Technology from Europe:
France

France’s oil and gas chief sees greater activity, more technical progress

Dominique Maillard

 Dominique Maillard is general director of France’s General Directorate for Energy and Raw Materials (DGEMP) within the Ministry of the Economy, Finance and Industry. He recently gave World Oil his assessment of prospects for France’s upstream industry during 2003.

  Question: How do you describe your and the General Directorate’s mission?

 Answer: DGEMP is concerned with all policies related to energy and raw materials, both upstream and downstream. The oil and gas E&P sector in France represents only a portion of the General Directorate’s activities. The Office of Oil & Gas Exploration and Production, which is part of the Hydrocarbon Resources Department within DGEMP, is dedicated to this E&P sector. This office is in charge of acreage awards and the dissemination of data related to French E&P activities. It also promotes E&P activity within French territory.

 Q: What is your assessment of last year’s E&P market for French oil company operators, and equipment/service companies? What level of activity and business do you expect for this year? 

 A: With the exception of Elf-EAPF and Esso Rep (which are subsidiaries of big companies), operators producing oil and gas in France are now mostly small firms, either of French origin and well-established, or foreign companies that came in during the 1990s. Even if (for the time being) they benefit from high oil prices, they are all trying to lower costs and concentrate investments on the best fields.

 Because no new field has been discovered in recent years, these operators are generally producing from fields that have already been fully delineated and developed. Therefore, they drill mainly in-fill wells, replacement wells or delineation wells located on under-drilled sectors of some producing fields.

 Last year – compared to projections made in 2001 – the number of wells drilled was markedly lower, due to some local difficulties that delayed several projects. Most of these projects, however, are still in portfolio. They could be drilled this year, thus allowing us to reach a figure very close to the 24 wells drilled in 2001. If one looks at the investment curve from the mid-1990s, one does not see a downward trend, but rather a series of ups and downs, with a mean figure close to $50 million/year. As long as there is no new field to develop, this figure seems to be in line with the average sizes of the companies and fields they are operating.

 As concerns exploration acreage, it is true that there has been a marked downward trend in exploration investment since the end of the 1980s; very few wildcats have been drilled these last 13 years. But it can be easily observed that exploration is still active, with new applications regularly filed (sometimes by new companies, especially offshore), permits granted, and seismic reprocessing and interpretation work continuing.

 This work led to the definition of several prospects on existing permits, with associated drilling projects. Offshore areas are attracting new companies, and overall offshore exploration acreage last year reached a very high level of almost 50,000 sq km (19,305 sq mi). Higher levels have not been recorded since the 1970s. 

 As regards investment figures, one has to be careful with their interpretation. Certainly, year-to-year comparisons are not really significant when there are low activity levels (since 1997, the annual number of exploration wells has averaged between zero and four, which could be the figure for 2003 according to work programs received from operators).

 Another fact also has to be taken into account to explain the low level of exploration investment. This is the progressive replacement, since the mid-1990s, of old operators by new ones. These newer operators have either focused their activities first on production optimization, or they have been at too early an exploration stage on their permits to undertake drilling a well.

 Thus, I would not consider the poor record of 2002 as a harbinger of a worse period in years to come. There are some positive signs but, of course, it is hard to make predictions, given that future evolution in oil prices is especially uncertain these days.

  Q: What role, if any, does your office play in E&P tax policies and greater access to French exploration tracts?

 A: Concerning tax policies, my office can make proposals, but the process of tax modification also involves other government entities and, of course, the Parliament. It also has to comply with the framework defined by the European Union. Moreover, in any tax modification effort, it is necessary to balance the interests of all relevant players (oil companies, the state and local communities). Overall, the tax system aims to encourage new E&P investment and presents some advantageous features. These include the absence of surface rental payments and reduced rates for wells recently brought onstream. 

 Concerning exploration acreage, it is already broadly open – applications may be made at any time, on any area that is not covered by an exploration permit or a production concession. Exploration permits do not cover all prospective zones, and in some areas like the South Aquitaine, no exploration permit exists for the time being.

  Q: What are some major projects, in Europe or other regions, that French companies are involved in?

 A: In spite of our modest domestic E&P activity, which I have already mentioned, I would like to emphasize that French oil and gas companies and contractors have always been at the forefront of the hydrocarbon industry. Thus, French companies have been involved in major projects worldwide for a long time. Among these projects I would mention, for example, the Sincor heavy oil development project in Venezuela and the Girassol deepwater development project in Angola. 

  Q: Can you mention some recent projects that are notable, either because they are good examples of E&P work involving French companies or because they focus on important French-created technology or support capabilities? 

 A: From a technological standpoint, Girassol field is certainly the best example. It is 150 km (93 mi) offshore the Angolan coast, in 1,400 m (4,595 ft) of water, and it produces 200,000 bopd. A number of deep offshore records have been set at Girassol. We can mention the installation of 1,300-m-high (4,265-ft-high) riser towers, allowing efficient flow assurance, or the installation of hundreds of pieces of equipment at the bottom of the sea with ROVs (remotely operated vehicles).

 French companies have contributed greatly to this project. I am especially pleased that, in recognition of this contribution, TotalFinaElf will receive the prestigious “Distinguished Achievement Award” for Girassol’s development at the 2003 Offshore Technology Conference, this May in Houston.

  Q: How important are these technical capabilities to new international projects?

 A: They are extremely important. These capabilities result from more than 30 years of continuous commitment by the French industry to innovative R&D activity. Independent research institutes like IFP (Institut Français du Pétrole) and IFREMER (Institut Français de Recherche pour l’Exploitation de la Mer) also play very important roles in developing new technologies that can be used later by the industry.

 Consequently, it is quite natural that these technical capabilities can find important applications worldwide. Offshore West Africa is a major place where French oil service companies realize about 20% of their revenues. The deepwater Gulf of Mexico is also very promising, with complex technical challenges. This is why major French contractors have subsidiaries in the US. Additionally, I would mention Brazil’s offshore areas, Canada’s heavy oil fields and the Middle East, in general.