TOTAL Gets 30% Right In Qatar's Offshore Al-Shaheen Field

Integrated oil & gas company TOTAL S.A. (TO:TOT) announced that it has signed an agreement with Qatar Petroleum that gave it a 30% interest to operate the giant offshore Al-Shaheen oil field. The interest in the field will be for 25 years starting Jul 14, 2017.

Al-Shaheen Oil Field

The Al-Shaheen field produces 300 thousand barrels of oil per day. This field is at present jointly operated by Maersk Oil and Qatar Petroleum, per a 25-year production sharing agreement expiring in Jul 2017. This field, consisting of 30 platforms and 300 wells, began operation in 1994.

Development of Al-Shaheen

In Jul 2015, Qatar Petroleum opened a competitive tender process to further develop this oil field, which currently produces nearly half of Qatar’s oil output.

Global integrated oil & gas companies like BP Plc (NYSE:BP) and Royal Dutch Shell (LON:RDSa) plc RDS.A were also in the race to win the right to operate this field. However, it was TOTAL who won the bid to be the new partner of Qatar Petroleum.

TOTAL FINA SA Price

TOTAL FINA SA Price | TOTAL FINA SA Quote

Why TOTAL?

Thanks to its technical and commercial competence, TOTAL has been selected to be an operator from a group of highly competent bidders.

The selection of TOTAL for this oil field is in sync with its objective to expand its presence in the Middle East. TOTAL will invest nearly $5 billion over the five-year period starting from 2017. The primary objective of TOTAL will be to maintain the current production rate of 300,000 barrels per day taking into account the natural decline in production over time.

TOTAL also has plans to increase production from this field through the development of areas which are yet to be explored commercially.

This deal further strengthened TOTAL’s presence in Qatar, which has spanned for the past eight decades.

Other Deals for TOTAL

TOTAL continues to expand its operations through acquisitions and strategic tie-ups. Earlier this month, TOTAL entered into an agreement to acquire Lampiris, which will help the company to expand gas and power distribution activities in Belgium.

In May, the company signed an agreement to acquire Saft Group. This acquisition will allow TOTAL to diversify its operations and make further inroads into the renewable energy space. TOTAL already owns 66% of the U.S. solar firm, SunPower Corporation (NASDAQ:SPWR) .

Our View

Without a doubt, the agreement with Qatar Petroleum is significant for TOTAL as oil prices have been staging a comeback from historic lows hit earlier this year.

TOTAL S.A. currently has a Zacks Rank #3 (Hold).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>