Total SA Boosts Its Presence in This Rapidly Growing LNG Market

Eager to capitalize on growing LNG demand from China, Total SA is making some big moves.

Mar 30, 2014 at 12:00PM

Led by rapidly growing demand from Asian markets, global demand for liquefied natural gas is expected to double by 2025. Aiming to capitalize on this expected growth, French oil major Total SA (NYSE:TOT) recently made a big move that will allow it to capture a larger share of the fast-growing Chinese natural gas market. Let's take a closer look.


An LNG import terminal in Kochi, India. Photo Credit: Taken by Augustus

Total inks gas supply deal with CNOOC
On Wednesday, Total announced that it has signed an LNG cooperation agreement with China National Offshore Oil Corporation, or CNOOC, that will further strengthen the two companies' existing partnership.

Since 2010, Total has been supplying CNOOC with as much as 1 million tons of LNG per year as part of a 15-year contract. Under the new agreement, the two parties have agreed to a price review of this existing supply, established a framework for additional supply of 1 million tons per year, as well as further cooperation throughout the LNG value chain, according to a press release from Total.

Total has already established a strong presence in the Chinese natural gas market. Having delivered a total of 5 million tons of LNG between 2010 and 2014, it currently supplies more than 8% of the Chinese market. By strengthening its existing relationship with CNOOC, the third-largest LNG importer in the world, the company will have an even larger presence in China, where demand is expected to grow at an annual rate of 20% over the next few years.

The rush for Asian LNG
In addition to its strong relationship with CNOOC, Total also recently edged out ExxonMobil (NYSE:XOM) and Royal Dutch Shell (NYSE:RDS-A) in a three-way bidding war to acquire a majority stake in two natural gas fields in Papua New Guinea. Total paid $613 million up front for a stake in the nation's Elk and Antelope gas fields, which it will develop alongside joint venture partner InterOil Corp. (NYSE:IOC). The company plans to export gas produced from the two fields to nearby Asian markets.

Total's recent moves are reflective of the current frenzy among the Western oil majors to capitalize on growing LNG demand from major Asian markets such as China, Japan, India, South Korea, and Taiwan. Companies including Total, Shell, Exxon, BP, and ConocoPhillips (NYSE:COP) are all pursuing major LNG projects that will primarily serve Asian markets.

Exxon, BP, TransCanada, and ConocoPhillips have teamed up to develop a massive LNG export project in Alaska that will include an 800-mile pipeline connected to oil fields in Alaska's North Slope and a liquefaction facility in the Kenai Peninsula. The project's liquefaction facility could potentially ship as much as 18 million metric tons of LNG per year, mainly to Asia.

Chevron is also developing two massive LNG projects off the West Coast of Australia -- the Gorgon and Wheatstone LNG projects -- to serve Asian markets. The two projects will have a combined production capacity of nearly 25 million tons per year, the majority of which is already under long-term contract with primarily Asian buyers. Chevron says Gorgon and Wheatstone are about 80% and 30% complete, respectively, and are slated to go into service by 2016.

Total positioned for stronger growth
Given the highly positive outlook for LNG demand growth in Asia, Total's various LNG projects and cooperation with China should serve the company well over the long term. Though LNG projects require massive amounts of upfront capital expenditures, they generate strong and stable cash flows for decades and require little additional spending after starting up.

In addition to its growing LNG presence, Total's declining spending and rising cash flows are another reason to be optimistic. The company's capital spending peaked last year and is expected to be about $3 billion-$4 billion lower over the next few years. Meanwhile, operating cash flow is set to rise sharply thanks to major new project start-ups such as CLOV in Angola, Ekofisk South in the Norwegian North Sea, Ofon 2 in Nigeria, and others, which bodes well for additional dividend increases.

OPEC is absolutely terrified of this game-changer
As companies like Total pursue oil and gas projects all over the world, they should continue to drive profit growth for one particular energy company. Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour. (That's almost as much as the average American makes in a year!) And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click here to uncover the name of this industry-leading stock, and join Buffett in his quest for a veritable landslide of profits!

Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool recommends Chevron and Total. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers