd and NLNG for 1.15 million metric tons of LNG per year.
TOTAL acquires an additional 30% interest in the Victoria discovery, bringing its overall stake to 50%, and disposes of 5% of its interest in the Tyrihans field. Production start-up on Victoria is scheduled for 2009 and a first production plateau should occur about 2011 with an estimated (100%) output of 70,000 barrels of oil equivalent per day.
fields, Bethany and Maben, located in eastern Texas and Mississippi respectively, to XTO Energy Inc.
TOTAL acquired a 60% interest in offshore Exploration Blocks 17 and 18, located off the south-east coast of Bangladesh. The blocks, with a combined area of nearly 14,000 square kilometers, are in water about 20 meters deep.
Production start-up on the Forvie gas and condensates field in the North Sea (TOTAL operator, 100%). Forvie North is expected to produce about 20,000 barrels of oil equivalent per day during its plateau phase.
TOTAL was awarded the Bomana exploration block (TOTAL operator, 100%) in the Rio Del Rey offshore basin. The block, covering 140 square kilometers, is located close to the concessions already operated by TOTAL in Cameroon.
Oil discovery at the Jathma-1 well, on Block 10 in the East Shabwa development zone (TOTAL operator, 28.57%).
TOTAL and PetroChina signed a production-sharing agreement covering appraisal, development and production of natural gas on China’s Sulige South Block, covering an area of nearly 2,390 square kilometers in the Ordos Basin (Inner Mongolia).
Fifth oil discovery in the eastern part of Block 32 (TOTAL operator, 30%) in Angola’s ultra deepwater zone about 14 kilometers south of Canela-1 and 15 kilometers south-east of Gengibre-1, the discoveries made on the same block in 2004 and 2005 respectively.
Republic of Congo
Oil discovery on the ultra-deepwater Mer Très Profonde Sud permit, about 180 kilometers south of Pointe Noire in the Republic of Congo.
TOTAL awarded two offshore exploration permits about 150 kilometers off the north-west coast of Australia in water about 1,400 meters deep.
Production start-up on the Glenelg offshore gas and condensates field in the British North Sea, 240 kilometers east of Aberdeen in water about 100 meters deep. The Group has successfully drilled a deviated well 7,300 meters long from the Elgin platform, reaching it target (a very-high temperature and pressure reservoir – 200 °C and 1,150 bars) 5,600 meters below sea level. The well has the potential to produce about 30,000 barrels of oil equivalent per day.
New oil discovery on Block NC 186 (TOTAL, 24%) in the Murzuk Basin, about 800 kilometers south of Tripoli. Exploration well K1 tested at 2,300 barrels of oil per day.
The Norwegian parliament approved the development plan for the Tyrihans field (TOTAL, 21.51%). Tyrihans is located in the Haltenbanken area of the Norwegian North Sea, about 170 kilometers from the coast in water 285 meters deep. Production startup is scheduled for 2009 and a first production plateau should be reached by about 2011 with about 70,000 barrels of oil equivalent per day.
The Netherlands Arbitration Institute (NAI) delivered its decision to both parties, Santander Central Hispano (SCH) and TOTAL, in the arbitration concerning CEPSA. The decision provides for the return to TOTAL of its 8.31% interest in CEPSA currently held via Somaen Dos, a holding company in which SCH and TOTAL are shareholders; the recognition of TOTAL’s right to exercise its call option against SCH over 4.35% of CEPSA at a price then estimated at below €5 per share.
TOTAL focuses on exploration and production in the Gulf of Mexico, following the signature of an agreement to sell two mature
Yemen: transporting pipeline sections for Yemen LNG Ltd
France: part of the new distillate hydrocracker (DHC) at the Normandy refinery
Positive test on well N° 1 on the Alaminos Canyon 856 Block (TOTAL operator, 70%) offshore in the Gulf of Mexico. The well, drilled to a depth of 4,450 meters in water 2,320 meters deep, is about 225 kilometers east of the Texas coast.
TOTAL provided assistance to victims of the earthquake on the island of Java and donated $1 million to the Indonesian Red Cross
Start-up of the hydrogen production unit (Steam Methane Reformer-SMR) at the Normandy refinery near Le Havre. This startup marks the first step in the commissioning of the new distillate hydrocracker (DHC).
Gas discovery in the Timimoun Perimeter (TOTAL operator, 63.75%) in southwest Algeria. Exploration well MJB-3 tested at 235,000 cubic meters per day.
TOTAL signed two agreements to take part in exploration on four new offshore blocks off the north-west coast of Australia. The blocks are located between 300 and 400 kilometers from the coast in water between 1,000 and 3,000 meters deep. Oil discovery on Block NC 191 (TOTAL operator, 100%) in the southwest of Libya, about 800 kilometers south of Tripoli.
TOTAL signed a farm-in agreement with Amni International Petroleum Development Company Ltd to acquire a 40% interest in two offshore oil mining licenses, OML 112 and OML 117, to the southeast of the Nigerian coast. An appraisal well, Ima 12, confirmed the potential of gas reserves in the zone.
The General Shareholders’ Meeting of TOTAL S.A. approved the spin-off of Arkema. Since October 1, 2004 this company has manufactured vinyl products, industrial chemicals and performance products.
Republic of Congo
Oil discovery on the offshore Moho-Bilondo permit (TOTAL operator, 53.5%) about 80 kilometers off the coast of the Republic of Congo in water between 600 and 900 meters deep.
TOTAL and the Saudi Arabian Oil Company (Aramco) signed a Memorandum of Understanding for the constriction and operation of an oil refinery with a capacity of 400,000 barrels per day at Jubail in Saudi Arabia. The refinery, which is expected to become operational in 2011, will have deep conversion capacity and will produce for export. It will process Arabian Heavy crude into very high quality refined products meeting the most stringent standards.
Second oil discovery on the Alaminos Canyon 856 Block in the Gulf of Mexico (TOTAL operator, 70%). Well N°2, drilled to a depth of 4,760 meters in water 2,380 meters deep, tested positive, encountering oil pay over a thickness of 26 meters in the main objective.
Oil discovery on the first exploration well drilled on the Dissoni offshore block in the Rio Del Rey area.
Signature of an agreement with Japanese energy company INPEX to acquire a 24% interest in Block WA 285-P, located in approximately 250 meters of water offshore northwestern Australia. The Block WA 285-P, contains the Ichthys gas field, discovered in 2000.
Inauguration of the Euskadour international gas interconnector linking the grids in the Basque region of France and Spain. During its first phase, the 28-kilometer Euskadour gas pipeline will carry about 500 million cubic meters of natural gas per year (equivalent to the annual consumption of the French city of Bordeaux) both ways across “the Pyrenees”.
Signature of an agreement for TOTAL to acquire a 49% interest in the offshore East Sepanjang Block, located northeast of the island of Java, in Indonesia. Subject to certain conditions, TOTAL may subsequently acquire an additional 41% interest.
o TOTAL IN 2006
Canada: the Joslyn project in Athabasca
Qatar: the Dolphin project multi-phase gas treatment plant at Ras Laffan
TOTAL acquires Chevron’s interest in the Brass LNG liquefied natural gas project in the Niger delta, 90 kilometers west of Port Harcourt, in Nigeria. The first phase of the project provides for two liquefaction trains each producing 5 million metric tons per year, with production mainly intended for the European and American markets.
The Altamira regasification terminal in Mexico began commercial operations. The facility, the first of its type to be built in Mexico, will make a significant contribution to the country’s gas supply.
TOTAL disposed of its power-generation assets in Argentina. Leveraging its position as the country’s second-largest gas supplier, the Group will now focus on the exploration-production segment.
Signature of an agreement between TOTAL and Banco Santander Central Hispano (Santander) to implement the provisions of the partial award made in March 2006 by the Netherlands Arbitration Institute, which adjudicated their dispute concerning CEPSA. Under the agreement, the CEPSA shares held by investment vehicle Somaen Dos which are due to TOTAL were returned immediately. TOTAL now directly owns 44.5% of CEPSA’s share capital.
Start-up of the commercial production phase of the Joslyn project in Canada’s Athabasca region, about 60 kilometers north-west of Fort McMurray, in Alberta Province.
TOTAL was awarded 20 deep-offshore exploration blocks in the western zone of the Gulf of Mexico, as part of Lease Sale 200. The blocks will be operated by Total E&P USA Inc. with a 100% interest.
Signature, under the auspices of the French Prime Minister’s office, of a “Charter to Foster the Use of Superethanol E85” in France. The Group is committed to equip between 200 and 275 retail stations, more than 40% of the number deemed necessary in France by end-2007 by the Prost study Group. Start-up of the distillate hydrocracker (DHC) at the Normandy refinery.
A consortium comprising TOTAL (50%), Hocol (operator, 20%, subsidiary of Maurel & Prom) and Talisman (30%) was awarded exploration rights for the Niscota block in Colombia.
Gas discovery located between the Tunu and Peciko fields, on the offshore Mahakam permit.
TOTAL signed a final agreement with the regional authorities in Basilicate (southern Italy) to develop the Tempa Rossa field. This field, due to start producing in 2010, will yield plateau production of about 50,000 barrels of oil per day. The agreement also sets out the Group’s commitment regarding environmental protection and social programs in the region. TOTAL awarded an exploration permit for Block L3 on the Netherlands continental shelf. The block, covering 406 square kilometers, is 100 kilometers north of Den Helder in water about 40 meters deep.
Promising oil and gas discoveries in the Alwyn zone. This zone in the British North Sea includes a number of producing fields – Alwyn North, Dunbar, Grant, Ellon, Nuggets and Forvie North – all owned and operated by TOTAL. The new discovery is 160 kilometers east of the Shetland and 440 kilometers north-east of Aberdeen. The Jura West 3/15-10 well, drilled 10 kilometers to the east of the Dunbar field, could start producing in 2008. A second development well and another exploration well nearby are already planned. Jura West is expected to start production in 2008, via a 3 kilometre tie-back to the Forvie North subsea manifold which is linked to the Alwyn North NAB process platform. These discoveries come only weeks after a previous exploration well (3/9 a-N50), drilled from the NAA platform on Alwyn North, encountered 85 meters of sand containing gas reservoirs in
TOTAL acquired 4.35% of CEPSA share capital from Santander, as the result of an agreement signed in August 2006. TOTAL now owns 48.83% of CEPSA.
Confirmation of the potential of a fourth production zone on Block 17 (TOTAL operator, 40%) with the discovery of Orquidea-2 in Angola’s deep offshore.
Two new oil discoveries on the eighth and ninth exploration wells on Block 32 (TOTAL operator, 30%) in Angola’s ultra-deep offshore.
TOTAL signed an agreement to farm into the offshore permit AC/P37 in Australia’s Browse Basin. The permit, which covers 4,415 square kilometers, is located about 200 kilometers off the north-west coast in water about 200 meters deep. TOTAL has an 80% interest and is operator for the lower levels of the permit.
TOTAL launched a CO2 capture and sequestration pilot project in the Lacq basin in southwest France. The project, which leverages a technique considered among the most promising in the fight against climate change, calls for up to 150,000 metric tons of CO2 to be injected into a depleted natural gas field at Rousse over a period of two years starting in late 2008.
the Stratfjord formation as well as 60 meters of oil in the Brent formation above it.
TOTAL and Nigeria LNG Ltd (NLNG) sign a 20-year sales and purchase agreement under which TOTAL will lift 1,375 million metric tons per year of LNG to be produced by NLNG’s train 7. Promising discoveries and the launch of studies for a new standalone development on the Egina field in Nigeria’s deep-offshore zone.
Start of production on the Dalia field on Angola’s deep-offshore Block 17. The field, which was discovered in 1997 some 135 kilometers from the coast in water between 1,200 and 1,500 meters deep, holds an estimated 1 billion barrels of recoverable reserves. Plateau production should reach 240,000 barrels of oil equivalent per day.
TOTAL was awarded three new permits in the British North Sea. The Group now has a 36% interest in Blocks 206/3 and 206/4. These two blocks, located 80 kilometers west of the Shetland, enhance the gas potential of the neighboring Laggan zone. TOTAL also has a 100% interest in Block 3/8f near the Alwyn field, about 420 kilometers north-east of Aberdeen.
Start of commercial gas production on the Shah Deniz gas development project in the Caspian. Shah Deniz lies off the coast of Azerbaijan about 70 kilometers south of Baku.
TOTAL and French electricity utility EDF inaugurated a photovoltaic solar panel plant owned by their joint venture subsidiary TENESOL. The plant is in Saint-Martin-du-Touch on the outskirts of Toulouse (southern France).
Inauguration of the deep-offshore Dalia field by Angola’s Oil Minister, Desiderio Costa, in the presence of the President of the national company Sonangol (Sociedade Nacional de Combustíveis de Angola), Manuel Vicente and TOTAL’s Chief Executive Officer, Christophe de Margerie. Dalia, located on the prolific Block 17 where 15 discoveries have now been made, was brought into production in December 2006. Output from the field could be as high as 240,000 barrels per day.
Signature of an exploration and production-sharing contract with the Gabon authorities for the offshore Diaba permit. This permit, covering 9,075 square kilometers, lies about 50 kilometers off the southern coast of Gabon at water depths ranging from 100 to 2,500 meters.
TOTAL finalized acquisition of a 16.7% interest in the second train of Qatargas II and also took an 8.35% stake in the South Hook LNG import terminal in the United Kingdom.
TOTAL put into service its first retail station pumps supplying superethanol motor fuel. This new biofuel, with a very high ethanol content (up to 85%), will allow flexfuel vehicles to run on superethanol, unleaded super 95 or 98 or any blend of these fuels. Inauguration of the distillate hydrocracker (DHC) at the Normandy refinery.
HIGHLIGHTS OF THE 1ST QUARTER OF 2007
TOTAL was awarded a new exploration block, South East Mahakam, in the Mahakam delta (offshore from East Kalimantan, Indonesia). The Group is operator with a 50% interest.
Oil discovery on the sixth exploration well (Salsa-1) drilled on Block 32 (TOTAL operator, 30%) in Angola’s ultra-deep offshore, about 15 kilometers south-west of the Mostarda-1 discovery. Oil discovery on the deep-offshore Block 14 (TOTAL, 20%), in the Lower Congo Basin off the coats of Angola.
Start of development of the Jura gas and condensates field, only four months after it was discovered. Jura is expected to go into production in the second quarter of 2008 and to reach plateau production of about 45,000 barrels of oil equivalent per day.
Gas discoveries on three exploration wells – Ton Chan-1X, Ton Chan-2X and Ton Rang-2X – drilled on Blocks 15 and 16, operated by the Thai national company PTTEP in the Gulf of Thailand.
o TOTAL IN 2006
uu TOTAL’s Upstream segment includes
Exploration & Production and Gas & Power activities. The Group has exploration and production activities in 42 countries and produces oil or gas in 30 countries.
UPSTREAM SEGMENT FINANCIAL DATA
2.36 Mboe/d produced in 2006. 11.1 Bboe of proved reserves as of December 31, 2006*. 9.0 B€ invested in 2006. 14,862 employees.
* Based on year-end Brent price of 58.93 $/b.
20,782 20,307 8,709
20,888 18,421 8,029
15,037 12,844 5,859
Non-Group Sales Adjusted operating income Adjusted net operating income
UPSTREAM / EXPLORATION & PRODUCTION
Qatar: the Dolphin project multi-phase gas treatment plant at Ras Laffan
Nigeria: an operator on an Akogep oil and gas production platform
Canada: studying seismic survey maps
EXPLORATION & PRODUCTION
Exploration and development
TOTAL’s Upstream segment intends to continue to combine longterm growth and profitability at the levels of the best in the industry. TOTAL continued to follow an active exploration program in 2006, with exploration investments of consolidated subsidiaries amounting to 1,214 M€. The principal exploration investments were made in Nigeria, the United Kingdom, Angola, the United States, Libya, Venezuela, Norway, Algeria, Congo, Kazakhstan, Canada, Indonesia, Australia, Argentina, Cameroon, Mauritania, Gabon, China, Azerbaijan and Thailand. The development expenditures of the Group’s consolidated Exploration & Production subsidiaries amounted to 6.0 B€ in 2006, (including a share in the Ichthys project in Australia) primarily in Norway, Angola, Nigeria, Kazakhstan, Indonesia, Congo, Yemen, Qatar, the United Kingdom, Canada, Australia, the United States, Venezuela, Azerbaijan and Gabon.
Conditions in the oil market remained globally favorable in 2006. Crude oil prices, on average, increased compared to 2005, driven by robust demand and sustained production capacity utilization rates. Adjusted net operating income for the Upstream segment was 8,709 M€ compared to 8,029 M€ in 2005, an increase of 8%. Expressed in dollars, 2006 adjusted net operating income for the Upstream segment was $10.9 billion, an increase of $0.9 billion compared to 2005, composed mainly of the $2.5 billion positive effect of higher hydrocarbon prices, which was partially offset by the negative impact of lower production volumes and changes in the portfolio (approx -$0.6 billion), higher production costs (approx -$0.5 billion, including -$0.2 billion for exploration) and the impact of changes in tax terms (approximately -$0.5 billion).
Proved reserves calculated according to SEC rules were 11,120 Mboe as of December 31, 2006, representing close to 13 years of production at the current rate. At year-end 2006, TOTAL had a solid and diversified portfolio of proved plus probable reserves representing 20.5 Bboe, or more than 23 years of production at the current rate (b). Proved reserves are the estimated quantities of TOTAL’s entitlement under concession contracts, production sharing contracts or buyback agreements.
(b) Limited to proved and probable reserves covered by E&P contracts on fields that have been drilled and for which technical studies have demonstrated economic development in a 40 $/b Brent environment, including the portion of heavy oil in the Joslyn field developed by mining.
(a) For further information, please consult TOTAL’s “Registration Document 2006”, which is available in print or by accessing in the Group’s web site www.total.com
o TOTAL IN 2006
Angola: the Dalia FPSO in the deep offshore
Liquids represented approximately 59% of these reserves and natural gas the remaining 41%. These reserves are located primarily in Europe (Norway, the United Kingdom, the Netherlands, Italy and France), Africa (Nigeria, Angola, Congo, Gabon, Libya, Algeria and Cameroon), Asia/Far East (Indonesia, Myanmar, Thailand and Brunei), North America (Canada and the United States), the Middle East (United Arab Emirates, Qatar, Yemen, Oman, Iran and Syria), South America (Venezuela, Argentina, Bolivia, Trinidad & Tobago and Colombia), and the CIS (Kazakhstan, Azerbaijan and Russia). TOTAL’s production in Africa averaged 720 kboe/d in 2006 (including its share in the production of equity affiliates), making TOTAL one of the leading international oil companies, based on production, in the region. Projects in Africa accounted for 31% of the Group’s total production in 2006.
The Group has been present in Algeria since 1952. Its production comes from the Hamra (100%) and Tin Fouyé Tabankort (TFT) (35%) fields, as well as, through the Group’s 48.83% interest in CEPSA, from the Ourhoud and Rhourde El Khrouf (RKF) fields. TOTAL’s share of production amounted to 80 kboe/d in 2006.
For the full year 2006, hydrocarbon average daily production was 2,356 kboe/d compared to 2,489 kboe/d in 2005, a decrease of 5% due to the following elements : -2% due to the price effect, -1% due to changes in the portfolio and -2% due to shut-downs in the Niger Delta area. Excluding these items, the positive impact of new field start-ups was offset by normal declines and shutdowns in the North Sea. In 2004, average production amounted to 2,585 kboe/d. Liquids accounted for approximately 64% and natural gas accounted for approximately 36% of TOTAL’s combined liquids and natural gas production in 2006 on an oil equivalent basis. The table on the next page sets forth by geographic area TOTAL’s average daily production of crude oil and natural gas for each of the last three years. Consistent with industry practice, TOTAL often holds a percentage interest in its acreage rather than a 100% interest, with the balance being held by joint venture partners (which may include other international oil companies, state oil companies or government entities). TOTAL frequently acts as operator (the party responsible for technical production) on acreage in which it holds an interest. As in 2005 and 2004, substantially all of the crude oil production from TOTAL’s Exploration & Production activities in 2006 was marketed by the Trading-Shipping activities of its Downstream segment.
TOTAL has been present in Angola since 1953 and is currently one of the most prominent oil companies in the country. The Group has onshore, deep-offshore and ultra-deep-offshore interests through six production permits (three operated: Blocks 17, 3, and FS/FST; three non-operated: Blocks 0, 14, and 2) and three exploration permits (Block 32, operator; and Blocks 31 and 33). The Group’s production comes principally from Block 17 (40%, operator), Block 0 (10%) and Block 14 (20%). On Block 17, Dalia began production in December 2006 and is expected to reach a production plateau of 240 kboe/d. On Block 14, the Benguela Belize Lobito Tomboco (BBLT) platform began production in January 2006. 20 discoveries have been made on Blocks 31 and 32. TOTAL’s production in Angola (including its share in the production of equity affiliates) reached 117 kboe/d in 2006. Deep-offshore Block 17 is TOTAL’s principal producing asset in Angola. It is composed of four major production zones: Girassol, which has been in production since December 2001, Dalia, which has been in production since December 2006, Pazflor, where development studies are underway, and CLOV, which is based on the Cravo, Lirio, Orquidea, and Violeta discoveries. The “standalone” development design for CLOV is being studied after the successful drilling of the Orquidea-2 well in the summer of 2006. On the Girassol structure, production (a) from the Girassol and Jasmim fields reached 210 kb/d on average in 2006, despite the planned maintenance of the FPSO (Floating Production, Storage and Offloading) facility, which occurs every five years. On the second production zone, Dalia field began production in December 2006. This development was launched in 2003 and is based on a system of sub-sea wells connected to a new FPSO facility with a production capacity of 240 kb/d.
TOTAL has been present in Africa since 1928. Its exploration and production operations are primarily located in the countries bordering the Gulf of Guinea and in North Africa. Highlights of 2006 included: • in Angola, first oil of the Dalia project on Block 17, with a planned production capacity (a) of 240 kboe/d, as well as the start-up of the Benguela Belize Lobito Tomboco and Landana North fields on Block 14; • and, in Nigeria, taking interests in the Brass LNG liquefied natural gas project as well as in offshore Blocks OML 112 and OML 117.
(a) In 100 %.
UPSTREAM / EXPLORATION & PRODUCTION
Production by geographic area
Liquids (kb/d) 603 35 108 13 93 82 84 188 7 1 6 119 11 3 13 9 83 29 3 20 6 7 <1 7 365 6 1 237 121 88 14 20 29 16 9 1,218 Natural Gas (Mcf/d) 479 129 24 2 22 27 275 47 47 598 375 97 43 2 81 1,282 65 891 121 205 2 <1 2 1,970 124 247 726 873 11 6 3 2 4,389 Total (kboe/d) 694 59 112 13 97 87 84 242 16 1 15 226 78 21 22 9 96 253 15 182 15 41 8 <1 8 728 30 44 372 282 90 15 20 29 17 9 2,015 Liquids (kb/d) 672 38 144 12 91 94 84 209 9 <1 9 143 11 3 19 12 98 29 3 20 6 8 8 390 7 1 247 135 98 14 23 31 22 8 1,349
Natural Gas (Mcf/d) 418 141 23 2 20 26 206 174 174 586 351 97 38 2 98 1,254 54 890 109 201 2 2 2,063 117 283 734 929 28 7 3 18 4,525 Total (kboe/d) 751 64 148 12 95 98 84 250 41 <1 41 247 74 21 26 13 113 248 13 182 13 40 9 9 770 29 51 383 307 103 16 23 31 25 8 2,169 Liquids (kb/d) 693 42 159 13 87 99 62 231 16 16 128 11 3 24 90 31 3 22 6 9 9 424 9 1 263 151 110 16 26 31 30 7 1,411
Natural Gas (Mcf/d) 440 160 27 21 27 205 241 241 474 325 82 32 35 1,224 58 854 110 202 2,218 143 330 775 970 39 6 1 32 4,636 Total (kboe/d) 776 72 164 13 90 104 62 271 61 61 213 70 18 30 95 245 14 177 14 40 9 9 832 35 59 406 332 117 17 26 31 36 7 2,253
Consolidated subsidiaries Africa Algeria Angola Cameroon Congo Gabon Libya Nigeria North America Canada United States South America Argentina Bolivia Colombia Trinidad & Tobago Venezuela Asia/Far East Brunei Indonesia Myanmar Thailand CIS Azerbaijan Russia Europe France Netherlands Norway United Kingdom Middle East United Arab Emirates (U.A.E.) Iran Qatar Syria Yemen Total consolidated production Equity and non-consolidated affiliates Africa
Total equity and non-consolidated affiliates Worldwide production
(a) Primarily attributable to TOTAL’s share of CEPSA’s production in Algeria. (b) Primarily attributable to TOTAL’s share of production from concessions in the U.A.E.
o TOTAL IN 2006
Congo: the Djeno terminal
Basic engineering studies for the development of Pazflor, the third production zone made up of the Perpetua, Zinia, Hortensia, and Acacia fields in the eastern portion of Block 17, continued in 2006. These studies plan for the development, scheduled to begin in 2007, of a FPSO facility with a production capacity of 200 kb/d. The successful Orquidea-2 appraisal well confirmed the Group’s interest in developing the Cravo, Lirio, Orquidea and Violeta fields, through a fourth FPSO facility on Block 17. Basic engineering studies for the development of this new production zone (CLOV) should be launched in 2007. On Block 14 (20%), production increased significantly with the start-ups of Benguela Belize (January 2006), and Lobito and Landana North (June 2006). Production should continue to increase through the ramp-up of production of BBLT and the startup of production at Tombua Landana (scheduled for 2009). The Lucapa discovery made in November 2006 added to the Group’s estimate of the Block’s potential resources. The Moho-Bilondo project is under development, with production expected to begin in the first half 2008. The production plateau is expected to reach 90 kb/d.
Total Gabon is one of the Group’s oldest subsidiaries in subSaharan Africa. The Group’s share of production in 2006 was 87 kboe/d. Total Gabon is a Gabonese company whose shares are listed on Eurolist by Euronext Paris. TOTAL holds 58%, the Republic of Gabon 25% and the public float 17%. In 2006, Total Gabon signed an exploration and production sharing contract for a new deep-offshore permit, Diaba, covering an area of 9,075 km2 off the southern coast of Gabon. Under this agreement, Total Gabon has an 85% interest in the permit while the Republic of Gabon has the remaining 15%.
TOTAL has been present in Cameroon since 1951. TOTAL’s share of production amounted to 13 kb/d in 2006. In March 2006, TOTAL signed an exploration and production sharing contract for the Bomana block (100%). In April 2006, the Group signed renewals for three operated concessions, Bavo-Asoma, Kita-Edem and Sandy Gas, for a 25-year period and at the same time renewed its non-operated concession for Mokoko-Abana. Blocks PH 60 (50%, operator) and PH 59 (50%) were relinquished in August 2006, when these concessions reached their term. The Group’s share of production in 2006 reached 84 kboe/d. Production comes from the Mabruk field (75%, operator), offshore Block C 137 (75% (a), operator), and Block NC 186 (24% (a)) and NC 115 (30% (a)). In the Murzuk Basin in 2006, the Group made a discovery on Block NC 191 (100%, operator). On Block NC 186, the Group is continuing to develop several previously discovered structures.
The Group has conducted exploration and production activities in Mauritania since 2003. In January 2005, TOTAL signed two production sharing contracts with the Mauritanian government for onshore Blocks Ta7 and Ta8 in the Taoudenni Basin, representing a combined total of 58,000 km2. Following an aerial survey to obtain magnetic and gravimetric data performed in 2005 and 2006, a 3,000 km 2D seismic campaign was launched in July 2006 for an expected duration of fifteen to eighteen months.
TOTAL, the largest operator of production in Congo, has been present in the country since 1928. TOTAL’s share of production, primarily offshore, reached 97 kboe/d in 2006, compared to 95 kboe/d in 2005 and 90 kboe/d in 2004. Highlights for 2006 included discoveries on the Mer Très Profonde Sud (MTPS, 40%, operator) and the Moho-Bilondo (53.5%, operator) permits. The first phase of development for the Moho-Bilondo project was launched in 2005. TOTAL holds interests in several exploration and production permits. The principal producing fields that it operates are Nkossa (53.5%), Tchibouela (65%), Kombi-Likalala-Libondo (65%) and Tchibeli-Litanzi-Loussima (65%).
(a) Participation in the foreign consortium.
TOTAL has been present in Nigeria since 1962. It operates six production permits (OML) out of the 43 in which it holds an interest, and five exploration permits (OPL) out of six in which it has an interest. The Group’s share of production reached 242 kboe/d in 2006. The fields operated by TOTAL, OML 58, 100, 102 (40%, operator) and OML 99 - Amenam (30.4%, operator), contributed approximately 60% of the Group’s Nigerian in 2006. TOTAL’s production also
UPSTREAM / EXPLORATION & PRODUCTION
Canada: exploiting the Surmont tar sands
Nigeria: an Akogep oil and gas production platform
comes from its interests in SPDC, in the Ekanga field (40%), and in the Bonga field (12.5%), where production started in November 2005 and reached its plateau production of 210 kboe/d early in 2006. The Group’s appraisal of the Egina field (OML 130), which began in 2004, continued from 2005 through 2007 with the drilling of one exploration well and three appraisal wells. In 2007, the Group announced that the Egina field was expected to be developed on a stand-alone basis. Within the framework of the joint venture between NNPC (Nigerian National Petroleum Corporation) and TOTAL, the authorities approved the “OML 58 Upgrade” development plan in July 2006. This new project is expected to begin operations in 2009 and to supply Nigeria LNG’s (NLNG) sixth liquefaction train. After evaluating the bids it had received, late in 2006 the Group gave its final approval for a new development project (Ofon II) on the OML 102 permit. The Nigerian authorities had previously approved the development of this project in 2005. This new phase, whose launch is scheduled for 2009, is expected to produce an additional 70 kboe/d (in 100%). TOTAL also continued to develop the Amenam Phase II project in 2005 and 2006. This project, which produces associated gas from the Amenam field to supply NLNG, entered into operation late in 2006. TOTAL is also actively pursuing development work on its deep offshore discoveries. Development of the Akpo field on OML 130 (24%, operator) is continuing. The principal engineering and construction contracts for the development of Akpo, which were signed in 2005, are currently being executed, with a goal of reaching a production plateau of 225 kboe/d (in 100%). Production on the Akpo project is expected to begin late in 2008. TOTAL holds a 15% interest in the NLNG gas liquefaction plant. At this plant, a fourth train came on line in November 2005, followed by a fifth train which began operations in February 2006. In 2004, NLNG’s shareholders decided to invest in a sixth train, which is scheduled to be commissioned in 2007. The company began studies for a seventh train, with a capacity of 8.5 Mt, in July 2005, which continued in 2006. In 2006, TOTAL acquired a 17% interest in the Brass LNG project, which plans to build two trains, each with a capacity of 5 Mt/year. The Group also agreed to supply approximately two thirds of the second train’s requirements. The final investment decision for this project is expected to be made in 2007.
in a British court. In May 2006, the High Court of London ordered White Nile to disclose the contracts upon which its claims are based to TOTAL. This ruling was confirmed by the Court of Appeal in January 2007.
Since 2004, TOTAL has strengthened its position in Canadian oil sands by increasing its share in the Surmont permit and acquiring Deer Creek Energy Ltd. The first phase of Deer Creek Energy’s Joslyn project began production in November 2006. In November 2005, TOTAL signed an agreement to exchange four mature onshore fields in South Texas for a 17% stake in the deep-offshore Tahiti field in the Gulf of Mexico, which is scheduled to begin production in mid-2008. In 2006, two successful wells were drilled on the Alaminos Canyon 856 permit. Production for the year 2006 amounted to 16 kboe/d, less than 1% of the Group’s total production.
In Canada, the Group is participating in oil sands projects in Athabasca, Alberta. The Surmont (50%) and Joslyn permits are its principal assets. Deer Creek Energy Ltd, acquired in 2005, operates the Joslyn permit, with an 84% interest. In 1999, TOTAL began participating in a pilot project on the Surmont permit in Athabasca to extract bitumen using Steam Assisted Gravity Drainage (SAGD). Engineering and construction activities are ongoing. Production is expected to begin in the summer of 2007. In 2005, TOTAL acquired 83% of Deer Creek Energy Ltd which holds 84% of the Joslyn permit, through a public tender launched in August. The Joslyn permit, located approximately 140 km north of Surmont, will principally (approximately 90%) be developed using mining techniques. This permit is expected to be developed in several phases. The first phase, using SAGD, began production in November 2006. The mining development phases are scheduled to begin in 2013, with a planned initial production plateau of 100 kb/d anticipated to be increased to 200 kb/d in a subsequent phase. In January 2006, TOTAL acquired 100% of the OSP 674 permit, and in September 2006, it acquired 100% of the OSL 457 (located near the OSP 674 permit) and OSL 841 permits (located 30 km north of the OSL 354 permit).
Late in 2004, TOTAL (32.5%, operator) updated its production sharing contract for Block B (118,000 km2 in southeast Sudan). To counter a claim by the White Nile Company, which publicly claimed to have rights to the area covered by the permit held by TOTAL and its partners, the Group sought to enforce its rights
o TOTAL IN 2006
Argentina: a gas compression and crude oil treatment plant at Aguada Pichana
TOTAL is conducting various studies in cooperation with Mexico’s state-owned PEMEX under a technical cooperation agreement signed in December 2003. ration-production contracts with the Bolivian government and increased its interest in Block XX West (operator) to 75%.
TOTAL has been present in Argentina since 1978 and operates approximately 25% of the country’s gas production. In 2006, TOTAL produced 78 kboe/d, a 5% increase compared to 2005 (74 kboe/d). TOTAL holds interests in Argentina’s two major basins: Neuquen (the San Roque and Aguada Pichana fields) and Tierra del Fuego (notably Carina and Canadon-Alfa). On the San Roque field (24.7%, operator), a medium-pressure compression project launched in 2003 was commissioned in August 2006. The development of the Rincon Chico North discovery and the low-pressure compression project were launched in January 2006, with production scheduled to begin in February 2008 and May 2008 respectively. These projects are expected to extend the field’s production plateau.
TOTAL has been present in the United States since 1957. In 2006, the Group’s production decreased to 15 kboe/d. Production in 2006 came principally from three deep-offshore fields in the Gulf of Mexico: Virgo (64%, operator), Aconcagua (50%, operator) and Matterhorn (100%, operator). Production from these fields was affected by Hurricane Katrina in 2005. Production on Matterhorn was shut down from August 2005 to August 2006 and production on Virgo was shut down from August 2005 to May 2006. In February 2006, the Group signed and closed an agreement to sell two mature fields, Bethany and Maben, located, respectively, in eastern Texas and in Mississippi. In August 2006, TOTAL increased its interest in the Chinook project from 15% to 33.33%. Development plans for this project are currently being discussed. In December 2006, TOTAL signed an agreement to sell its interests in the Aconcagua and Camden Hills fields, as well as its interest in the Canyon Express System (25.8%, operator). This transaction closed in January 2007. In 2006, two successful wells were drilled on the Alaminos Canyon 856 permit (70%, operator), confirming the extension of the Great White field. In 2006, TOTAL was also awarded 27 new deep-offshore blocks (Keathley and Garden Banks) after bidding in Louisiana and Texas.
TOTAL holds six permits in Bolivia: San Alberto and San Antonio, both in production (15%) and four permits in the exploration or appraisal phase: Blocks XX West (75%, operator), Aquio and Ipati (80%, operator) and Rio Hondo (50%). In October 2006, TOTAL acquired an additional 34% of Block XX West, adding to the 41% interest it already held. In 2006, the Group’s production remained stable at 21 kboe/d. Pursuant to the decree of May 1, 2006 regarding the nationalization of hydrocarbons, TOTAL signed six new exploration and production contracts in October 2006 for all blocks in which it has an interest. Although these contracts were approved by the Bolivian legislature on December 3, 2006, they will not become effective until an additional legislative ratification has been completed. The new contracts retain certain terms from production sharing agreements while providing for a 50% production tax and profit sharing between YPFB (Yacimientos Petroliferos Fiscales Bolivianos, the state-owned Bolivian oil company) and the foreign partner, after reimbursement of investments and costs.
The Group’s production in South America in 2006 amounted to 226 kboe/d, which accounted for approximately 10% of the Group’s overall production. The Group is involved in ongoing discussions with Venezuelan authorities regarding legal and tax changes in the country. TOTAL’s acquisition of a 49% interest in the offshore exploration Block 4 of the Plataforma Deltana was formally approved by the Venezuelan authorities in January 2006. In Colombia in 2006, the Group agreed to acquire 50% of the Niscota exploration block. In Bolivia, TOTAL signed new explo-
In 2005, TOTAL increased its interest in the Curio discovery zone on Block BC2 from 35% to 41.2%.
UPSTREAM / EXPLORATION & PRODUCTION
Venezuela: the Sincor project
TOTAL holds a 19% interest in the Cusiana and Cupiagua fields, where the Group’s share of production reached 22 kboe/d in 2006. In order to renew the Group’s exploration acreage in Colombia, TOTAL relinquished the Tangara permit late in 2006. An agreement to acquire 50% of the Niscota exploration block was concluded in September 2006.
In 2006 TOTAL increased its offshore interests in both exploration and development of previously discovered fields in northwest Australia. In February 2006 with the same partners as for Block WA-269P (30%), TOTAL acquired a 30% share in the two adjacent blocks, WA-369P and WA-370P, located in the Carnarvon basin near the Pluto field. A 3D seismic campaign on these blocks was completed in 2006 and four wells are scheduled to be drilled in 2007 and 2008. Also in 2006, TOTAL acquired a 25% share in adjacent blocks, WA-301P, WA-303P, WA-304P, and WA-305P, located in the Browse basin. A well is scheduled to be drilled on Block WA-303P in 2007. In addition, in August 2006 TOTAL acquired a 24% interest in Block WA-285P, also in the Browse basin. The Ichthys gas and condensates field, in the same basin, has already had six successful wells drilled since 2000. This field is expected to be developed to produce an estimated 6 Mt/y to 10 Mt/y of LNG, condensates and liquefied petroleum gas (LPG). In 2006, this project received the Major Project Facilitation Status, which should contribute to obtaining governmental approvals, expected in 2008. The environmental evaluation of the development scheme was launched in May 2006, and exploration and appraisal drilling are planned for 2007. In January 2007, TOTAL acquired an 80% interest, as operator, for the lower levels of Block AC/P-37. A seismic campaign is scheduled for 2007.
Trinidad & Tobago
TOTAL holds a 30% interest in Block 2C (Grand Angostura field) where production amounted to 9 kboe/d in 2006, compared to 13 kboe/d in 2005. TOTAL also has an 8.5% share in the adjacent Block 3A, where an oil discovery (Ruby-1) was under evaluation early in 2007.
TOTAL has been present in Venezuela since 1980 and is one of the main partners of PDVSA (Petróleos de Venezuela S.A.), a stateowned company, in particular for oil production in the Orinoco Basin. The Group holds interests in the Sincor (47%) and Yucal Placer (69.5%) projects as well as in the offshore exploration Block 4 of the Plataforma Deltana (49%). TOTAL’s average production amounted to 96 kboe/d in 2006. On March 31, 2006, the Venezuelan government terminated all operating contracts signed in the nineteen-nineties and decided to transfer the management of fields concerned to new mixed companies to be created with the state-owned company PDVSA (Petroleos de Venezuela S.A.) as the majority owner. The government and the Group did not reach an agreement on the terms of the transfer of the Jusepin field under the initial timetable. However, subsequent negotiations have led to a settlement, announced in March 2007, under which the government has committed to pay the Group $ 137.5 million.
Late in 2005, TOTAL signed an agreement to acquire 60% of two offshore exploration blocks, 17 and 18, located southeast of Bangladesh. The government approved this agreement on March 14, 2007.
Asia/Far East – Pacific
In 2006, TOTAL’s production in Asia/Far East, principally from Indonesia, amounted to 253 kboe/d, compared to 248 kboe/d in 2005 and 245 kboe/d in 2004, an increase of 2% over the period. Asia/Far East represented 11% of the Group’s overall production for the year 2006. Highlights for the 2004 to 2006 period included the acquisition of interests in several exploration permits in Australia, Bangladesh and Indonesia, the acquisition of a 24% interest in the Ichthys LNG project in Australia in partnership with INPEX, and the signature of an agreement with China National Petroleum Corporation for the appraisal, development and production of natural gas on the Sulige South block in China.
TOTAL is the operator of the Maharaja Lela Jamalulalam field, located offshore on Block B of Brunei Darussalam (37.5%, operator). The Group’s share of production amounted to 15 kboe/d in 2006, compared to 13 kboe/d in 2005 and 14 kboe/d in 2004. After completing studies in 2006, TOTAL is planning to drill several exploration wells on this block in 2007. TOTAL is also the operator of deep-offshore exploration Block J (60%), for which a production sharing contract was signed in March 2003. Exploration operations on the 5,000 km2 block have been suspended since May 2003 due to a border dispute with Malaysia.
o TOTAL IN 2006
Indonesia: the Peciko gas treatment center
Early in 2006, TOTAL and China National Petroleum Corporation signed a production sharing contract for the appraisal, development, and production of natural gas resources on the South Sulige block covering an area of approximately 2,390 km2 in the Ordos Basin in the Inner Mongolia province. The agreement was approved by the Chinese authorities and became effective in May 2006. The appraisal work outlined in the contract (seismic acquisition, well testing) began in September 2006. The project to extend the Tambora field, launched in 2004, advanced with the commissioning of three new platforms by mid-2006. Phase 1 of the new Sisi-Nubi offshore development was launched in 2005 and is ongoing. Gas from Sisi-Nubi is expected to be produced early in 2008 through existing processing facilities.
Since 2001, TOTAL has held a 42.5% interest in the deep offshore Block SKF permit. After drilling an exploration well in 2004, TOTAL reevaluated the exploration potential of the permit and requested an extension of the exploration period to carry out additional work, which was obtained in March 2007.
TOTAL has been present in Indonesia since 1968. Indonesia represented 8% of the Group’s production in 2006, amounting to 182 kboe/d. TOTAL operates two offshore blocks in the East Kalimantan zone, the Mahakam permit (50%, operator), and the Tengah permit (22.5%). TOTAL’s operations in Indonesia are primarily concentrated on the Mahakam permit, which covers several fields including Peciko and Tunu, the largest gas fields in the East Kalimantan zone. TOTAL delivers its natural gas production to PT Badak, the Indonesian company that operates the Bontang LNG plant. The overall capacity of the eight liquefaction trains of the Bontang plant is 22 Mt/y, one of the largest in the world (a). The LNG produced is primarily sold under long-term contracts with Japanese, South Korean and Taiwanese purchasers that mainly use it for power generation. In 2006, the production operated by TOTAL on the Mahakam permit amounted to 2,648 Mcf/d, and the gas delivered by TOTAL to Bontang accounted for more than 70% of the plant’s supply. In 2006, TOTAL acquired a 49% share in the offshore East Sepanjang block, located northeast of the island of Java. A seismic acquisition campaign is scheduled and an exploration well is expected to be drilled. Late in 2006, a gas discovery, Tunu Great South-1, was made between the Tunu and Peciko fields on the Mahakam permit. On the neighboring Tunu field, the tenth phase of development is underway and four additional platforms became operational in 2006. The eleventh development phase, to install onshore compression units, was launched in 2005 and is continuing. A new phase for drilling additional wells was agreed upon late in 2006.
TOTAL is the operator of the Yadana field (31.2%). The Group’s share of production was 15 kboe/d in 2006. This field, located on offshore Blocks M5 and M6, produces natural gas, which is principally delivered to PTT (Thailand’s state-owned company) and used in Thai power plants.
The Group’s primary asset in Thailand is the Bongkot gas and condensates field (33.3%), where its production reached 41 kboe/d in 2006. PTT (Thailand’s state-owned company) purchases all the condensates and natural gas produced. Production from phase 3E, launched early in 2005 to create three well platforms, began mid-February 2007. A new development phase, 3F, for three new well platforms was launched early in 2006 and production from this development phase is expected to begin mid-2008. Early in 2007, three new gas discoveries, Ton Chan-1X, Ton Chan-2X and Ton Rang-2X on Blocks 15 and 16 of the Bongkot field confirmed the Group’s interest in this concession. The development plan for these three new discoveries is being prepared, with production anticipated for as early as 2009.
Commonwealth of Independent States (CIS)
TOTAL’s production for 2006 was 8 kboe/d, accounting for 0.3% of the Group’s overall production. Highlights for 2006 included the start-up of the Shah Deniz project in Azerbaijan.
(a) Source : Wood MacKenzie, Deutsche Bank.
UPSTREAM / EXPLORATION & PRODUCTION
Kazakhstan: an artificial island on the Kashagan field
TOTAL’s presence in Azerbaijan dates back to 1996 and is centered on the Shah Deniz field (10%). After phase 1 of development of this gas and condensate field was launched in 2003, production from the first well began in December 2006. The first gas sales to Azerbaijan were made late in 2006. The South Caucasus Pipeline Company (SCPC), in which TOTAL holds a 10% interest, completed the construction of a gas pipeline to transport gas from Shah Deniz to the Turkish and Georgian markets. This gas pipeline was gradually brought onstream and became operational in November 2006. Construction of the 1,770 km BTC (Baku-Tbilissi-Ceyhan) oil pipeline, with an operating capacity of 1 Mb/d, began in August 2002 and was completed in 2006. This pipeline, owned by BTC Co. (in which TOTAL has a 5% interest), links Baku to the Mediterranean Sea. The first delivery to Ceyhan (Turkey) was made in June 2006. In 2005, TOTAL was pre-selected by Gazprom, along with four other foreign companies, to potentially participate in the giant Shtokman gas production project in the Barents Sea. In October 2006, Gazprom announced that the project would not proceed under the proposed contractual framework, since the Russian Federation no longer wished to share acreage with independent oil companies. Other contractual arrangements are being studied for this project.
TOTAL’s production in Europe amounted to 728 kboe/d in 2006, representing 31% of the Group’s overall production. Highlights of the period from 2004 to 2006 include start-up of the Skime, Kvitebjørn and Kristin fields in Norway, an increase in the Group’s interest in the PL211 license (Victoria), new developments on existing fields (Ekofisk Area Growth, structure J and West Flank of Oseberg, and the North Flank of Valhall) and the approval by the Norwegian Parliament of the Tyrihans development plan. In the United Kingdom, satellites of the Alwyn (Forvie North, Nuggets N4) and Elgin-Franklin (Glenelg) facilities began production. In both the United Kingdom and Norway, several discoveries (including Jura West in the United Kingdom) were made and new exploration licenses awarded. In Italy, TOTAL signed an agreement with the Basilicate region to start developing the Tempa Rossa field.
TOTAL has been present in Kazakhstan since 1992, where it is a partner on the North Caspian Sea permit which contains the Kashagan field. TOTAL holds an 18.52% interest in this permit. Drilling of development wells was launched in 2004 and continued in 2005 and 2006, with production now scheduled to begin near the end of 2010. The size of the Kashagan field may eventually allow production to be increased to more than 1 Mb/d (in 100%). The North Caspian permit includes other structures that are smaller than Kashagan: Aktote, Kairan, Kalamkas and Kashagan Southwest. These structures are in the appraisal phase. In 2006, two new appraisal wells were drilled on Kalamkas and Kairan. The Kalamkas-3 well was positive and the results for the Kairan 2 well are being evaluated. A long-duration test is expected to start on Kairan 2 during the first half 2007.
The Group has operated fields in France since 1939, with its most significant activity being the development and operation of the Lacq gas field, which began in 1957. The Group’s principal natural gas fields, Lacq (100%) and Meillon (100%), located in southwest France, and several smaller natural gas and oil fields in the same region as well as in the Paris Basin, produced 30 kboe/d in 2006. After conducting an initial pilot test in 2006 on the SPREX process (de-acidifying gas by using cryogenics), a pilot program for capturing and injecting carbon dioxide is being studied. This program would modify a gas burning plant to operate in an oxy-combustion environment and the carbon dioxide produced would be re-injected in a depleted field. This program could begin operation in 2008. The restoration of certain sites and the re-industrialization of the Lacq platform are ongoing. Construction of a bio-ethanol unit by Agengoa Bioenergy began in 2006.
TOTAL has been present in Russia since 1989. The Group’s principal activity is on the Kharyaga field (50%, operator) in the Nenets territory. The Group’s production was 8 kboe/d in 2006. On the Kharyaga field, phase 2 of development was completed in 2005, targeting a production plateau of 30 kboe/d (in 100%). Pre-project studies for phase 3 were carried out in 2006. Late in 2005, TOTAL and the Russian Federation reached an amicable agreement to resolve a dispute over the interpretation of the production sharing agreement. As a result, the request for arbitration in Stockholm was withdrawn. In 2006, the production sharing contract was implemented normally, with profit oil being shared among the state and investors.
The Tempa Rossa field, discovered in 1989, is TOTAL’s principal asset. It is located on the unitized Gorgoglione concession in the southern Apennins, in the Basilicate region.
o TOTAL IN 2006
A preliminary agreement was reached with the Basilicate region in 2004. This initial agreement was the basis for the final agreement (Accordo Quadro) signed between the Basilicate region, TOTAL, and the other partners in September 2006. This agreement, combined with the approval of the development plan proposed by the Basilicate region in May 2006 allows development of the field to begin. In 2006, bids for the main purchasing and construction contracts were evaluated, and contracts may be awarded once the project is approved.
The sub-sea development of the Vilje oil field (24.2%) and the innovative development of Tordis IOR (5.6%) in the Tampen area in the North Sea are underway. Production is scheduled to begin in 2007. On the Haltenbanken area, in the Norwegian Sea, the Åsgard oil field (7.7%) contributes 7.5% of the Group’s production and Kristin (6%), the sub-sea high-pressure/high-temperature field, began production in November 2005. In February 2006, the development of the Tyrihans oil, gas and condensates field (23.2%) was approved by the authorities. Production is scheduled to begin in 2009, with an initial estimated plateau rate of 70 kboe/d (in 100%), to be reached in 2011. In 2006, TOTAL increased its interest in the PL211 license (in the Haltenbanken area) to 40% and became its operator. This license covers the Victoria discovery, which is not yet developed. The Group also disposed of a 3.3% interest in the Tyrihans field. As a result, the Group now has a 23.2% interest in this field. In the Barents Sea, the Group is involved in the Snøhvit project, which includes the development of the Snøhvit natural gas field (18.4%) and the construction of liquefaction facilities on Melkoya Island. Production is expected to begin in the third quarter of 2007, with a ramp-up over several months. TOTAL has an 8.1% interest in the Norwegian dry gas transport system, Gassled, after taking into account the incorporation of the new Langeled pipeline toward the United Kingdom.
Since the late sixties, the Group has played a major role in the development of a large number of fields in the Norwegian North Sea. TOTAL holds interests in 66 production permits on the Norwegian continental shelf, ten of which it operates. Norway is the largest contributor to the Group’s production, with an average of 372 kboe/d in 2006. The largest contribution to this production, for the most part non operated, comes from the Ekofisk area (39.9%) in southern Norway, which accounts for approximately 45% of the Group’s production in the country. This area is made up of four producing fields with a combined average production of 169 kboe/d for 2006. The Ekofisk Area Growth project (EAG) to install a new platform and drill a series of wells, began in October 2005 and contributed to 2006 production. TOTAL operates the Skirne/Byggve gas and condensates field (40%), which accounts for 3% of the Group’s production in Norway. The Frigg field (77%, operator) was shut down in October 2004 after 27 years in production. TOTAL is leading a significant multiyear decommissioning and site restoration program at this site. The Oseberg area (10%) in the central North Sea accounts for slightly more than 9% of the subsidiary’s production and consists of several platforms and projects, including structure J, which began production in June 2005, the West Flank oil field, which began production in February 2006, and the Tune gas field. The Sleipner area (West 9.4% and East 10%) including Glitne (21.8%), also in the central North Sea, represents nearly 9% of production in the country, while the Troll (3.7%) oil and gas field contributes 7.5%. Among other significant non-operated producing fields are those located in the Tampen area, including Snorre (6.2%) and Visund (7.7%), which started gas production in October 2005 (six years after oil production began). The Valhall area (including Valhall 15.7%) and Kvitebjørn (5%) started production in October 2004.
TOTAL has been present in the Netherlands for more than forty years, where it is the second largest gas operator. The Group’s share of production amounted to 44 kboe/d in 2006. TOTAL holds 22 offshore production permits, of which 18 are operated by the Group, two operated offshore exploration permits and one onshore exploration permit. Several development wells were drilled over the past three years. During this period, the first phase in the reorganization of Block L7 was launched, along with major maintenance work. The L4G structure, developed in 2005 and 2006, began production in August 2006. The development of structure K5F was approved, with production scheduled to begin early in 2008. Late in 2006, the Group was awarded a new exploration permit covering offshore block L3.
UPSTREAM / EXPLORATION & PRODUCTION
North Sea: a production and treatment platform on the Ekofisk field
United Kingdom: a control-room operator on a platform on the Elgin field
Scotland: producing the Elgin-Franklin field
TOTAL has been present in the UK since 1962. The Group’s production amounted to 282 kboe/d in 2006. The UK contributes approximately 12% of the Group’s oil and gas production, coming principally from three major zones: Alwyn, Elgin-Franklin and Bruce. The Elgin-Franklin zone, which has been in production since 2001, has made a significant contribution to the Group’s activities in the UK. This project, one of the largest investments made in the British North Sea in the past twenty years, constituted a technical milestone, combining the development of the deepest reservoirs in the North Sea (5,500 m) with temperature and pressure conditions among the highest in the world. In 2007, TOTAL obtained two permits as operator (Blocks 206/3 and 206/4, 36%) west of the Shetland Islands and another permit (Block 3/8f, 100%) north of Dunbar from the 24th licensing round launched by the UK Department of Trade and Industry. In 2005, TOTAL acquired the right to obtain a 25% interest in two zones located near Elgin-Franklin by drilling an appraisal well on the Kessog structure. Drilling began near the end of 2006. Depending on the results of this appraisal well, TOTAL has an option to increase its interest in these zones (Blocks 30/1b and 30/1c) to 50%. TOTAL disposed of its share in Peik (PL088), which is partially located in Norway, in the first quarter 2007. Work on the multi-year program to decommission the Frigg facilities and restore the site continues. The Forvie Central well discovered small oil and gas columns. The Jura West well (Block 3/15) discovered gas on more than 300 meters of Brent quality reservoirs and is believed to be a significant discovery. This well is expected to be connected to the Forvie North sub-sea collector, which is connected to the NAB processing platform on the Alwyn North field. Production is expected to begin in 2008. Late in 2005, the British government decided to increase the Supplementary Corporation Tax on oil and gas operations. As a result, the Corporation Tax increased from 40% to 50%. For fields subject to the Petroleum Revenue Tax, the overall tax burden increased from 70% to 75%. This tax increase, which was adopted mid-2006, became effective at the beginning of 2006
TOTAL has been developing long-term partnerships in the Middle East for eighty years. TOTAL’s 2006 share of production in the Middle East (including the production of equity affiliates and unconsolidated subsidiaries) increased by 2% compared to 2005, primarily due to the increase in production from the United Arab Emirates. It reached 406 kboe/d in 2006 (representing 17% of the Group’s overall production). Between 2003 and 2006, TOTAL has developed its LNG activities, launching the Yemen LNG project and acquiring an interest in the Qatargas II project.
TOTAL has a 30% interest in a joint venture with state-owned Saudi Aramco for natural gas exploration in a 200,000 km2 area in southern Rub Al-Khali. An initial five-year period of work began in January 2004. A 137,800 km2 gravimetric survey was performed in 2004. An 18,250 km 2D seismic campaign, launched in 2004 on the same site, continued in 2005 before being completed late in 2006.
United Arab Emirates
TOTAL’s activities in the United Arab Emirates are located in Abu Dhabi and Dubai, where the Group’s presence dates back to 1939 and 1954, respectively. TOTAL’s production in 2006 reached 267 kboe/d. In Abu Dhabi, TOTAL holds a 75% interest (operator) in the Abu Al Bu Khoosh field. TOTAL is also a 9.5% shareholder in the Abu Dhabi Company for Onshore Oil Operations (ADCO), which operates the Asab, Bab, Bu Hasa, Sahil and Shah onshore fields, as well as a 13.3% shareholder in Abu Dhabi Marine (ADMA), which operates the Umm Shaif and Lower Zakum offshore fields. TOTAL holds a 15% interest in Abu Dhabi Gas Industries (GASCO), a company that produces butane, propane, and condensates from the associated gases produced by onshore fields. TOTAL also holds 5% of the Abu Dhabi Gas Liquefaction Company (ADGAS), a company that produces LNG, LPG, and condensates from the natural gas produced by offshore fields. The Group also has a 33.3% interest in Ruwais Fertilizer Industries (FERTIL), which produces ammonia and urea from methane supplied by the Abu Dhabi National Oil Company (ADNOC). In Dubai, TOTAL holds a 27.5% interest in the Fateh, Falah and Rashid fields through the combination of its 50% interest in Dubai Marine Areas Limited (DUMA, which holds 50% of the concession offshore Dubai), and its 2.5% interest held directly by Total E&P
o TOTAL IN 2006
Abu Dhabi: the TOTAL stand at the international Gastech conference
Dubai. An agreement was reached to relinquish this concession at the beginning of April 2007. TOTAL is also a shareholder (24.5%) in Dolphin Energy Limited, which is expected, in the summer of 2007, to begin the United Arab Emirates marketing of the natural gas produced by the Dolphin project in Qatar. Natural gas sales agreements for this project were signed in 2003 and 2005, and the Qatari authorities approved the final development plan in December 2003. 11 of South Pars were launched in 2005 and the bidding process to award the principal supply and construction contracts began in July 2006.
Since 1997, the Group has been providing technical assistance for the upstream activities of state-owned Kuwait Oil Company (KOC) under an agreement renewed late in 2006. The Group also holds a 20% interest in the consortium formed to participate in the bidding process opened to international oil companies for production activities on oil fields in northern Kuwait.
TOTAL signed the first buyback contract for the development of the Sirri A&E fields in 1995. The Group’s production amounted to 20 kb/d in 2006. Its share of production comes from four buyback contracts, on the Sirri, South Pars, Balal, and Dorood fields. The Sirri A&E fields (60% interest in foreign consortium) have been operated by the state-owned National Iranian Oil Company (NIOC) since 2001. Average production (in 100%) from phases 2 and 3 of the offshore South Pars gas and condensate field (40% interest in foreign consortium) was slightly less than 2,000 Mcf/d and 90 kboe/d in 2006, due to major maintenance work that began in 2005, continued in 2006 and is now complete. Production operations have been conducted by NIOC since 2004. The development of the Balal offshore oil field (through a 46.8% interest in a foreign consortium) was completed, and the facilities were transferred to NIOC in 2004. The development of the Dorood field (through a 55% interest in a foreign consortium) is nearly completed, with the additional adjustment work needed following start-up underway. In 2004, TOTAL signed several agreements with its partners creating the framework for the Pars LNG liquefied natural gas future project and its principal commercial terms. These agreements outline the relationship between the Pars LNG plant (40%), in charge of the liquefaction activities, and Block 11 of South Pars (80%), expected to supply gas to the liquefaction plant. The project calls for the initial construction of two trains, each with a capacity of 5 Mt/y of LNG, to be followed by the construction of a third train with the same capacity. It is expected that the purchasers of LNG from the project will also become partners in the project. Pursuant to the agreed framework, engineering studies for the natural gas liquefaction plant and the development of Block
TOTAL is present in Oman on Blocks 6 and 53, and in the Oman LNG/Qalhat LNG gas liquefaction plant. Production averaged 35 kboe/d in 2006. On Block 6, operated by Petroleum Development Oman (PDO), in which TOTAL holds a 4% interest, oil production in 100% averaged 589 kb/d in 2006, down from 631 kb/d in 2005. Development of the Mukhaizna heavy oil field on Block 53 (2%) was launched in 2006 pursuant to the production sharing contract signed in 2005. Production for 2006 averaged 9.5 kb/d in 100%. The two liquefaction trains of Oman LNG (5.54%) produced 6.7 Mt in 2006. The third liquefaction train, commissioned late in 2005 and owned by a new company, Qalhat LNG, produced 2.2 Mt in 2006 (2.04%, Group interest through Oman LNG).
TOTAL has been present in Qatar since 1936 and holds interests in the Al Khalij field, the North field, the Dolphin project, the Qatargas I liquefaction plant and the second train of Qatargas II. TOTAL’s production in Qatar (including its share in the production of equity affiliates) averaged 58 kboe/d in 2006. After the third phase of development on the North zone was completed on the Al Khalij field (100%) in 2004, efforts to maintain production contributed to production of 42 kb/d (in 100%) in 2006. TOTAL holds a 20% interest in the upstream operations of Qatargas I, which produces natural gas and condensates on a block in the North field. The Group also owns a 10% interest in the Qatargas I liquefaction plant. A de-bottlenecking project was completed in June 2005, raising the production capacity for the three trains to nearly 10 Mt/y. Production in 2006 reached 9.9 Mt.
UPSTREAM / EXPLORATION & PRODUCTION
Qatar: the DOL 1 platform for the Dolphin project
Yemen: laying the gas pipeline from Marib to Balhaf
In December 2001, the Group signed a contract with state-owned Qatar Petroleum providing for the sale of 2,000 Mcf/d of gas from the North field, produced by the Dolphin project (24.5%), for a 25-year period. This gas is expected to be transported to the United Arab Emirates through a 360 km gas pipeline. The final development plan was approved in December 2003 by the Qatari authorities and the construction contracts were awarded in 2004. Construction progressed on both the Ras Laffan Industrial City site and the offshore section. Production is scheduled to begin in the summer of 2007. In February 2005, TOTAL signed a memorandum of understanding to acquire a 16.7% interest in the second train of Qatargas II. This integrated project intends to develop two new LNG trains, each with an annual capacity of 7.8 Mt. In July 2006, TOTAL signed four contracts to purchase 5.2 Mt/y of LNG on behalf of the Group. In December 2006, TOTAL formalized its acquisition of the 16.7% in the second train of Qatargas II. The project is scheduled to begin operations in the winter of 2008/2009. In July 2005, TOTAL announced a project to locate a Research Center in the Qatari Scientific and Technical Complex, which is expected to be completed in 2007.
TOTAL has been present in Yemen since 1987 and operates approximately 10% of the country’s production. The Group has interests in the country’s two oil basins, as the operator on Block 10 (Masila Basin, East Shabwa permit 28.57%) and as a partner on Block 5 (Marib Basin, Jannah permit 15%). A new production record was set in 2006 on the East Shabwa permit, with 40 kb/d in 100%, 25 kb/d of which came from the “basement” zone, whose development was launched in 2003. Development of the basement is expected to continue through 2007 and 2008 in order to take full advantage of this discovery. TOTAL’s production also comes from its share in the Jannah permit, where production averaged 45 kb/d (in 100%) in 2006, stable compared to the previous years. The Yemen LNG liquefied natural gas project, operated by Yemen LNG, a company in which TOTAL (39.62%) is the principal shareholder, was officially launched in August 2005. This project calls for the construction of two liquefaction trains with a combined capacity of 6.9 Mt/y. Operations are expected to begin late in 2008. Yemen LNG signed three long-term LNG sales contracts in 2005, one each with Total Gas & Power Ltd (2 Mt/y) and with Suez (2.5 Mt/y) for deliveries to the United States over a 20-year period to begin in 2009, and the third with Kogas (2 Mt/y) to be delivered to South Korea, also for a 20-year period.
TOTAL has been present in Syria since 1988 and is the operator of nearly 10% of the country’s production. The Deir Ez Zor permit (100%, operated by DEZPC, 50% of which is held by TOTAL) is the Group’s only remaining asset in Syria since the expiration of the BOT (build, operate, transfer) contract for the Deir Ez Zor gas and condensates reprocessing plant (50%) whose facilities were transferred to state-owned SGC (Syrian Gas Company) on January 1, 2006. In 2006, the Group’s production from the Deir Ez Zor permit was 17 kboe/d.
o TOTAL IN 2006
Yemen: training courses for local employees (Yemen LNG)
I GAS & POWER
The Gas & Power division encompasses the marketing, trading, transport and storage of natural gas and liquefied natural gas (LNG), LNG re-gasification and the maritime transport and trading of liquefied petroleum gas (LPG). It also includes power generation from combined cycle plants and renewable energies, the trading and marketing of electricity as well as the production and marketing of coal. TOTAL is continuing to develop its global presence in each of these activities. project, planned to directly connect Algeria and Spain, through its 20% interest, which gives TOTAL an indirect interest of 10% in the project. The Group relinquished its direct participation in the project in 2006. In the UK, TOTAL’s subsidiary Total Gas & Power Ltd sells gas and power to the industrial and commercial markets. This subsidiary also conducts global gas, electricity and LNG trading activities. In 2006, Total Gas & Power Ltd marketed 135 Bcf (3.8 Bm3) of natural gas to industrial and commercial customers. Electricity sales in 2006 amounted to 3.2 TWh in 2006. In addition, TOTAL holds a 10% interest in Interconnector UK Ltd, a gas pipeline connecting Bacton in the United Kingdom to Zeebrugge in Belgium.
In 2006, TOTAL pursued its strategy of developing its activities downstream from natural gas production to optimize access for the Group’s present and future gas production and reserves to traditional (organized around long-term contracts between producers and integrated gas companies) as well as newly (or soon to be) deregulated markets.
In the United States, TOTAL sold approximately 925 Bcf (26.2 Bm3) of natural gas in 2006, supplied by its own production and external sources. In Mexico, Gas del Litoral, a company in which TOTAL holds a 25% interest, sold approximately 25.5 Bcf (0.7 Bm3) of natural gas in 2006. In South America, TOTAL owns interests in several natural gas transport companies in Argentina, Chile and Brazil, including 15.4% in Transportadora de Gas del Norte (TGN), which operates a gas transport network covering the northern half of Argentina, 56.5% of the companies which own the GasAndes pipeline connecting the TGN network to the Santiago del Chile region and 9.7% of Transportadora Gasoducto Bolivia-Brasil (TBG), whose gas pipeline supplies southern Brazil from the Bolivian border. These different assets represent a total integrated network of approximately 9,000 km serving the Argentine, Chilean and Brazilian markets from gas-producing basins in Bolivia and Argentina, where the Group has natural gas reserves. The actions taken by the Argentine government after the 2001 economic crisis and the subsequent energy crisis put TOTAL’s Argentine subsidiaries in difficult financial and operational situations. In 2006, TOTAL continued its efforts to preserve the value of these subsidiaries’ assets. In particular, TGN’s debt was restructured after approval by 99.4% of the company’s creditors.
TOTAL has been active in the downstream sector of the gas value chain for more than 60 years. Natural gas transport, marketing and storage activities were initially developed to complement the Group’s domestic production in Lacq (France). Today, TOTAL’s objective is to become a leading supplier of gas to European industrial and commercial customers. Since April 2005, the Group’s transport and storage activities in southwest France have been brought under a wholly-owned subsidiary, TIGF, which operates a regulated transport network of 4,905 km of pipelines and two storage units with a combined usable capacity of 85 Bcf (2.4 Bm3), approximately 20% of the overall natural gas storage capacity in France (a). Highlights of 2006 included the inauguration of the Euskadour pipeline (TIGF, 100% of the portion in France). This pipeline, whose construction was approved in 2003, is the second pipeline to connect the Atlantic coasts of Spain and France. In 2006, TOTAL sold 243 Bcf (6.9 Bm3) of natural gas to French customers through its marketing subsidiary Total Énergie Gaz (TEGAZ). In Spain, since 2001, TOTAL has a direct and indirect interest of approximately 52% in Cepsa Gas Comercializadora (CEPSA), which sold approximately 119 Bcf (3.4 Bm3) of natural gas in 2006. CEPSA is participating in studies for the Medgaz gas pipeline
(a) Source: International Gas Union 2006.
TOTAL markets natural gas, transported through pipelines from Indonesia, Thailand and Myanmar and in the form of LNG, in Japan, South Korea, Taiwan and India. The Group is also developing new LNG outlets in emerging markets.
UPSTREAM / GAS & POWER
In India, highlights of 2006 included the marketing of 0.8 Bm3 of natural gas from the Hazira terminal. This represents, after re-gasification, the equivalent of approximately 600,000 tons of LNG which was supplied through the international LNG spot market. In Japan, TOTAL holds a 3% stake in DME-Development and a 6% stake in DME-International, along with nine Japanese corporate partners. These companies aim to develop a new process to obtain DiMethyl Ether (DME), an environmentally-friendly liquid fuel, by conversion of natural gas into carbon monoxide and hydrogen followed by a chemical transformation of this synthetic gas. A pilot plant with a capacity of 100 tons per day of DME was built in Kushiro, on the Hokkaido Island, where several tests were performed between 2004 and 2006. The various tests conducted at the plant since then have enabled DME-Development to confirm the potential of this new technology. DME production since the startup of the plant totaled 20,000 tons as of the end of 2006. In 2006, DME-International continued to pursue feasibility studies for the construction of commercial production units.
agreements providing for shipments from various producing projects in which TOTAL holds interests, in particular in the Middle East, Norway and West Africa.
The Hazira re-gasification terminal, located on the west coast of the Gujarat state in India, was inaugurated in April 2005. It has an initial capacity of approximately 3.4 Bm3 per year. Since May 2005, TOTAL has held a 26% interest in this merchant terminal whose activities include taking delivery of LNG, re-gasification and natural gas marketing. TOTAL has agreed to provide up to 26% of the LNG for the Hazira terminal. Due to market conditions, in 2005 and 2006 the Hazira terminal was essentially operated on the basis of short-term (spot) contracts, both for the sale of gas on the Indian market and the purchase of LNG from international markets. Twelve cargos were delivered in 2006.
In Qatar, pursuant to heads of agreement signed in February 2005, TOTAL signed purchase contracts in July 2006 for up to 5.2 Mt/y of LNG from Qatargas II (second train) over a 25-year period. This LNG is expected to be marketed in France, the UK and North America. In December 2006, TOTAL concluded an agreement to acquire a 16.7% interest in the second train of Qatargas II. In Yemen, through its wholly-owned subsidiary Total Gas & Power Ltd, TOTAL, signed an agreement in July 2005 with Yemen LNG Ltd (in which TOTAL has a 39.62% interest) to purchase 2 Mt/y of LNG over a 20-year period, beginning in 2009, to be delivered to the United States. In Iran, as part of the agreements for the Pars LNG project (in which TOTAL has a 40% interest), Total Gas & Power Ltd signed a long-term purchase agreement for approximately 3 Mt/y of LNG. This agreement is conditioned upon the final investment decision for the project regarding the construction of two liquefaction trains, each with a capacity of 5 Mt/y.
Liquefied Natural Gas (LNG)
TOTAL has entered into agreements to obtain long-term access to LNG re-gasification capacity on the three continents which are the largest consumers of natural gas: North America (United States and Mexico), Europe (France, United Kingdom) and Asia (India). With these agreements in place, TOTAL is positioned to develop new natural gas liquefaction projects, notably in the Middle East.
In June 2006, TOTAL acquired a 30.3% interest in the Société du Terminal Méthanier de Fos Cavaou (STMFC). This re-gasification terminal is scheduled to start receiving LNG deliveries at the end of 2007. In the future, the terminal is expected to have a re-gasification capacity of 8.25 Bm3 per year (6.1 Mt/y), of which 2.25 Bm3 per year (1.7 Mt/y) have been reserved by Total Gas & Power Ltd. In December 2006, in connection with its entry in the Qatargas II project, TOTAL acquired an 8.35% interest in the South Hook LNG re-gasification terminal project in the UK. In addition, as part of the Snøhvit project (Norway), Total Gas & Power Ltd signed an agreement in 2004 to purchase 1 Bm3 per year (0.7 million of tons per year) of LNG intended mainly for marketing in North America and Europe. TOTAL holds an 18.4% interest in the Snøhvit liquefaction plant currently under construction. The first deliveries are expected in the last quarter of 2007. TOTAL (through its subsidiary Total Norge) has chartered an LNG tanker, the Arctic Lady, to transport this LNG. This tanker was built by Mitsubishi Heavy Industries in Nagasaki (Japan) and was delivered to TOTAL in April 2006.
In Nigeria, train 4 of Nigeria LNG Ltd (NLNG), a company in which TOTAL holds a 15% interest, began operations in November 2005, followed by train 5 in February 2006. These two additional trains, with a liquefaction capacity of 4 Mt/y of LNG each, increased the total nominal capacity of the plant to 17.9 Mt/y. TOTAL took delivery of its first LNG shipment from Nigeria in January 2006, under a contract providing for 0.23 Mt/y of LNG over a 20-year period. In July 2004, in connection with NLNG’s decision to build a sixth gas liquefaction train at its Bonny plant (Nigeria), TOTAL, through its subsidiary Total Gas & Power, purchased an additional 0.9 Mt/y of LNG over a 20-year period to be added to the initial 0.23 Mt/y from other trains. Deliveries from train 6 are scheduled to start in 2007. In October 2006, TOTAL acquired a 17% interest in the Brass LNG project to construct two liquefaction trains, each with a capacity of 5 Mt/y, scheduled to begin deliveries in 2011. In connection with the acquisition of this interest, in July 2006 TOTAL signed a preliminary agreement with Brass LNG Ltd setting forth the principal terms for a LNG purchase contract for 1.65 Mt/y over a 20-year period, destined mainly for North America and Western Europe. As is the case for purchase contract for train 7 of NLNG, this purchase contract for Brass LNG would also be subject to final investment decision for the project, which is scheduled to begin deliveries early in the next decade.
In Mexico, the construction of the Altamira re-gasification terminal, in which TOTAL holds a 25% interest, was completed on schedule during the summer of 2006. This new terminal, located on the east coast of Mexico, has an initial LNG re-gasification capacity of 6.7 Bm3 per year (1.7 Bm3 TOTAL share), and started its commercial operations at the end of September 2006. In the United States, under an agreement signed in November 2004 to reserve re-gasification capacity at the Sabine Pass LNG terminal in Louisiana, TOTAL has reserved a re-gasification capacity of 10 Bm3 (1 Bcf per day), beginning in April 2009 for a renewable 20-year period. The construction of this terminal, which began in April 2005, is due to be completed in 2008. The LNG to supply Sabine Pass is expected to come from LNG purchase
o TOTAL IN 2006
power plant capacity, to 276 MW, and the development of the Afam VI power plant, with a planned capacity of approximately 600 MW; and • the OML 58 project, part of the EPNL joint-venture in which TOTAL holds a 40% interest (operator), concerns the development of a new 400 MW combined-cycle power plant near the city of Obite.
TOTAL’s subsidiary Total Gas & Power Ltd has been trading LNG cargos since 2001. This activity provides TOTAL with flexibility in the supply of gas to its main customers. Suppliers are the main liquefaction plants which produced more LNG than they were required to deliver under their long-term sales agreements (Nigeria, Oman, Abu Dhabi, Algeria and Egypt). The customers for these cargos are located primarily in France, Spain and Asia (India, Japan and Taiwan). TOTAL sold nineteen spot cargos in 2006.
As part of its sustainable development policy, TOTAL is developing its position in renewable energy, with a particular focus on solarphotovoltaic energy, where the Group has been present since 1983, and wind power. In addition, since 2005, TOTAL has been participating in the development of marine energy, another promising technology for renewable energy.
Liquefied Petroleum Gas (LPG)
In 2006, TOTAL traded and sold 5.8 Mt of LPG (butane and propane) worldwide. Nearly half of this quantity originated from fields or refineries operated by the Group. LPG trading involves the use of six time-charters and approximately 60 spot charters. In 2006, this activity represented approximately 11% of worldwide seaborne LPG trade (a). In 2006, TOTAL continued the construction, launched in November 2003, of a LPG importation and storage unit located in Visakhapatnam, on the east coast of India in the state of Andhra Pradesh. This terminal is expected to start commercial operations mid-2007 and has a planned storage capacity of 60,000 tons and a planned off-take capacity of 1.2 Mt/y. TOTAL has a 50% interest in this project in partnership with Hindustan Petroleum Company Ltd.
In solar power (silicon-crystal technology), TOTAL manufactures photovoltaic cells (Photovoltec), solar panels and designs solar systems (TENESOL). The Group is also involved in financing projects for rural electrification (Temasol in Morocco and KES in South Africa). Since January 2006, TOTAL has held 47.8% in Photovoltech, a company specialized in manufacturing photovoltaic cells. Photovoltech sales rose to approximately 44 M€ in 2006, from 25 M€ in 2005. Due to strong demand for and the successful marketing of its products, Photovoltech is planning to increase its total production capacity from 20 MWp/y to 80 MWp/y by the end of 2007. Civil engineering for the new production facilities to increase capacity began in the fall of 2006. TOTAL holds a 50% interest in TENESOL, its partnership with EDF, which designs, manufactures, markets and operates solar-photovoltaic power systems. Its principal markets are for network connections in Europe (Germany and Spain) and for decentralized rural electrification and telecommunication systems in the French Overseas Territories. TENESOL owns two solar panel manufacturing plants: TENESOL Manufacturing in South Africa, with an annual production capacity of 35 MWp, and TENESOL Technologies in the region of Toulouse, France, with an annual production capacity of 15 MWp. TOTAL is pursuing decentralized rural electrification activities by responding to call for tenders from authorities in several countries, including Mali, Morocco, Senegal and South Africa. In South Africa, an ongoing project to equip 15,000 households, led by Kwazulu Energy Service Company (TOTAL, 35%), had equipped nearly 9,000 households by the end of 2006. In Morocco, Temasol, in which TOTAL has indirect interests through Total Maroc (32.2%) and TENESOL (35.6%), continued its development. In 2006, approximately 24,000 of the total of 58,500 households covered by these projects were equipped. In Morocco, Temasol, in which TOTAL has indirect interests through Total Maroc (32.2%) and TENESOL (35.6%), continued its development. In 2006, approximately 24,000 of the total of 58,500 households covered by these projects were equipped.
Power and Cogeneration
As a refiner and petrochemicals producer, TOTAL has interests in several cogeneration facilities. Cogeneration is a process whereby the steam produced to turn turbines to generate electricity is then captured and used for industrial purposes. TOTAL also participates in another type of cogeneration, which combines power generation with water desalination, and in gas-fired power generation, as part of its strategy of pursuing opportunities at all levels of the gas value chain. The Taweelah A1 cogeneration plant in Abu Dhabi, which combines power generation and water desalination, has been in operation since May 2003 and is owned and operated by Gulf Total Tractebel Power Cy, in which TOTAL has a 20% interest. Taweelah A1 currently has a total power generation capacity of 1,430 MW and a water desalination capacity of 385,000 m3 per day. Near the end of 2006, it was decided to develop an additional 250 MW of capacity, which is expected to enter into operation in 2009. In Thailand, TOTAL owns 28% of Eastern Power and Electric Company Ltd (EPEC) which has operated the combined cycle gas power plant of Bang Bo, with a capacity of 350 MW, since March 2003. In Argentina, in November 2006 TOTAL sold its 63.9% interest in Central Puerto S.A., a company which owns and operates gasfired power stations in Buenos Aires and in the Neuquén region, with a total capacity of 2,165 MW. In December 2006, TOTAL also sold its 70% interest in Hidroneuquen, a company owning a 59% interest in a hydroelectric dam located in the Neuquén region. In Nigeria, TOTAL and its partner, the state-owned NNPC, are participating in two projects to construct gas-fired power generation units. These projects are part of the Nigerian government’s policy to develop power generation, stop gas flaring and privatize the power generation sector: • the Afam project, part of the SPDC joint-venture in which TOTAL holds a 10% interest, concerns the upgrading of the Afam V
TOTAL currently operates a wind farm in Mardyck (close to its Flanders refinery in northern France) and is conducting development studies for onshore and offshore projects in France, the United Kingdom and Spain. Mardyck, commissioned in November 2003, has a capacity of 12 MW and produced approximately 25.2 BWh of electricity in 2006.
(a) Source : Poten & Partners - LPG IN WORLD MARKETS – Yearbook 2006.
UPSTREAM / GAS & POWER
France: the Mardyck wind farm on the site of the Flanders refinery (Dunkirk)
South Africa: the Forzando colliery
It is designed to allow comparison of different technologies at the same site in order to prepare for possible larger scale offshore or onshore projects in the future. In December 2005, after a call for tenders, TOTAL was selected by the French Ministry of Industry for an onshore wind power project with a planned capacity of 90 MW to be built in Aveyron region. Pursuant to the terms of the bid, the project is subject to obtaining a construction permit. The public consultation for this project began in January 2007, and the wind farm is expected to begin operations in 2009. Work on this project will be conducted by the Éoliennes de Mounès company, in which TOTAL has a 50% interest. TOTAL is also preparing for the development of a wind farm with a 120 MW capacity offshore Dunkirk, France. This project, in which TOTAL holds a 50% interest, should benefit from the power purchase terms set in the tariff order released on July 10, 2006.
The Group’s South African coal is exported through the port of Richard’s Bay, the world largest coal terminal, of which 5.7% is owned by TOTAL. On the South African domestic market, sales amounted to 0.6 Mt in 2006, primarily intended for the industrial and metallurgic sectors. In parallel, Total Coal South Africa (TCSA) is developing new mines, including the construction of the Forzando South mine, which was completed near the end of 2006 and which is expected to reach its planned production capacity of 1.2 Mt/y by 2009. TOTAL is also active in coal trading through its wholly-owned subsidiary Total Energy Resources (TER) in Hong Kong and through a representative office established in Jakarta in September 2004. Of the 2.6 Mt of coal traded in 2006, 62% was sold in Asia. In France, TOTAL, through its subsidiary CDF Énergie, is an important steam coal distributor in the industrial sector (paper, cement, agro-food, residential heating, etc.), with sales of 2.2 Mt in 2006, originating from diverse sources outside the Group.
In marine energy, TOTAL acquired a 10% interest in a pilot project located offshore Santona, on the northern coast of Spain, in June 2005. The construction and test of a first buoy, approved in 2006, should determine the final size of the project, as well as its planned generation capacity. This pilot project is expected to provide information necessary to assess the technical and economic potential of this technology. TOTAL has a 21.5% interest in Scotrenewables Marine Power, a company, located in the Orkney Islands in Scotland (UK). This company is developing tidal current energy converter technology.
TOTAL sold approximately 9.2 Mt of coal worldwide in 2006 (compared to 9.5 Mt in 2005 and 11.3 millions of tons in 2004), of which 4.4 Mt was South African steam coal produced by the Group. Approximately 75% of the Group's South African coal production was sold to European utility companies and approximately 12% was sold in Asia.
o TOTAL IN 2006
uu The Downstream segment conducts TOTAL’s refining,
marketing, trading and shipping activities. No. 1 in Western European refining/marketing (a). No. 1 in African marketing (b). Refining capacity of approximately 2.7 Mb/d at year-end 2006. Nearly 17,000 retail stations at year-end 2006. Approximately 3.8 Mb/d of products sold in 2006. One of the leading worldwide traders of oil and refined products. 1.78 B€ invested in 2006. 34,467 employees.
(a) Company sources, Oil and Gas Journal of December 18, 2006. (b) Company sources, PFC Energy, December 2006.
DOWNSTREAM SEGMENT FINANCIAL DATA
113,887 3,644 2,784
99,934 3,899 2,916
86,896 3,235 2,331
Non-Group sales Adjusted operating income Adjusted net operating income
DOWNSTREAM / REFINING & MARKETING
France: inauguration of the hydrocracker (DHC) at the Normandy refinery
Germany: the Leuna refinery
France: operators working on a storage tank at the La Mède refinery (Marseille)
REFINERY THROUGHPUT (kb/d)*
G Europe G Rest of world 2,410 313 297 2,454
Conditions in the oil market remained globally favorable in 2006. Refinery margins, while lower than in 2005, remained on average at satisfactory level. In 2006, the downstream net operating income averaged 2,784 M€ compared to 2,916 M€ in 2005, down from 5%. Expressed in dollars, the downstream adjusted net operating income averaged $3.5 billion, down from $0.1 billion compared to 2005. This evolution is notably due to the impact of the weaker refining environment, partially offset by favorable market effects (-$0.65 billion), the impact of performance improvement (approximately $0.3 billion) and the positive effect (an estimated $0.25 billion) of the recovery after the disruption of activities in 2005 (strikes in France and consequences of Hurricane Katrina in the United States).
* Including Group’s share in CEPSA.
In 2006, refinery throughput averaged 2,454 kb/d compared to 2,410 kb/d in 2005, up 2%. Refinery utilization rate was 88% in 2006.
2006 REFINED PRODUCTS SALES BY GEOGRAPHICAL AREA: 3,786 kb/d*
5% Rest of world 15% Americas 9% Africa
* Including trading activities and Group’s share in CEPSA.
o TOTAL IN 2006
As of December 31, 2006, TOTAL’s worldwide refining capacity was 2,700 thousand barrels per day (kb/d). The Group’s refined products sales worldwide were 3,786 kb/d (including trading activities), compared to 3,792 kb/d in 2005 and 3,761 kb/d in 2004. TOTAL is the largest refiner/marketer (a) in Western Europe and, with a market share of 11%, the largest marketer in Africa (b). As of December 31, 2006, TOTAL’s marketing network consisted of 16,534 retail stations worldwide, of which approximately 50% are owned by the Group. TOTAL’s refineries also allow the Group to produce a broad range of specialty products, such as lubricants, liquefied petroleum gas (LPG), jet fuel, special fluids, bitumen and petrochemical feedstock. Since 2004 TOTAL has pursued a sustained refining investment program to respond to changes in the oil market. This program, initiated with the construction of a distillate hydrocracker (DHC) at the Group’s refinery in Normandy, France, continued in 2006 with the launch of engineering studies for two major projects: the construction of a full-conversion refinery in Saudi Arabia and the construction of a deep conversion unit at the Port Arthur, Texas, refinery. Under this program, the Group plans to invest an average of 1 B€ per year in refining over the 2006-2010 period (excluding capitalization of turnarounds). For its marketing activities, the Group’s strategy is to strengthen its positions in Europe and Africa and to pursue targeted growth in certain other markets, in particular in Asia.
As of December 31, 2006, TOTAL held interests in 27 refineries (including thirteen that it operates), located in Europe, the United States, the French West Indies, Africa and China. TOTAL’s refining capacity in Western Europe is 2,342 kb/d, accounting for more than 85% of the Group’s global refining capacity and making TOTAL the leading refiner in this region. TOTAL operates twelve refineries in Western Europe. TOTAL also has minority interests in another German refinery (Schwedt) as well as interests in four Spanish refineries through its holdings in CEPSA. In the United States, TOTAL operates the Port Arthur, Texas, refinery near the Gulf of Mexico, which has a production capacity of 174 kb/d. TOTAL, Sinochem and PetroChina have been in partnership for more than ten years in the WEPEC refinery located in Dalian (China), whose annual refining capacity averages 219 kb/d. TOTAL holds a 22.41% interest in this refinery. From 2006 to 2010, TOTAL plans to invest approximately 5 B€ in refining, excluding capitalization of turnarounds. Nearly 40% is designated for projects to increase refining capacities and for conversion projects to upgrade heavier crudes. Nearly 20% is designated for developing units and desulphurization to process highsulphur crudes. Finally, approximately 30% is designated for modernizing refining sites, improving safety and energy efficiency and reducing environmental impacts. • Concerning growth and conversion, two major projects were initiated in Saudi Arabia and the United States in the first half 2006. TOTAL and The Saudi Arabian Oil Company (Saudi Aramco) signed a Memorandum of Understanding (MOU) related to a project for the construction and operation of a refinery with a capacity of 400 kb/d in Jubail, Saudi Arabia. This fullc-onversion refinery is being designed to process Arabian Heavy crude and produce high-quality refined products adapted for all markets, mainly
for export. A comprehensive joint Front-End Engineering and Design (FEED) study was undertaken in July 2006. Saudi Aramco and TOTAL agreed to form a joint venture company in which Saudi Aramco and TOTAL would each hold 35% and the remaining 30% would be listed on the Saudi stock exchange, subject to the approval of the relevant authorities, at the end of the FEED (beginning of 2008). Start-up of the refinery is scheduled for 2011. TOTAL launched studies for the construction of a deep conversion unit or coker at the Port Arthur refinery in the United States. This project is being designed to upgrade heavy crudes and produce lighter products for a structurally short American fuel market. • Performance investments are designed to adapt TOTAL’s refineries to changes in the European oil market: growing demand for diesel and increasing supply of high-sulphur crudes. The first project of this type is the construction of a distillate hydrocracker (DHC) at the Normandy refinery in France. This unit, whose construction began in the spring of 2004, came on-stream successfully in 2006. The project represented a total investment of approximately 550 M€ over the 2003-2006 period, and also included, the construction of a hydrogen production unit. The Group also decided to build a desulphurization unit at the Lindsey (Immingham) refinery in the UK. This investment is being designed to raise the portion of high-sulphur crude that the plant can process from 10% to 70%. The unit is scheduled to begin operating in 2009. A second project to build a desulphurization unit at the Donges refinery in France is currently being studied. Commissioning is planned for 2010. A third project to construct a desulphurization unit at the Leuna refinery in Germany is also being studied. In addition, CEPSA (c) has announced investments to improve the performance of its refineries, including the construction of a 2.1 Mt hydrocracker (d) unit at the Huelva refinery in Spain. This unit is scheduled to begin operating near the end of 2009.
(a) Source: Oil and Gas Journal, December 18, 2006. (b) Company sources, PFC Energy, December 2006. (c) Group’s share in CEPSA: 48.83% as of December 31, 2006. (d) To which should be added a crude distillation unit (CDU), a vacuum distillation unit (VDU) and a steam methane reformer (SMR).
DOWNSTREAM / REFINING & MARKETING
China: the Dalian refinery
France: the hydrocracker (DHC) at the Normandy refinery
Crude oil refining capacity
The table below sets forth TOTAL’s share of the daily crude oil refining capacity of its refineries.
As of December 31
Refineries operated by the Group Normandy (France) Provence (France) Flandres (France) Donges (France) Feyzin (France) Grandpuits (France) Antwerp (Belgium) Leuna (Germany) Rome (Italy)
331 158 141 230 116 99 350 227 64 221
331 158 159 229 118 99 350 225 64 221 73 84 174 2,285 423 2,708
328 155 160 231 119 99 352 227 52 223 73 84 176 2,279 413 2,692
Immingham (United Kingdom) Milford Haven (United Kingdom Vlissingen (Netherlands) Subtotal Other refineries in which the Group has an interest (e) Total
74 81 174 2,266 434 2,700
Port Arthur, Texas (United States)
(a) For refineries not 100% owned by TOTAL, the indicated capacity represents TOTAL’s proportionate share of the overall refining capacity of the refinery. (b) TOTAL’s interest was 71.9% as of December 31, 2006 and 2005; TOTAL’s interest was 57.5% as of December 31, 2004. (c) TOTAL’s interest is 70%. (d) TOTAL’s interest is 55%. (e) Fourteen refineries in which TOTAL has interests ranging from 16.7% to 55.6% (seven in Africa, four in Spain, one in Germany, one in Martinique and one in China) and the Reichstett refinery in France in 2004).
The table below sets forth by product category TOTAL’s net share of refined product output.
532 179 660 582 455 2,408
534 191 639 593 406 2,363
580 188 712 552 419 2,451
Gasoline Avgas and jet fuel Kerosene and diesel fuel Fuel oils and heating oils Other products Total
(a) Including TOTAL’s share in CEPSA.
Utilization rate (crude refining only)
o TOTAL IN 2006
Morocco: a retail station in Casablanca
The Group is one of the leading marketers, in the combined six largest European markets (France, Spain, Benelux, United Kingdom, Germany and Italy) (a). TOTAL is also the largest marketer in Africa, with a market share of 11%, after acquiring distribution affiliates in fourteen African countries in 2005 and 2006.
(a) Company data, based on quantities sold.
Sales of refined products (a)
The table below sets forth by geographic area TOTAL’s volumes of refined petroleum products sold for the years indicated.
837 1,438 264 274 153 2,966 820 3,786
852 1,444 256 260 151 2,963 829 3,792
882 1,495 257 245 129 3,008 753 3,761
France Rest of Europe (a) United States Africa Rest of world Total excluding Trading Trading (Balancing and Export Sales) Total including Trading
(a) Including TOTAL’s share in CEPSA.
The table below sets forth by geographic area the number of retail stations in the TOTAL’s network.
As of December 31 France
5,220 4,628 1,672 3,562 1,452 16,534
5,459 4,937 1,677 3,505 1,398 16,976
5,626 5,003 1,697 3,199 1,332 16,857
Rest of Europe (excluding CEPSA) CEPSA Africa Rest of world Total
(a) Retail stations under the TOTAL and Elf brands and approximately 2,000 retail stations under the Élan brand. (b) Including all the retail stations within the CEPSA network.
In Europe, TOTAL has a network of retail stations in France, Belgium, Luxembourg, the Netherlands, Germany, the UK, Portugal, Italy, and, through its 48.83% interest in CEPSA, Spain and Portugal. In France, the TOTAL-branded network has a diverse selection of products (such as the Bonjour convenience stores) and strong customer loyalty programs. As of December 31, 2006, the network in France consisted of approximately 2,600 TOTAL branded retail stations in France and nearly 300 Elf-branded retail stations. Elf-branded retail stations offer quality fuels and basic services at prices that are particularly competitive. TOTAL also markets fuels at nearly 2,000 Élan-branded retail stations, generally located in rural areas. In Germany, a major network reorganization program was completed in 2006, with the closing of 40 retail stations and the development of non-fuel sales. In the UK, a program launched in 2003 to rationalize sites and increase non-fuel sales continued in 2006. Non-fuel sales increa-
sed following the opening of approximately 20 Bonjour convenience stores. As of December 31, 2006, TOTAL had a network of 475 AS24branded retail stations in 20 European countries. This network, dedicated to professional transporters, opened 43 new retail stations in 2006, mainly in Central and Eastern Europe. TOTAL is among the leaders in Europe for fuel-payment credit cards, with approximately 3.5 million cards issued in 16 European countries. In 2006, more than 4.7 Mm3 of motor fuels were sold and paid for using TOTAL’s credit card. In 2006, TOTAL continued to expand its distribution in Europe of two new high-performance fuels branded TOTAL EXCELLIUM 98 and TOTAL EXCELLIUM diesel. These new generation fuels reduce fuel consumption and carbon dioxide emissions. With the launch of the EXCELLIUM range, TOTAL has acquired a significant share of the market for next generation fuels in Europe. In 2005, TOTAL began distributing an urea-based additive called AdBlue intended for professional transporters in Europe. As of December 31, 2006, more than 130 TOTAL and AS24 retail
DOWNSTREAM / REFINING & MARKETING
Germany: a Munich retail station supplying hydrogen
stations were equipped to distribute bulk and conditioned urea. Between now and 2009, TOTAL expects to progressively expand its distribution of AdBlue to include a network of approximately 400 retail stations in 27 European countries.
ten terminals and depots, as well as sales and distribution of fuel, lubricants, aviation and marine petroleum products. TOTAL also acquired assets in Cambodia in December 2006 to strengthen its existing activities. Both acquisitions remain subject to any necessary approval by the relevant authorities in each country. In 2006, after the distribution of petroleum products was partially opened to foreign companies in Indonesia, TOTAL decided to develop a pilot network of five retail stations in Jakarta.
TOTAL is present in more than 40 African countries and has interests in seven refineries. In 2005, TOTAL strengthened its position in Africa through the acquisition of distribution affiliates in fourteen African countries (Djibouti, Eritrea, Ethiopia, Ghana, Guinea Conakry, Liberia, Malawi, Mauritius, Mozambique, Sierra Leone, Chad, Togo, Zambia and Zimbabwe). This acquisition, completed in 2006, includes 500 retail stations and 29 terminals and depots with an overall capacity of 380,000 m3. Through this agreement, TOTAL has strengthened its presence in West Africa, consolidating its positions in East Africa and becoming the largest marketer of petroleum products in Africa.
TOTAL produces a wide range of refined petroleum products at its refineries and other facilities. TOTAL is among the leading companies in the European specialty products market, particularly in the bitumen, jet fuel and lubricant markets. TOTAL markets lubricants in more than 150 countries. In 2006, TOTAL strengthened its positions in the lubricants market by signing supply agreements with car manufacturers Nissan and Honda. In September 2006, TOTAL entered into a joint venture agreement with Veolia Group (TOTAL 35%) to build a 120 kt capacity oil recycling plant in France. Commissioning of the plant is scheduled for 2008. TOTAL continued to develop its liquefied petroleum gas (LPG) distribution activities on a worldwide scale, and is the fourth largest international distributor (a).
TOTAL is present in nearly 20 Asian countries. Building on their experience together at the Dalian refinery, in 2005 TOTAL and Sinochem decided to develop two retail station network partnerships in China. A joint venture agreement, signed in March 2005, is designed to develop a network of 200 retail stations in Beijing and in the area north of the city. At the end of December 2006, 22 retail stations were operating. A second joint venture agreement for the creation of a network of 300 retail stations in the provinces of Shanghai, Jiangsu and Zhejiang in eastern China was signed in September 2005. The first retail station opened in November 2006. These investments represent a major step forward in TOTAL’s strategy of expanding its petroleum products marketing operations in China. In July 2006, TOTAL strengthened its positions in the Pacific area through the acquisition of assets in Fiji, Samoa and Tonga. The acquisition includes a network of retail stations, approximately
(a) Company sources, on the basis of volumes sold.
o TOTAL IN 2006
France: an Elf-branded retail station The VLCC “La Famenne”, under time charter to the Group
Switzerland: traders at work in Geneva
Bio-fuels and hydrogen
The Group plays an active part in the promotion of renewable energies and alternative fuels. In 2006, TOTAL consolidated its position as an important oil and gas company active in biofuels in Europe by producing and incorporating 500 kt of ETBE (a) in seven refineries (b) (compared to 360 kt in 2005 and 310 kt in 2004) and incorporating 420 kt of VOME (c) in diesel fuels at nine European refineries and several storage sites. In November 2006, TOTAL and several other parties (car manufacturers, oil companies, agricultural representatives, ethanol producers) signed the Superethanol E85 Development Charter, a charter to develop superethanol in France (fuel with up to 85% of ethanol from agricultural production, also called “flexfuel”). As part of this charter, TOTAL undertook to equip 200 to 275 retail stations to distribute flexfuel by the end of 2007. The rate at which Superethanol is adopted by the market will depend both on the creation of appropriate tax incentives and the marketing of suitable vehicles. In 2006, TOTAL continued its research and testing programs for fuel cell and hydrogen fuels technologies. To this purpose, TOTAL entered into cooperation agreements for automotive applications (with BMW in March 2006, Renault in 2003 and Delphi in 2001) and for stationary applications (with Electrabel and Idatech in 2004). Under its partnership with BVG, the largest public transport company in Germany and the bus operator in Berlin, TOTAL created a Center of Excellence for Hydrogen in Berlin. The first consumer hydrogen fueling station opened in Berlin in March 2006. As part of the partnership with BMW, a second hydrogen fueling station opened in December 2006 near the car manufacturer’s Innovation and Research Center. The construction of a third hydrogen fueling station in Europe is under study. TOTAL is also an active participant in the hydrogen technology platform program launched by the European Commission at the end of 2003, intended to promote the development of this technology in Europe.
I TRADING & SHIPPING
The Trading & Shipping sector: • sells and markets the Group’s crude oil production; • provides a supply of crude oil for the Group’s refineries; • imports and exports the appropriate petroleum products for the Group’s refineries to be able to adjust their production to the needs of local markets; • charters appropriate ships for these activities; and • undertakes trading on various derivatives markets. Although Trading & Shipping’s main focus is serving the Group, its know-how and expertise also allow Trading & Shipping to extend the scope of its activities beyond meeting the strict needs of the Group.
TOTAL is one of the world’s major traders of crude oil and refined products on the basis of volumes traded. The table opposite sets forth selected information with respect to TOTAL’s worldwide sales and source of supply of crude oil for each of the last three years.
(a) ETBE: Ethyl-Tertio-Butyl-Ether. (b) Including Algeciras and Huelva refineries (CEPSA). (c) VOME: Vegetable-Oil-Methyl-Esther.
DOWNSTREAM / TRADING & SHIPPING
Sales & supply of crude oil
(kb/d, except %)
For the year ended December 31 Sales of crude oil Total Sales Sales to Downstream segment (a) Sales to external customers Sales to external customers as a percentage of total sales Supply of crude oil Total supply Produced by the Group (b) (c) Purchased from external suppliers Production by the Group as a percentage of total supply
(a) Excludes share of CEPSA. (b) Includes condensates and natural gas liquids. (c) Includes TOTAL’s proportionate share of the production of equity affiliates.
4,112 2,074 2,038 50%
4,465 2,111 2,354 53%
4,720 2,281 2,439 52%
4,112 1,473 2,639 36%
4,465 1,615 2,850 36%
4,720 1,686 3,034 36%
The Trading division operates extensively on physical and derivatives markets, both organized and over the counter. In connection with its trading activities, TOTAL, like most other oil companies, uses derivative energy instruments to adjust its exposure to fluctuations in the price of crude oil and refined products. The Trading division undertakes certain physical transactions on a spot basis, but also enters into term and exchange arrangements and uses derivative instruments such as futures, forwards, swaps and options. These operations are entered into with various counterparties. All of TOTAL’s trading activities are subject to strict internal controls and trading limits.
In 2006, the principal market benchmarks stood at historically high levels: 2006
Brent ICE Futures - 1 Line
55.25 507.9 13.91
38.04 347.5 19.97
57.87 510.5 8.35 (2-Nov) (12-Jan) (6-Apr)
78.30 668.8 27.21 (7-Aug) (10-Aug) (25-Jan)
($/b) ($/t) ($/t)
66.11 580.4 14.52
Gasoil ICE Futures - 1st Line (a) VLCC Ras Tanura Chiba - BITR (b)
(a) 1 Line : Quotation for first month nearby delivery ICE Futures. (b) HLCC : Very Large Crude Carrier. BITR: Baltic International Tanker Routes.
Throughout 2006, the Trading division maintained a level of activity similar to levels attained in 2004 and 2005, trading physical volumes of crude oil and refined products amounting to an average of approximately 5 Mb/d.
The principal activity of the Shipping division is to arrange the transportation of crude oil and refined products necessary for Group activities. The Shipping division provides a wide range of shipping services required by the Group to develop its activities and maintains a rigorous safety policy. Like a certain number of other oil companies and shipowners, the Group uses freightrate derivative contracts in its shipping activity in order to manage its exposure to freight-rate fluctuations. In 2006, the Shipping division of the Group chartered 3,170 voyages to transport approximately 127 Mt of oil. As of December 31, 2006, the Group employs a fleet made up of sixty three vessels chartered under long-term or medium-term agreements (including six LPG tankers). The fleet is modern, with an average age of approximately five years and is predominately comprised of double-hulled vessels. Throughout 2006, world crude tanker tonnage increased by 4.9%.This was the fourth consecutive year of high-growth in terms of available crude tonnage. Tonnage demand in 2006 was less sustained than the year before, due to the slowdown in the growth of global oil demand. These trends reinforce a structural surplus of available tonnage, particularly in a situation where the orderbook reaches a historical record, both in absolute value (124 million deadweight tons) and as a percentage of the active fleet (30% of the global fleet, between 30% and 65% according to the different tanker segments). On the crude tanker segment, after the seasonal rise observed during the last quarter of 2005, the chartering markets dropped significantly throughout the year 2006, apart from some volatile peaks. Following a strengthening of freight rates during the second and third quarter, the rates declined significantly after August 2006, particularly for VLCCs. The situations in both the crude and the petroleum products freight markets during the last quarter of 2006 thus were not comparable to the historical level observed at the end of 2004 and 2005. The large number of deliveries expected in 2007, which should not be offset by the demolition of ships, should lead to an increase in tonnage supply (+5.8%) (a) greater than the increase in ton-miles (+3%) (a).
(a) Source: PIRA.
o TOTAL IN 2006
uu The Chemicals segment is organized into the Base the Chemicals activities (petrochemicals and fertilizers) and
Specialties activities, which includes the Group’s rubber processing, resins, adhesives and electroplating activities.
CHEMICALS SEGMENT FINANCIAL DATA* 2006
16,765 1,148 967 (a)
14,886 960 936 (a)
Sales Adjusted operating income Adjusted net operating income (a)
19,113 1,215 884 (a)
(a) Includes deferred tax change related to Arkema activities of 18 M€ in 2006, 151 M€ in 2005 and 148 M€ in 2004. * Under IFRS rules for discontinued operations, the historical statements on income and ROACE have been restated to exclude the contribution of Arkema.
NON-GROUP SALES BY SECTOR
ADJUSTED OPERATING INCOME BY SECTOR
France: a chemist at the Eastern Research and Development Center (ERDC) on the Carling Saint Avold site
France: a laboratory at the Soficar plant, specializing in carbon fibers
South Korea: the Cray Valley Korea resins production plant
In 2006, the Chemicals segment sales amounted to 19.11 B€. Europe accounted for 57% of the segment’s overall sales for 2006 and North America for 24%. The remaining 19% of 2006 sales were principally realized in Asia and Latin America. Results for the segment in 2006 benefited from the healthy world demand and continued to progress in spite of the increase in raw materials and energy prices. Petrochemical margins, relatively poor during the first quarter of the year, gradually improved to reach high levels in the second semester, due to the combined effects of strong demand and a decrease in the price of naphtha. In 2006, TOTAL’s Chemicals segment pursued its plan of actions focusing on three key areas: on-the-job safety, safety management systems and major risk prevention.
TOTAL is one of the world’s largest integrated chemical producers (a). On May 12, 2006, TOTAL S.A.’s shareholders approved the spin-off of Arkema which included vinyl products, industrial intermediates and performance products. Since May 18, 2006, Arkema has been listed on Eurolist by Euronext Paris.
I BASE CHEMICALS
TOTAL’s Base Chemicals activities encompass petrochemicals and fertilizers. Sales reached 12.01 B€ in 2006. Demand remained strong throughout the year due to the favorable economic environment. In 2006, naphtha prices were very volatile, increasing markedly during the first half of the year before decreasing significantly during the second half. As a result, margins markedly improved during the latter part of the year. Adjusted net operating income from Base Chemicals activities increased by more than 9% in 2006 compared to 2005.
TOTAL’s petrochemicals activities include olefins and aromatics (base petrochemicals) as well as polyethylene, polypropylene and styrenics. On October 1, 2004, Total Petrochemicals was created to regroup these activities. TOTAL’s main petrochemicals sites are located in Belgium (Antwerp, Feluy), France (Gonfreville, Carling, Lavéra, Feyzin), and the United States (Port Arthur, Houston and Bayport in Texas, Carville in Louisiana) as well as in Singapore and China (Foshan). Most of these sites are either adjacent to or connected by
(a) Source: company data, based on annual sales.
o TOTAL IN 2006
Belgium: the Total Petrochemicals Feluy polymer production site
TOTAL’s production capacities by main product groups and regions
Europe North America (2006) (2006)
5,185 2,600 1,315 1,205 1,240 1,195 930 440 1,070 1,350
Middle East (c) (2006)
655 725 280 145 515
7,035 4,255 2,035 2,420 3,105
7,005 4,125 2,035 2,420 3,175
7,055 4,040 2,130 2,305 3,110
Olefins (a) Aromatics Polyethylene Polypropylene Styrenics
(a) Ethylene, propylene and butadiene. (b) Styrene, polystyrene and elastomers (activity discontinued at the end of 2006). (c) Including minority interests in Qatar and 50% of Samsung-Total Petrochemicals capacities in Daesan (South Korea).
pipelines to Group refineries. As a result, most of TOTAL’s petrochemicals activities are closely integrated with the Group’s refining operations. In August 2003, TOTAL entered into a 50/50 joint venture with Samsung General Chemicals. This joint venture, named SamsungTotal Petrochemicals, has an integrated site at Daesan in South Korea where it produces a wide range of petrochemicals products and polymers which are marketed in Asia. TOTAL’s objective is to strengthen its position among the leaders in petrochemicals. In mature markets, TOTAL intends to improve the competitiveness of its existing large sites. In the faster growing Asian markets, TOTAL’s strategy is to expand its activities, either from plants located within the more dynamic markets or from sites located in countries benefiting from favorable access to raw materials. Samsung-Total Petrochemicals launched a major program to expand and upgrade its site at Daesan as part of this strategy. This investment targets a significant expansion of the capacities of the steamcracker and of the styrene plant, as well as the construction of a new polypropylene line. Construction on these plants is continuing, and they are expected to be brought on stream in 2007 and 2008, respectively. In Qatar, where the Group has had a long-term presence through its interest in Qapco, TOTAL, through its affiliate Qatofin, is participating in the construction of an ethane-based steamcracker at Ras Laffan and of a new low-density polyethylene plant at Mesaïeed. These two units are scheduled to be brought onstream at the end of 2008. At all sites, safety and environmental improvements were in line with the yearly targets set by the Group.
Base petrochemicals encompass the olefins and aromatics produced by steamcracking petroleum cuts, mainly naphtha, as well as propylene and aromatics produced in the refineries of the Group. The economic environment for these activities is extremely volatile and margins are strongly influenced by the evolution of the price of naphtha. The year 2006 was characterized by important fluctuations in the price of naphtha and a strong global demand in steam-cracker derivatives, reflecting the healthy economic environment. In addition, a number of unplanned outages within the industry disturbed the supply of aromatics in North America and olefins in Europe, while the start-up of some petrochemical plants in the Middle East was significantly delayed. These factors, combined with strong demand and the decrease in the price of naphtha in the second half of the year, contributed to keeping margins at high levels throughout the second half 2006. Olefins production increased by 1% in 2006 compared to 2005.
Polyethylene is a plastic produced by the polymerization of ethylene manufactured in the Group’s steamcrackers. It is principally intended for the packaging, automotive, food, cable and pipe markets. Margins are strongly influenced by the level of demand and by competition from expanding production in the Middle East, which takes advantage of favorable access to raw materials (ethylene, made from ethane). In 2006, strong world demand helped to absorb new production brought onstream in the Middle East and in China as well as contri-
France: the Grande Paroisse fertilizer plant at Grandpuits
buting to maintaining margins in spite of the increase in the raw materials prices. Sales in Europe were negatively affected by limited availability of ethylene. Nevertheless, TOTAL’s global sales volumes increased by 1.4% in 2006 compared to 2005.
Polypropylene is a plastic produced by the polymerization of propylene manufactured in Group steamcrackers and refineries and principally intended for the packaging, appliance, car industry, carpet and household and sanitary goods markets. Margins are primarily influenced by the level of demand and the availability and price of propylene. In 2006, polypropylene demand was strong in Europe, where supply and demand were generally balanced, and margins remained satisfactory. However in the United States, both demand and margins were negatively affected by the volatility and high price of propylene. In Asia, demand and margins improved in the second semester after a weak start of the year. Sales volumes increased by 1.8% in 2006 compared to 2005.
In 2006, Grande Paroisse’s sales decreased by 11% compared to 2005. The activity was negatively affected by turnarounds and various technical problems incurred in the Group’s nitrogen plants, and also by the weak demand for fertilizers during the first part of the year. Furthermore, the increase in the price of natural gas had a negative impact on margins. In July 2006, Grande Paroisse stopped its French production of complex fertilizers due to the continuously declining market for those products and closed its plants in Bordeaux, Basse Indre, Rouen and Granville. Besides, Zuid Chemie - the Dutch affiliate of Grande Paroisse - was sold to Rosier, of which Elf Aquitaine holds a 57% share, to create a more competitive player in the Benelux market. Grande Paroisse also unveiled an important plan intended to support its nitrogen derivatives production and announced the construction of a new urea plant at Grandpuits as well as a new world-class nitric acid plant in Rouen. These plants are scheduled to be brought onstream in 2008, concurrent with the shutdown of the fertilizers plant in Oissel and four small obsolete acid nitric lines in Rouen and Mazingarbe. Grande Paroisse continued to face the consequences of the explosion which struck its Toulouse plant in September 2001 and made payments, under the French law presumption of civil responsibility, over and above the compensation paid by insurance companies, reaching a cumulative amount approaching 1,227 M€ as of December 31, 2006.
This business unit encompasses styrene monomer and polystyrene. The elastomers activity was shut-down in 2006. Most of the styrene produced by the Group is used in the production of polystyrene. Polystyrene is a plastic principally used in packaging, domestic appliances, electronics and audio-video. Margins are strongly influenced by the level of polystyrene demand as well as by the price of benzene, the principal raw material. In 2006, the increase in world styrene demand was relatively weak, approximately 2%, and demand continued to decline in Europe. World polystyrene demand varied little after the effect of the increased competition of other materials, plastics and paper. Margins were affected by the high prices of raw materials, ethylene and benzene, and by the high costs of energy. Nevertheless, TOTAL’s polystyrene sales volumes increased by 0.3% in 2006 compared to 2005.
TOTAL’s Specialties sector includes rubber processing (Hutchinson), resins (Cray Valley, Sartomer and Cook Composites & Polymers), adhesives (Bostik) and electroplating (Atotech). The sector serves consumer and industrial markets for which customer-oriented marketing and service as well as innovation are key drivers. The Group markets specialty products in more than 55 countries. Its strategy is to continue its international expansion by combining internal growth and targeted acquisitions while concentrating on growing markets and focusing on the distribution of new products with high added value. In 2006, the Specialties sector benefited from a generally favorable environment and particularly from stronger demand in Europe. In 2006, sales reached 7.10 B€, an increase by nearly 9% compared to 2005. The adjusted net operating income from the Specialties sector increased by 10% in 2006 compared to 2005.
The Fertilizers business unit (Grande Paroisse) manufactures and markets nitrogen fertilizers made using natural gas, and complex fertilizers manufactured using nitrogen, phosphorus and potassium products. Margins are strongly influenced by the price of natural gas.
o TOTAL IN 2006
France: the powder production workshop in the Bostik plant at Sainville
TOTAL’s adhesives subsidiary, Bostik, is one of the worldwide leaders in its sector, based on sales, with leading positions in the industrial, hygiene, construction and consumer and professional distribution markets. In 2006, sales increased by 15% compared to 2005. This increase in sales recorded in 2006 stems partly from acquisitions made in the second half of 2005 and early in 2006, and partly from healthy global economic conditions. The activity was sustained in the AsiaPacific zone, remained well oriented in the United States and improved significantly in Europe. Nevertheless, margins were negatively affected by the increase in the prices of raw materials. In 2006, Bostik strengthened its position in the construction and distribution segments by acquiring Sealocrete and Wetherby (UK) and Paso (Germany). Bostik also acquired Pegaso (Mexico) in the industrial segment and the laminated adhesives activities of Du Pont in Germany, as well as purchasing the minority shareholders’ shares of ASA (Australia).
Hutchinson manufactures and markets products derived from rubber processing for the automotive and aerospace industries as well as for consumer markets. Sales increased by approximately 5% in 2006 compared to 2005. In 2006, the automotive industry sales increased by 4% compared to 2005 despite a difficult environment in Europe and in the United States. In 2006, sales from the industrial division increased by approximately 10% compared to 2005, weaker demand from the defense industry in the United States was offset by growth from other segments. Sales from the consumer goods sector increased by approximately 2% due to higher consumer demand in Europe. Early in 2006, Hutchinson strengthened its industrial division by acquiring the French company Jehier, a manufacturer of various insulating components for the aerospace and defense industries. Throughout 2006, Hutchinson continued to develop in growing markets such as Central and Eastern Europe, South America and China.
Atotech, which encompasses TOTAL’s electroplating activities, is the second largest company in this market, based on worldwide sales (a). In 2006, sales grew by approximately 19% compared to 2005. Electroplating activity benefited from the growth of the electronic industry in Asia and also from strong demand for general metal finishing. In 2006, Atotech strengthened its general metal finishing activities by acquiring the shares of Kunz GmbH (Germany), a company specialized in anti-corrosion coating technologies intended for automotive uses. Atotech also expanded the production capacity of its Neuruppin (Germany) and Guangzhou (China) plants and commissioned a new industrial complex that combines both manufacturing and technical center facilities at Jang-An (South Korea).
TOTAL produces and markets resins for adhesives, inks, paints, coatings and structural materials through its three subsidiaries Cray Valley, Sartomer and Cook Composites & Polymers. In 2006, TOTAL’s resins activities improved its results, benefiting from the favorable environment. Sales grew by approximately 8% in 2006 compared to 2005. In 2006, Cray Valley decided to de-bottleneck its tackifying resins plant in Beaumont, Texas, United States, acquired in 2005. Sartomer started the expansion of its photocure plant in VillersSaint-Paul, France and pursued the construction of a new monomers and oligomers plant near Guangzhou, China. Cray Valley pursued the streamlining of its resin coatings production in Europe and closed its plant in Tönisworth (Germany), whose production is being transferred to other Cray Valley plants in Zwickau (Germany) and Boretto (Italy).
(a) Source: company data.
RESEARCH AND DEVELOPMENT
RESEARCH AND DEVELOPMENT
RESEARCH AND DEVELOPMENT COSTS
In Petrochemicals, R&D is directed toward the discovery of new resources from gas, coal or renewable energies and also the improvement of the energy efficiency of the facilities, as well as the development of new specialized polymers, the products of the future. Research and development challenges for TOTAL can be defined along four main lines: • knowledge of the resources and their quality, mainly oil and gas, but also for biomass and renewable energies; • competitiveness, renewal and quality of products, including the ability to meet market needs, their life cycle and their impacts; • efficiency, reliability and duration of production facilities, notably their energy output; • environmental challenges with regard to water, air and soil on production sites, and the future of residual gases such as carbon dioxide. These challenges are addressed in synergy rather than competitively. The approach varies according to the different business segments.
Atotech is part of the rapid global development of microelectronics, dealing with engraving, brasing and electroplating technologies. Hutchinson is innovating in the field of clean production technologies connected to thermoplastic products and attractive systems for major clients. Bostik is focusing its research and innovation program on developing functional adhesives that do more than just assemble parts into a whole but also offer new properties: better acoustics for building and transport applications and recyclability and compostability for hygiene and packaging applications. Bostik and Cray Valley-Sartomer are working on the development of new products derived from clean technologies, notably using biomass resources.
Main focus of business segment R&D
Exploration & Production
Upstream R&D has a number of themes, including: • seismic data acquisition and processing; • digital simulation and characterization of reservoirs (such as low permeability or very deep reservoirs), sour gas processing and chemical conversion of gas; • oil recovery in operated reservoirs and issues connected to heavy oil recovery are two major concerns which led the Group to increase the Research budget; • CO2 capture and geological storage in “depleted” gas reservoirs the subject of a major new project in France.
Controlling and reducing the environmental impact of its activities is a challenge common to the whole Group, such as the reduction of gas emissions, the reduction of water contamination to comply with the European water framework and the REACH directives, as well as the reduction of greenhouse gas emission whether through the improvement of energy efficiency or efforts leading to carbon capture and sequestration.
TOTAL’s management is considering the Group’s research and development trends and the optimal organization of the Research Department to adapt to a new context that requires both a strong research in all business segments as well as improved cross-disciplinary cooperation. Within the framework of a change in the management, this movement led to a reorganization of this Department which now reports directly to the Group’s Management. The Group has 22 major R&D centers worldwide and developed approximately 500 active partnerships with other industrial groups, university research or special research institutes. In addition, TOTAL benefits from a network of academic scientists worldwide committed to scientific watch and analysts useful to the Group’s R&D activities.
Gas & Power
The main R&D themes concern energy conversion: new technical options for LNG terminals, new processes for GTL (Gas to Liquids), notably including the emergence of DME (Di-MethylEther) production, the Group’s commitment in direct production processes and CTL (Coal-to-Liquids) processes to convert coal into liquid hydrocarbons. This business segment is also committed in power generation (the means to improve output) and CO2 capture in power plants. For renewable energies, major themes for R&D concern possible evolutions of photovoltaic technology with the new cell generation and power generation from biomass. TOTAL also entered into a partnership in wave power.
For refining and marketing, TOTAL is preparing to include in its activities resources of the future, whether from non-conventional oil or from first or second biomass generation. TOTAL is also developing new high performance fuels, additives and lubricants adapted to the market, car manufacturers and energy. This business segment is also developing processes and catalysts, considered as two major R&D drivers, to improve productivity and reduce environmental impacts.
o TOTAL IN 2006
CORPORATE SOCIAL RESPONSIBILITY
CORPORATE SOCIAL RESPONSIBILITY
o TOTAL IN 2006
uu Giveninthe nature and international scope of TOTAL’s activities, we are directly involved issues relating to our planet’s overall environmental, social and
economic equilibrium. The Group is therefore fully engaged in corporate social responsibility (CSR) via concrete policies, commitments and targets. Each year, we provide full details of our CSR performance in a special report entitled Sharing Our Energies*. The following pages outline the themes covered by that report.
I BUSINESS PRINCIPLES
The principles that guide the Group in its everyday activities are: responsibility, respect for human rights, integrity and transparency. TOTAL has based its policies on key international documents and the Group makes every effort to ensure that these policies are implemented.
Human rights: a key challenge
TOTAL does business in many countries. Some of them may not always respect human rights, others may suffer from political strife or social unrest, still others may involve security problems. In all cases, TOTAL’s top priority is human rights. The Group strives to ensure that this commitment is put into practice, with particular emphasis on raising employee awareness and providing relevant appropriate training.
Commitments based on universal principles
TOTAL’s approach to CSR is based on a Code of Conduct communicated to Group employees. The Code is the main reference document for everyday decision-making and compliance with its provisions is closely monitored. The Code emphasizes that TOTAL supports: • the principles of the Universal Declaration of Human Rights; • the Fundamental Conventions of the International Labour Organization; • the OECD Guidelines for Multinational Enterprises; • the Principles of the United Nations Global Compact. The Code also defines the Group’s values: “Our core values are professionalism, respect for employees, an ongoing concern for safety and environmental protection, and a commitment to contribute to the development of host communities. Our concept of professionalism emphasizes responsibility, accountability, integrity and exemplary behavior”.
CSR: an integral part of TOTAL’s strategy
Our commitment to CSR is an integral part of TOTAL’s overall strategy and everyday activities. We pay particular attention to CSR issues when deciding where to do business or to invest. They are also taken into account by management of all entities reporting directly to the Chief Executive Officer: • the Strategy and Risk Assessment Division (environment, safety, local development, security and international relations); • the Ethics Committee; • the Human Resources Division. In addition, basic rules of behavior together with guidelines for their application are disseminated all business units, giving concrete expression to the commitments made at Group level in the Code of Conduct.
* Further information on TOTAL’s 2006 social responsability achievements and policy can be obtained by consulting or downloading the Corporate Social Responsability Report, “Sharing our energies”. www.total.com/csr
ETHICS - INDUSTRIAL SAFETY
A safety awareness program
property is a in uu At TOTAL, the safety of people and risks we face major concernthethe conduct of our business. The industrial are related to products we manufacture or use in our processes as well as to actual industrial operations and transportation.
MANAGING TECHNOLOGICAL RISK
Number of accidents per million man-hours worked – TOTAL employees and contractor employees
(TRIR: Total Recordable Injury Rate LTIR: Lost Time Incident Rate)
The main thrusts of the Group’s safety strategy are to reduce industrial risk by means of preventive and protective measures, to integrate urban worksites into their surroundings and to plan for emergency situations so as to limit the consequences of any accidents. TOTAL operates nearly 400 sites worldwide involving high technological risk (as defined by the Seveso Directive for the European Union or presenting an equivalent level of risk for sites outside the EU). We apply a unique risk-analysis methodology in order to define concrete measures for integrating urban sites into their surroundings in compliance with national legislation. Similarly, all sites implement Safety Management Systems and their effectiveness is regularly audited with the aid of evaluation grids adapted to each type of activity and recognized by outside bodies. By the end of 2006, 76% of high-risk sites had been audited and we plan to implement this approach at all sites by the end of 2009.
— TRIR target
G TRIR real
— LTIR real
IMPROVING WORKPLACE SAFETY
STRENGTHENING TRANSPORT SAFETY
TOTAL is committed to reducing even further the frequency and severity of workplace accidents, whether they involve Group employees or contractor personnel. Between 2001 and 2005, we reduced workplace accidents by 59% and we have now set new targets for the 2006-2009 period. In 2006, TOTAL recorded 5.1 accidents per million man-hours worked, so the target set for 2006 – a 10% reduction – has been easily exceeded. For oil, gas and petrochemicals operations alone, we recorded a TRIR of 3.4, which ranks TOTAL alongside the five main international oil companies. We also posted a similar fall in the number of lost-time incidents (LTIR). Thanks to a commitment by both TOTAL employees and our contractors, all Group business segments posted encouraging safety results during 2006.
TOTAL uses a variety of means – road, rail, pipeline, inland waterway, sea – to transport our products from production sites to plants and refineries and from there to end users. Whatever the mode of transport used, our risk management is always based on the same principles: • risk analysis; • development and audit of safety management systems; • maximum integration of accident feedback; • rigorous selection and inspection of equipment; • certification of transport chain participants. Given that road accidents account for such a large proportion (nearly 80%) of TOTAL’s industrial accidents as well as a similarly high proportion, in recent years, of fatal accidents, we have now decided to implement specific road-transport risk plans in all Group entities. The main thrust of these plans is additional road-safety training for both TOTAL employees and the employees of our logistics contractors.
o TOTAL IN 2006
France: overseas students attending courses at the TOTAL university in Bougival
human at TOTAL are nonuu The principles underlyingdiversityresources management ongoing employee discrimination, promotion of and equal opportunity, dialogue and skills development. These objectives guide all the efforts of the Group and its subsidiaries to attract, motivate and retain the talented men and women we need to expand geographically and rise to new energy challenges.
A POLICY OF NON-DISCRIMINATION
FOSTERING EMPLOYEE DIALOGUE
Helping all of the Group’s 95,000 employees to achieve equitable career advancement is one of TOTAL’s top priorities, and the Group’s main career-management tools are applied in all countries where we operate. By the end of 2006, 78% of managerial (or equivalent) positions had been evaluated using the Hay method and 98% of Group companies had set in place a system of annual assessment interviews. TOTAL also emphasizes non-discrimination in its policy on remuneration and social benefits, and in 2006 we formally strengthened employee life insurance coverage so that it now amounts to at least two years gross salary. Some 72% of employees now benefit from decease cover at the standard level (a).
With 151 new collective agreements concluded during 2006, TOTAL has clearly demonstrated its desire to bolster the role played by employee representatives in decisions affecting the Group. This year, the agreement on the European Social Platform (b) led to the publication of our first set of social tracking indicators covering 10 countries and more than 50 subsidiaries in Europe. This report, which outlines all Group initiatives in the areas of employee dialogue, management of skills/employment needs, restructuring and equal opportunity, is a major step forward in the collaborative determination of tracking indicators.
PROMOTING DIVERSITY AND EQUAL OPPORTUNITY
ENHANCING EMPLOYEE SKILLS
During 2006, TOTAL continued its efforts to promote nationality and gender diversity at managerial level, while also encouraging all other facets of diversity: non-discrimination, employment of disabled workers and recruitment of local staff in all countries where we operate. Recruitment, one of the main pillars of TOTAL’s diversity drive, made a significant contribution to our progress in this area in 2006. For example, the proportion of women among new recruits (managerial positions, permanent contracts) stood at 26%, compared to 20% in 2003. And as TOTAL increases its international scope, so its recruitment becomes more international too: in 2006, 68% of new recruits (managerial positions, permanent contracts) were non-French nationals and 95% of them were recruited outside France. In terms of our consolidated scope, TOTAL boasts employees of 130 different nationalities.
Faced with new challenges – increasingly complex projects, a changing energy context and the need to expand geographically – TOTAL must ensure that its employees acquire the necessary skills to meet these challenges. The Group strives to ensure that all employees receive the training they need, throughout their career. This may include training in technical and managerial skills, refresher courses, exchanges of experience, seminars on Group values… In 2006, TOTAL employees received on average 4.6 days of training.
(a) At constant scope, cover is up 3% compared to 2005. (b) Additional information on this agreement is available on the Group’s internal site. www.total.com/csr
France: students from the grandes écoles attend a careers information session organized by the Group
HUMAN RESOURCES - LOCAL DEVELOPMENT
Angola: the Group supports community projects focusing on health
Philippines: TOTAL helps the Bantay-Bata Center to look after children in difficulty
LOCAL DEVELOPMENT IN NON-OECD COUNTRIES
lack of skilled labor and technological expertise, meaning that efforts must be made early on to train local operators and transfer technology to local contractors.
TOTAL has a strong presence in non-OECD countries and is keen on contributing to their socio-economic development. The three vectors of our effort here are: encouraging transparency regarding the taxes and production royalties paid by oil companies to host governments; expanding “local content” of projects (local jobs and procurement); and setting up socio-economic programs for local communities.
Partnering the socio-economic development of local communities
In non-OECD countries, TOTAL sets up socio-economic aid programs so that local communities can benefit from our presence in terms of human development. Community programs can involve a range of areas – health, education, vocational training, microcredit – depending on local needs. The guiding principle of TOTAL’s initiatives in this area is partnership. The projects that we support are always defined in consultation with the local authorities and representatives of surrounding communities, and the local people are always made responsible for project execution. This strictly defined role-sharing ensures the legitimacy of TOTAL’s contribution to socio-economic and health programs, which are naturally the prerogative of host countries themselves. It is also the best guarantee of success for projects that require both technical expertise and knowledge of the local culture, customs and needs, knowledge that Group employees do not necessarily possess. The success of community projects is also encouraged by the empowerment of local players, thus reducing their dependence on TOTAL’s presence. The latest version of the Code of Conduct is available in 16 languages, including 2 dual-language versions.
Ensuring greater transparency of oil revenues
Nearly two thirds of TOTAL’s production comes from non-OECD countries, and we feel that revenues from the extractive industries should make a greater contribution to alleviating poverty and fostering sustainable development in these countries. Since 2002 we have supported the Extractive Industries Transparency Initiative (EITI), whose aim is to encourage better governance and the transparency of oil and mining revenues in countries that depend on natural resources. EITI brings together representatives of governments, oil/mining companies, international financial bodies, investor associations, NGOs and professional organizations.
Fostering development of tade and industry in host countries
TOTAL’s local content policy is aimed at greater use of local personnel and industrial facilities in carrying out its projects. This increases the positive spin-off for trade and industry in terms of employment, skills development and technological expertise. The Group has been pursing this policy for more than ten years now. Local-content programs are developed on a case-by-case basis, according to the technical characteristics of the project and the local industrial base. At project planning stage, a study is carried out of all resources (skilled labor, facilities) available locally. In trying to boost local content, TOTAL often comes up against a
* Further information on TOTAL’s 2006 social responsability achievements and policy can be obtained by consulting or downloading the Corporate Social Responsability Report, “Sharing our energies”. www.total.com/csr
o TOTAL IN 2006
France: the Prime G unit at the Flanders refinery (Dunkirk)
without damaging the environment is one of TOTAL’s uu The desire to produce is not just one of our fundamental business principles operational priorities. This but it also represents an opportunity to optimize our practices and processes.
CERTIFYING ENVIRONMENTAL PERFORMANCE
TOTAL continues to extend implementation of its Environmental Management System, and by the end of the year, 223 of our worksites had gained ISO 14001 certification. This corresponds to 74% of our environmentally-sensitive sites (i.e. 132 sites). In line with the principles of openness and dialogue set out in TOTAL’s Health, Safety, Environment and Quality (HSEQ) Charter, the Group responds to requests from non-financial rating agencies. On its own initiative, TOTAL has also asked its Statutory Auditors to sign off on certain indicators included in its environmental reporting. In addition, we are gradually extending across the Group our in-house Environmental Risk Evaluation (ERE) methodology, which has proved particularly useful for identifying priority action areas at worksites.
• securing the future of energy via renewable energies, hydrogen fuel-cell development, R&D programs on new industrial equipment and processes that generate fewer emissions, and involvement in development of new technologies like the capture and geological sequestration of CO2. TOTAL is also taking part in the climate change debate at national and international level and is helping to finance scientific expeditions in this area. One example is the expedition to the North Pole in April 2008 to be led by explorer Jean-Louis Etienne, which will carry out thickness measurements on the sea ice.
COMBATING CLIMATE CHANGE
(a) When oil is produced, it is always accompanied by associated gases that are not easy to store and then export. When they cannot be either consumed on-site or valorized, these gases are usually flared, i.e. burned off. Notes to p.65 (a) Combustion without nitrogen, where air is replaced by pure oxygen so as to obtain a combustion gas with a very high CO2 content. (b) Parts per million. (c) France’s Center for Research on Marine Pollution. (d) Bureau of Geological and Mining Research. (e) See the chapter on Corporate Philanthropy, pp 70-71.
While continuing to expand our business activities, TOTAL is contributing to the global reduction in greenhouse gas (GHG) emissions. Our action plan includes: • improving our reporting of emissions data; • reducing GHG emissions by Group sites and by our customers; • optimizing the energy efficiency of our products and processes by means of keynote initiatives, such as stepping up efforts to reduce gas flaring (a) at facilities operated worldwide by our E&P segment (target: a 50% reduction by 2012);
Argentina: sorting waste for disposal at Aguada Pichana
CO CAPTURE AND STORAGE
segment between 2000 and 2005 has already led to a reduction of more than two thirds in the hydrocarbon content of discharged water. The target for 2007, maximum content of 30 ppm (b), is expected to be reached shortly by all E&P subsidiaries.
TOTAL is helping to develop and perfect techniques for capturing and sequestering CO2. Indeed the Group was an early player in this area, which is a promising vector for reducing GHG emissions. Following preliminary studies, in early 2007 we launched a first pilot project at our Lacq site in southern France. The pilot, which covers the whole process from capture to geological storage of CO2, including steam production facilities, is expected to start operating in 2008. Over a period of two years, it will generate up to 150,000 metric tons of CO2, which will be captured and stored. The role of the pilot is to demonstrate the large-scale feasibility of oxycombustion technology (a), which could reduce CO2 emissions by 50% and lower storage costs by a similar proportion, compared to existing technologies. TOTAL is also a partner in a number of other industrial demonstration projects worldwide and is playing an active role in R&D in this area.
Consolidating marine and waterway pollution prevention and response resources
With Corapol (c),which brings together about 30 in-house pollution specialists, the Group has a team specifically trained to respond to accidental pollution.
Reducing and valorizing waste
When collecting and treating waste from our worksites – whether this is done in-house or by outside contractors – traceability is a high priority for TOTAL. Right from the design stage, all our development teams adopt the full-life-cycle approach in developing low-impact products and processes that will generate less waste.
Rehabilitating industrial sites
TOTAL pays close attention to the rehabilitation of its industrial sites, thinking ahead about restoration even while the site continues to operate and rehabilitating sites for other uses once facilities are decommissioned. In both cases, we try to ensure that the sites no longer involve any risk for humans or the environment. Together with our partner BRGM (d), we have now launched a project called Remtec+ to rehabilitate polluted soils. The aim of the project is to gradually develop an in-house soil remediation referential, to harmonize the actions of the Group’s different business entities and to work out a common approach based on feedback from about 30 rehabilitation programs either completed or still under way.
Improving air quality
As regards other emissions, particularly sulfur dioxide (SO2), nitrogen oxide (NOX) and volatile organic compounds (VOC), TOTAL is focusing its efforts on reducing all gaseous emissions likely to degrade the quality of the air (pollution, health hazard, unpleasant odor…) in the vicinity of Group worksites. A number of measures have been implemented to decrease these emissions and to improve emissions reporting: better metering methods, emissions reduction campaign, modifications to plant and equipment, vapor-recovery apparatus, improved pipeline maintenance, etc.
TOTAL continues with its efforts to reduce water consumption at worksites by means of specific action plans for different industrial segments and types of site. During 2005, six pilot sites operated by different business segments ran studies on potential water conservation, and the feedback here was analyzed and compiled into a methodological guide to be published in 2007. This guide will help all Group sites to define and achieve water-conservation objectives. We also continue to improve the quality of water discharged by our facilities. A program carried out by the Exploration & Production
SAFEGUARDING BIOLOGICAL DIVERSITY
TOTAL has adopted a systematic approach to the conservation of biodiversity at and in the vicinity of its worksites. We made a commitment to this effect via a guide to practical methodology published in 2005, and since autumn 2006 this methodology has been tested at three pilot sites. At the same time, the Group finances biodiversity projects (e) via the TOTAL Corporate Foundation for Biodiversity and the Sea, set up in 1992.
o TOTAL IN 2006
THE FUTURE OF ENERGY
South Africa: manufacturing solar panels (Tenesa)
are to secure our energy future we must satisfy growing uu If we while also combating climate change. TOTAL’s approach energy demand here is to diversify energy supply while also promoting energy efficiency.
FOSSIL FUELS: OPTIMIZING RESOURCES
TOTAL continues to focus on developing new techniques for identifying and recovering oil and gas resources so that we can replace our reserves (our reserves renewal rate (a) stood at 127% at the end of 2006), optimize production from mature fields and valorize nonconventional hydrocarbons. The Group is one of the world leaders in deep-offshore operations and is particularly well placed in West Africa; during 2006 we started production on the Dalia field, one of the largest deep-offshore projects in the world. TOTAL also has large-scale projects producing extra-heavy crude. In Venezuela, the Group is a partner in the Sincor project, which is now producing 180,000 barrels per day of high-quality, synthetic crude. And in Canada, we continue to work on two projects that are developing ways to produce the tar sands of Athabasca, where TOTAL has a 50% stake in the Surmont permit and 84% of the Joslyn permit. Our Group has also built up a very strong position in natural gas, which accounts for a growing share of our portfolio: about 40% of our hydrocarbon reserves and a third of our overall production. In 2006, the Group produced 48 billion cubic meters of gas throughout the world. TOTAL is today a leading player in the liquefied natural gas (LNG) segment. Upstream, we have interests in six liquefaction plants, and in 2006 the Group finalized arrangements for its partnership in Qatargas II, which will be the largest LNG scheme in the world.
Downstream, we have either a partnership stake or rights to regasification capacity in five LNG import terminals, including the Altamira facility in Mexico, which became operational in 2006. The same year, TOTAL also began operating the first LNG carrier to be directly chartered by the Group. TOTAL has also been a coal producer and marketer since the early 1980s and currently operates three collieries in South Africa. Our annual production of 3 million metric tons is mainly marketed in Europe, where it is used for power generation. In 2006, the Group marketed 9.5 million metric tons of coal throughout the world.
RENEWABLE ENERGIES: TARGETED DEVELOPMENT
(a) 20.5 billion boe if the figure is limited to the proved and probable reserves covered by contracts signed by TOTAL Exploration & Production and involving fields already drilled and where technical studies have showed that development will be economical in a context of Brent at $40 per barrel. Also included is the Group share of Joslyn production using mining techniques.
In the field of biomass, a multi-purpose energy source that can be used to provide heat, electricity, gas or liquid fuel, TOTAL is working to identify the valorization vectors that are most relevant to our core businesses. As the leading European player in the biofuels segment, we are working on two first-generation fuels – ethyl-tertio-butyl-ether (ETBE) and vegetable oil methyl ester (VOME). The Group currently blends some 900,000 metric tons of these biofuels into the motor fuels it sells in Europe, and we are actively working to enhance their valorization so as to keep pace with strong growth in demand and rapidly changing specifications (new biodiesel bases, motor fuels with high ethanol or biodiesel content). At the same time, TOTAL is also looking ahead to the development of second-generation biofuels, which will complement the various biofuels already available by broadening the range of bio-resources used in their manufacture while also improving the overall environmental impact.
THE FUTURE OF ENERGY
France: the Mardyck wind farm on the site of the Flanders refinery (Dunkirk)
In solar power (silicon-crystal technology), TOTAL manufactures photovoltaic cells (Photovoltec), solar panels and designs solar systems (TENESOL). The Group is also involved in financing projects for rural electrification (Temasol in Morocco and KES in South Africa). In January 2006, TOTAL increased its interest from 42.5% to 47.8% in Photovoltech, a company specialized in manufacturing photovoltaic cells. Photovoltech sales rose to approximately 44 M€ in 2006, from 25 M€ in 2005. Due to strong demand for and the successful marketing of its products, Photovoltech is planning to increase its total production capacity from 20 MWp/y to 80 MWp/y by the end of 2007. Civil engineering for the new production facilities to increase capacity began in the fall of 2006. TOTAL holds a 50% interest in TENESOL, its partnership with EDF, which designs, manufactures, markets and operates solar-photovoltaic power systems. TENESOL’s consolidated sales decreased by approximately 8% between 2005 and 2006, amounting to approximately 134 M€ in 2006, compared to 145 M€ in 2005, the equivalent of an installed capacity of 33 MWp. Its principal markets are for network connections in Europe (Germany and Spain) and for decentralized rural electrification and telecommunication systems in the French Overseas Territories. TENESOL owns two solar panel manufacturing plants: TENESOL Manufacturing in South Africa, with an annual production capacity of 35 MWp, and TENESOL Technologies in the region of Toulouse, France, with an annual production capacity of 15 MWp. TOTAL is pursuing decentralized rural electrification activities by responding to call for tenders from authorities in several countries, including Mali, Morocco, Senegal and South Africa. In South Africa, an ongoing project to equip 15,000 households, led by Kwazulu Energy Service Company (TOTAL, 35%), had equipped nearly 9,000 households by the end of 2006. In Morocco, Temasol, in which TOTAL has indirect interests through Total Maroc (32.2%) and TENESOL (35.6%), continued work on a project awarded in May 2002 to equip 16,000 households. In 2004, Temasol was also awarded a project to equip 37,000 households. In 2005, it was awarded part of a project to equip an additional 5,500 households. At the end of 2006, approximately 24,000 of the total of 58,500 households covered by these projects were equipped, compared to 20,000 at the end of 2005 and 10,000 at the end of 2004. TOTAL has also confirmed its interest in marine-power (generation using the motion of waves and tidal streams) by becoming a partner in R&D projects in Spain and Scotland.
NEW ENERGY VECTORS: FOCUSING ON CREATIVITY AND INNOVATION
TOTAL is a partner in a number of R&D programs focusing on liquid hydrocarbons that could become viable alternatives to conventional motor fuels. Promising options here could be to drive a synthetic intermediate gas from natural gas (GTL technology), from coal (CTL) or from biomass (BTL) and then transform it into liquid fuel such as diesel or aviation fuel (kerosene). The Group is also involved, via an active partnership-oriented research policy, in development of hydrogen fuel-cell technology for both stationary and automotive applications. Two public hydrogen filling stations are already operating in Germany.
ENERGY EFFICIENCY: POTENTIAL GAINS
For us at TOTAL, it is essential to improve energy efficiency at our industrial sites if we are to curb greenhouse gas emissions and reduce production costs, and thus meet the expectations of civil society. The Group is working to improve the energy efficiency of all its industrial sites (refineries, petrochemical plants, oil and gas production sites), modifying plant and equipment and implementing other energy-saving measures. We are also implementing cogeneration schemes, refining valorization projects and oil-product quality enhancement programs such as Clean Fuel. At the same time, TOTAL strives to offer customers environmentfriendly products and services that result in energy saving, while also encouraging all citizens to rationalize their energy consumption for both household and transport needs.
(a) A 50-50 joint venture between TOTAL and France’s power utility EDF. (b) A joint venture with Electrabel and the Independent European Center for Electronics Research (IMEC). In 2006 TOTAL was a 47.8% partner.
o TOTAL IN 2006
The Corporate Foundation which was uu up inTOTAL is an expression of thefor Biodiversity and the Sea, environment set 1992, Group’s commitment to the and, more particularly, the conservation of biodiversity. The main thrusts of the Foundation’s action are to gain a better understanding of our planet’s ecosystems, particularly marine ecosystems, and to help restore damaged areas and safeguard endangered species. The Foundation also devotes part of its budget to educational and awareness programs on the environment.
HIGHLIGHTS OF THE 2006 PROGRAMME
Santo 2006 is a scientific expedition initiated by France’s National Museum of Natural History, the Institute for Research on Development and Pro-Natura International. The purpose of the expedition is to draw up an inventory of flora and fauna in terrestrial and marine milieus on the island of Santo. This is one of the main islands of the Vanuatu archipelago, which includes a dozen larger islands and about 80 smaller ones. From early August until December 2006, some 170 scientists from 25 countries took turns working on Santo as part of the study expedition. The Foundation provided support for the “Marine Biodiversity” module of this project, which focused on an inventory of local mollusks and decapod crustaceans. The project was presented at the “France – Oceania Summit” held in Paris on 26 June 2006, under the patronage of the French president.
Perros Guirec Seminar on Seabird Conservation
As part of its ecosystem rehabilitation program, the Foundation supports a number of seabird conservation initiatives. This was the theme of a seminar organized by the Coastal Protection Agency in conjunction with the Foundation. The seminar was held in the Breton town of Perros Guirec on 16-17 October 2006. Scientists and managers of nature reserves took advantage of the occasion to share their experiences and compare their approaches in an effort to enhance overall knowledge and management of seabird colonies. In 2002, the Coastal Protection Agency launched an initiative to rehabilitate seabird nesting sites on small Breton coastal islands. The aims of the program were to enhance the reproduction conditions of certain seabird species and to set up a chain of small islands offering an attractive nesting environment. The TOTAL Corporate Foundation provided financial support for this program, which was in line with a number of its other seabird projects in Europe. In 2006 the Foundation launched another project, this time in partnership with Heriot Watt University (International Centre for Island Technology), involving analysis of the underwater behavior of seabirds and the use of sensors to study the signals they emit at the moment when they dive. The Foundation is also supporting another seabird project in the Barents Sea, in partnership with the Norwegian Polar Institute in Tromsø and France’s National Scientific Research Center (CNRS).
Between 2002 and 2006, the Foundation has been one of the main supporters of the program to set up the REBENT monitoring system (from the French REseau BENThique - benthic network), intended to supplement the marine environment surveillance networks already operating around the French coastline. The aim of REBENT is to acquire relevant and coherent knowledge of coastal benthic habitats and to set up an ongoing monitoring network able to detect medium and long-term changes in these habitats, with particular emphasis on biological diversity. Brittany was selected as the pilot region for the initiative. Actions currently under way involve about 15 scientists in any given year. Present programs involve about 50 days per year of survey campaigns aboard oceanographic vessels, airborne surveys, satellite data acquisition, numerous survey trips in small boats, about a hundred dives and several dozen days of survey work on foot in intertidal zones.
France: an aerial photo of seagrass beds in the Glénans archipelago
Thailand: coral in the Khanom - Mu Koh Tale Tai Marine National Park Vanuatu: Marginella (Cystiscidae), an inventory of mollusks during the Santo 2006 expedition
Comparative analysis of recent and archived mapping imagery has now allowed specialists to study the spatial dynamics of plant life in intertidal zones. More localized monitoring of biodiversity was set in place at selected sites involving remarkable and/or particularly representative habitats. In cross-tidal zones, these habitats usually include fine sediments, vegetation beds and certain types of rocky zones. In very shallow water (0 to 40 meters), they usually involve fine sand, maerl banks and rocky seabeds, and these are monitored using divers. Monitoring stations are located all along the coast and samples are taken from each habitat at regular intervals in accordance with an appropriate protocol. The considerable amount of data being accumulated will be of greatest value in the medium and long term. Early results, based on knowledge already acquired about the groups and succession of species, have already allowed scientists to define qualitative and quantitative indicators for monitoring the ecological condition of fine-sand zones. The desire to ensure wide diffusion of the program results led to the decision to set up a dedicated REBENT website where all interested parties (scientists, environmental managers and the general public) can access all documentation (technical sheets, study reports, and in the near future monitoring bulletins) as well as all new maps and satellite images processed using dynamic mapping tools (www.rebent.org).
discipline workshop for long-term study and observation, for the benefit of both the scientific community and the general public. The program will focus on: • study of the diversity of marine and coastal species as well as those living in a coral reef milieu; • construction of a database of marine and coastal biodiversity with a view to putting together a reference collection of existing marine and coastal organisms; • creation of a marine education center for students, schoolteachers and others.
Total Pacifique - Study of humpback whales / Opération Cétacés
As part of its commitment to protecting and valorizing the lagoon around New Caledonia, the Foundation has been providing support for an association called Opération Cétacés (Operation Cetaceans), which is carrying out a study of the humpback whales that come to the lagoon each year in July-September to mate. The project began in July 2006 and is due to be completed by the end of 2008. The study also includes an eco-tourism aspect (evaluation of the impact of “whale-watcher” boats on humpback whales in a reproduction zone) and an educational side (a marine mammal awareness campaign, mainly aimed at school children). During the two observation campaigns organized in JulySeptember 2006, 136 groups of whales were observed, including 70 new individuals, bringing to 428 the total number of whales observed around New Caledonia.
GROUP SUBSIDIARY PROJECTS
I EMPLOYEE PROJECT
Provence Refinery - A heritage trail in Grambois
An association called “The Friends of the Jas de Monsieur”, set up to safeguard local heritage (traditional rural architecture, crafts and lifestyle) in the Luberon region, has launched an initiative to restore the country paths that are gradually disappearing from the rural environment and being replaced by roads and highways. The immediate aims of the project are: to restore a heritage trail in a typical Luberon region village; to enhance visitors’ understanding of and respect for the local heritage; and to foster exchanges between the various stakeholders exploiting (craftspeople and farmers) and visiting (tourists, hikers, schoolchildren) the area.
Total E&P Thailand – Research program on marine biodiversity
Thailand is renowned for its high biodiversity. Recognizing the importance of maintaining that biodiversity, the country’s Biodiversity Research and Training (BRT) Program launched a biodiversity study based in Khanom Beach-Thal-Tai Islands Marine National Park. An agreement between the Foundation (which is supporting the study), the subsidiary and the BRT was signed in February 2006 in the presence of President Chirac of France. The aims of the study program are to assess the biodiversity present in Khanom National Park and to use the park as a multi-
o TOTAL IN 2006
In parallel with its uustimulate economicindustrial activities, TOTAL implements programs designed to and social development in communities living near its worksites. In line with its commitment to corporate social responsibility and sustainable development, the Group also pursues an active policy of philanthropy with three main thrusts: the environment via TOTAL Corporate Foundation for Biodiversity and the Sea, community support and cultural heritage.
I COMMUNITY SUPPORT
Launching of an international program for employees to support community projects
In response to a growing desire by Group employees to be more closely involved in general-interest initiatives, in 2006 TOTAL set up an international program to provide financial support for community projects (health, education, humanitarian causes) suggested by employees. The budget allocated to this program in 2006 amounted to €200,000, with a maximum of €5,000 per project. Employees proposing projects for support must be members of the association managing the project and their involvement must be personal and voluntary. During 2006, 55 employee projects were approved for support, half of which were in Africa.
… and providing ongoing international training for Chinese emergency medical staff
As part of its preparation for the 2008 Olympic Games, the Beijing municipal authorities have decided to improve the organization of their emergency ambulance service, using France’s SAMU system as a model. The program, launched in 2004, is actively supported by TOTAL. The main vector for Group support has been to provide about 30 scholarships over three years to enable young Chinese doctors from ambulance teams to go to France for one-year specialist courses in emergency medicine at French teaching hospitals.
In France: supporting educational initiatives…
After launching a partnership with the Association for Effective Schooling (APFEE) in 2005, TOTAL decided to increase its financial aid to the association to €300,000 in 2006, thereby becoming its main private sponsor. The APFEE, which is committed to combating illiteracy, offers those municipalities that desire it a helping hand for children in the early years of primary school having difficulty learning how to read and write. Also in 2006, TOTAL agreed to join a number of other corporate sponsors in helping to fund an experimental project launched by the Paris Institute for Political Studies in high schools in the Paris suburb of Seine-St Denis.
Improving public health: continuing the partnership begun in 2005 with the Pasteur Institute…
In autumn 2005, TOTAL and the Pasteur Institute signed a 5-year partnership agreement aimed at strengthening the scientific and human resources devoted to combating infectious diseases. The partnership has two thrusts. Firstly, TOTAL is providing funding of €2.5 million for research programs carried out by multi-discipline international Pasteur Institute teams. Secondly, in order to foster international cooperation, the Pasteur Institute is making available its expertise and knowledge of the health problems experienced in developing countries to assist TOTAL and its local subsidiaries in non-OECD countries where the Group operates in setting up training programs for medical and para-medical staff in the prevention, diagnosis and treatment of infectious diseases, particularly sexually-transmitted infections. 2006 saw the first concrete results of this partnership: in Angola, about a hundred health workers attended training courses in Luanda set up in conjunction with the local bureau of WHO.
…and helping disadvantaged youngsters achieve social integration
Via sport. In 2006, TOTAL continued to partner the Le Havre football club and its parent association Havre Athletic Club (HAC). The club runs a youth program called “HAC mon parrain” (literally: HAC my godfather), designed to forge social ties using football as a vector. The initiative gives about 400 youngsters, both boys and girls, from various neighborhoods of Le Havre a chance to play sport with proper organization and training.
France: TOTAL is helping to restore the ramparts of the town of Lectoure (Gers)
France: the Cézanne exhibition in Provence
Angola: a training program for health workers in Luanda
Support for temporary exhibitions
As a regular partner to the Paris Arab World Institute, TOTAL was the exclusive sponsor of the “Venice and the Orient” exhibition that ran from October 2006 to February 2007. The theme of the exhibition was the intercultural dialogue generated by the multiple contacts forged down through the centuries between the city of the Doges and the most powerful Islamic dynasties. The Group also provides support for exhibitions in France’s various regions. One of these was “Cézanne en Provence”, on display during summer 2006 at the Granet Museum in Aix-en-Provence. The exhibition was jointly organized by the museum, the Aix municipal authorities and the French Museums Board as part of the national celebrations to mark the centenary of the painter’s death. The exhibition, the highlight of Cézanne Year in France, attracted more than 400,000 visitors. Organizers of both exhibitions ran special guided tours for TOTAL shareholders and employees.
Via music & dance. In 2006 TOTAL once again provided support for the “Ten months of School and Opera” educational and cultural programs run by the Paris Opera. The scheme is mainly aimed at students at schools in disadvantaged areas. The Group also supports the initiatives taken by the Pau-Pays de Béarn regional orchestra to interest youngsters in music.
I CULTURAL HERITAGE
Including patronage of cultural activities in its corporate philanthropy program, TOTAL has a number of aims: • to assist major cultural bodies to carry out their projects and to ensure that large numbers of people benefit from them; • to valorize disciplines related to the Group’s own activities: TOTAL backs archaeological digs in the Middle East and provides significant support for the Paris Natural History Museum’s mineralogy program; • to play a role in culture and tourism in the main regions of France where the Group has worksites.
Wide ranging partnership with France’s Heritage Foundation
2006 was the first year covered by the 3-year sponsorship agreement signed in 2005 between TOTAL and the Heritage Foundation. This foundation is an independent, private non-profit organization whose aim is to help safeguard and valorize the nation’s heritage, with particular emphasis on sites not protected by the State as historical monuments. TOTAL is committed to contributing some €8 million over the period 2006-2008, with the provison that the funds be used for industrial or arts/crafts sites deemed to have cultural or tourism value and located in the main regions where TOTAL operates worksites. By the end of December 2006, 16 projects had been approved for support in a number of regions: Île-de-France, Midi-Pyrénées, Aquitaine, Pays-de-Loire, Rhône-Alpes, Provence-Alpes-Côte d’Azur and Lorraine.
TOTAL partners the Louvre Museum
After financing the Louvre’s restoration of the Apollo Gallery, TOTAL is now contributing €4 million to enable the museum to set up a new Department of Islamic Art. Only a small proportion of the Louvre’s prestigious collection of Islamic art is currently on display, but the entire collection will soon be housed in a new display space in the Cour Visconti. During 2006, the facades of the Cour were restored. The new department is expected to be opened to the public in 2009.
o TOTAL IN 2006
o TOTAL IN 2006
18, shareholders received uu 2006 saw two major operations. On Maywas split by four. The GroupArkema shares and the TOTAL S.A. share par value launched an appropriate communication campaign to provide shareholders with full information on the timetable and other details of these operations.
TOTAL share fact sheet
Exchanges Paris, Brussels, London and New York
Change in stock prices in Europe compared to major European oil companies between January 1, 2006 and December 31, 2006*
FR0000120271 TOTF.PA FP FP F: TAL FP
ISIN Reuters Bloomberg Datastream Mnémo
+ 4.4% + 3.6%
Included in the main indices: CAC 40, DJ Euro Stoxx 50, DJ Stoxx 50, DJ Global Titans Included in the main sustainable development and governance indices: DJSI World, DJ STOXX SI, FTSE4Good, FTSE ISS CGI, ASPI Weight in indices as of December 31, 2006: CAC 40 13.0% DJ EURO STOXX 50 5.9% DJ STOXX 50 3.8% DJ GLOBAL TITANS 2.2%
- 8.3% TOTAL (euro) (a) Royal Dutch Shell A (euro)
- 1.6% ENI (euro)
Royal Dutch Shell B (euro)
1st 1st 3rd 15th
position position position position
BP (pound sterling)
* in local currency (a) In order to take into account Arkema’s spin-off and the four-for-one stock split, Euronext Paris defined an adjustment of TOTAL’s historical stock price. Therefore, TOTAL’s stock price before May 18, 2006 was multiplied by a 0.9871 adjustment coefficient (based on TOTAL’s 210 euros closing price on May 17, 2006 as well as Arkema’s reference stock price (before quotation) of 27 euros)) and by 0.25. These adjustments, defined by Euronext are taken into account in the stock price evolution calculation of this chart.
Largest capitalization on the Paris Bourse and the Euro zone as of December 31, 2006
LARGEST COMPANIES BY MARKET CAPITALIZATION (in B€)
TOTAL ENI EDF Sanofi-Aventis Santander Central Hispano
Source: Bloomberg for other companies.
132.6 102.1 100.6 95.0 88.4
Change in stock prices in the United States compared to major oil competitors between January 1, 2006 and December 31, 2006*
+ 36.4% + 29.5% + 23.7% + 20.6% + 15.7% + 15.1% + 10.3% + 4.5%
Market Capitalization as of December 31, 2006 132.6 B€ 174.5 B$ Percentage of float: 100% (Eurolist by Euronext™) Par value: 2.50 euros (after the four-for-one stock split on May 18, 2006) Credit rating as of December 31, 2006 (long term/short term/outlook) Standard & Poor’s : AA/A1+ / Stable Moody’s : Aa1/P1/Stable
TOTAL (b) Exxon BP Mobil
Royal Royal Chevron ENI Dutch Dutch Shell A Shell B
* in dollars (b) In order to take into account Arkema’s spin-off and the ADR’s split by two, the New York Stock Exchange (NYSE) defined an adjustment on TOTAL ADR’s historical stock price. Therefore, TOTAL’s stock price before May 23, 2006 was multiplied by a 0.9838 adjustment coefficient (based on TOTAL ADR’s 130.4 dollars closing price on May 22, 2006 as well as Arkema’s OTC closing price on May 18, 2006 of 42.15 dollars) and by 0.5. These adjustments, defined by the NYSE are taken into account in the stock price evolution calculation of this chart.
Four-for-one stock split
The General Meeting of Shareholders of May 12, 2006 decided to split the TOTAL share par value by four, effective as of May 18, 2006. Consequently, on May 18, 2006, each shareholder received four new TOTAL shares, par value 2.50 euros per share, for each old share, par value 10 euros per share. In addition, after approval of this four-for-one stock split, the Company changed the ratio between its ADRs (American Depositary Receipts) and the TOTAL shares: since May 23, 2006 one ADR corresponds to one share (compared to two ADRs per share previously).
I SHARE PERFORMANCE
TOTAL share price (in euros) in Paris (2002-2006) (a) €
— TOTAL — CAC 40 (indexed on TOTAL share price) — EURO STOXX 50 (indexed on TOTAL share price)
Source Datastream - Price as at December 29, 2006: 54.65 euros. (a) See (a) on the previous page.
TOTAL ADR price (in dollars) in New York (2002 – 2006) (b)
— DOW JONES (indexed to the TOTAL ADR price)
Source Datastream - Price as at December 29, 2006: 71.92 $. (b) See (b) on the previous page.
o TOTAL IN 2006
Dividend over the past five years
Within the framework of the spin-off of Arkema’s chemical activities from the Group’s other chemical activities, the General Meeting of Shareholders of May 12, 2006 approved TOTAL S.A.’s contribution to Arkema, under the regulation governing spin-offs, of all its interests in the businesses included under Arkema’s perimeter, as well as to allocate one Arkema share allotment right for each TOTAL share, with ten allotment rights entitling the holder to one Arkema share. Fractional rights were traded on the Eurolist by Euronext™ market until June 26, 2006, and under Delisted Shares from June 27 to December 29, 2006 inclusive. Pursuant to the Article L 228-6 of the French Commercial Code and the Articles 205-1 and 205-2 of the decree N° 67-236 of March 23, 1967, the holders of allotment rights for fractional Arkema shares were informed by a notice prior to the sale of such fractional shares (Avis préalable à la mise en vente de titres non réclamés) published on August 3, 2006 in the French newspaper Les Echos, that: • as of the delisting of the allotment rights from the compartment of delisted shares section of the regulated markets (compartiment des valeurs radiées des marchés réglementés) of Euronext Paris dated December 29, 2006 after-hours trading, the allotment rights can still be negotiated over the counter until the sale date mentioned above in the notice; • Arkema’s shares corresponding to allotment rights for fractional shares will be sold on the Eurolist by Euronext™ two years after the publishing of the notice mentioned above, if they did not use their rights before the expiration date. As of this sale, the former allotment rights for fractional Arkema shares will be, as necessary, cancelled and their holders will only be able to lay claim to the cash distribution of the net proceeds from unclaimed Arkema’s shares sale. TOTAL S.A. will make the net proceeds of this sale available to their holders’ in a secured financial intermediary account for ten years. When this time limit expires, the unclaimed amounts will be handed over to the French Caisse des dépôts et consignations where the holders will still be able to claim them for a period of twenty years. After this time limit, the amounts will permanently become property of the French State. Moreover, since May 18, 2006, Arkema’s shares have been freely traded on the Eurolist by Euronext™.
1.87* 1.62 1.35 1.18 1.03
(a) Amounts adjusted in order to take into account the four-for-one stock split effective as from May 18, 2006. (b) For 2004, 2005 and 2006 the lower part corresponds to the interim dividend. * Subject to approval by the Shareholders’ Meeting on May 11, 2007.
Share buybacks and share cancellation continued in 2006
During 2006, TOTAL bought back 75.925 million shares of its own shares for cancellation, representing 3.1% of the capital (a). Over the 24 months preceding December 31, 2006, the Company cancelled 131,322,272 TOTAL shares, par value 2.50 euros per share, representing 5.4% of the capital as of December 31, 2006.
Percentage of the capital bought back*
4.6 3.5 3.0 2.8 3.1
* Average capital of year N = (Capital as of December 31, N-1+ Capital as of December 31, N)/2. For 2002, excluding buybacks linked to coverage of employees options plans. For 2005 and 2006, excluding buybacks linked to the grants of restricted shares decided by the Board of Directors on July 19, 2005 and July 18.
Appreciation of a portfolio invested in TOTAL shares
For every 1,000 euros invested in TOTAL stock as of December 31, in year N, by an individual resident in France, assuming that the net dividends (excluding the tax credit) are reinvested in TOTAL stock, and excluding tax and social withholding. Furthermore, the one-year yield between December 31, 2005 and December 31, 2006 of an investment in a TOTAL share, with a sale on December 31, 2006 of one tenth of Arkema’s share allocated for the spin-off (i.e. at a closing price of 38.93 euros of the Arkema Share), is 8.20%.
Investment date Annual yield
Dividend for 2006
In accordance with the distribution policy announced at the General Meeting of Shareholders on May 14, 2004, an interim dividend is paid in the fourth quarter of each year, except under extraordinary circumstances. The Board of Directors met on November 7, 2006 and, after approving the accounts as of September 30, 2006, approved an interim 2006 dividend in the amount of 0.87 euros per share paid on November 17, 2006. For the fiscal year 2006, as in the past, TOTAL continued its dynamic dividend policy by proposing a dividend of 1.87 euros per share to the General Meeting of Shareholders, including a balance of 1.00 euro per share, which would be payable on May 18, 2007. This dividend of 1.87 euros represents an increase of 15% compared to the previous year. Over the past five years, this increase amounts to an average of 16% per year. In 2006, TOTAL’s pay-out ratio was 34% (a).
The capital invested at the end of the period would be TOTAL 1,077 1,596 4,605 8,798 CAC 40 1,209 1,351 2,891 4,235
1 year 5 years 10 years 15 years
January 1, 2006 January 1, 2002 January 1, 1997 January 1, 2002
TOTAL CAC 40 7.7% 20.9% 9.8% 6.2% 16.5% 11.2% 15.6% 10.1%
(a) Amounts adjusted in order to take into account the four-for-one stock split effective as from May 18, 2006.
(a) TOTAL’s share prices, that are used to calculate the annual yields, take into consideration the adjustment made by Euronext Paris after Arkema’s share allocation rights partition.
The TOTAL share price
Information in this table from periods before May 18, 2006 has been recalculated to reflect the four-for-one stock split. Trading prices and dividends have been divided by four and trading volumes in Paris and London have been multiplied by four.
Price of share (in euros) Highest (during regular trading session) Adjusted highest (a) (during regular trading session) Lowest (during regular trading session) Adjusted lowest (a) (during regular trading session) Last of the year (close) Adjusted last of the year (a) (close) Trading volume (average per session) Paris Stock Exchange London Exchange SEAQ International (b) New York Stock Exchange (c) (number of ADRs) Dividend per share (in euros) Net dividend Tax credit
58.15 57.40 46.52 54.65 -
57.28 56.54 39.50 38.99 53.05 52.37
42.95 42.40 34.85 34.40 40.18 39.66
36.98 36.50 27.63 27.27 36.85 36.38
44.85 44.27 30.30 29.91 34.03 33.59
10,677,157 3,677,117 1,500,331
10,838,962 3,536,068 1,716,466
10,975,854 3,800,048 1,199,271
11,803,806 3,431,732 978,117
11,917,604 7 652,800 956,940
(a) Adjusted market price of the spin-off of Arkema. (b) To make the trading volume on the SEAQ International comparable to the trading volume in Paris, the number of transactions recorded in London is usually divided by two to account for activity of market makers in London. However, the volumes presented in the table above have not been divided by two. (c) After the four-for-one stock split, which was approved by the General Meeting of shareholders of May 12, 2006, effective on May 18, 2006, as well as after the change in the ADR ratio, on May 23, 2006, one ADR now represents one TOTAL share. Moreover trading volumes in New York before May 23, 2006 were multiplied by two. (d) For 2006, subject to approval by the General Meeting of Shareholders of May 11, 2007. This amount includes the interim 2006 dividend of 0.87 euros per share with a par value of 2.5 euros paid on November 17, 2006. (e) Based on a tax credit of 50% on the net dividends paid before January 1, 2005, enforceable date of tax credit elimination for individuals under the 2004 French Finance Law. For other shareholders, the tax credit was eliminated by this law as of January 1, 2004. Pursuant to Article 243 bis of the French General Tax Code, the interim dividend paid on November 17, 2006 and the balance of the dividend paid on May 18, 2007 (subject to approval by the General Meeting of Shareholders of May 11, 2007) are eligible for the 40% rebate applying to individuals residing for tax purposes in France provided for by Article 158 paragraph 3 of the French General Tax Code.
TOTAL share over the last 18 months (on the Paris Stock Exchange) (a)
Average volume traded September 2005 October 2005 November 2005 December 2005 January 2006 February 2006 March 2006 April 2006 May 2006 June 2006 July 2006 August 2006 September 2006 October 2006 November 2006 December 2006 January 2007 February 2007 Maximum on the period Minimum on the period 11,125,183 14,043,673 10,856,295 8,123,034 11,177,540 10,743,661 10,487,025 10,706,458 15,249,339 12,466,491 9,719,101 8,632,591 11,855,458 8,804,893 8,928,941 9,287,909 11,036,797 9,896,507 Highest price traded 57.28 57.05 56.05 55.10 58.15 57.03 55.35 57.43 57.10 51.70 53.85 54.50 53.10 54.80 56.95 56.00 55.45 53.95 Lowest price traded 53.38 49.75 51.45 52.65 53.30 52.58 51.43 53.85 48.65 46.52 49.70 51.10 49.45 50.10 52.30 52.20 50.80 51.02 Adjusted highest price traded (b) 56.54 56.32 55.33 54.39 57.40 56.29 54.64 56.69 56.37 58.15 46.52 Adjusted lowest price traded (b) 52.69 49.11 50.79 51.97 52.62 51.90 50.76 53.16 48.65 57.40 46.52
(a) Source: Euronext Paris. (b) In order to take into account Arkema’s spin-off and the four-for-one stock split, Euronext Paris defined an adjustment of TOTAL’s historical stock price. Therefore, TOTAL’s stock price before May 18, 2006 was multiplied by a 0.9871 adjustment coefficient (based on TOTAL’s 210 euros closing price on May 17, 2006 as well as Arkema’s reference stock price (before quotation) of 27 euros)) and by 0.25.
o TOTAL IN 2006
Estimated shareholder base
Distribution of shareholders by main category (excluding treasury shares)
Estimate at December 31, 2006 Group employees
23% 15% 21% 25% 2%
% of capital 4% 10% 86% France
STRENGTHENING RELATIONSHIPS WITH INDIVIDUAL SHAREHOLDERS
Individual shareholders Institutional shareholders
United Kingdom Rest of Europe North America Rest of world
(a) Based on the definition of employee shareholding pursuant to Article L 125-102 of the French Commercial Code.
2004 was marked by the implementation of a new communications system intended for the 520,000 TOTAL individual shareholders. This new system allows TOTAL to achieve three goals: • communicate with each individual shareholders at least once a year through the JDA (Shareholders Journal); • create more personalized communications with each shareholder thanks to the daily use of Customer Relationship Management (CRM) database; and • make it easier to read the Company’s financial statements for a population of non-specialists through training sessions offered to member shareholders of the Shareholders Circle. 2005 allowed the consolidation of the existing system. A new format, in magazine form, was prepared for the Shareholders Journal with the assistance of the Consultative Shareholders Committee. The threshold for bearer shareholders to receive a direct invitation to the shareholders’ meeting was reduced to 50 former shares (par value 10 euros per share). 2006 was marked by the following events: • A special communication program for the four-for-one stock split and the spin-off of Arkema, including the sending of a complete information document, to all individual shareholders, a column dedicated on the website www.total.com (offering an access to a personalized simulation tool and audio explanations of these operations by Robert Castaigne, Chief Financial Officer of TOTAL) and finally, the strengthening of the processing capacity for phone, mail and internet information of internet requests from shareholders. • TOTAL won the prize for the Best Shareholders Service awarded by the Journal des Finances. • www.total.com, was elected the third best website, during the 6th edition of Grand Prix Boursoscan organized by Boursorama and TLB on June 22, 2006. • TOTAL was ranked third for the “Fils d’Or” 2006, prize for the best individual shareholders service, awarded by La Vie Financière and Synerfil on November 16, 2006. Finally, as in the past, TOTAL made efforts to promote meetings and exchanges with individual shareholders. During 2006, these meetings involved nearly 13,000 individual shareholders.
The number of French individual TOTAL shareholders is estimated at approximately 570,000.
4% Employees 10% Individual shareholders
86% Institutional shareholders)
Distribution of shareholders by geographic region (excluding treasury shares)
Estimate at December 31, 2006 excluding treasury shares France United Kingdom Rest of Europe North America Rest of world % of capital 34% 15% 23% 26% 2%
Shareholders’ Meeting: a strong turnout
The Shareholders’ meeting, held on May 12, 2006 gathered more than 3,000 shareholders in attendance at the Paris Convention Center. As each year, this meeting was broadcast live and was later available on the Group’s website (www.total.com). Notices of the meeting are sent to all the registered shareholders and to the bearer shareholders holding 200 shares or more (50 old shares).
26% North America
2% Rest of world
“Actionaria” Trade Show: strong interest in the TOTAL stand
On November 17 and 18, 2006, during the Actionaria Trade Show in Paris, the TOTAL team welcomed over 4,500 people at its booth, 5% more than in the previous year continuing the trend of increasing its presence year after year.
23% Rest of Europe 15% United Kingdom
France: the Shareholders’ Consultative Committee
France : “Actionaria” Trade Show
Meetings for individual shareholders in the regions
TOTAL continued its schedule of information sessions for individual shareholders, with five meetings organized in Lyon, Brussels, Nantes, Marseille, and Biarritz. A total of more than 2,300 people attended the conferences. The cities of Lille, Metz, Tours, Grenoble, Rennes and, on the occasion of the Actionaria Trade Show, Paris are already scheduled for 2007.
The Shareholders’ Circle: 30 events
The Shareholders’ Circle, opened to shareholders with at least 30 bearer shares or one registered share, organized 30 events in 2006 (compared to 28 in 2005). These events, proposed to the members of the Shareholders’ Circle, provided the opportunity to invite almost 3,000 individual shareholders, compared to 2,830 in 2005. Members of the Shareholders’ Circle visited industrial facilities as well as sites supported by the TOTAL Foundation. They also participated in trainings intended to the understanding of TOTAL’s accounts and in cultural events within the framework of the Group’s sponsorship policy.
Shareholders’ Consultative Committee: a strong contribution
In 2006, the Consultative Shareholders Committee (composed of twelve members all newly appointed on March 15, 2006 after a selection by a recruitment center), specifically provided clarification on communication tools used for the spin-off of Arkema and the TOTAL four-for-one stock split. The Committee also worked on the contents of reference material distributed during the individual shareholders’ meetings as well as on the format of the financial notices periodically published by TOTAL. The committee was also consulted on the information in the Shareholders Journal, the Shareholders’ Circle program and the Shareholder notebook of this publication. Concerning the Annual General Meeting, the Consultative Committee also addressed the format of the General Meeting notice and gave its feedback on the holding of this meeting. Finally, the opinion of the committee was recorded on informative contents and put on line on TOTAL’s website.
Registered shares: facilitating share transactions
What are registered shares? TOTAL shares, which are generally bearer instruments, may be registered. In this case, shareholders are identified by TOTAL S.A., in its capacity as the issuer, or by its agent, BNP Paribas Securities Services. There are two forms of registration: • Administered Registered Shares: Shares are registered with the issuing Company through BNP Paribas Securities Services, but the holder’s financial intermediary continues to administer them with regards to sales, purchases, coupons, shareholders’ meeting notices, etc. • Pure registered shares: The issuing Company retains and directly administers the shares on behalf of the holder through BNP Paribas Securities Services which administers the sales, purchases, coupons, shareholder meeting notices, etc. so that the shareholder does not need to appoint a financial intermediary. This form of registration is not very compatible with the registration of shares in a PEA given the applicable administrative procedures. Some of the advantages of pure registered shares are: • no custodial fees; • a dedicated toll-free number for all contacts with BNP Paribas Securities Services (a toll-free call within France): 0 800 11 7000 or +33 1 40 14 80 61 (from abroad) ; from Monday to Friday, 8:45 am - 6:00 pm (fax +33 1 55 77 34 17);
o TOTAL IN 2006
The JDF® TOTAL Prize France: TOTAL organizes a session for financial analysts
• easier placement of market orders (a) (telephone, mail, fax, internet); • preferential brokerage fees: 0.20% (before tax) based on the amount of the transaction, with no minimum amount and capped to 1,000 euros per transaction; • personal notice of Meeting of Shareholders; • double voting rights if shares are held continuously for two consecutive years; • complete information about TOTAL: the shareholder receives at home all information published by the Group for its shareholders; • internet access to the shareholders’ account; • the ability to join the TOTAL Shareholders’ Circle with one share. To convert TOTAL shares to pure registered shares, just fill out the form that can be obtained on request from the Individual Shareholder Relation Department and send it to the financial intermediary. Once BNP Paribas Securities Services receives the shares, it will send a certificate of account registration and ask for the following: • a bank account number (or a postal account or savings account number) for payment of dividends; • a market service agreement to facilitate trading the TOTAL shares on the stock exchange.
Individual Shareholders For general information, conversion of bearer to registered shares, membership in the Shareholders Circle: TOTAL S.A. Individual Shareholders Relations Departments 2, place de la Coupole - La Défense 6 92400 Courbevoie - FRANCE Tel. From France 0 800 039 039 (toll-free number) From outside France Tel: + 33 1 47 44 24 02 From Monday to Friday, 9:00 am-12:30 pm and 1:30 pm-5:30 pm Fax E-mail From France: 01 47 44 20 14 From outside France: + 33 1 47 44 20 14 firstname.lastname@example.org email@example.com
Communication award from the Journal des Finances
In 2006 TOTAL was awarded the top prize for service to shareholders, awarded by the Journal des Finances. TOTAL was top of the rankings drawn up by the Journal des Finances on the basis of the quality of listed companies’ financial communication (taking into account both form and content) aimed at individual shareholders. This award underlines the increased interest TOTAL has taken in the quality of its communication with shareholders.
Contacts Valérie Laugier (Individual Shareholders Relations Manager) Jean-Louis Piquée (Individual Shareholders Relations)
(a) Subject to approval by the May 11, 2007 shareholders’ meeting.
• Paris: Jérôme Schmitt Vice President Investor Relations TOTAL S.A. 2, place de la Coupole - La Défense 6 92078 La Défense Cedex FRANCE Phone 01 47 44 58 53 or +33 1 47 44 58 53 Fax 01 47 44 58 24 or +33 1 47 44 58 24 E-mail firstname.lastname@example.org • North America: Robert Hammond Director of Investor Relations North America TOTAL AMERICAN SERVICES INC. 100 Pavonia Avenue, Suite 401 Jersey City, NJ 07310 USA Phone +1 201 626 3500 Fax +1 201 626 4004 E-mail ir.nyc@TOTAL.com
RELATIONSHIPS WITH INSTITUTIONAL SHAREHOLDERS AND FINANCIAL ANALYSTS
Every year, members of the Group’s management meet with portfolio managers and financial analysts in the leading financial centers of Europe (Paris, Brussels, Amsterdam, the Hague, Rotterdam, London, Dublin, Edinburgh, Frankfurt, Munich, Cologne, Düsseldorf, Vienna, Zurich, Geneva, Lausanne, Stockholm, Helsinki, Copenhagen, Milan, Madrid and Lisbon) and North America (New York, Boston, Philadelphia, Chicago, Denver, Detroit, Minneapolis, Dallas, Atlanta, Houston, Miami, San Francisco, Los Angeles, San Diego, Montreal and Toronto). The first meetings are held in the beginning of the year, after publication of the results for the prior fiscal year. The second meetings take place in the second half of the year, after publication of the results of the first half of the current year. Several information meetings are also organized when earnings are published. The material from these meetings is available in the “Investors Relations / Publications” section of www.total.com. Three telephone conferences led by Robert Castaigne, Chief Financial Officer for the Group, were also conducted in 2006, as every year, to discuss earnings for the first, second and third quarters of the year. These conferences are also available in the “Investors Relations/Publications” section of www.total.com. The Group organized about 400 meetings with institutional investors and analysts in 2006. In addition, on November 14 and 15, 2006, TOTAL organized a seminar to introduce the activities and strategy of the Upstream division. Nearly 80 persons, half of them composed of TOTAL’s major institutional shareholders and the other half of analysts, attended this seminar animated by Christophe de Margerie and the principal executives in charge of the Upstream division.
February 14 Results for the 4th quarter and full year 2006 April 4 Meeting with individual shareholders in Lille May 4 Results for the 1st quarter 2007 May 11 Shareholders’ Meeting at the Paris Convention Centre May 18 Payment in cash of the final dividend for 2006 (a) June 6 Meeting with individual shareholders in Metz August 2 Results for the 2nd quarter and the 1st half of the year 2007 September 5 Presentation of mid-2007 outlook October 16 Meeting with individual shareholders in Tours November 7 Results for the 3rd quarter 2006 November 17-18 Actionaria Trade Show in Paris / Information meeting in the amphitheatre of Paris Convention Center November 27 Meeting with individual shareholders in Grenoble December 6 Meeting with individual shareholders in Nice
May 16 Shareholders’ meeting in Paris
(a) Subject to approval by the May 11, 2007 shareholders’ meeting.
o TOTAL IN 2006
o TOTAL IN 2006
STATUTORY AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
uu For the year ended December 31, 2006
To the shareholders, In compliance with the assignment entrusted to us by the Annual General Shareholder’s Meeting, we have audited the accompanying consolidated financial statements of TOTAL S.A. for the year ended December 31, 2006. The consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements based on our audit.
I Opinion on the consolidated financial statements
We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and results of the Group as at December 31, 2006 in accordance with IFRSs as adopted by the European Union.
II Justification of our assessments
In accordance with the requirements of article L 823-9 of the Commercial Code relating to the justification of our assessments, we bring to your attention the following matters: Some accounting principles applied by TOTAL involve a significant amount of judgments and estimates principally related to the application of the successful efforts method for the oil and gas activities, the depreciation of long-lived assets, the provisions for dismantlement, removal and environmental costs, the evacuation of retirement obligations and the determination of the current and deferred taxation. Detailed information relating to the application of these accounting principles is given in the notes to the consolidated financial statements. Our procedures relating to the material judgments or estimates made by the management and which can result from the application of these accounting principles enabled us to assess their reasonableness. The assessments were made in the context of our audit of the consolidated financial statements taken as a whole, and therefore contributed to the formation of the unqualified opinion expressed in the first part of this report.
III Specific verification
In accordance with professional standards applicable in France, we have also verified the information given in the Group management report. We have no matters to report as to its fair presentation and conformity with the consolidated financial statements. Paris La Défense, April 3, 2007
The statutory auditors KPMG Audit Department of KPMG S.A. ERNST & YOUNG Audit
CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31, (in M€) (a)
Sales Excise taxes
Revenues from sales
Purchases net of inventory variation Other operating expenses Exploration costs Depreciation, depletion, and amortization of tangible assets and leasehold rights Operating income Corporate Business segments* Total operating income Other income Other expense Financial interest on debt Financial income from marketable securities & cash equivalents
Cost of net debt
(83,334) (19,536) (634) (5,055)
(70,291) (17,159) (431) (5,007)
(545) 24,675 24,130 789 (703) (1,731) 1 367
(467) 24,636 24,169 174 (455) (1,214) 927
Other financial income Other financial expense Income taxes Equity in income (loss) of affiliates Consolidated net income from continuing operations (Group without Arkema) Consolidated net income from discontinued operations (Arkema) Consolidated net income Group share** Minority interests and dividends on subsidiaries’ redeemable preferred shares
592 (277) (13,720) 1,693 12,140 (5) 12,135 11,768 367
396 (260) (11,806) 1,173 13,104 (461) 12,643 12,273 370
Earnings per share (euros) (b) Diluted earnings per share (euros)*** (b)
* ** ***
Adjusted operating income from business segments Adjusted net operating income from business segments Adjusted net income Adjusted diluted earnings per share (euros) (b)
25 166 12 377 12,585 5.44
23,468 11,912 12,003 5.08
(a) Except for per share amounts. (b) 2004 and 2005 amounts are recalculated to reflect the four-for-one stock split that took place on May 18, 2006. Earnings per share from continuing and discontinued operations are disclosed in Note 32 to the consolidated financial statements.
For further information, please consult TOTAL’s “Registration Document 2006”, which is available in print or by accessing in the Group’s web site www.total.com
o TOTAL IN 2006
CONSOLIDATED BALANCE SHEET
As of December 31 (in M€)
Non-current assets Intangible assets, net Property, plant and equipment, net Equity affiliates: investments and loans Other investments Hedging instruments of non-current financial debt Other non-current financial assets Total non-current assets Current assets Inventories, net Accounts receivable, net Prepaid expenses and other current assets Current financial assets Cash and cash equivalents Total current assets Total actif
4,705 40,576 13,331 1,250 486 2,088 62,436
4,384 40,568 12,652 1,516 477 2,794 62,391
11,746 17,393 7,247 3,908 2,493 42,787 105,223
12,690 19,612 6,799 334 4,318 43,753 106,144
LIABILITIES & SHAREHOLDERS' EQUITY
Shareholders’ equity Common shares Paid-in surplus and retained earnings Cumulative translation adjustment Treasury shares Total shareholders’ equity - Group share Minority interests and subsidiaries’ redeemable preferred shares Total shareholders’ equity Non-current liabilities Deferred income taxes Employee benefits Other non-current liabilities Total non-current liabilities Non-current financial debt Current liabilities Accounts payable Other creditors and accrued liabilities Current borrowings Other current financial liabilities Total current liabilities Total liabilities and shareholders’ equity 15,080 12,509 5,858 75 33,522 105,223 16,406 13,069 3,920 33 33,428 106,144 7,139 2,773 6,467 16,379 14,174 6,976 3,413 7,051 17,440 13,793 6,064 41,460 (1,383) (5,820) 40,321 827 41 148 6,151 37,504 1,421 (4,431) 40,645 838 41,483
CONSOLIDATED BALANCE SHEET
CONSOLIDATED FINANCIAL INFORMATION FOR THE LAST FIVE YEARS
Summary consolidated balance sheet for the last five years
As of December 31 (in M€)
50,450 2,017 36,286 12,147 29,513 6,137 23,376 79,963
54,010 2,752 38,592 12,666 31,319 6,515 24,804 85,329
Non-current assets Intangible assets Property, plant and equipment Other non-current assets Current assets Inventories Other current assets Total assets
62,436 4,705 40,576 17,155 42,787 11,746 31,041 105,223
62,391 4,384 40,568 17,439 43,753 12,690 31,063 106,144
53,827 3,176 34,906 15,745 32,940 9,264 23,676 86,767
Shareholders’ equity, Group share Minority interests and preferred shares Provisions and other non-current liabilities Non-current financial debt Current debt Total liabilities 40,321 827 16,379 14,174 33,522 105,223 40,645 838 17,440 13,793 33,428 106,144 31,608 810 16,283 11,289 26,777 86,767 30,406 1,060 15,605 9,783 23,109 79,963 32,146 1,201 16,643 10,157 25,182 85,329
Summary consolidated income statement for the last five years
104,652 (86,905) (4,977) 12,770 (1,199) (85) (5,353) 1,086 7,219 194 7,025
102,540 (86,622) (5,792) 10,126 31 (35) (5,034) 866 13 5,954 13 5,941
Sales Operating expenses Depreciation and amortization of tangible assets Operating income Other income and expense Other financial income and expense Income taxes Share net income of equity method consolidated affiliates Net income from continuing operations (Group excluding Arkema) Net income from Arkema Consolidated net income Minority interests Net income
153,802 (124,617) (5,055) 24,130 86 (49) (13,720) 1,693 12,140 (5) 12,135 367 11,768
137,607 (108,431) (5,007) 24,169 (281) (151) (11,806) 1,173 13,104 (461) 12,643 370 12,273
116,842 (94,721) (5,095) 17,026 2,302 (36) (8,603) 1,158 11,847 (698) 11,149 281 10,868
(a) Data for 2005 and 2004 restated under IFRS, to take account of the spin-off of the Arkema activities decided at the time of the Shareholders’ Meeting on May 12, 2006. (b) French GAAP.
o TOTAL IN 2006
I Photos credits:
Total / P. Adenis • D. Albretcht • Kjetil Alsvik • B. Bernard • J. Borowski • P. Boulen • B. Chazarenc • M. Dufour • P. Foucha • T. Gonzalez • Jayan KP • M. Labelle • P. Laurent • E. Miller • G. Perrin • V. Rackelboom • M. Roussel • Ph. Schaff • L. Zylberman • Biodiversity Research Program • Ortholittoral 2000/Ifremer • Santo 2006 • D.R. © TOTAL S.A. • May 2007 • Design and production: Harrison & Wolf
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