Total SA, the French oil group, has promised to invest an average of $23-billion (U.S.) a year between 2012 and 2014 as it joins industry peers in spending more on exploration and production to replace dwindling reserves.
The company also promised to lift capital spending on exploration projects alone by 20 per cent to $2.5-billion. The increase in investment was started last year after Total's chief executive officer, Christophe de Margerie, decided to take on riskier projects in areas such as eastern Africa.
He said 80 per cent of capital spending would go toward exploration and production. "Never has the search for new energy sources been so essential," Mr. de Margerie said. "We have a strong desire to develop a bolder company."
Royal Dutch Shell PLC and BP PLC, Total's big European rivals, have announced similar spending hikes as the large western oil groups are forced to invest in squeezing more hydrocarbons from existing wells and more demanding drilling programs to discover new sources of oil and gas.
The disclosure of the capital spending plans came as Total reported a 7-per-cent increase in profit in the fourth quarter to €2.7-billion ($3.6-billion) because of the strength of high oil prices and in spite of weak refining markets and flat production.
This compared with an 18-per-cent increase at Shell and 14 per cent at BP. Total's profit for 2011 rose 11 per cent to €11.4-billion, or 17 per cent in dollar terms to $15.9-billion.
Like its rivals, Total also reported a slight decline in returns on capital for its exploration and production business, to 20 per cent from 21 per cent, as it has to spend more to secure supplies.
Production of 2.38 million barrels of oil equivalent a day in the fourth quarter was roughly equivalent to last year, as the impact from the conflict in Libya helped to offset a 4-per-cent increase from new projects and acquisitions.
Total said it expected production to increase by an average of 2.5 per cent a year between now and 2015, depending on the continuing availability of oil and gas from Syria and Libya.
The production increase should be between 2 and 3 per cent in 2012, as new projects in Angola, Nigeria and Thailand make a contribution. The company said it had managed to replace 185 per cent of the oil and gas that it pumped last year because of the contribution from new fields.
Mr. de Margerie said he was also looking at investing in the Kurdish semi-autonomous region in northern Iraq.