FRANCE:

GEP sees continued improvement for French industry in 2001

Victor Vachier, executive vice-president of GEP (French Suppliers Council to the Oil and Gas Industry), foresees at least 10% growth in France’s oil and gas industry, as it outpaces global market trends.

Q. What role does GEP play within France’s E&P industry?

Victor Vachier

A. For more than 40 years, GEP has been a place where French oil and gas companies, contractors, subcontractors and manufacturers meet to exchange views about their industry in every field: technology, national markets, projects, etc. Today, GEP represents large contractors; lobbies national and European bodies; and helps SMEs (small and medium size enterprises) develop an export strategy by offering them marketing information and initiating appropriate actions. Moreover, in the field of e-business, GEP offers a portal, www.gep-france.com, where its members can browse the international professional world and where foreign visitors can find detailed information about French technology.

Q. What major initiatives and projects is GEP leading or contributing to?

A. GEP is a founding member of EUROGIF (European Oil and Gas Innovation Forum) and provides European Union decision-makers information for managing their energy policies. EUROGIF and GEP advocate and promote technologies, and help seek R&D funding for solving the environmental problems linked to hydrocarbons. In addition, GEP manages a Russian / European association of companies called ERIP, whose Russian staff presents four to five technical workshops each year in Tyumen (Western Siberia). GEP also has committees to advise its members on environmental, human resources and standardization issues.

Q. How did French oil companies and equipment / service firms cope with the difficult economics of 1998 and 1999?

A. According to our annual survey, which we prepare in cooperation with IFP, the decrease in revenue during 1999 was 4%, compared to the 1998 results, which were up by 14%. These figures show that French companies probably kept their share of the then-declining market.

Q. Do you agree with analysts, who say that 2000 was a "recovery" year for European E&P? How did French activity perform?

A. Due to its competitiveness, the French industry performed very well in 2000. Revenues reached their best level at US$12 billion. This increase is ahead of the global market. It probably results from the fact that France has large contractors for offshore work, and offshore developments did not slow down as much as other projects.

Q. What is GEP’s outlook for French E&P activity in 200l?

A. We expect the figures in 2001 to reach another record level. This will follow the general trend of investments in oil and gas fields, probably up by at least 10% or more.

Q. What are some of the major exploration or development projects underway?

A. The major exploration and development projects will occur in offshore West Africa, a place where, traditionally, French companies are used to working and realize about one-third of their revenue. Offshore West Africa is definitely the hot spot for E&P business. In the Gulf of Mexico, French companies have increased their activity, because big contractors have subsidiaries in the U.S. Additionally, French suppliers, like others, are waiting for the opening of Saudi Arabia’s gas projects, while they are still active in other Persian Gulf countries, where they realize about 20% of their activity. Of course, French companies also have marketing relationships with Iran, Iraq and Libya.

Q. How is the health of the French construction sector of the upstream industry?

A. Although the sector is healthy, France is not involved very much in the fabrication and conversion of FPSOs. Its yards are busy building other types of more added-value vessels. But it is worth mentioning that the Brest yard, which traditionally works for the French Navy, is entering the offshore market. The yard launched two deep-drilling semisubmersibles for Sedco Forex in 2000.

Q. What are some of the French E&P industry’s greatest operating challenges?

A. They are the same as those of the whole profession: efficiency in geosciences; technological innovations to go deeper and deeper; flowlines to bring the effluents from seabed to surface; flow assurance; technologies to install more equipment at the bottom of the sea and bring power there; and, of course, production from heavy oil fields.

Q. What major technological challenges do French companies face?

A. We can mention the Girassol field, which will begin production in 2001, and the Syncor project in Venezuela that went onstream recently.

Q. Can you describe some technical advances and applications in France’s upstream sector? How likely are these advances to be applied in other regions?

A. French technologies have always been at the forefront of the hydrocarbon industry. For example, Coflexip is well known for its flexible hoses; Foramer has been a pioneer in dynamic positioning drilling ships. The E&P history speaks for itself! Girassol offers many technical innovations, the main one being the design and structure of the risers. These innovations follow those produced by construction of the largest concrete FPSO for N’Kossa field. We should also mention the laying of pipelines in deep offshore areas, for which Coflexip and Bouygues Offshore are the leading contractors. So, French contractors can offer innovative, competitive solutions for each specific project.

Q. What is the French government’s policy toward the upstream industry?

A. The French government today does not interfere with contractors. Many contractors have international shareholders, which is considered normal in a global world, where oil and gas are just commodities. But the government still cares about maintaining a favorable environment for contractors and suppliers in France. In addition, it supports specialized schools to train engineers, technicians and skilled workers. For example, the prestigious ENSPM (Ecole Nationale du Pétrole et des Moteurs) is known worldwide for its engineering and vocational training. Institut Français du Pétrole (IFP) is a national organization (with about 1,000 research engineers) that supports the oil and gas business. The IFP is involved, among others, in conducting research to solve the environmental problem of CO₂ in the atmosphere. The CEP&M – COPREP is also a government agency that supports innovative R&D projects of contractors and SMEs.

Q. What are the latest developments in French E&P tax policies?

A. This is not a critical question in France, which is not, unfortunately, an appealing oil-producing country. Only a few independent companies are still investing in exploration.

Q. How do French oil companies and equipment / service firms feel about today’s relatively high oil prices? What is their opinion of OPEC’s actions?

A. Everyone in the world, including French industrialists, believes that the oil price should be neither too low nor too high. The so-called right price should be around US$25/bbl. French industrialists are encouraged to see that oil companies are increasing their E&P expenses. They believe that the tight balance between supply and demand will keep the oil price at its present level. OPEC countries have a more effective position. Only Saudi Arabia is a swing producer, being the only one able to influence production.

From a general point of view, the AIE forecast of oil and gas production in 2020 shows that hydrocarbons will still represent 60% of energy requirements. This entails two general considerations: 1) Environmental constraints will produce new technologies and investments, with French companies playing their parts in developing these technologies; and 2) Dependence of most of the world’s countries upon Middle Eastern production will grow to an unbearable political level. Volatility will then be more important in the E&P business than expected in previous considerations.