Chinese appetite for LNG gives Total a boost

Hand with thumb up, China flag painted
Source: DollarPhotoClub

Total’s troubles might be over thanks to the company’s close relationship with China. Last year, Total’s sales fell 2% to $251.73 billion while profits fell 18% to $11.21 billion. The company’s hydrocarbon production remained flat, at 2.3 million barrels of oil equivalents per day. Yet thanks to Total’s close relationship with Chinese oil companies such as CNOOC – which is also one of the biggest importers of LNG in the world – Total is now increasing its sales of LNG to meet the target of 30% increase by 2017.

Over the last 52 weeks, Total’s American depositary receipts have risen by 39% to $67.74, easily outperforming the S&P 500, which is up 16% in the same period. According to analysts’ estimates compiled by Thomson Reuters, Total’s revenue could fall further in the current year, to $230.3 billion, but the company could start showing improvements in 2015.

On top of that, Total has said that it could potentially produce 3 million barrels of oil equivalents per day by 2017. The company’s shares could continue to outperform on the back of this optimism.

Total is a leader in LNG production, producing more than 12 million tons of liquefied natural gas per year. It is present in all LNG markets in the world, including the Middle East and Asia.

Apart from LNG, Total helps China develop its huge shale gas deposits. To comply with Chinese laws which require foreign investors to work with local companies, Total partnered up with China National Petroleum Corp. with which it searches for gas in the country’s Anhui province.

Chinese shale gas exploration is still in very early stages with difficult geology, lack of water and infrastructure quoted as the main obstacles to progress.

The US Energy Information Administration (EIA) has named China as the most shale-gas-rich country in the world with 1,115 trillion cf. of technically recoverable shale gas deposits.

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