Chevron Corporation (CVX), TOTAL S.A. (ADR) (TOT): Another Oil Company Takes the African Route to Expand

Energy has become an important part of our lives and its role is ever expanding. The bigger the role energy plays, the more is it required, and the more we need it, the greater is the necessity to find newer sources.

This is exactly what the oil and natural gas companies are doing. To be in business, the biggest challenge that oil and natural gas companies face is to replace their depleting reserves. And in one such move TOTAL S.A. (ADR) (NYSE:TOT), along with its partners, has decided to invest $10 billion in Congo to increase production.

Chevron Corporation (CVX)

Reversal of fortunes

TOTAL S.A. (ADR) (NYSE:TOT)’s production decreased 2% last year. Though the shutdown of the Elgin platform in the North Sea due to natural gas leakage had an effect on production, it was not the only reason behind the decline. The decrease in production led the company to shift focus, and finding new sources is high on Total’s agenda. TOTAL S.A. (ADR) (NYSE:TOT) has decided to script a reversal, and increase its production 25% over the next 5 years to reach more than 3 million barrels of oil and natural gas. This is where Africa comes into play.

Investing in Africa

TOTAL S.A. (ADR) (NYSE:TOT) has decided to invest in Moho Nord, the largest oil and natural gas project offshore Congo. Moho Nord is one of the series of investments that Total is mulling to invest in to improve production. The company is also pursuing two more deep water projects in West Africa. The investment in Moho Nord is supposed to produce 140,000 barrels of oil equivalent per day by 2017, when the production will be in full throttle. Total holds a 53.5% stake, along with Chevron Corporation (NYSE:CVX) which holds 31.5% in the project.

Chevron Corporation (NYSE:CVX) is also increasing its acreage position in West Africa. It holds an interest in Lianzi, which has a production capacity of 46,000 barrels of oil per day and is expected to be operational by 2015. Chevron Corporation (NYSE:CVX) also expects final approval on Lucapa by next year, which has a production capacity of 80,000 barrels of oil per day.

Total and Chevron Corporation (NYSE:CVX) are not the only ones eyeing West Africa. Another oil and natural gas company, VAALCO Energy, Inc. (NYSE:EGY), has not only decided to invest in West Africa, but has also announced about their plans to exit unconventional oil plays in the U.S. VAALCO reported a loss of $18.9 million for the fourth quarter of 2012, due to decreased oil production and unsuccessful drilling.

Foolish bottom line

Total has taken a step in the right direction. It needs to find newer sources of oil if it has to achieve the 25% growth target that they have set for themselves. It will only be a matter of time before we see what they can achieve. For now on, keep a close eye on the stock.

The article Another Oil Company Takes the African Route to Expand originally appeared on and is written by Satarupa Bose.

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