The West African nation of Angola is one of the top producers of oil in the world. For years, the nation has competed with Nigeria for the title of largest oil producer in sub-Saharan Africa. However, the country has yet to hit the production targets that it has set for itself. In fact, some of the country's older fields have been suffering from declining production, a relatively common occurrence as oil fields begin to age. Fortunately, a recent announcement from French oil giant Total (TTE -0.44%) may help the country prevent its production from declining, and even increase it going forward .

Development of giant field
On April 14, Total announced that it's going to move forward with its plans to develop the Kaombo oil field off of the Angolan coast. This is a giant oil field that's estimated to contain approximately 650 million barrels of oil. The French company is the operator of the field, but several other companies also have stakes in the field and are therefore entitled to a percentage of its eventual production. These other companies include Sonangol (the Angolan national oil company), which has a 30% interest in the project, and ExxonMobil (XOM -0.57%), which has a 15% interest. Total also has a 30% interest in the project. The remaining 20% interest in the project belongs to Sonangol Sinopec International, a joint venture between China's Sinopec (SNP) and China Sonangol, which is itself a joint venture between Sonangol and New Bright International Development based in Hong Kong. 

The Kaombo project has suffered from several delays during its history due almost entirely to the cost of developing the ultra-deepwater field. This is not something that is unusual. In fact, an increasing number of large-scale oil projects around the world have suffered from delays as oil companies are seeing the costs of these projects escalate. In fact, the cost of a deepwater development increased by nearly 20% last year alone. Fortunately, there are steps that oil companies can take to reduce the cost of developing all the deepwater fields that have been discovered during the past few years, as we see here.

Cost reductions make the project viable
The Kaombo field was originally expected to cost $20 billion to bring to production. However, by reexamining its budget, Total was able to bring the cost of developing the field down to $16 billion. One of the biggest steps that it took was that the company began to settle for a "just good enough" approach instead of taking its original "the best possible" approach. This reduced the costs by enough to get Total's management to approve the project. The company will now get to work bringing this field online. This is a relatively lengthy process, and the field will not start producing oil until 2017.

Very high eventual production from field
Once production starts at Kaombo, it is expected to be massive. Total expects that Kaombo will produce a maximum of 230,000 barrels of oil per day. This field alone will contribute 15% to Angola's oil output (and remember that Angola is already one of the largest exporters of crude oil in the world). This will also significantly increase Total's equity production in the country. Last year, the company averaged equity production of 186,000 barrels per day in the country.

Will increase company's Angolan production significantly
As was already discussed, Total will not receive all of the production from the Kaombo oil field. After all, the company only has a 30% stake in it. However, if we assume that Total will receive 30% of this production per its 30% stake, then that would still increase Total's Angolan production by 37%. Of course, the total production that the company gets from this project will likely be somewhat below that because the Angolan government will take some of the oil produced as tax; but bringing this field online will still prove quite accretive to Total's production, which should ultimately be beneficial for shareholders.