Loading...
Docoh

TotalEnergies SE (TTE)

Filed: 16 Mar 16, 12:00am

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Form 20-F

 

 

(Mark One)

 

¨REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from            to            

OR

 

¨SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  Date of event requiring this shell company report

Commission file number: 1-10888

 

 

TOTAL S.A.

(Exact Name of Registrant as Specified in Its Charter)

Republic of France

(Jurisdiction of Incorporation or Organization)

2, place Jean Millier

La Défense 6

92400 Courbevoie

France

(Address of Principal Executive Offices)

Patrick de La Chevardière

Chief Financial Officer

TOTAL S.A.

2, place Jean Millier

La Défense 6

92400 Courbevoie

France

Tel: +33 (0)1 47 44 45 46

Fax: +33 (0)1 47 44 49 44

(Name, Telephone, Email and/or Facsimile Number and Address of Company Contact Person)

 

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

 

 

Title of each class

  

Name of each exchange on which registered

Shares  New York Stock Exchange*
American Depositary Shares  New York Stock Exchange

 

*Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

2,440,057,883 Shares, par value2.50 each, as of December 31, 2015

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þ    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).**

Yes  ¨    No  ¨

 

**This requirement is not currently applicable to the registrant.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  þ Accelerated filer  ¨ Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP  ¨  

International Financial Reporting Standards as issued by the International

Accounting Standards Board  þ

  Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item17  ¨    Item 18   ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

 

 


TABLE OF CONTENTS

 

   Page 

CERTAIN TERMS

   i  

ABBREVIATIONS

   ii  

CONVERSION TABLE

   ii  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

   iii  

Item 1.

  

Identity of Directors, Senior Management and Advisers

   1  

Item 2.

  

Offer Statistics and Expected Timetable

   1  

Item 3.

  

Key Information

   1  
  

Selected Financial Data

   1  
  

Exchange Rate Information

   2  
  

Risk Factors

   2  

Item 4.

  

Information on the Company

   9  
  

History and Development

   9  
  

Business Overview

   10  
  

Other Matters

   44  

Item 4A.

  

Unresolved Staff Comments

   73  

Item 5.

  

Operating and Financial Review and Prospects

   73  

Item 6.

  

Directors, Senior Management and Employees

   84  
  

Directors and Senior Management

   84  
  

Compensation

   93  
  

Corporate Governance

   111  
  

Employees and Share Ownership

   124  

Item 7.

  

Major Shareholders and Related Party Transactions

   128  

Item 8.

  

Financial Information

   131  

Item 9.

  

The Offer and Listing

   134  

Item 10.

  

Additional Information

   135  

Item 11.

  

Quantitative and Qualitative Disclosures About Market Risk

   147  

Item 12.

  

Description of Securities Other than Equity Securities

   148  

Item 13.

  

Defaults, Dividend Arrearages and Delinquencies

   149  

Item 14.

  

Material Modifications to the Rights of Security Holders and Use of Proceeds

   149  

Item 15.

  

Controls and Procedures

   149  

Item 16A.

  

Audit Committee Financial Expert

   155  

Item 16B.

  

Code of Ethics

   155  

Item 16C.

  

Principal Accountant Fees and Services

   155  

Item 16D.

  

Exemptions from the Listing Standards for Audit Committees

   156  

Item 16E.

  

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

   156  

Item 16F.

  

Change in Registrant’s Certifying Accountant

   156  

Item 16G.

  

Corporate Governance

   157  

Item 16H.

  

Mine Safety Disclosure

   159  

Item 17.

  

Financial Statements

   159  

Item 18.

  

Financial Statements

   159  

Item 19.

  

Exhibits

   160  


Basis of presentation

Financial information included in this Annual Report is presented according to International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and IFRS as adopted by the European Union (EU) as of December 31, 2015.

Statements regarding competitive position

Unless otherwise indicated, statements made in “Item 4. Information on the Company” referring to TOTAL’s competitive position are based on the Company’s estimates, and in some cases rely on a range of sources, including investment analysts’ reports, independent market studies and TOTAL’s internal assessments of market share based on publicly available information about the financial results and performance of market participants.

Additional information

This Annual Report on Form 20-F reports information primarily regarding TOTAL’s business, operations and financial information relating to the fiscal year ended December 31, 2015. For more recent updates regarding TOTAL, you may inspect any reports, statements or other information TOTAL files with the United States Securities and Exchange Commission (“SEC”). All of TOTAL’s SEC filings made after December 31, 2001, are available to the public at the SEC website at http://www.sec.gov and from certain commercial document retrieval services. See also “Item 10 — 8. Documents on Display”.

No material on the TOTAL website forms any part of this Annual Report on Form 20-F. References in this document to documents on the TOTAL website are included as an aid to their location and are not incorporated by reference into this document.

Certain terms

Unless the context indicates otherwise, the following terms have the meanings shown below:

 

“acreage”

The area, expressed in acres, over which TOTAL has interests in exploration or production.

 

“ADRs”

American Depositary Receipts evidencing ADSs.

 

“ADSs”

American Depositary Shares representing the shares of TOTAL S.A.

 

“association”/“consortium”/“joint venture”

Terms used to generally describe a project in which two or more entities participate. For the principles and methods of consolidation applicable to different types of joint arrangements according to IFRS, refer to Note 1 to the Consolidated Financial Statements.

 

“barrels”

Barrels of crude oil, condensates, NGL or bitumen.

 

“Company”

TOTAL S.A.

 

“condensates”

Condensates are a mixture of hydrocarbons that exist in a gaseous phase at original reservoir temperature and pressure, but that, when produced, exist in a liquid phase at surface temperature and pressure. Condensates are sometimes referred to as C5+.

 

“crude oil”

Crude oil is a mixture of compounds (mainly pentanes and heavier hydrocarbons) that exists in a liquid phase at original reservoir temperature and pressure and remains liquid at atmospheric pressure and ambient temperature. “Crude oil” or “oil” are sometimes used as generic terms to designate crude oil plus condensates plus NGL.

 

“Depositary”

JP Morgan Chase Bank, N.A.

 

“Depositary Agreement”

The depositary agreement pursuant to which ADSs are issued, a copy of which is attached as Exhibit (a) to the registration statement on Form F-6(Reg. No. 333-199737) filed with the SEC on October 31, 2014.

 

“ERMI”

The ERMI (European Refining Margin Indicator) is a Group indicator intended to represent the refining margin after variable costs for a theoretical complex refinery located around Rotterdam in Northern Europe that processes a mix of crude oil and other inputs commonly supplied to this region to produce and market the main refined products at prevailing prices in the region.

 

“Group”

TOTAL S.A. and its subsidiaries and affiliates. The terms TOTAL and Group are used interchangeably.

 

“hydrocracker”

A refinery unit which uses a catalyst and extraordinarily high pressure, in the presence of surplus hydrogen, to shorten molecules.

 

“liquids”

Liquids consist of crude oil, bitumen, condensates and NGL.

 

“LNG”

Liquefied natural gas.

 

“LPG”

Liquefied petroleum gas is a mixture of hydrocarbons, the principal components of which are propane and butane, in a gaseous state at atmospheric pressure, but which is liquefied under moderate pressure and ambient temperature. LPG is included in NGL.

 

“NGL”

Natural gas liquids (NGL) are a mixture of light hydrocarbons that exist in the gaseous phase at atmospheric pressure and are recovered as liquids in gas processing plants; NGL include very light hydrocarbons (ethane, propane and butane).

 

2015 Form 20-F TOTAL S.A. i


“oil and gas”

Generic term which includes all hydrocarbons (e.g., crude oil, condensates, NGL, bitumen and natural gas).

 

“project”

As used in this report, “project” may encompass different meanings, such as properties, agreements, investments, developments, phases, activities or components, each of which may also informally be described as a “project”. Such use is for convenience only and is not intended as a precise description of the term “project” as it relates to any specific governmental law or regulation.

 

“proved reserves”

Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The full definition of “proved reserves” that we are required to follow in presenting such information in our financial results and elsewhere in reports we file with the SEC is found in Rule 4-10 of Regulation S-X under the U.S. Securities Act of 1933, as amended (including as amended by the SEC “Modernization of Oil and Gas Reporting” Release No. 33-8995 of December 31, 2008) (“Rule 4-10”).

 

“proved developed reserves”

Proved developed oil and gas reserves are proved reserves that can be expected to be recovered (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. The full definition of “developed reserves” that we are required to follow in presenting such information in our financial results and elsewhere in reports we file with the SEC is found in Rule 4-10.

 

“proved undeveloped reserves”

Proved undeveloped oil and gas reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. The full definition of “undeveloped reserves” that we are required to follow in presenting such information in our financial results and elsewhere in reports we file with the SEC is found in Rule 4-10.

 

“steam cracker”

A petrochemical plant that turns naphtha and light hydrocarbons into ethylene, propylene, and other chemical raw materials.

 

“TOTAL”

TOTAL S.A. and its subsidiaries and affiliates. We use such term interchangeably with the term Group. When we refer to the parent holding company alone, we use the term TOTAL S.A. or the Company.

 

“trains”

Facilities for converting, liquefying, storing and off-loading natural gas.

 

“turnarounds”

Temporary shutdowns of facilities for maintenance, overhaul and upgrading.

Abbreviations

 

b

 = barrel boe = barrel of oil equivalent cf = cubic feet GWh = gigawatt-hour

t

 = metric ton m3 = cubic meter Btu = British thermal unit TWh = terawatt-hour

/d

 = per day /y = per year k = thousand Wp = watt peak

M

 = million B = billion W = watt  

Conversion table

 

1 acre

  = 0.405 hectares  

1 b

  = 42 U.S. gallons  

1 boe

  = 1 b of crude oil  = 5,390 cf of gas in 2015(a) (5,400 cf in 2014 and 5,403 cf in 2013)

1 b/d of crude oil

  = approximately 50 t/y of crude oil  

1Bcm/y

  = approximately 0.1 Bcf/d  

1 m3

  = 35.3147 cf  

1 kilometer

  = approximately 0.62 miles  

1 ton

  = 1 t  = 1,000 kilograms (approximately 2,205 pounds)

1 ton of oil

  = 1 t of oil  = approximately 7.5 b of oil (assuming a specific gravity of 37° API)

1 Mt of LNG

  = approximately 48 Mcf of gas  

1 Mt/y LNG

  = approximately 131 Mcf/d  

 

(a) 

Natural gas is converted to barrels of oil equivalent using a ratio of cubic feet of natural gas per one barrel. This ratio is based on the actual average equivalent energy content of TOTAL’s natural gas reserves during the applicable periods, and is subject to change. The tabular conversion rate is applicable to TOTAL’s natural gas reserves on a group-wide basis.

 

ii TOTAL S.A. Form 20-F 2015


Cautionary statement concerning forward-looking statements

TOTAL has made certain forward-looking statements in this document and in the documents referred to in, or incorporated by reference into, this Annual Report. Such statements are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the management of TOTAL and on the information currently available to such management. Forward-looking statements include information concerning forecasts, projections, anticipated synergies, and other information concerning possible or assumed future results of TOTAL, and may be preceded by, followed by, or otherwise include the words “believes”, “expects”, “anticipates”, “intends”, “plans”, “targets”, “estimates” or similar expressions.

Forward-looking statements are not assurances of results or values. They involve risks, uncertainties and assumptions. TOTAL’s future results and share value may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond TOTAL’s ability to control or predict. Except for its ongoing obligations to disclose material information as required by applicable securities laws, TOTAL does not have any intention or obligation to update forward-looking statements after the distribution of this document, even if new information, future events or other circumstances have made them incorrect or misleading.

You should understand that various factors, certain of which are discussed elsewhere in this document and in the documents referred to in, or incorporated by reference into, this document, could affect the future results of TOTAL and could cause results to differ materially from those expressed in such forward-looking statements, including:

 

  

material adverse changes in general economic conditions or in the markets served by TOTAL, including changes in the prices of oil, natural gas, refined products, petrochemical products and other chemicals;

  

changes in currency exchange rates and currency devaluations;

  

the success and the economic efficiency of oil and natural gas exploration, development and production programs, including, without limitation, those that are not controlled and/or operated by TOTAL;

  

uncertainties about estimates of changes in proven and potential reserves and the capabilities of production facilities;

  

uncertainties about the ability to control unit costs in exploration, production, refining and marketing (including refining margins) and chemicals;

  

changes in the current capital expenditure plans of TOTAL;

  

the ability of TOTAL to realize anticipated cost savings, synergies and operating efficiencies;

  

the financial resources of competitors;

  

changes in laws and regulations, including tax and environmental laws and industrial safety regulations;

  

the quality of future opportunities that may be presented to or pursued by TOTAL;

  

the ability to generate cash flow or obtain financing to fund growth and the cost of such financing and liquidity conditions in the capital markets generally;

  

the ability to obtain governmental or regulatory approvals;

  

the ability to respond to challenges in international markets, including political or economic conditions (including national and international armed conflict) and trade and regulatory matters (including actual or proposed sanctions on companies that conduct business in certain countries);

  

the ability to complete and integrate appropriate acquisitions, strategic alliances and joint ventures;

  

changes in the political environment that adversely affect exploration, production licenses and contractual rights or impose minimum drilling obligations, price controls, nationalization or expropriation, and regulation of refining and marketing, chemicals and power generating activities;

  

the possibility that other unpredictable events such as labor disputes or industrial accidents will adversely affect the business of TOTAL; and

  

the risk that TOTAL will inadequately hedge the price of crude oil or finished products.

For additional factors, you should read the information set forth under “Item 3 — C. Risk Factors”, “Item 4 — E. Other Matters”, “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk”.

 

2015 Form 20-F TOTAL S.A. iii


Items 1 - 3

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

 

 

A. SELECTED FINANCIAL DATA

 

 

The following table presents selected consolidated financial data for TOTAL on the basis of IFRS as issued by the IASB and IFRS as adopted by the EU for the years ended December 31, 2015, 2014, 2013, 2012 and 2011. Effective January 1, 2014, TOTAL changed the presentation currency of the Group’s Consolidated Financial Statements from the Euro to the US Dollar. Comparative 2013, 2012 and 2011 information in the table below has been restated. Following the retrospective application of the accounting interpretation IFRIC 21 effective January 1, 2014, the information for 2013 and 2012 has been restated; however, the impact on such restated results is not significant. Ernst & Young Audit and KPMG S.A., independent registered public accounting firms and the Company’s auditors, audited the historical consolidated financial statements of TOTAL for these periods from which the financial data presented below for such periods are derived, except for the application of IFRIC 21 and the change of presentation currency for the year 2011. All such data should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included elsewhere herein.

SELECTED CONSOLIDATED FINANCIAL DATA

 

(M$, except share and per share data)(a)  2015  2014   2013   2012   2011 

INCOME STATEMENT DATA

         

Revenues from sales

   143,421    212,018     227,969     234,216     231,830  

Net income, Group share

   5,087    4,244     11,228     13,648     17,400  

Earnings per share

   2.17    1.87     4.96     6.05     7.74  

Fully diluted earnings per share

   2.16    1.86     4.94     6.02     7.71  

CASH FLOW STATEMENT DATA

         

Cash flow from operating activities

   19,946    25,608     28,513     28,858     27,193  

Total expenditures

   28,033    30,509     34,431     29,475     34,161  

BALANCE SHEET DATA

         

Total assets

   224,484    229,798     239,223     225,886     211,793  

Non-current financial debt

   44,464    45,481     34,574     29,392     29,186  

Non-controlling interests

   2,915    3,201     3,138     1,689     1,749  

Shareholders’ equity — Group share

   92,494    90,330     100,241     93,969     86,667  

Common shares

   7,670    7,518     7,493     7,454     7,447  

DIVIDENDS

         

Dividend per share (euros)

   2.44(b)   2.44     2.38     2.34     2.28  

Dividend per share (dollars)

   $2.67(b)(c)   $2.93     $3.24     $3.05     $2.97  

COMMON SHARES(d)

         

Average number outstanding of common shares2.50 par value (shares undiluted)

   2,295,037,940    2,272,859,512     2,264,349,795     2,255,801,563     2,247,479,529  

Average number outstanding of common shares2.50 par value (shares diluted)

   2,304,435,542    2,281,004,151     2,271,543,658     2,266,635,745     2,256,951,403  

 

(a) 

Following the retrospective application of the accounting interpretation IFRIC 21 effective January 1, 2014, the information for 2013 has been restated; however, the impact on such restated results is not significant (for further information concerning this restatement, see the introduction to the Notes to the Consolidated Financial Statements included elsewhere herein).

(b) 

Subject to approval by the shareholders’ meeting on May 24, 2016.

(c) 

Estimated dividend in dollars includes the first quarterly interim ADR dividend of $0.69 paid in October 2015 and the second quarterly interim ADR dividend of $0.66 paid in January 2016, as well as the third quarterly interim ADR dividend of $0.66 payable in April 2016 and the proposed final interim ADR dividend of $0.66 payable in July 2016, both converted at a rate of $1.09/.

(d) 

The number of common shares shown has been used to calculate per share amounts.

 

2015 Form 20-F TOTAL S.A. 1


Item 3

 

 

 

B. EXCHANGE RATE INFORMATION

 

 

 

For information regarding the effects of currency fluctuations on TOTAL’s results, see “Item 5. Operating and Financial Review and Prospects”.

Most currency amounts in this Annual Report on Form 20-F are expressed in U.S. dollars (“dollars” or “$”) or in euros (“euros” or “”). For the convenience of the reader, this Annual Report on Form 20-F presents certain translations into dollars of certain euro amounts ($1.30/1.00).

The following table sets out the average dollar/euro exchange rates expressed in dollars per1.00 for the years indicated, based on an average of the daily European Central Bank (“ECB”) reference exchange rate.(1) Such rates are used by TOTAL in preparation of its Consolidated Statement of Income and Consolidated Statement of Cash Flow in its Consolidated Financial Statements. No representation is made that the euro could have been converted into dollars at the rates shown or at any other rates for such periods or at such dates.

DOLLAR/EURO EXCHANGE RATES

 

Year

  Average Rate 

2011

   1.3920  

2012

   1.2848  

2013

   1.3281  

2014

   1.3285  

2015

   1.1095  

The table below shows the high and low dollar/euro exchange rates for the four months ended December 31, 2015, and for the first months of 2016, based on the daily ECB reference exchange rates published during the relevant month expressed in dollars per1.00.

DOLLAR/EURO EXCHANGE RATES

 

Period

  High   Low 

September 2015

   1.1419     1.1138  

October 2015

   1.1439     1.0930  

November 2015

   1.1032     1.0579  

December 2015

   1.0990     1.0600  

January 2016

   1.0920     1.0742  

February 2016

   1.1347     1.0884  

March 2016(a)

   1.1119     1.0856  

 

(a) 

Through March 14, 2016.

The ECB reference exchange rate on March 14, 2016 for the dollar against the euro was $1.1119/.

 

 

 

C. RISK FACTORS

 

 

 

The Group conducts its activities in an ever-changing environment and is exposed to risks that, if they were to occur, could have a material adverse effect on its business, financial condition, assets and liabilities, results or outlook.

The Group employs a continuous process of identifying and analyzing risks in order to determine those that could prevent it from achieving its objectives. This section presents the significant risks to which the Group believes it is exposed as of the date of this report. However, as of that date, the Group may not be aware of other risks that could, or other risks may not have been considered by the Group as being likely to, have a significant adverse impact on the Group, its business, financial condition, assets and liabilities, results or outlook. For additional information on these conditions, along with TOTAL’s approaches to managing certain of these risks, refer to “Item 4 — E. Other Matters”, “Item 5. Operating and Financial Review and Prospects”, “Item 11. Quantitative and Qualitative Disclosures About Market Risk” and “Item 15 — Controls and Procedures”.

The financial performance of TOTAL is sensitive to a number of market-related factors, the most significant being crude oil and natural gas prices, refining margins and exchange rates.

Generally, a decline in crude oil prices has a negative effect on the Group’s results due to a decrease in revenues from oil production. Conversely, a rise in crude oil prices increases revenues.

The year 2015 was marked by the continuing sharp fall in oil prices that started in the second half of 2014. For the year 2016, according to the scenarios retained, the Group estimates that a decrease of $10 per barrel in the price of Brent Crude would decrease annual adjusted net operating income by approximately $2 billion and cash flow from operations by approximately $2 billion. Conversely, an increase of $10 per barrel in the price of Brent Crude would increase annual adjusted net operating income by approximately $2 billion and cash flow from operations by approximately $2 billion.

The impact of changes in crude oil prices on downstream operations depends upon the speed at which the prices of finished products adjust to reflect these changes. The Group estimates that a decrease in its European Refining Margin Indicator (ERMI) of $10 per ton would decrease annual adjusted net operating income by approximately $0.5 billion and cash flow from operations by approximately $0.6 billion. Conversely, an increase in its ERMI of $10 per ton would increase annual adjusted net operating income by approximately $0.5 billion and cash flow from operations by approximately $0.6 billion.

 

 

 

(1) 

For the period 2011-2015, the averages of the ECB reference exchange rates expressed in dollars per1.00 on the last business day of each month during the relevant year are as follows: 2011 — 1.40; 2012 —1.29; 2013 —1.33; 2014 — 1.32; and 2015 — 1.10.

 

2 TOTAL S.A. Form 20-F 2015


Item 3 - C. Risk Factors

 

 

All of the Group’s activities are, for various reasons and to varying degrees, sensitive to fluctuations in the dollar/euro exchange rate. The Group estimates that an increase of $0.10 per euro (weakening of the dollar versus the euro) would decrease adjusted net operating income by approximately $0.15 billion and cash flow

from operations by approximately $0.1 billion. Conversely, a decrease of $0.10 per euro (strengthening of the dollar versus the euro) would increase adjusted net operating income by approximately $0.15 billion and cash flow from operations by approximately $0.1 billion.

 

 

Market impact environment 2016(a)  

Scenario

retained

   Change   Estimated impact on adjusted
net operating income
   Estimated impact on cash
flow from operations
 

Brent

   50 $/b     -10 $/b     -2 B$     -2 B$  

European refining margin indicator (ERMI)

   35 $/t     -10 $/t     -0.5 B$     -0.6 B$  

$/

   1.0  $/     +0.1 $ per      -0.15 B$     -0.1 B$  

 

(a) 

Sensitivities revised once per year upon publication of the previous year’s fourth quarter results. Indicated sensitivities are approximate and based upon TOTAL’s current view of its 2016 portfolio. Results may differ significantly from the estimates implied by the application of these sensitivities. 85% of the impact of the $/ sensitivity on net adjusted operating income is attributable to the Refining & Chemicals segment.

 

In addition to the adverse effect on the Group’s revenues, margins and profitability, a prolonged period of low oil and natural gas prices could lead the Group to review its projects and the evaluation of its assets and oil and natural gas reserves.

Prices for oil and natural gas may fluctuate widely due to many factors over which TOTAL has no control. These factors include:

 

 

variations in global and regional supply of and demand for energy;

 

global and regional economic and political developments in resource-producing regions, particularly in the Middle East, Africa and South America;

 

the ability of the Organization of the Petroleum Exporting Countries (OPEC) and other producing nations to influence global production levels and prices;

 

prices of unconventional energies as well as evolving approaches for developing oil sands and shale oil, which may affect the Group’s realized prices, notably under its long-term gas sales contracts and asset valuations, particularly in North America;

 

cost and availability of new technology;

 

governmental regulations and actions;

 

global economic and financial market conditions;

 

war or other conflicts;

 

changes in demographics, including population growth rates and consumer preferences; and

 

adverse weather conditions that can disrupt supplies or interrupt operations of the Group’s facilities.

Low oil and natural gas prices over prolonged periods may reduce the economic viability of projects planned or in development, impact the Group’s asset sale program and reduce liquidity, thereby decreasing the Group’s ability to finance capital expenditures and/or causing it to cancel or postpone investment projects.

If TOTAL is unable to follow through with investment projects, the Group’s opportunities for future revenue and profitability growth would be reduced, which could materially impact the Group’s financial condition.

Prolonged periods of low oil and natural gas prices may reduce the Group’s reported reserves and/or result in impairment that could have a significant effect on the Group’s results in the period in which it occurs.

Conversely, in a high oil and gas price environment, the Group can experience significant increases in cost and government take, and,

under some production-sharing contracts, the Group’s production rights could be reduced. Higher prices can also reduce demand for the Group’s products.

The Group’s earnings from its Refining & Chemicals and Marketing & Services segments are primarily dependent upon the supply and demand for refined products and the associated margins on refined product sales, with the impact of changes in oil and gas prices on earnings on these segments being dependent upon the speed at which the prices of refined products adjust to reflect movements in oil and gas prices. In 2015, the negative effects of the decline of oil prices on the Group’s results were partially offset by the results of Refining & Chemicals, which were supported by high refining margins. In 2016, there can be no assurance that the refining margins will remain at such a high level.

The activities of Trading & Shipping (oil, gas and power trading and shipping activities) are particularly sensitive to market risk and more specifically to price risk as a consequence of the volatility of oil and gas prices, to liquidity risk (inability to buy or sell cargoes at market prices) and to counterparty risk (when a counterparty does not fulfill its contractual obligations). The Group uses various energy derivative instruments to adjust its exposure to price fluctuations of crude oil, refined products, natural gas, power and freight-rates. Although TOTAL believes it has established appropriate risk management procedures, large market fluctuations may adversely affect the activities and operating results of the Group.

Since the second half of 2014, oil prices have declined very significantly. For more detailed information on the impact of the sharp decline in oil prices on the Group’s 2015 results, financial condition (including impairments, significant reductions to capital expenditures and operating costs, and divestments completed under the Group’s asset sale program) and outlook, refer to “Item 5. Operating and Financial Review and Prospects”.

Certain financial risks are detailed in Note 31 to the Consolidated Financial Statements.

TOTAL is exposed to risks related to the safety and security of its operations.

The Group’s activities involve a wide range of operational risks, such as explosions, fires, accidents, equipment failures, leakage of toxic products, emissions or discharges into the air, water or soil, that can potentially cause death or injury, or impact natural resources and ecosystems.

 

 

2015 Form 20-F TOTAL S.A. 3


Item 3 - C. Risk Factors

 

The industrial event that could have the most significant impact is a major industrial accident (e.g., blow out, explosion, fire, leakage of highly toxic products resulting in the death or injury of one or several people and/or accidental pollution on a large-scale or at an environmentally sensitive site).

Acts of terrorism against the Group’s plants and sites, pipelines, and transportation and computer systems could also disrupt its business activities and could cause harm to people, the environment and property.

Certain activities of the Group face specific additional risks. TOTAL’s Upstream segment faces, notably, risks related to the physical characteristics of oil and gas fields, particularly during exploration operations that can cause blow outs, explosions and fires and harm the environment as well as lead to a disruption of the Group’s operations or reduce its production. In addition to the risks of explosions and fires, the activities of the Refining & Chemicals and Marketing & Services business segments entail risks related to the overall life cycle of the products manufactured, as well as the materials used. With regard to transportation, the likelihood of an operational accident depends not only on the hazardous nature of the products transported, but also on the volumes involved and the sensitivity of the regions through which they are transported (quality of infrastructure, population density, environmental considerations).

TOTAL’s workforce and the public are exposed to risks inherent to the Group’s operations (loss of life, injuries, property damage, environmental damage) that could result in regulatory action and legal liability against the Group’s entities and senior management as well as damage to the Group’s reputation. Like most industrial groups, TOTAL is affected by reports of occupational illnesses, particularly those caused by past exposure of Group employees to asbestos.

To manage the operational risks to which it is exposed, the Group maintains worldwide third-party liability insurance coverage for all its subsidiaries. TOTAL also has insurance to protect against the risk of damage to Group property and/or business interruption at its main refining and petrochemical sites. TOTAL’s insurance and risk management policies are described in “Item 4 — E. Other Matters — 3. Insurance and risk management”. However, the Group is not insured against all potential risks. In certain cases, such as a major environmental disaster, TOTAL’s liability may exceed the maximum coverage provided by its third-party liability insurance. The Group cannot guarantee that it will not suffer any uninsured loss and there can be no guarantee, particularly in the event of a major environmental disaster or industrial accident, that such loss would not have a material adverse effect on the Group.

Crisis management systems are necessary to effectively respond to emergencies, avoid potential disruptions to TOTAL’s business and operations and minimize impacts on third parties and the environment.

TOTAL has crisis management plans in place to deal with emergencies (refer to “Item 15 — Controls and Procedures”). However, these plans cannot exclude the risk that the Group’s business and operations may be severely disrupted in a crisis situation or ensure the absence of impacts on third parties or the environment. TOTAL has also implemented business continuity plans to continue or resume operations following a shutdown or incident. An inability to restore or replace critical capacity in a timely manner could prolong the impact of any disruption and could have a material adverse effect on the Group’s business and operations.

TOTAL is subject to increasingly stringent environmental, health and safety laws and regulations in numerous countries and may incur material related compliance costs.

The Group’s activities are subject to numerous laws and regulations pertaining to health, safety and the environment. In most countries where the Group operates, particularly in Europe and the United States, sites and products are subject to increasingly strict laws governing the protection of the environment (e.g., water, air, soil, noise, protection of nature, waste management, impact assessments), health (e.g., occupational safety, chemical product risk), and the safety of personnel and residents (e.g., major risk facilities).

Product quality and consumer protection are also subject to regulations. The Group’s entities ensure that their products meet applicable specifications and abide by all applicable consumer protection laws. Failure to do so could lead to personal injury, environmental harm and loss of customers, which could negatively impact the Group’s operating results, financial position and reputation.

TOTAL incurs, and will continue to incur, substantial expenditures to comply with increasingly complex laws and regulations aimed at protecting health, safety and the environment. Such expenditures could have a material adverse effect on the Group’s operating results and financial position.

As a further result of, notably, the introduction of new laws and regulations, the Group could also be compelled to curtail, modify or cease certain operations or implement temporary shutdowns of facilities, which could diminish the Group’s productivity and have a material adverse impact on its operating results.

Moreover, most of the Group’s activities will eventually, at site closure, require decommissioning followed by environmental remediation after operations are discontinued, due to compliance with applicable regulations. Costs related to such activities may materially exceed the Group’s provisions and adversely impact its operating results. With regard to the permanent shutdown of an activity, the Group’s environmental contingencies and asset retirement obligations are addressed in the “Asset retirement obligations” and “Provisions for environmental contingencies” sections of the Group’s Consolidated Balance Sheet (refer to Note 19 to the Consolidated Financial Statements). Future expenditures related to asset retirement obligations are accounted for in accordance with the accounting principles described in Note 1Q to the Consolidated Financial Statements.

Laws and regulations related to climate change may adversely affect the Group’s business.

Growing public concern in a number of countries over greenhouse gas (GHG) emissions and climate change, as well as a multiplication of stricter regulations in this area, could adversely affect the Group’s businesses, increase its operating costs and reduce its profitability.

The scientific community has established a link between climate change and increasing GHG emissions. The worldwide goal to limit global warming has led to the need to gradually reduce fossil fuel use notably through the diversification of the energy mix. The share of natural gas, the least GHG-emitting fossil energy source, represented nearly 50% of TOTAL’s production in 2015, compared to approximately 35% in 2005. The Group has ceased its coal production activities and is developing its renewable energy production activities in solar and biomass. Regulations designed to gradually limit fossil fuel use may, depending on the

 

 

4 TOTAL S.A. Form 20-F 2015


Item 3 - C. Risk Factors

 

GHG emission limits and time horizons set, negatively and significantly affect the development of the most emitting projects, as well as the economic value of some of the Group’s assets.

In Europe, the regulations concerning the market for CO2 emission allowances, the EU Emissions Trading System (EU-ETS), entered a third phase on January 1, 2013. This phase marks the end of the overall free allocation of emission allowances: certain emissions, such as those related to electricity production, no longer benefit from free allowances, while for others free allowances have been significantly reduced. Free allocations are now established based on the emission level of the top-performing plants (i.e., the least GHG-emitting) within the same sector (“top 10 benchmark”). Lower-performing plants must purchase, at market price, the necessary allowances to cover their emissions over these free allocations. The plants also need to indirectly bear the cost of allowances for all electricity consumed (including electricity generated internally at the facilities).

The European Commission’s decision to apply a “cross-sectoral correction factor” (CSCF) has reduced the total amount of free allocations for all sectors combined by an average of 11.6% over phase 3 (2013-2020). However, the revision in 2014 of the list of “sectors exposed to carbon leakage” confirmed that the refining sector in Europe is an exposed sector, which may continue to benefit from free allowances that partially cover its deficits.

In this context, the Group estimates that approximately 30% of its emissions subject to the EU-ETS will not be covered by free allowances during the 2013-2020 period. The financial risk related to the foreseeable purchase of CO2 emission allowances on the market should remain low for the Group during this period. At year-end 2015, the price of the EU allowances stood at approximately8/t CO2 and may reach approximately20/t(1) CO2 for 2020 due to the combined effects of backloading(2), having removed 900 Mt from phase 3 allowance auctions, and the establishment of a “market stability reserve” at the end of this phase.

The physical effects of climate change may adversely affect the Group’s business.

TOTAL’s businesses operate in varied locales where the potential physical impacts of climate change, including changes in weather patterns, are highly uncertain and may adversely impact the results of the Group’s operations.

Climate change potentially has multiple effects that could harm the Group’s operations. The increasing scarcity of water resources may negatively affect the Group’s operations in some regions of the world, high sea levels may harm certain coastal activities, and the multiplication of extreme weather events may damage offshore and onshore facilities. These climate risk factors are continually assessed in TOTAL’s management and risk management plans.

The Group believes that it is impossible to guarantee that the contingencies or liabilities related to the matters mentioned above will not have a material adverse impact in the future on its business, assets and liabilities, consolidated financial situation, cash flow or income.

Disruption to or breaches of TOTAL’s critical IT services or information security systems could adversely affect the Group’s operations.

The Group’s activities depend heavily on the reliability and security of its information technology (IT) systems. If the integrity of its IT

systems were compromised due to, for example, technical failure, cyber attack, computer intrusions and viruses, power or network outages or natural disasters, the Group’s activities and assets could sustain serious damage, material intellectual property could be divulged and, in some cases, personal injury, environmental harm and regulatory violations could occur, potentially having a material adverse effect on the Group’s financial condition, including its results.

The Group’s production growth and profitability depend on the delivery of its major development projects.

Growth of production and profitability of the Group rely heavily on the successful execution of its major development projects that are increasingly complex and capital-intensive. These major projects are subject to a number of challenges, including, in particular, those related to:

 

 

negotiations with partners, governments, suppliers, customers and others;

 

obtaining project financing;

 

controlling operating costs;

 

earning an adequate return in a low oil price environment;

 

adhering to projects schedules; and

 

the timely issuance or renewal of permits and licenses by government agencies.

Poor delivery of any major project that underpins production or production growth could adversely affect the Group’s financial performance.

The Group’s long-term profitability depends on cost-effective discovery, acquisition and development of economically viable new reserves; if the Group is unsuccessful, its operating results and financial condition would be materially and adversely affected.

A large portion of the Group’s revenues and operating results are derived from the sale of oil and gas that the Group extracts from underground reserves developed as part of its exploration and production activities. The development of oil and gas fields, the construction of facilities and the drilling of production or injection wells is capital intensive and requires advanced technology. Due to constantly changing market conditions and environmental challenges, cost projections can be uncertain. For the Upstream segment to continue to be profitable, the Group needs to replace its reserves with new proved reserves that can be developed and produced in an economically viable manner.

In addition, TOTAL’s ability to discover or acquire and develop new reserves successfully is uncertain and can be negatively affected by a number of factors, including:

 

 

the geological nature of oil and gas fields, notably unexpected drilling conditions including pressure or unexpected heterogeneities in geological formations;

 

the risk of dry holes or failure to find expected commercial quantities of hydrocarbons;

 

the inability of service companies to deliver on contracted services on time and on budget;

 

the inability of the Group’s partners to execute or finance projects in which the Group holds an interest;

 

equipment failures, fires, blow-outs or accidents;

 

the Group’s inability to develop or implement new technologies that enable access to previously inaccessible fields;

 

 

 

(1)

Company data.

(2)

Backloading: authorization given to the European Commission to intervene at its own discretion in the CO2 allowance auction calendar.

 

2015 Form 20-F TOTAL S.A. 5


Item 3 - C. Risk Factors

 

 

the Group’s inability to anticipate market changes in a timely manner;

 

adverse weather conditions;

 

compliance with both anticipated and unanticipated governmental requirements, including U.S. and EU regulations that may give a competitive advantage to companies not subject to such regulations;

 

shortages or delays in the availability or delivery of appropriate equipment;

 

industrial action;

 

competition from oil and gas companies for the acquisition and development of assets and licenses;

 

increased taxes and royalties, including retroactive claims; and

 

disputes related to property titles.

These factors could lead to cost overruns and could impair the Group’s ability to complete a development project or make production economical. Some of these factors may also affect the Group’s projects and facilities further down the oil and gas chain.

If TOTAL fails to develop new reserves cost-effectively in sufficient quantities to replace the Group’s reserves currently being developed, produced and marketed, the Group’s financial condition, including its results, would be materially and adversely affected.

The Group’s oil and gas reserves data are estimates only and subsequent downward adjustments are possible. If actual production from such reserves proves to be lower than current estimates indicate, the Group’s operating results and financial condition would be negatively impacted.

The Group’s proved reserves figures are estimates prepared in accordance with SEC rules. Proved reserves are those reserves which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically recoverable — from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations — prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Reserves are estimated by teams of qualified, experienced and trained geoscientists, petroleum engineers and project engineers, who rigorously review and analyze in detail all available geoscience and engineering data (e.g., seismic data, electrical logs, cores, fluids, pressures, flow rates, facilities parameters). This process involves making subjective judgments, including with respect to the estimate of hydrocarbons initially in place, initial production rates and recovery efficiency, based on available geological, technical and economic data. Consequently, estimates of reserves are not exact measurements and are subject to revision.

A variety of factors that are beyond the Group’s control could cause such estimates to be adjusted downward in the future, or cause the Group’s actual production to be lower than its currently reported proved reserves indicate. These main such factors include:

 

 

a decline in the price of oil or gas, making reserves no longer economically viable to exploit and therefore not classifiable as proved;

 

an increase in the price of oil or gas, which may reduce the reserves to which the Group is entitled under production sharing and risked service contracts and other contractual terms;

 

changes in tax rules and other government regulations that make reserves no longer economically viable to exploit; and

 

the actual production performance of the Group’s deposits.

The Group’s reserves estimates may therefore require substantial downward revisions should its subjective judgments prove not to have been conservative enough based on the available geoscience and engineering data, or the Group’s assumptions regarding factors or variables that are beyond its control prove to be incorrect over time. Any downward adjustment would indicate lower future production amounts, which could adversely affect the Group’s financial condition, including its results.

Many of the Group’s projects are conducted by equity affiliates or are operated by third parties. For these projects, the Group’s degree of control, as well as its ability to identify and manage risks, may be reduced.

A significant number of the Group’s projects is conducted by equity affiliates. In cases where the Group’s company is not the operator, such company may have limited influence over, and control of, the behavior, performance and costs of the partnership, its ability to manage risks may be limited and it may, nevertheless, be prosecuted by regulators or claimants in the event of an incident.

For additional information concerning equity affiliates, refer to Note 12 (“Equity affiliates: investments and loans”) to the Consolidated Financial Statements.

Additionally, the partners of the Group may not be able to meet their financial or other obligations to the projects, which may threaten the viability of a given project. These partners may also not have the financial capacity to fully indemnify the Group in the event of an incident.

Contracts signed by the Group’s entities may provide for indemnification obligations either by TOTAL in favor of the contractor or third parties or by the contractor or third parties in favor of TOTAL if, for example, an event occurs leading to death, personal injury or property or environmental damage.

With respect to joint ventures, contractual terms generally provide that the operator, whether an entity of the Group or a third party, assumes full liability for damages caused by its gross negligence or willful misconduct.

In the absence of the operator’s gross negligence or willful misconduct, other liabilities are generally borne by the joint venture and the cost thereof is assumed by the partners of the joint venture in proportion to their respective ownership interests.

With respect to third-party providers of goods and services, the amount and nature of the liability assumed by the third party depends on the context and may be limited by contract. With respect to their customers, the Group’s entities ensure that their products meet applicable specifications and abide by all applicable consumer protection laws. Failure to do so could lead to personal injury, environmental harm and loss of customers, which could negatively impact the Group’s financial condition and reputation.

 

 

6 TOTAL S.A. Form 20-F 2015


Item 3 - C. Risk Factors

 

TOTAL has significant production and reserves located in politically, economically and socially unstable areas, where the likelihood of material disruption of the Group’s operations is relatively high.

A significant portion of TOTAL’s oil and gas production and reserves is located in countries outside of the Organisation for Economic Co-operation and Development (OECD). In recent years, a number of these countries have experienced varying degrees of one or more of the following: economic instability, political volatility, civil war, violent conflict, social unrest, actions of terrorist groups and the application of international economic sanctions. Any of these conditions alone or in combination could disrupt the Group’s operations in any of these regions, causing substantial declines in production or revisions to reserves estimates. In Africa, which represented 29% of the Group’s 2015 combined liquids and gas production, certain of the countries in which the Group has production have recently suffered from some of these conditions, including Nigeria, which is one of the main contributing countries to the Group’s production of hydrocarbons, and Libya. The Middle East, which represented 21% of the Group’s 2015 combined liquids and gas production, has in recent years suffered increased political volatility in connection with violent conflict and social unrest, including Syria, where European Union (EU) and U.S. economic sanctions have prohibited TOTAL from producing oil and gas since 2011. In Yemen, the deterioration of security conditions in the vicinity of Balhaf have lead the company Yemen LNG, in which the Group holds a stake of 39.62%, to stop its commercial production and export of LNG and to declareforce majeure to its various stakeholders. In South America, which represented 6% of the Group’s 2015, combined liquids and gas production, certain of the countries in which TOTAL has production have recently suffered from some of the above-mentioned conditions, including Argentina and Venezuela. In Russia, where, as of December 31, 2015, the Group held 19% of its proved reserves, members of the international community have, since July 2014, adopted economic sanctions against certain Russian persons and entities, including various entities operating in the financial, energy and defense sectors, in response to the situation in Ukraine (for additional information, refer to the risk factor on economic sanctions, below).

Furthermore, in addition to current production, TOTAL is also exploring for and developing new reserves in other regions of the world that are historically characterized by political, social and economic instability, such as the Caspian Sea region where TOTAL has large projects currently underway.

The occurrence and magnitude of incidents related to economic, social and political instability are unpredictable. It is possible that they could have a material adverse impact on the Group’s production and operations in the future and/or cause certain investors to reduce their holdings of TOTAL’s securities.

TOTAL, like other major international energy companies, has a geographically diverse portfolio of reserves and operational sites, which allows it to conduct its business and financial affairs so as to reduce its exposure to political and economic risks. However, there can be no assurance that such events will not have a material adverse impact on the Group.

Intervention by host country authorities can adversely effect the Group’s activities and its operating results.

TOTAL has significant exploration and production activities, and in some cases refining, marketing or chemicals operations, in countries whose governmental and regulatory framework is subject to unexpected change and where the enforcement of contractual rights is uncertain. The legal framework of TOTAL’s exploration

and production activities, established through concessions, licenses, permits and contracts granted by or entered into with a government entity, a state-owned company or, sometimes, private owners, is subject to risks of renegotiation that, in certain cases, can reduce or challenge the protections offered by the initial legal framework.

In addition, the Group’s exploration and production activities in such countries are often undertaken in conjunction with state-owned entities, for example as part of a joint venture where the state has a significant degree of control. In recent years, in various regions globally, TOTAL has observed governments and state-owned enterprises impose more stringent conditions on companies pursuing exploration and production activities in their respective countries, increasing the costs and uncertainties of the Group’s business operations, which is a trend TOTAL expects to continue.

Potential increasing intervention by governments in such countries can take a wide variety of forms, including:

 

 

the award or denial of exploration and production interests;

 

the imposition of specific drilling obligations;

 

price and/or production quota controls and export limits;

 

nationalization or expropriation of assets;

 

unilateral cancellation or modification of license or contract rights;

 

increases in taxes and royalties, including retroactive claims;

 

the renegotiation of contracts;

 

the imposition of increased local content requirements;

 

payment delays; and

 

currency exchange restrictions or currency devaluation.

Imposition of any of these factors by a host government where TOTAL has substantial operations, including exploration, could cause the Group to incur material costs or cause the Group’s production or value of the Group’s assets to decrease, which could potentially have a material adverse effect on its results.

For example, the Nigerian government has been contemplating new legislation to govern the petroleum industry which, if passed into law, could have an impact on the existing and future activities of the Group in that country through increased taxes and/or operating costs and could adversely affect financial returns from projects in that country.

The Group operates in a highly competitive environment. Its competitiveness could be adversely impacted if the Group’s level of innovation lagged behind its competitors.

TOTAL’s main competitors are comprised of national and international oil companies. The evolution of the energy sector has opened the door to new competitors and increased market price volatility.

TOTAL is subject to competition in the acquisition of assets and licenses for the exploration and production of oil and natural gas as well as for the sale of manufactured products based on crude and refined oil. In the gas sector, major producers increasingly compete in the downstream value chain with established distribution companies, including those that belong to the Group. Increased competitive pressure could have a significant negative effect on the prices, margins and market shares of the Group’s companies.

The pursuit of unconventional gas development, particularly in the United States, has contributed to falling market prices and a marked difference between spot and long-term contract prices. The competitiveness of long-term contracts indexed to oil prices could be affected if this discrepancy persists and if it should prove difficult to invoke price revision clauses.

 

 

2015 Form 20-F TOTAL S.A. 7


Item 3 - C. Risk Factors

 

The Group’s activities are carried out in a constantly changing environment with new products and technologies continuously emerging. The Group may not be able to anticipate these changes, identify and integrate technological developments in order to maintain its competitiveness, maintain a high level of performance and operational excellence, and best meet the needs and demands of its customers. The Group’s innovation policy requires significant investment, notably in R&D, of which the expected impact cannot be guaranteed.

Ethical misconduct or breaches of applicable laws by employees of the Group could expose TOTAL to criminal and civil penalties and be damaging to TOTAL’s reputation and shareholder value.

The Group’s Code of Conduct, which applies to all of its employees, defines TOTAL’s commitment to business integrity and compliance with all applicable legal requirements and high ethical standards. This commitment is supported by a “zero tolerance” principle. Ethical misconduct or non-compliance with applicable laws and regulations by TOTAL or any third party acting on its behalf could expose TOTAL and/or its employees to criminal and civil penalties and could be damaging to TOTAL’s reputation and shareholder value.

In addition, such misconduct or non-compliance may lead the competent authorities to impose other measures, such as the appointment of an independent monitor in charge of assessing the Group’s compliance and internal control procedures and, if need be, recommending improvements. For an overview of the settlements between TOTAL, the SEC and the Department of Justice (DoJ) providing for the appointment of an independent monitor, refer to “Item 4 — E. Other Matters — 4.3.7.1. Preventing corruption” and “Item 8 — 4. Legal or arbitration proceedings — Iran”.

With respect to competition laws, which apply to the Group’s companies in the vast majority of countries in which it does business, non-compliance may result in substantial fines and expose the Group and its employees to criminal sanctions and civil suits.

Generally, entities of the Group could potentially be subject to administrative, judicial or arbitration proceedings that could have a material adverse impact on the Group or its financial situation.

TOTAL has activities in certain countries targeted by economic sanctions. If the Group’s activities are not conducted in accordance with applicable laws and regulations, TOTAL could be sanctioned or otherwise penalized.

Various members of the international community have targeted certain countries, including Iran, Syria and Russia, with economic sanctions and other restrictive measures. U.S. and European restrictions relevant to the Group and certain disclosure concerning the Group’s limited activities or presence in certain targeted countries are outlined below and in “Item 4 — E. Other Matters — 5. Information concerning certain limited activities in Iran and Syria”, respectively.

TOTAL continues to closely monitor the possible impacts of international economic sanctions regimes on its activities. The Group does not believe that its activities in targeted countries are in violation of applicable international economic sanctions administered by the United States, the European Union (“EU”) and other members of the international community. However, the Group cannot assure that current or future regulations or developments related to economic sanctions will not have a negative impact on its business or reputation. A violation by the

Group of applicable laws or regulations could result in criminal, civil and/or material financial penalties.

 

- 

Restrictions against Iran

With respect to Iran, the United States has adopted a number of measures since 1996 that provide for the possible imposition of sanctions against non-U.S. companies engaged in certain activities in and with Iran. Pursuant to the Iran Sanctions Act (“ISA”), which has been amended and expanded on several occasions since 1996, including by the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (“CISADA”), the President of the United States is authorized to initiate an investigation into the activities of non-U.S. companies in Iran’s energy sector and to impose sanctions against persons found, amongst other activities, to have knowingly made investments of $20 million or more in Iran’s petroleum sector in any 12-month period. In May 1998, the U.S. government waived the application of ISA sanctions for TOTAL’s past investments in the South Pars gas field. This waiver, which has not been modified since it was granted, does not address any of TOTAL’s other activities in Iran. Excluding the investments made as part of the development of South Pars, TOTAL made investments in Iran in excess of $20 million in each of the years between 1996 and 2007.These investments are not sanctionable by the U.S. authorities pursuant to a determination made by the U.S. Department of State on September 30, 2010, under the “Special Rule” provision of ISA that allows it to avoid making a determination of sanctionability with respect to any party that provides certain assurances. The U.S. Department of State further indicated that, so long as TOTAL acts in accordance with its commitments, it will not be regarded as a company of concern for its past Iran-related activities. Since 2008, TOTAL’s position in Iran essentially has consisted of being reimbursed for its past investments as part of buyback contracts signed between 1995 and 1999 with respect to permits on which the Group is no longer the operator. Since 2011, TOTAL has had no production in Iran. Furthermore, since the applicability of the “Special Rule” to TOTAL was announced by the U.S. State Department, the United States imposed a number of additional restrictive measures targeting activities in Iran. TOTAL does not conduct activities that it believes would be sanctionable under these measures.

Many U.S. states have adopted legislation with respect to Iran requiring, in certain conditions, state pension funds to divest themselves of securities in any company with active business operations in Iran and state contracts not to be awarded to such companies. State regulators have adopted similar initiatives relating to investments by insurance companies. If TOTAL’s presence in Iran were determined to fall within the prohibited scope of these laws, and TOTAL were not to qualify for any available exemptions, certain U.S. institutions holding interests in TOTAL may be required to sell their interests. If significant, sales of securities resulting from such laws and/or regulatory initiatives could have an adverse effect on the prices of TOTAL’s securities.

The EU has also adopted sanctions regimes with regard to Iran, including a set of restrictive measures adopted in July and October 2010 that prohibited, among other things, the supply of key equipment and technology in the refining, liquefied natural gas (LNG), and oil and gas exploration and production sectors in Iran, as well as technical assistance, training and financial assistance in connection with such items. Extension of loans or credit to, acquisition of shares in, entry into joint ventures with or other participation in enterprises in Iran (or Iranian-owned enterprises outside of Iran) engaged in any of the targeted sectors also is prohibited. Moreover, with respect to restrictions on transfers of funds and on financial services, any transfer of at least400,000

 

 

8 TOTAL S.A. Form 20-F 2015


Items 3 - 4

 

or equivalent to or from an Iranian individual or entity shall require a prior authorization of the competent authorities of the EU Member States. TOTAL conducts its activities in compliance with these EU measures. On January 23, 2012, the Council of the EU prohibited the purchase, import and transport of Iranian oil and petroleum and petrochemical products by European persons and by entities constituted under the laws of an EU Member State. Prior to that date, TOTAL had ceased these activities.

On July 14, 2015, the EU, the P5+1 countries (China, France, Russia, the United Kingdom, the United States and Germany) and Iran reached an agreement called the Joint Comprehensive Plan of Action (the “JCPOA”) regarding limits on Iran’s nuclear activities and relief under certain U.S., EU and UN sanctions regarding Iran. On January 16, 2016, in recognition of the International Atomic Energy Agency (“IAEA”) having verified that Iran has met its initial nuclear compliance commitments under the JCPOA, EU and UN and secondary U.S. (i.e., those covering non-U.S. persons) economic and financial sanctions were suspended, but they could be re-imposed if there is a dispute over Iran’s compliance with its nuclear commitments. TOTAL is closely monitoring developments in this regard.

 

- 

Restrictions against Syria

With respect to Syria, the EU adopted measures in May 2011 that prohibit the supply of certain equipment to this country, as well as certain financial and asset transactions with respect to a list of named individuals and entities. These measures apply to European persons and to entities constituted under the laws of an EU Member State. In September 2011, the EU adopted further measures, including, notably, a prohibition on the purchase, import or transportation from Syria of crude oil and petroleum products. Since early September 2011, the Group ceased to purchase hydrocarbons from Syria. On December 1, 2011, the EU extended sanctions against, among others, three state-owned Syrian oil firms, including General Petroleum Corporation, TOTAL’s co-contracting partner in the production sharing agreement signed in 1988 (Deir Ez Zor licence) and the Tabiyeh contract. The United States also has various measures regarding Syria. Since early December 2011, the Group has ceased its activities that contributed to oil and gas production in Syria.

 

- 

Restrictions against Russia

Since July 2014, members of the international community have adopted economic sanctions against certain Russian persons and entities, including various entities operating in the financial, energy and defense sectors, in response to the situation in Ukraine.

Among other things, the United States has adopted economic sanctions targeting OAO Novatek(1)(“Novatek”), as well as entities in which Novatek (individually or with other similarly targeted persons or entities collectively) owns an interest of at least 50%, including OAO Yamal LNG(2)(“Yamal LNG”). These sanctions prohibit U.S. persons from transacting in, providing financing for or otherwise dealing in debt issued by these entities after July 16, 2014 of greater than 90 days maturity. Consequently, the use of the U.S. dollar for such financing, including for Yamal LNG, is effectively prohibited.

As a result, the financing plan for the Yamal LNG project is being reviewed, and the project’s partners are engaged in efforts to develop a financing plan in compliance with the applicable regulations.

The economic sanctions initially adopted by the European Union in 2014 and subsequently extended do not materially affect TOTAL’s activities in Russia. TOTAL has been formally authorized to continue all its activities in Russia (in the Kharyaga field as operator, and in the Termokarstovoye field and Yamal project in which the Group holds interests) by the French government, which is the competent authority for granting authorization under the EU sanctions regime.

TOTAL’s activities in Russia are also not materially affected by restrictive measures adopted by the United States in August 2015 imposing export controls and restrictions relating to the export of certain goods, services, and technologies destined for projects located in Russia in the field of oil exploration.

With respect to the exploration project in the Bazhenov play (tight oil) in western Siberia, which has been suspended since 2014, TOTAL signed in July 2015 an agreement to transfer the exploration licenses it held in this play to OAO Lukoil. This agreement also sets out the conditions under which TOTAL and OAO Lukoil could potentially resume their joint activities in Russia. In January 2016, TOTAL signed an agreement to sell 50% of its interest in the Kharyaga field and transfer the operatorship to Zarubezhneft. After the sale, which is expected to be completed in 2016, TOTAL’s interest in the Kharyaga field will be 20%.

TOTAL continues to closely monitor the different international economic sanctions with respect to its activities in Russia.

As of December 31, 2015, the Group held 19% of its proved reserves in Russia.

 

 

ITEM 4. INFORMATION ON THE COMPANY

 

 

A. HISTORY AND DEVELOPMENT

 

 

 

TOTAL S.A., a Frenchsociété anonyme (limited company) incorporated on March 28, 1924 is, together with its subsidiaries and affiliates, the world’s fourth largest publicly-traded integrated oil and gas company(3).

With operations in more than 130 countries, TOTAL is engaged in every sector of the oil industry, including upstream (hydrocarbon exploration, development and production) and downstream (refining, petrochemicals, specialty chemicals, trading and shipping

of crude oil and petroleum products and marketing). TOTAL also operates in the renewable energies and power generation sectors.

TOTAL began its Upstream operations in the Middle East in 1924. Since then, the Company has grown and expanded its operations worldwide. In early 1999, the Company acquired control of PetroFina S.A. and in early 2000 it acquired control of Elf Aquitaine. Since the repeal in 2002 of the decree of December 13, 1993 that established a golden share of Elf Aquitaine held by the

 

 

 

(1) 

A Russian company listed on stock exchanges in Moscow and London and in which the Group held an interest of 18.9% as of December 31, 2015.

(2) 

A company jointly owned by Novatek (60%), Total E&P Yamal (20%), and CNODC (20%), a subsidiary of China National Petroleum Corporation. Novatek’s investment in the company OAO Yamal LNG is to be reduced to 50.1% following an agreement signed in September 2015 for the entry of the Silk Road Fund (9.9%). This agreement is expected to be approved by the authorities in 2016.

(3) 

Based on market capitalization (in dollars) as of December 31, 2015.

 

2015 Form 20-F TOTAL S.A. 9


Item 4 - A. History and Development

 

French government, there are no longer any agreements or regulatory provisions governing shareholding relationships between TOTAL and the French government. Information on TOTAL S.A.’s shareholding structure is presented in “Item 7 — 1. Major shareholders”, below. For information concerning the Group’s principal capital expenditures and divestitures, see “Item 4 — E. Other Matters — 1. Investments”, “Item 5 — Results 2013-2015” and “Item 5 — Liquidity and Capital Resources”.

The Company’s corporate name is TOTAL S.A. Its registered office is 2, place Jean Millier, La Défense 6, 92400 Courbevoie, France. Its telephone number is +33 (0)1 47 44 45 46 and its Internet address is total.com. TOTAL S.A. is registered in France at the Nanterre Trade Register under the registration number 542 051 180. The length of the life of the Company is 99 years from March 22, 2000, unless it is dissolved or extended prior to such date.

 

 

 

B. BUSINESS OVERVIEW

 

 

 

The Group’s goal is to be a global energy company. TOTAL is a leading international oil and gas company, and is active in new energy sources, such as solar energy and biomass. To achieve this goal, TOTAL leverages its integrated business model, which enables it to capture synergies between the different business segments of the Group. TOTAL stands out due to its operational excellence, its technological expertise and its capacity to manage complex projects. The Group’s strategy is based on four main priorities:

 

 

driving profitable, sustainable growth in Exploration & Production’s hydrocarbon activities;

 

developing competitive, top-tier refining and petrochemical complexes;

 

responding to its customer needs by delivering innovative solutions and services that go beyond the supply of petroleum products; and

 

consolidating its leadership in solar energy and continuing to develop biomass in order to offer the most appropriate energy solutions.

This strategy incorporates the challenges of climate change using the International Energy Agency 2°C scenario (450 ppm) as a point

of reference. TOTAL’s challenge is to contribute to satisfying the demand for energy of the world’s growing population, while providing concrete solutions to limit the effects of climate change. To do so, the Group focuses its actions around several key points, including the development of gas and renewable energies.

At the core of TOTAL’s strategy is a strong belief that energy is vital, drives progress and must be made available to everyone. Energy is a precious resource that must be used wisely. The Group is helping to produce the energy that people around the planet need to live and thrive, while ensuring that its operations deliver economic, societal and environmental benefits. TOTAL is meeting this challenge with and for its employees, its stakeholders and local communities.

Beyond safety, the values of respect, responsibility and exemplary conduct underpin TOTAL’s Code of Conduct and accompany priority business principles in the realms of safety/security/health/the environment, integrity (preventing corruption, fraud and anti-competitive practices) and human rights. It is through strict adherence to these values and principles that TOTAL will be able to build strong and sustainable growth for the Group and its stakeholders and fulfill its motto: committed to better energy.

 

 

1.GEOGRAPHICBREAKDOWNOFACTIVITIES

 

 

 

TOTAL’s worldwide operations in 2014 were conducted through three business segments: Upstream, Refining & Chemicals and Marketing & Services. The table below gives information on the

geographic breakdown of TOTAL’s activities and is taken from Note 5 to the Consolidated Financial Statements included elsewhere herein.

 

 

(M$)  France   Rest of
Europe
   North
America
   Africa   Rest of
world
   Total 

2015

            

Non-Group sales

   36,536     79,463     14,857     17,612     16,889     165,357  

Property, plant and equipment, intangible assets, net

   4,123     22,354     17,169     43,536     36,885     124,067  

Capital expenditures

   980     4,783     3,493     9,154     9,623     28,033  

2014

            

Non-Group sales

   51,471     114,747     23,766     23,281     22,857     236,122  

Property, plant and equipment, intangible assets, net

   4,350     25,137     16,064     41,405     34,602     121,558  

Capital expenditures

   1,266     5,880     3,658     9,798     9,907     30,509  

2013

            

Non-Group sales

   57,650     128,661     22,332     23,146     19,936     251,725  

Property, plant and equipment, intangible assets, net

   6,251     26,840     19,588     37,847     32,349     122,875  

Capital expenditures

   1,772     6,289     4,157     10,705     11,508     34,431  

 

2.UPSTREAMSEGMENT

 

 

TOTAL’s Upstream segment includes the activities of Exploration & Production and Gas. The Group has exploration and production activities in more than 50 countries and produces oil or gas in approximately 30 countries. Gas conducts activities downstream from production related to natural gas, liquefied natural gas (LNG) and liquefied petroleum gas (LPG), as well as power generation and trading, and other activities.

 

10 TOTAL S.A. Form 20-F 2015


Item 4 - B.2. Upstream Segment

 

 

2.1.Exploration & Production

 

 

Exploration & Production’s mission is to discover and develop oil and gas fields in order to meet growing energy demand. Safety is a core value for that mission.

In an environment marked by the significant drop in hydrocarbon prices, Exploration & Production’s strategy is based on:

 

 

developing its operational excellence (reduction of operating costs and development costs and operational efficiency improvement) by drawing on its technological expertise and on innovation;

 

maintaining a leading position in the Group’s technical areas of excellence, such as deep offshore and LNG;

 

renewing reserves through exploration and access to already discovered but undeveloped resources.

This strategy aims at developing an oil and gas production model that is resilient(i.e., which can withstand a long period of low hydrocarbon prices), profitable and sustainable.

Additionally, Exploration & Production thrives to minimize the environmental impact of its activities.

In 2015, the Group’s production grew 9.4% compared to 2014. Exploration & Production is exiting a heavy investments phase, which peaked in 2013, and which is expected to lead to a production increase of 5% per year over the period of 2014-2019. The main growth levers include, on the one hand, the start-up of 20 major projects between 2015 and 2019 and, on the other hand, the improvement of the operational efficiency of the facilities. In 2015, nine projects were started up. After 2020, TOTAL’s objective for organic production growth of 1 to 2% is in line with worldwide growth in demand for hydrocarbons.

 

2.1.1.Exploration and development

TOTAL evaluates exploration opportunities based on a variety of geological, technical, political, economic (including taxes and license terms) environmental and societal factors.

The exploration strategy deployed since 2015 aims to prioritize drilling that creates value and resources. The Group expects more balanced exploration investments:

 

 

50% for core and emerging basins, where the presence of hydrocarbons is already proven;

 

25% for near-field exploration around operated assets; and

 

25% for high-potential frontier basins.

In April 2015, a new organization for the Group’s exploration activities, adapted to the new strategy, was implemented with a new senior exploration management team. The organizational changes are focused notably on strengthening regional basin mastery and technical excellence.

In 2015, exploration expenditure from all Exploration & Production subsidiaries stood at $1.9 billion (excluding exploration bonuses), which were made mainly in the United States, Iraq, Norway, Brazil, Papua New Guinea, Nigeria and the United Kingdom, compared to $2.6 billion in 2014 and $2.9 billion in 2013. The 2016 exploration budget is $1.5 billion.

Organic investments(1) from all Exploration & Production subsidiaries stood at $20.5 billion in 2015, compared to $23 billion in 2014 and $24 billion in 2013, and were mainly made in Angola, Nigeria, the Republic of the Congo, Norway, Canada, Australia, the United Kingdom, Russia, Kazakhstan, Indonesia, the United States and Argentina.

2.1.2.Reserves

The definitions used for proved, proved developed and proved undeveloped oil and gas reserves are in accordance with the United States Securities & Exchange Commission (SEC) Rule 4-10 of Regulation S-X as amended by the SEC Modernization of Oil and Gas Reporting release issued on December 31, 2008. Proved reserves are estimated using geological and engineering data to determine with reasonable certainty whether the crude oil or natural gas in known reservoirs is recoverable under existing regulatory, economic and operating conditions.

TOTAL’s oil and gas reserves are consolidated annually, taking into account, among other factors, levels of production, field reassessments, additional reserves from discoveries and acquisitions, disposal of reserves and other economic factors.

Unless otherwise indicated, any reference to TOTAL’s proved reserves, proved developed reserves, proved undeveloped reserves and production reflects the Group’s entire share of such reserves or such production. TOTAL’s worldwide proved reserves include the proved reserves of its consolidated subsidiaries as well as its proportionate share of the proved reserves of equity affiliates. The reserves estimation process involves making subjective judgments. Consequently, estimates of reserves are not exact measurements and are subject to revision under well-established control procedures.

The reserves booking process requires, among other things:

 

 

internal peer review of technical evaluations to ensure that the SEC definitions and guidance are followed; and

 

that management makes significant funding commitments towards the development of the reserves prior to booking.

For further information concerning the reserves and their evaluation process, see sections 1 and 2 of “Supplemental Oil and Gas Information (Unaudited)”.

 

 

Proved reserves for 2015, 2014 and 2013

In accordance with the amended Rule 4-10 of Regulation S-X, proved reserves at December 31 are calculated using a 12-month average price determined as the unweighted arithmetic average of the first-day-of-the-month price for each month of the relevant year unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. The reference prices for 2015, 2014 and 2013 were, respectively, $54.17/b, $101.27/b and $108.02/b for Brent crude.

As of December 31, 2015, TOTAL’s combined proved reserves of oil and gas were 11,580 Mboe (53% of which were proved developed reserves). Liquids (crude oil, condensates, natural gas liquids and bitumen) represented approximately 48% of these reserves and natural gas the remaining 52%. These reserves were located in Europe (mainly in Norway and the United Kingdom), Africa (mainly in Angola, Gabon, Nigeria and the Republic of the Congo), the Americas (mainly in Canada, Argentina, the United States and Venezuela), the Middle East (mainly in Qatar, the United Arab Emirates and Yemen), and Asia-Pacific (mainly in Australia), and in Kazakhstan and Russia.

Discoveries of new fields and extensions of existing fields brought an additional 2,762 Mboe to the Upstream segment’s proved reserves during the 3-year period ended December 31, 2015 (before deducting production and sales of reserves in place and adding any acquisitions of reserves in place during this period). The net level of reserve revisions during this 3-year period is

 

 

2015 Form 20-F TOTAL S.A. 11

 

(1) 

For Exploration & Production, organic investments include exploration investments, net development investments and net financial investments.


Item 4 - B.2. Upstream Segment

 

+244 Mboe, which was due to the overall positive revisions in field behaviors, a scope change in two projects in 2013, the impairment of two assets in Libya in 2015 due to the degradation of the security situation and to the positive impact of the decrease in hydrocarbon prices in 2015 that led to a reserves increase on fields with production sharing or service contracts and on Canadian bitumen fields (royalty effect), which was partially offset by the reserves decrease resulting from the suspension or cancellation due to economic reasons of capital expenditures associated with, or from shorter producing life of, certain producing fields.

As of December 31, 2014, TOTAL’s combined proved reserves of oil and gas were 11,523 Mboe (50% of which were proved developed reserves) compared to 11,526 Mboe (49% of which were proved developed reserves) as of December 31, 2013. Liquids (crude oil, condensates, natural gas liquids and bitumen) at year-end 2014 represented approximately 46% of these reserves and natural gas the remaining 54% and, at year-end 2013, approximately 47% of these reserves and natural gas the remaining 53%.

 

 

Sensitivity to oil and gas prices

Changes in the price used as a reference for the proved reserves estimation result in non-proportionate inverse changes in proved reserves associated with production sharing and risked service contracts (which together represent approximately 20% of TOTAL’s reserves as of December 31, 2015). Under such contracts, TOTAL is entitled to a portion of the production, the sale of which is meant to cover expenses incurred by the Group. As oil prices decrease, more barrels are necessary to cover the same amount of expenses. Moreover, the number of barrels recoverable under these contracts may vary according to criteria such as cumulative production, the rate of return on investment or the income-cumulative expenses ratio. This increase is partly offset by a reduction of the duration over which fields can be produced economically. However, the decrease in reserves due to this reduction is generally less than the increase in reserves under production sharing or risked service contracts due to such lower prices. As a result, lower prices usually lead to an increase in TOTAL’s reserves. In Canada, a decrease in the reference price per barrel used as a reference for estimating proved reserves leads to a decrease in the volume of royalties and, therefore, an increase of the proved reserves, and vice versa.

Lastly, for any type of contract, a significant decrease in the reference price of petroleum products that negatively impacts projects profitability may lead to a reduction of proved reserves.

 

2.1.3.Production

The average daily production of liquids and natural gas was 2,347 kboe/d in 2015 compared to 2,146 kboe/d in 2014 and 2,299 kboe/d in 2013. Liquids represented approximately 53% and natural gas approximately 47% of TOTAL’s overall production in 2015.

The tables on the following pages set forth TOTAL’s annual and average daily production of liquids and natural gas by geographic area and for each of the last three fiscal years.

Consistent with industry practice, TOTAL often holds a percentage interest in its fields rather than a 100% interest, with the balance being held by joint venture partners (which may include other international oil companies, state-owned oil companies or government entities). The Group’s entities may frequently act as operator (the party responsible for technical production) on acreage in which it holds an interest. Refer to the table

“Presentation of production activities by region” on the following pages for a presentation of the Group’s producing assets.

As in 2014 and 2013, substantially all of the liquids production from TOTAL’s Upstream segment in 2015 was marketed by the Trading & Shipping division of TOTAL’s Refining & Chemicals segment (refer to the table “Trading’s crude oil sales and supply and petroleum products sales” in “— 3.2.1. Trading & Shipping”, below).

 

2.1.4.Delivery commitments

The majority of TOTAL’s natural gas production is sold under long-term contracts. However, its North American production, and part of its production from the United Kingdom, the Netherlands and Norway, is sold on the spot market. The long-term contracts under which TOTAL sells its natural gas usually provide for a price related to, among other factors, average crude oil and other petroleum product prices, as well as, in some cases, a cost-of-living index. Though the price of natural gas tends to fluctuate in line with crude oil prices, a slight delay may occur before changes in crude oil prices are reflected in long-term natural gas prices.

Some of TOTAL’s long-term contracts, notably in Bolivia, Indonesia, Nigeria, Norway, Thailand and Qatar, specify the delivery of quantities of natural gas that may or may not be fixed and determinable. Such delivery commitments vary substantially, both in duration and scope, from contract to contract throughout the world. For example, in some cases, contracts require delivery of natural gas on an as-needed basis, and, in other cases, contracts call for the delivery of varied amounts of natural gas over different periods of time. Nevertheless, TOTAL estimates the fixed and determinable quantity of gas to be delivered over the period 2016-2018 to be 3,591 Bcf. The Group expects to satisfy most of these obligations through the production of its proved reserves of natural gas, with, if needed, additional sourcing from spot market purchases (refer to sections 1 and 2 of “Supplemental Oil and Gas Information (Unaudited)”).

 

2.1.5.Contractual framework of activities

Licenses, permits and contracts governing the Group’s ownership of oil and gas interests have terms that vary from country to country and are generally granted by or entered into with a government entity or a state-owned company and are sometimes entered into with private owners. These agreements usually take the form of concessions or production sharing contracts.

In the framework of oil concession agreements, the oil company owns the assets and the facilities and is entitled to the entire production. In exchange, the operating risks, costs and investments are the oil company’s responsibility and it agrees to remit to the relevant host country, usually the owner of the subsoil resources, a production-based royalty, income tax, and possibly other taxes that may apply under local tax legislation.

The production sharing contract (“PSC”) involves a more complex legal framework than the concession agreement: it defines the terms and conditions of production sharing and sets the rules governing the cooperation between the company or consortium in possession of the license and the host country, which is generally represented by a state-owned company. The latter can thus be involved in operating decisions, cost accounting and production allocation. The consortium agrees to undertake and finance all exploration, development and production activities at its own risk. In exchange, it is entitled to a portion of the production, known as “cost oil”, the sale of which is intended to cover its incurred expenses (capital and operating costs). The balance of production,

 

 

12 TOTAL S.A. Form 20-F 2015


Item 4 - B.2. Upstream Segment

 

known as “profit oil”, is then shared in varying proportions, between the company or consortium, on the one hand, and the host country or state-owned company, on the other hand.

Today, concession agreements and PSCs can coexist, sometimes in the same country or even on the same block. Even though there are other contractual models, TOTAL’s license portfolio is comprised mainly of concession agreements.

On most licenses, the partners and authorities of the host country, often assisted by international accounting firms, perform joint venture and PSC cost audits and ensure the observance of contractual obligations.

In some countries, TOTAL has also signed contracts called “risked service contracts”, which are similar to PSCs. However, the profit oil is replaced by a defined cash monetary remuneration, agreed by contract, which depends notably on field performance parameters such as the amount of barrels produced.

 

Oil and gas exploration and production activities are subject to authorization granted by public authorities (licenses), which are granted for specific and limited periods of time and include an obligation to relinquish a large portion, or the entire portion in case of failure, of the area covered by the license at the end of the exploration period.

TOTAL pays taxes on income generated from its oil and gas production and sales activities under its concessions, PSCs and risked service contracts, as provided for by local regulations. In addition, depending on the country, TOTAL’s production and sales activities may be subject to a number of other taxes, fees and withholdings, including special petroleum taxes and fees. The taxes imposed on oil and gas production and sales activities are generally substantially higher than those imposed on other industrial or commercial businesses.

 

 

2015 Form 20-F TOTAL S.A. 13


Item 4 - B.2. Upstream Segment

 

2.1.6.Production by region

The following table sets forth the Group’s annual liquids and natural gas production by region.

 

    2015   2014   2013 
    Liquids
Mb
   Natural
gas
Bcf
(b)
   Total
Mboe
   Liquids
Mb
   Natural
gas
Bcf
(b)
   Total
Mboe
   Liquids
Mb
   Natural
gas
Bcf
(b)
   Total
Mboe
 

Africa

   198     247     247     191    253     240    194     255    245  

Algeria

   3     35     9     2     29     7     2     30     8  

Angola

   86     18     90     70     20     73     64     23     68  

Gabon

   20     5     22     20     5     21     20     6     22  

Libya

   5          5     10          10     18          18  

Nigeria

   54     178     89     57     187     94     58     187     95  

The Congo, Republic of

   30     11     32     32     13     35     32     10     34  

North America

   18     112     38     14     104     33     10     93     27  

Canada(a)

   5          5     4          4     5          5  

United States

   13     112     33     10     104     28     5     93     22  

South America

   17     215     55     18     219     57     20     229     61  

Argentina

   3     129     26     3     134     27     5     134     28  

Bolivia

   1     49     10     1     51     11     1     47     10  

Trinidad & Tobago

                                 1     19     4  

Venezuela

   13     37     19     14     34     19     13     29     18  

Asia-Pacific

   12     471     94     11     430     87     11     427     86  

Australia

        10     1          8     1          9     1  

Brunei

   1     23     5     1     24     5     1     22     5  

China

        22     4          23     4          17     3  

Indonesia

   8     247     54     7     217     47     6     221     48  

Myanmar

        56     7          49     6          47     6  

Thailand

   3     113     23     4     108     22     4     112     23  

CIS

   20     457     106     13     414     91     12     382     83  

Azerbaijan

                  1     22     5     2     30     7  

Russia

   20     457     106     12     393     86     10     352     76  

Europe

   60     424     137     60     397     133     61     449     143  

France

                       3     1          16     3  

Norway

   47     224     88     49     210     88     50     210     89  

The Netherlands

        58     10          62     11          71     13  

United Kingdom

   13     142     39     11     122     32     11     152     38  

Middle East

   128     283     179     70     396     143     118     422     196  

United Arab Emirates

   100     24     105     42     22     46     90     26     95  

Iraq

   7          7     4          4     3          3  

Oman

   8     21     12     9     22     13     9     24     14  

Qatar

   12     209     49     12     203     48     13     204     50  

Yemen

   1     29     6     3     148     31     4     168     35  

Total production

   453     2,209     856     377     2,213     783     426     2,257     839  

Including share of equity affiliates

   81     667     204     73     726     208     119     714     251  

Angola

                       4     1          6     1  

Venezuela

   14     3     14     14     2     14     13     3     14  

United Arab Emirates

   39     18     43     40     19     43     88     22     92  

Oman

   8     21     12     8     22     12     8     24     13  

Qatar

   3     140     28     3     139     28     3     141     28  

Yemen

        29     5          147     27          167     31  

Russia

   17     456     102     9     392     83     7     351     72  

 

(a) 

The Group’s production in Canada consists of bitumen only. All of the Group’s bitumen production is in Canada.

(b) 

Including fuel gas (159 Bcf in 2015, 155 Bcf in 2014, 151 Bcf in 2013).

 

14 TOTAL S.A. Form 20-F 2015


Item 4 - B.2. Upstream Segment

 

The following table sets forth the Group’s average daily liquids and natural gas production by region.

 

    2015   2014   2013 
    Liquids
kb/d
   Natural
gas
Mcf/d
(b)
   Total
kboe/d
   Liquids
kb/d
   Natural
gas
Mcf/d
(b)
   Total
kboe/d
   Liquids
kb/d
   Natural
gas
Mcf/d
(b)
   Total
kboe/d
 

Africa

   542     677    678     522     693     657     531     699     670  

Algeria

   7     96    25     5     79     20     5     82     21  

Angola

   238     49    248     191     54     200     175     62     186  

Gabon

   55     15    59     55     14     58     55     16     59  

Libya

   14          14     27          27     50          50  

Nigeria

   147     487    245     156     511     257     158     511     261  

The Congo, Republic of

   81     30    87     88     35     95     88     28     93  

North America

   48     308    103     39     285     90     28     256     73  

Canada(a)

   14          14     12          12     13          13  

United States

   34     308    89     27     285     78     15     256     60  

South America

   47     588    152     50     599     157     54     627     166  

Argentina

   8     354    72     9     367     75     13     366     78  

Bolivia

   3     133    28     4     139     30     4     129     28  

Trinidad & Tobago

                                 2     52     12  

Venezuela

   36     101    52     37     93     52     35     80     48  

Asia-Pacific

   34     1,290    258     30     1,178     238     30     1,170     235  

Australia

        28    4          23     4          25     4  

Brunei

   3     62    15     2     66     15     2     59     13  

China

        59    11          63     12          46     8  

Indonesia

   22     676    147     18     594     130     17     605     131  

Myanmar

        153    19          135     17          129     16  

Thailand

   9     312    62     10     297     60     11     306     63  

CIS

   54     1,252    290     36     1,135     249     32     1,046     227  

Azerbaijan

                  3     59     14     5     82     20  

Russia

   54     1,252    290     33     1,076     235     27     964     207  

Europe

   161     1,161    374     165     1,089     364     168     1,231     392  

France

                       9     2     1     45     9  

Norway

   125     614    239     135     576     242     136     575     243  

The Netherlands

   1     158    28     1     171     31     1     195     35  

United Kingdom

   35     389    107     29     333     89     30     416     105  

Middle East

   351     778    492     192     1,084     391     324     1,155     536  

United Arab Emirates

   274     66    287     115     61     127     247     71     260  

Iraq

   18     1    18     12     1     12     7     1     7  

Oman

   25     58    36     24     61     36     24     66     37  

Qatar

   32     573    134     32     555     132     36     558     137  

Yemen

   2     80    17     9     406     84     10     459     95  

Total production

   1,237     6,054     2,347     1,034     6,063     2,146     1,167     6,184     2,299  

Including share of equity affiliates

   219     1,828    559     200     1,988     571     325     1,955     687  

Angola

                       10     2          16     3  

Venezuela

   36     7    37     37     6     38     35     7     37  

United Arab Emirates

   107     50    116     109     51     118     240     61     253  

Oman

   24     58    34     23     61     34     23     66     35  

Qatar

   7     383    77     7     381     77     8     385     78  

Yemen

        80    15          404     75          458     84  

Russia

   45     1,250    280     24     1,075     227     19     962     197  

 

(a) 

The Group’s production in Canada consists of bitumen only. All of the Group’s bitumen production is in Canada.

(b) 

Including fuel gas (435 Mcf/d in 2015, 426 Mcf/d in 2014, 415 Mcf/d in 2013).

 

2015 Form 20-F TOTAL S.A. 15


Item 4 - B.2. Upstream Segment

 

2.1.7.Presentation of production activities by region

The table below sets forth, by country, TOTAL’s producing assets, the year in which TOTAL’s activities commenced, the Group’s interest in each asset and whether TOTAL is operator of the asset.

TOTAL’s producing assets as of December 31, 2015(a)

 

Africa

   

Algeria

1952

  Non-operated: Tin Fouyé Tabankort (35.00%)

Angola

1953

  Operated: Girassol, Jasmim, Rosa, Dalia, Pazflor, CLOV (Block 17) (40.00%)
  Non-operated: Cabinda Block 0 (10.00%), Kuito, BBLT, Tombua-Landana (Block 14) (20.00%)(b), Lianzi (Block 14K) (10.00%)(b), Angola LNG (13.60%)

Gabon

1928

  Operated: Anguille (100.00%), Anguille Nord Est (100.00%), Anguille Sud-Est (100.00%), Atora (40.00%), Avocette (57.50%), Baliste (50.00%), Barbier (100.00%), Baudroie Marine (50.00%), Baudroie Nord Marine (50.00%), Coucal (57.50%), Girelle (100.00%), Gonelle (100.00%), Grand Anguille Marine (100.00%), Grondin (100.00%), Hylia Marine (75.00%), Lopez Nord (100.00%), Mandaros (100.00%), M’Boukou (57.50%), M’Boumba (100.00%), Mérou Sardine Sud (50.00%), Port Gentil Océan (100.00%), Tchengue (100.00%), Torpille (100.00%), Torpille Nord Est (100.00%)
   Non-operated: Rabi Kounga (47.50%)

Libya

1959

  Non-operated: zones 15, 16 & 32 (75.00%)(c)

Nigeria

1962

  Operated: OML 58 (40.00%), OML 99 Amenam-Kpono (30.40%), OML 100 (40.00%), OML 102 (40.00%), OML 130 (24.00%)
  Non-operated: OML 102-Ekanga (40.00%), Shell Petroleum Development Company (SPDC 10.00%), OML 118—Bonga (12.50%), OML 138 (20.00%)

The Congo, Republic of

1968

  Operated: Kombi-Likalala-Libondo (65.00%), Moho Bilondo (including Moho phase 1b) (53.50%), Nkossa (53.50%), Nsoko (53.50%), Sendji (55.25%), Tchendo (65.00%), Tchibeli-Litanzi-Loussima (65.00%), Tchibouela (65.00%), Yanga (55.25%)
  Non-operated: Lianzi (26.75%), Loango (42.50%), Zatchi (29.75%)

North America

   

Canada

  Non-operated: Surmont (50.00%)
1999   

United States

1957

  Non-operated: Several assets in the Barnett Shale area (25.00%)(d), Several assets in the Utica Shale area (25.00%)(d), Chinook (33.33%) Tahiti (17.00%)

South America

   

Argentina

1978

  Operated: Aguada Pichana (27.27%), Aguada San Roque (24.71%), Aries (37.50%), Cañadon Alfa Complex (37.50%), Carina (37.50%), Hidra (37.50%), Kaus (37.50%)
  Non-operated: Rincón de Aranda (45.00%) Sierra Chata (2.51%)

Bolivia

1995

  Non-operated: San Alberto (15.00%), San Antonio (15.00%), Itaú (41.00%)

Venezuela

1980

  Non-operated: PetroCedeño (30.32%), Yucal Placer (69.50%)

Asia-Pacific

   

Australia

2005

  Non-operated: Various fields in UJV GLNG (27.50%)(e)

Brunei

1986

  Operated: Maharaja Lela Jamalulalam (37.50%)

China

2006

  Non-operated: South Sulige (49.00%)

Indonesia

1968

  Operated: Bekapai (50.00%), Handil (50.00%), Peciko (50.00%), Sisi-Nubi (47.90%), South Mahakam (50.00%), Tambora (50.00%), Tunu (50.00%),
  Non-operated: Badak (1.05%), Nilam-gas and condensates (9.29%), Nilam-oil (10.58%), Ruby-gas and condensates (15.00%)

Myanmar

1992

  Operated:Yadana (31.24%)

Thailand

1990

  Non-operated:Bongkot (33.33%)

 

16 TOTAL S.A. Form 20-F 2015

 

(a) 

The Group’s interest in the local entity is approximately 100% in all cases except for Total Gabon (58.28%), TOTAL E&P Congo (85%) and certain entities in Abu Dhabi and Oman (see notes b through k below).

(b) 

Stake in the company Angola Block 14 BV (TOTAL 50.01%).

(c) 

TOTAL’s stake in the foreign consortium.

(d) 

TOTAL’s interest in the joint venture with Chesapeake.

(e) 

TOTAL’s interest in the unincorporated joint venture.


Item 4 - B.2. Upstream Segment

 

Commonwealth of Independent States   

Kazakhstan

1992

  Non-operated: Kashagan (16.81%)

Russia

1991

  Operated: Kharyaga (40.00%)
  Non-operated: Termokastovoye (49.00%)(f), Several fields through the participation in Novatek (18.90%)

Europe

   

Norway

1965

  Operated: Atla (40.00%) Skirne (40.00%)
  Non-operated:Åsgard (7.68%), Ekofisk (39.90%), Ekofisk South (39.90%), Eldfisk (39.90%), Embla (39.90%), Gimle (4.90%), Gungne (10.00%), Heimdal (16.76%), Huldra (24.33%), Islay (5.51%)(g), Kristin (6.00%), Kvitebjørn (5.00%), Mikkel (7.65%), Oseberg (14.70%), Oseberg East (14.70%), Oseberg South (14.70%), Sleipner East (10.00%), Sleipner West (9.41%), Snøhvit (18.40%), Stjerne (14.70%), Tor (48.20%), Troll I (3.69%), Troll II (3.69%), Tune (10.00%), Tyrihans (23.15%), Visund (7.70%), Visund South (7.70%), Visund North (7.70%)
The Netherlands 1964  Operated: F6a (gas) (55.66%), F6a (oil) (65.68%), F15a Jurassic (38.20%), F15a/F15d Triassic (32.47%), F15d (32.47%), J3a (30.00%), K1a (40.10%), K1b/K2a (60.00%), K2c (60.00%), K3b (56.16%), K3d (56.16%), K4a (50.00%), K4b/K5a (36.31%), K5b (50.00%), K6/L7 (56.16%), L1a (60.00%), L1d (60.00%), L1e (55.66%), L1f (55.66%), L4a (55.66%), L4d (55.66%)
  Non-operated: E16a (16.92%), E17a/E17b (14.10%), J3b/J6 (25.00%), K9ab-A (22.46%), Q16a (6.49%)
United Kingdom 1962  Operated: Alwyn North (100.00%), Dunbar (100.00%), Ellon (100.00%), Forvie North (100.00%), Grant (100.00%), Jura (100.00%), Nuggets (100.00%), Elgin-Franklin (46.17%), West Franklin (46.17%), Glenelg (58.73%), Islay (94.49%)(g)
  Non-operated: Bruce (43.25%), Markham unitized field (7.35%), Keith (25.00%)

Middle East

   

U.A.E.

1939

  Operated: Abu Dhabi-Abu Al Bukhoosh (75.00%)
  Non-operated: ADCO (10.00%), Abu Dhabi offshore (13.33%)(h), GASCO (15.00%), ADGAS (5.00%)

Iraq

1920

  Non-operated: Halfaya (22.5%)(i)

Oman

1937

  Non-operated: Various fields onshore (Block 6) (4.00%)(j), Mukhaizna field (Block 53) (2.00%)(k)

Qatar

1936

  Operated: Al Khalij (40.00%)
  Non-operated: North Field-Bloc NF Dolphin (24.50%), North Field-Qatargas 1 Downstream (10.00%), North Field-Qatargas 1 Upstream (20.00%), North Field-Qatargas 2 Train 5 (16.70%)

Yemen

1987

  Operated: Kharir/Atuf (Block 10) (28.57%)
  Non-operated: Various fields onshore (Block 5) (15.00%)

 

(f) 

TOTAL’s interest in the joint venture with Novatek.

(g) 

The field of Islay extends partially in Norway. TOTAL E&P UK holds a 94.49% stake and TOTAL E&P Norge 5.51%.

(h) 

Via Abu Dhabi Marine Areas Limited (equity affiliate), TOTAL holds a 13.33% stake in the Abu Dhabi Marine Areas (ADMA) concession operated by ADMA-OPCO.

(i) 

TOTAL’s interest in the joint venture

(j) 

TOTAL’s indirect interest (4.00%) in the concession, via its 10% interest in Private Oil Holdings Oman Ltd. TOTAL also has a direct interest (5.54%) in the Oman LNG facility (trains 1 and 2), and an indirect participation (2.04%) through OLNG in Qalhat LNG (train 3).

(k)

TOTAL’s direct interest in Block 53.

 

2.1.8.Main activities by geographic area

The information presented below describes the Group’s main exploration and production activities by geographic area, without detailing all of the assets held by TOTAL. The mentioned capacities are expressed in 100%.

Africa

In 2015, TOTAL’s production in Africa was 678 kboe/d, representing 29% of the Group’s overall production, compared to 657 kboe/d in 2014 and 670 kboe/d in 2013. The two main producing countries in Africa in 2015 were Angola and Nigeria.

InAlgeria, TOTAL’s production was 25 kboe/d during 2015, compared to 20 kboe/d in 2014 and 21 kboe/d in 2013. All of the

Group’s production in Algeria comes from the Tin Fouyé Tabankort (TFT) field (35%). TOTAL also has a 37.75% stake in the Timimoun gas development project.

The development of the Timimoun field continued in 2015 with engineering activities, the start of plant construction and drilling preparation.

InAngola, where TOTAL is the leading oil operator in the country(1), the Group’s production was 248 kboe/d in 2015 compared to 200 kboe/d in 2014 and 186 kboe/d in 2013. This production comes from Blocks 17, 14 and 0.

 

 

Deep offshore Block 17 (40%, operator) is TOTAL’s main asset in Angola. It is composed of four major producing hubs: Girassol, Dalia, Pazflor and CLOV. The latest greenfield project, CLOV, started production in June 2014 and, since September 2014, its production plateau of 160 kboe/d

 

 

 

(1) 

Company data.

 

2015 Form 20-F TOTAL S.A. 17


Item 4 - B.2. Upstream Segment

 

  has been maintained. In July 2015, Dalia Phase1A, a new development in the Dalia field, started production.
 

On the ultra-deep offshore Block 32 (30%, operator), the Kaombo project was launched in April 2014 to develop the discoveries in the southeast part of the block via two FPSOs (floating production storage and offloading facilities) with a capacity of 115 kb/d each. The drilling campaign of 59 wells began in October 2015 and production start-up is planned for 2017. The exploration and delineation of the center and north parts of the block (outside Kaombo) is ongoing.

 

On Block 14 (20%)(1), production comes from the Tombua-Landana and Kuito fields as well as the BBLT project, comprising the Benguela, Belize, Lobito and Tomboco fields.

 

Block 14K (36.75%) is the offshore unitization zone between Angola (Block 14) and the Republic of the Congo (Haute Mer license). The Lianzi field, which was connected to the existing BBLT platform (Block 14), started production at the end of October 2015. The project is expected to reach a production plateau of 40 kb/d. TOTAL’s interest in the unitized zone is held 10% through Angola Block 14 BV and 26.75% through Total E&P Congo.

 

On Block 0 (10%), the development of Mafumeira Sul was approved by the partners and authorities in 2012. This project constitutes the second development phase of the Mafumeira field and is expected to start production by the end of 2016.

 

In April 2014, TOTAL sold its entire stake in Block 15/06 (15%).

In the Bas-Congo basin, TOTAL is the operator of exploration Block 17/06 (30%). The Group relinquished Block 33 (58.67%, operator) in November 2014.

In the Kwanza basin, deep offshore, TOTAL is also operator of Blocks 25 (35%), 40 (40%) and 39 (7.5% following the finalization of the sale of half of its stake in March 2015). TOTAL is also developing its LNG activities through the Angola LNG project (13.6%), which includes a gas liquefaction plant near Soyo supplied by gas associated with production from Blocks 0, 14, 15, 17 and 18. LNG production started in June 2013, but various technical incidents required the extended shutdown of the plant. LNG production is expected to resume in 2016.

InGabon, the Group’s production in 2015 was 59 kboe/d compared to 58 kboe/d in 2014 and 59 kboe/d in 2013. The Group’s exploration and production activities in Gabon were primarily carried out by Total Gabon(2).

 

 

On the Anguille field (100%, operator), production of phase 3 of the redevelopment project (production capacity estimated at 20 kboe/d) from the AGM Nord platform started in 2013 and 18 wells are operational today.

 

On the Torpille field (100%, operator), the data acquired during the 3D seismic survey performed in 2014 is now being processed.

 

On the deep-offshore Diaba license (42.5%, operator), an exploration well (Diaman-1B), drilled in 2013, showed an accumulation of gas and condensates. Additional seismic data acquired at the end of 2014 on the western part of the license is being processed and is expected to generate a full inventory of the license’s prospectivity.

 

On the Nzeimbou (20%) license, the Igongo-1X well (which revealed a multilayer accumulation of oil and gas) was

  

commissioned by connecting to the facilities of the Echira field in June 2015.

InLibya, where the security context remains unstable, the Group’s production was 14 kb/d in 2015 compared to 27 kb/d in 2014 and 50 kb/d in 2013. This production comes from blocks located on offshore areas 15, 16 and 32 (Al Jurf, 75%(3)), which have not been affected by the security issues. Since the fourth quarter of 2014, production as well as exploration activities have been stopped on Mabruk — onshore areas 70 and 87 (75%(3)) — and on El Sharara — onshore areas 129, 130 (30%(3)), and 130 and 131 (24%(3)). In this environment of uncertainty, an impairment on the onshore assets was booked in the 2015 Consolidated Financial Statements.

InMorocco, the 3D seismic processing and interpretation studies acquired in 2013 in the south of the block continued in the scope of the reconnaissance authorization of Anzarane offshore, which covers an ocean region of 100,000 km² and was allocated in December 2011 to TOTAL by the ONHYM (National Office of Hydrocarbons and Mines). The results of geological studies having not been encouraging, the reconnaissance authorization, which had been extended until December 2015, was not transformed into an exploration license.

InNigeria, the Group’s production, primarily offshore, was 245 kboe/d in 2015, compared to 257 kboe/d in 2014 and 261 kboe/d in 2013. This decrease is explained mainly by the sale of interests in certain licenses of the Shell Petroleum Development Company (SPDC) joint venture as well as by an upsurge of oil bunkering activities since 2013. This has negatively affected onshore production and has had an impact on the integrity of the SPDC joint venture facilities as well as on the local environment.

TOTAL operates 5 of the 31 oil mining leases (OML) in which it has interests and also holds interests in 4 oil prospecting licenses (OPL).

Regarding the principal variations in TOTAL’s permits since 2013:

 

 

TOTAL was granted approval by the authorities in 2013 to increase its stake in OPL 285 from 26.67% to 60% and it drilled the Ekpeyi-1 exploration well in 2015;

 

in 2013, TOTAL was granted approval by the authorities for the renewal of OMLs 99, 100 and 102 for a period of 20 years;

 

on OML 138 (20%), the production of the offshore field Usan reached 130 kboe/d in 2013. In 2014, two exploration wells, Ukot South-2B and Ukot South-3, and an exploration well in 2015, Ukot South-4, led to three oil discoveries. The sale process, launched in November 2012, could not be closed. This asset is no longer accounted under “assets classified as held for sale” (refer to Note 4D to the Consolidated Financial Statements). TOTAL has ceased to be the operator of OML 138 since February 2014;

 

TOTAL sold its 10% interest in OMLs 18 and 29 (in 2015) and OML 24 (in 2014), operated via the SPDC joint venture. In addition, the sale process is underway for OML 25.

TOTAL continues to develop its operated assets, in particular:

 

 

OML 58 (40%, operator, onshore): in the scope of its joint venture with the Nigerian National Petroleum Corporation (NNPC), TOTAL has finalized the increase of gas production capacity from 370 Mcf/d to 550 Mcf/d;

 

 

 

(1) 

Stake held by the company Angola Block 14 BV (TOTAL 50.01%).

(2)

Total Gabon is a company under Gabonese law listed on Euronext Paris. TOTAL holds 58.28%, the Republic of Gabon holds 25% and the public float is 16.72%.

(3) 

TOTAL’s stake in the foreign consortium.

 

18 TOTAL S.A. Form 20-F 2015


Item 4 - B.2. Upstream Segment

 

 

OML 102 (40%, operator): in December 2014, TOTAL stopped routine flaring on the Ofon field (Ofon phase 2 project). The gas associated with the production of oil is now compressed and evacuated to shore and monetized via the Nigeria LNG plant;

 

OML 130 (24%, operator): the development of the Egina field (200 kboe/d capacity) launched in 2013 is underway. The drilling campaign for 44 wells started at the end of 2014.

 

OML 99 (40%, operator): additional studies are underway for the development of the Ikike field.

TOTAL is also developing LNG activities with a 15% stake in the Nigeria LNG Ltd company, which owns a liquefaction plant with a 22 Mt/year total capacity. Assessments are underway for the installation of an additional capacity of approximately 8.5 Mt/year. In an effort to focus its activities, TOTAL is currently re-evaluating its participation in the Brass LNG project, in which it holds a 20.48% interest.

The Group’s non-operated production in Nigeria comes mostly from the SPDC joint venture in which TOTAL holds a 10% stake. TOTAL also holds an interest in deep offshore OML 118 (12.5%). On this lease in 2015, the Bonga field contributed 19 kboe/d to the Group’s production. A unitization agreement for the Bonga South West/Aparo discovery (10%) was submitted to the authorities in 2015.

InUganda, a growth area for the Group and where TOTAL has been present in the upstream since 2012, the Group has a 33.33% stake in the EA-1, EA-1A and EA-2 licenses and 28.33% in the EA-3 license located in the region of Lake Albert. TOTAL is the operator of licenses EA-1 and EA-1A and partner on the other licenses.

 

 

On the EA-1 license, a drilling campaign, production tests and 3D seismic acquisition survey were carried out between 2012 and mid-2014. As of the end of 2014, five development plans had been submitted to the authorities. In 2015, discussions for the obtaining of production licenses were continued, and development optimization studies were conducted in order to start the project phase.

 

The EA-1A license expired in 2013 at the end of a drilling campaign that resulted in one discovery (Lyec). With the exception of the area relating to this discovery, the license was relinquished to the authorities.

 

On the EA-2 license, the drilling campaign and production tests started in 2012 were completed in 2014. Two development plans were submitted to the authorities in 2013. In 2015, discussions continued for the obtaining of production licenses.

 

The development plan for Kingfisher field, located on the EA-3 production license, was approved by the authorities in 2013 and the work to develop the field continues.

 

In 2015, discussions were continued with the authorities of Uganda in order to assess the best option for the layout for the crude oil export pipeline to the Indian Ocean.

Inthe Republic of the Congo, the Group’s production was 87 kboe/d in 2015 compared to 95 kboe/d in 2014 and 93 kboe/d in 2013. In December 2013, Qatar Petroleum International Upstream (QPI) purchased a 15% stake in the capital of Total E&P Congo, via a share capital increase of the subsidiary.

 

 

On the offshore field Moho Bilondo (53.5%, operator), phase 1b project (estimated capacity: 40 kboe/d) started production

  

in December 2015. Production of the Moho Nord project (estimated capacity: 100 kboe/d) is expected to start by the first half of 2017.

 

Block 14K (36.75%) corresponds to the offshore unitization area between the Republic of the Congo (Haute Mer license) and Angola (Block 14 located in Angola). The production of the Lianzi field started at the end of October 2015. TOTAL’s interests in the unitization area are held 26.75% by Total E&P Congo and 10% by Angola Block 14 BV.

 

Since 2013, as part of the renewal of licenses, the stake held by the Group has been 42.5% on the Loango license and 29.75% on the Zatchi license.

 

Total E&P Congo is operator of Djéno (63%) the sole oil terminal in the country.

Rest of Africa

TOTAL also holds interests in exploration licenses in South Africa, Côte d’Ivoire, Egypt, Kenya, Madagascar, Mauritania, Mozambique and the Democratic Republic of the Congo, and is negotiating with the authorities with the view to resume exploration activities in the Republic of South Sudan.

North America

In 2015, TOTAL’s production in North America was 103 kboe/d, representing 4% of the Group’s total production, compared to 90 kboe/d in 2014 and 73 kboe/d in 2013.

InCanada, the Group’s production was 14 kboe/d in 2015 compared to 12 kboe/d in 2014 and 13 kboe/d in 2013. This production comes entirely from TOTAL’s 50% stake in the Surmont project developed by SAGD(1). Phase 2 of the project was commissioned in September 2015 and at the end of the ramp-up in 2017, the project is expected to have a total capacity of approximately 150 kb/d (75 kb/d in Group share).

Construction of the second oil sands project in which TOTAL has a stake, the Fort Hills mining project, has progressed on time and within budget. At a more than 50% completion rate as at the end of 2015, production from Fort Hills is expected to start toward the end of 2017. As a result of a full comparative analysis of its global asset portfolio in the context of lower oil prices, the Group decided in 2015 to reduce its exposure to Canadian oil sands. In November 2015,TOTAL sold 10% of its 39.2% stake in the Fort Hills project to the operator, reducing its interest to 29.2%. Following this divestment, an impairment on the part of the asset sold was booked in the 2015 Consolidated Financial Statements.

On the Joslyn (38.25%, operator) and Northern Lights (50% operator) oil sands licenses, the projects were suspended and works have been strictly limited to legal and contractual obligations, and maintaining safety.

The Group booked an impairment of $2.2 billion on its oil sands assets in its 2014 Consolidated Financial Statements.

In theUnited States, the Group’s production was 89 kboe/d in 2015 compared to 78 kboe/d in 2014 and 60 kboe/d in 2013.

 

 

In the Gulf of Mexico, TOTAL holds interests in the deep offshore fields Tahiti (17%) and Chinook (33.33%).

In 2015, the TOTAL (40%) – Cobalt (60%, operator) alliance, formed in 2009 for exploration in the Gulf of Mexico, carried out further drilling to evaluate the size of the North Platte discovery.

 

TOTAL is also present in shale gas production in the United States through its 25% stake in two joint ventures operated by Chesapeake in the Barnett (Texas) and Utica (Ohio) basins.

 

 

 

(1) 

Steam Assisted Gravity Drainage, production by injection of recycled water vapor.

 

2015 Form 20-F TOTAL S.A. 19


Item 4 - B.2. Upstream Segment

 

  Drilling activity in these basins was greatly reduced in 2015 due to the decrease in the price of gas and related liquids. In Barnett, four wells were drilled in 2015 compared to 40 in 2014 and approximately 60 in 2013. In Utica, the number of drilling rigs employed has been reduced from nine to one in 2015 and TOTAL participated in eight wells with Chesapeake. In 2014, approximately 170 wells were drilled by the joint venture and over 200 were drilled in 2013.

Following successive decreases in gas prices in the United States, impairments on shale gas assets were booked in the 2013, 2014 and 2015 Consolidated Financial Statements.

The R&D stage oil shale projects (in situ and ex situ production technology) in which the Group holds a stake (through American Shale Oil LLC, 55.7%, and the 50/50 joint venture with the company Red Leaf Resources) including the development of the Red Leaf pilot, have been deferred.

South America

In 2015, TOTAL’s production in South America was 152 kboe/d, representing 7% of the Group’s total production, compared to 157 kboe/d in 2014 and 166 kboe/d in 2013. The two main producing countries in South America in 2015 were Argentina and Venezuela.

InArgentina, TOTAL operated approximately 30%(1) of the country’s gas production in 2015. The Group’s production was 72 kboe/d in 2015 compared to 75 kboe/d in 2014 and 78 kboe/d in 2013. From 2012, the Argentinean government concluded gas price agreements with various producers under which the government guarantees the price of gas for quantities above a fixed production level in exchange for compliance with defined production targets and applicable penalties (i.e., “deliver or pay”). In 2013, TOTAL signed an agreement of this type for a period of five years with retroactive effect from December 1, 2012.

 

 

In Tierra del Fuego, the Group operates the Carina and Aries offshore fields (37.5%). A drilling campaign for two additional wells off the existing platform was completed in 2015. The Vega Pleyade field (37.5%, operator), where development work was launched in 2013 (with a production capacity of 350 Mcf/d), started production in February 2016.

 

In the Neuquén basin, two pilot projects were launched following positive initial results of the drilling campaign on its mining licenses in order to assess its gas and shale oil potential: one on the Aguada Pichana Block (27.3%, operator) where production started mid-2015, and the other on the Rincón la Ceniza Block (42.5%, operator).

InBolivia, the Group’s production, mainly gas, was 28 kboe/d in 2015 compared to 30 kboe/d in 2014 and 28 kboe/d in 2013. TOTAL is active on seven licenses: three production licenses at San Alberto (15%), San Antonio (15%) and Block XX Tarija Oeste (41%); two licenses in development phase, Aquio and Ipati (60%, operator); and two exploration phase licenses, Rio Hondo (50%) and Azero (50%, operator of the exploration phase).

 

 

Following the discovery of the Incahuasi gas field, located in the Ipati Block, TOTAL was granted approval by the authorities to launch the first development phase of the project, including the connection of three wells already drilled in a 6.5 Mm³/d capacity processing plant. The project is expected to start production mid-2016. In mid-2014, TOTAL reduced its stake in Aquio and Ipati from 80% to 60%.

 

In 2013, TOTAL acquired a 50% stake in the Azero exploration license located in the Andean foothills, which extends over an area of 7,800 km². The exploration period began in June 2014.

InBrazil, a growth area for the Group, TOTAL acquired in 2013 a 20% stake in the Libra field, located in the Santos basin. The field is located in the ultra-deep offshore (2,000 m) approximately 170 km off the coast of Rio de Janeiro and covers an area of 1,550 km². In 2014, a 50 kb/d capacity boat was reserved for long duration production testing. In 2015, the drilling of two wells was completed and one of two others started in the northwest and center of the field.

The Group also holds stakes in 18 exploration licenses, following the 2015 acquisition of a 50% stake in Blocks P-M 1269, 1271, 1351 and 1353 in the Pelotas basin.

InVenezuela, where TOTAL has been active since 1980, the Group’s production was 52 kboe/d in 2015 as in 2014 and compared to 48 kboe/d in 2013. TOTAL has stakes in PetroCedeño (30.3%) and Yucal Placer (69.5%) as well as the offshore exploration Block 4 of Plataforma Deltana (49%).

Development of the extra heavy oil field of PetroCedeño continues in the southern area as in the main area (47 production wells were drilled in 2015 compared to 86 in 2014 and 43 in 2013), as well as the debottlenecking project for the water separation and treatment facilities.

In the Yucal Placer field, following the signature of an amendment to the gas sale contract, a new development phase was launched in 2012. In April 2014, the field’s production increased following the commissioning of new clusters and the debottlenecking of the existing gas processing train (production capacity of150 Mcf/d in 2015).

Rest of South America

TOTAL also holds interests in exploration licenses in Aruba, Colombia, French Guiana and Uruguay.

Asia-Pacific

In 2015, TOTAL’s production in Asia-Pacific was 258 kboe/d, representing 11% of the Group’s overall production, compared to 238 kboe/d in 2014 and 235 kboe/d in 2013. The two main producing countries in Asia-Pacific in 2015 were Indonesia and Thailand.

InAustralia, where TOTAL has had mining rights since 2005, the Group’s production was 4 kboe/d in 2015, 2014 and 2013.

 

 

The Ichthys project (30%) involves the development of a gas and condensate field located in the Browse Basin. This development will include a floating platform designed for the production (CPF, Central Processing Facility), processing and exploration of gas, an FPSO (with condensate processing capacity of 100 kb/d) to stabilize and export the condensate, an 889 km gas pipeline and an onshore liquefaction plant (with 8.9 Mt/y LNG and1.6 Mt/y LPG capacities) at Darwin. The LNG has already been sold mainly to Asian buyers under long-term contracts. Production is expected to start in 2017.

 

Gladstone LNG (GLNG) (27.5%) is an integrated gas production, transportation and liquefaction project of 7.2 Mt/y based on the development of coal seam gas from the Fairview, Roma, Scotia and Arcadia fields. The development of a first upstream phase was completed with the start of

 

 

 

(1) 

Source: Department of Federal Planning, Public Investment and Services, Energy Secretariat.

 

20 TOTAL S.A. Form 20-F 2015


Item 4 - B.2. Upstream Segment

 

  production of Fairview 3 and 4 and Roma 2. Train 1 (3.6 Mt/y capacity) started production in September 2015 and the first LNG cargo left GLNG for South Korea in October 2015. The development of the liquefaction plant continues with the construction of train 2, which is expected to start production in 2016. An asset impairment of approximately $1.4 billion was booked in TOTAL’s 2015 Consolidated Financial Statements.
 

The WA-492 and WA-493 licenses, located in the Carnarvon basin, were awarded to TOTAL (100%, operator) in 2013. A 2D seismic regional campaign began in January 2015.

 

In 2012, TOTAL signed an agreement to enter into three shale gas exploration licenses located in the South Georgina basin in the center of the country. In 2013, a 2D seismic survey was acquired on three licenses and a drilling campaign began in 2014 with two wells. Technical studies are ongoing.

InBrunei, TOTAL operates the offshore Maharaja Lela Jamalulalam gas and condensate field located on Block B (37.5%). The Group’s production was 15 kboe/d in 2015 as in 2014 and compared to 13 kboe/d in 2013. The gas is delivered to the Brunei LNG liquefaction plant.

A study regarding the additional development of the southern part of the gas field (Maharaja Lela South) was completed in 2013. The project was launched in early 2014 with the signature of most of the contracts and the 20-year extension on the existing license. Onshore, a first debottlenecking phase for the production processing plant was completed in 2015, increasing production by 20%. Offshore, the installation of a third platform was completed at the end of 2015 and the drilling campaign started in February 2016. The first wells are expected to be put into production in 2016.

Studies are currently being conducted to reassess the potential of the deep offshore exploration Block CA1 (where TOTAL is operator), which includes the Jagus East discovery. Following the decision of two partners to sell their interest in the block, TOTAL decided to exercise its preemptive right, bringing its stake from 54% to 86.9%. A well was drilled in November 2015, and has confirmed the connection of the Jagus East field with the Gumusut-Kakap reservoirs in Malaysia. Discussions of the terms of the unitization are underway between the two countries and an agreement should be reached in 2016.

InChina, TOTAL has been active since 2006 on the South Sulige Block, located in the Ordos Basin in the Inner Mongolia province. The Group’s production was 11 kboe/d in 2015 compared to 12 kboe/d in 2014 and 8 kboe/d in 2013. Following appraisal work by TOTAL, China National Petroleum Corporation (CNPC) and TOTAL agreed to a development plan under which CNPC is the operator and TOTAL holds a 49% stake. This development plan was approved by the authorities in 2014. The drilling of development wells is ongoing.

In 2013, TOTAL signed a joint study agreement with Sinopec for potential shale gas on the Xuancheng license (4,000 km²) near Nanjing. A 2D seismic survey was performed in 2014 and the drilling of an exploration well was completed in 2015.

InIndonesia, the Group’s production was 147 kboe/d in 2015 compared to 130 kboe/d in 2014 and 131 kboe/d in 2013.

TOTAL’s operations in Indonesia are primarily concentrated on the Mahakam license (50%, operator), which in particular includes the Peciko and Tunu gas fields. TOTAL also has a stake in the Sisi-Nubi gas field (47.9%, operator). The Mahakam license expires in December 2017. The Indonesian government has decided to

allocate 100% of the participating interest to Pertamina (operator) from January 1, 2018 onwards, while giving Pertamina the possibility to farm-out a maximum interest of 30% to TOTAL and its current partner, INPEX. The Group delivers most of its natural gas production to the Bontang LNG plant. These volumes of gas represented approximately 80% of the Botang plant’s supply in 2015. To this gas production was added the operated production of oil and condensates from the Handil and Bekapai fields.

 

 

On the Mahakam license, the works aimed at maintaining production on the Tunu, Peciko, South Mahakam, Sisi-Nubi and Bekapai fields are ongoing.

 

On the Sebuku (15%) license, production startup of the Ruby gas field took place in 2013, with a production capacity of approximately 100 Mcf/d. Production is routed via pipeline for processing and separation at the Senipah terminal (operated by TOTAL).

 

TOTAL also holds stakes in two exploration blocks: Mentawai (80%, operator) and Telen (100%).

 

In addition, the Group holds stakes in blocks with no activity: Sadang (30%), Sageri (50%), Arafura Sea (24.5%), Amborip VI (24.5%), South Mandar (49.3%), South West Bird’s Head (90%, operator) and South East Mahakam (50%, operator).

 

Early in 2015, the Group sold its stake in the two coal bed methane (CBM) blocks located in the East Kalimantan province, Kutai II (18.4%) and Kutai Timur (50%).

InMyanmar, the Group’s production was 19 kboe/d en 2015 compared to 17 kboe/d in 2014 and 16 kboe/d in 2013.

The Yadana field (31.2%, operator), located on the offshore Blocks M5 and M6, primarily produces gas for delivery to PTT (Thai state-owned company) for use in Thai power plants. The Yadana field also supplies the domestic market via two pipelines built and operated by MOGE, a Myanmar state-owned company. The LCP-Badamyar project, which includes the installation of the Badamyar field compression and development platform connected to the Yadana facilities, was launched in September 2014.

In 2014, the Group was awarded the deep offshore Block YWB (100%, operator) during the offshore round launched by the local authorities. The PSC was signed in February 2015.

In October 2015, the Group sold its stake in the offshore Block M11 (47.06%) and entered in exploration license A6 (40%) in the deep offshore area west of Myanmar. A first well was drilled in December 2015 on which a natural gas discovery has been made and is currently under evaluation.

InPapua New Guinea, where TOTAL has been active since 2012, the Group acquired in March 2014 a stake in Block PRL-15 (40.1%). TOTAL became the operator in August 2015. The State of Papua New Guinea retains the right to enter the license (when the final investment decision is made) at a maximum level of 22.5%. In this case, TOTAL’s stake would be reduced to 31.1%.

Block PRL-15 includes the two discoveries Elk and Antelope, growth areas for the Group. A delineation program of these discoveries is underway. The results of the first wells drilled have confirmed the level of resources in the Elk and Antelope fields. TOTAL has also started development studies in the Elk and Antelope fields, including on the construction of an onshore gas liquefaction plant. In July 2015, the location of the various production sites was announced to the authorities.

InThailand, the Group’s production was 62 kboe/d in 2015 compared to 60 kboe/d in 2014 and 63 kboe/d in 2013. This comes from the offshore gas and condensate field of Bongkot (33.33%). PTT (Thai state-owned company) purchases all of the natural gas and

 

 

2015 Form 20-F TOTAL S.A. 21


Item 4 - B.2. Upstream Segment

 

condensate production. New investments are underway for maintaining the plateau and responding to gas demand.

Rest of Asia

TOTAL also holds interests in exploration licenses in Malaysia and the Philippines.

Commonwealth of Independent States (CIS)

In 2015, TOTAL’s production in the CIS was 290 kboe/d, representing 12% of the Group’s total production, compared to 249 kboe/d in 2014 and 227 kboe/d in 2013. The main producing country in the CIS in 2015 was Russia.

InKazakhstan, TOTAL holds a stake in the North Caspian license (16.81%), which covers the Kashagan field.

The production of the first phase of the Kashagan project (300 kb/d), started in September 2013, was halted in October 2013 due to leaks detected in the gas export pipeline. The two gas and oil export pipelines are being replaced by the operator. The works progress according to plan and production is expected to resume in December 2016.

TOTAL is the operator of the Nurmunaï North and South onshore exploration licenses (51.1%, after the sale of 23.9% of interests in February 2015) located in the southwest of the country. The drilling of two exploration wells (the first on the Nurmunai North license and the second on the Nurmunaï South license) was performed between February and October 2015. The results are being analyzed.

InRussia, where, as of December 31, 2015, the Group holds 19% of its proved reserves, the Group’s production was 290 kboe/d in 2015 compared to 235 kboe/d in 2014 and 207 kboe/d in 2013. This production comes from the Kharyaga and Termokarstovoye fields and TOTAL’s stake in OAO Novatek (18.9% as of December 31, 2015). In 2015, Russia became the leading contributor to the Group’s production.

In 2014, international economic sanctions associated with the situation in Ukraine were adopted by the United States, the European Union and other countries. TOTAL complies with sanctions applicable to its activities. For further information, refer to “Item 3 —C. Risk Factors”, above.

On the Kharyaga (40%, operator) project, the works relating to the development plan of phases 3 and 4 are ongoing though they slowed in 2015 after a dispute with the main contractor, which was settled at the end of 2015. In addition, in January 2016, TOTAL signed an agreement for the sale of a 20% interest and the transfer of operatorship of the field. This sale is expected to take effect in the second quarter of 2016, subject to the approval of the authorities.

In addition to its shareholding in Novatek, TOTAL currently participates via a direct stake in two projects with Novatek:

 

 

Termokarstovoye (an onshore gas and condensates field, located in the Yamalo-Nenets region): the development and production license of Termokarstovoye field is held by ZAO Terneftegas, a joint venture between Novatek (51%) and TOTAL (49%). This field, which started production in May 2015, reached its capacity of 65 kboe/d in September 2015; and

 

Yamal LNG: in December 2013 the company OAO Yamal LNG(1) launched the project, aimed at developing the onshore

  

field of South Tambey (gas and condensates) located on the Yamal peninsula and at building a three-train gas liquefaction plant with total LNG capacity of 16.5 Mt/y. The financing plan for the Yamal LNG project is being reviewed, and the project’s partners are engaged in efforts to develop a financing plan in compliance with the applicable regulations. In 2015, the project advanced satisfactorily according to schedule.

The exploration project on the Bazhenov field (shale oil) in the Kanthy Mansiysk region has been suspended since 2014. In 2015, TOTAL transferred all of its rights in the awarded licenses to a subsidiary of the partner of the project.

For further information on international economic sanctions, refer to “Item 3 — C. Risk Factors”, above.

Rest of CIS

TOTAL also holds interests in exploration licenses in Azerbaijan and Tajikistan.

Europe

In 2015, TOTAL’s production in Europe was 374 kboe/d, representing 16% of the Group’s total production, compared to 364 kboe/d in 2014 and 392 kboe/d in 2013. The two main producing countries in Europe in 2015 were Norway and the United Kingdom.

InDenmark, TOTAL (80%, operator) acquired in 2010 two shale gas exploration licenses in order to assess their potential. On the 1/10 (Nordjylland) license, a vertical exploration well without hydraulic fracturing drilled in 2015 revealed the presence of gas, but the quantities were not sufficient to consider economically viable production. The Group is moving forward with restoration works on the drilling site, which will be rehabilitated in compliance with environmental obligations as required by Danish law. The 2/10 (Nordsjaelland) license was relinquished in July 2015 due to lower than expected estimated potential for the Group.

InFrance, the Group’s production ended with the sale in October 2014 of the Lacq concessions to Geopetrol. Production in 2014 was 2 kboe/d compared to 9 kboe/d in 2013. The Montélimar exclusive research license granted to TOTAL in 2010 for evaluating the shale gas potential of this area was repealed by the government in 2011. In January 2016, further to the appeal filed in 2011, the administrative court canceled the revocation of the license deciding the Group had fulfilled its obligations.

InItaly, TOTAL holds a stake in two exploration licenses and in the Tempa Rossa field (50%, operator), discovered in 1989 and located on the Gorgoglione concession (Basilicate region). Development of the Tempa Rossa project is underway.

InNorway, TOTAL has equity stakes in 97 production licenses on the Norwegian maritime continental shelf, 31 of which it operates. The Group’s production in 2015 was 239 kboe/d compared to 242 kboe/d in 2014 and 243 kboe/d in 2013.

 

 

In the Greater Ekofisk area, the Group holds a 39.9% stake in the Ekofisk and Eldfisk fields. Production at Ekofisk South started in 2013 and at Eldfisk II in January 2015 (capacity of 70 kboe/d each).

 

In the Sleipner area, development of the Gina Krog field located in the north of Sleipner and approved in 2013 is underway. The Group’s stake, currently 30% (after the sale of

 

 

 

(1) 

The OAO Yamal LNG company is owned by Novatek (60%), Total E&P Yamal (20%), and CNODC (20%), a subsidiary of China National Petroleum Corporation. Novatek’s investment in the company OAO Yamal LNG is to be reduced to 50.1% following an agreement signed in September 2015 for the entry of the Silk Road Fund (9.9%). This agreement is expected to be approved by the authorities in 2016.

 

22 TOTAL S.A. Form 20-F 2015


Item 4 - B.2. Upstream Segment

 

  8% in 2014), is expected to be reduced to 15% after the finalization of the sale of 15% announced in October 2015.
 

In the Greater Hild area, the Martin Linge field (51%, operator, estimated capacity 80 kboe/d) is currently being developed.

 

In the Haltenbanken region, the first sub-marine compression train in the world was commissioned on the Åsgard project (7.7%) in September 2015.

 

In the Barents Sea, the Group holds an 18.4% stake in the gas liquefaction plant of Snøhvit (capacity of 4.2 Mt/y). This plant is supplied with gas from the Snøhvit, Albatross and Askeladd fields.

Inthe Netherlands, TOTAL currently holds interests in 24 offshore production licenses, including 20 that it operates, and 2 offshore exploration licenses, E17c (16.92%) and K1c (30%). In 2015, the Group’s production was 28 kboe/d compared to 31 kboe/d in 2014 and 35 kboe/d in 2013.

In the United Kingdom, the Group’s production was 107 kboe/d in 2015 compared to 89 kboe/d in 2014 and 105 kboe/d in 2013. Approximately 90% of this production comes from operated fields in two main areas: the Alwyn area in the northern North Sea, and the Elgin/Frankin area in the Central Graben.

 

 

In the Alwyn area (100%), production from the Alwyn and Dunbar fields represents 20% and 25% of production, respectively. The rest of the production comes from satellites:

 

 1)linked to Alwyn by subsea tieback: the Forvie gas and condensates field joined by the Jura and Islay fields and the Nuggets gas field network, which started to produce in cyclic mode at the end of 2015;
 2)linked to Dunbar: the Ellon (oil and gas) and the Grant (gas and condensates) fields.

The natural decline of the Alwyn field’s production was partially compensated by the start-up of new reservoir compartments. A system for improving recovery, the concentric gas lift, was installed in three Alwyn wells in 2014.

On the Dunbar field (100%), a new development phase (Dunbar phase IV) is underway, which includes three well work-overs and the drilling of six new wells. Drilling on the first well, D14, started in April 2015.

 

 

In Central Graben, TOTAL holds stakes in the Elgin, Franklin and West Franklin fields (46.2%, operator). A redevelopment project involving the drilling of five new infill wells on Elgin and Franklin started in July 2013. The first well is currently being drilled. In addition, the West Franklin Phase II development project continued with the start-up of production of two new wells in 2015.

 

A third area, West of Shetland, is currently under development. This includes the fields of Laggan, Tormore, Edradour and Glenlivet (operator with 60%, following the sale of 20% of its interests carried out in 2015) and the P967 license, including the discovery of gas at Tobermory (30%, operator). Production of the Laggan and Tormore fields started in February 2016. Production of the Edradour and Glenlivet fields is expected to start in 2017 and 2018, respectively, with an expected total capacity of 90 kboe/d.

An impairment on gas assets in the United Kingdom was booked in the 2015 Consolidated Financial Statements.

In 2014, TOTAL acquired a 40% stake in two onshore shale gas exploration and production licenses (PEDL 139 and 140) located in the Gainsborough Trough basin of the East Midlands, and signed

an agreement enabling the Group to acquire a 50% stake in the PEDL 209 license located in the same area. A 3D seismic survey was performed on the PEDL 139 and 140 licenses. In August 2015, an agreement was signed for the sale of interests held by TOTAL E&P UK in transport pipelines (FUKA and SIRGE) and the St. Fergus terminal. The transfer is expected to take effect in the first half of 2016.

Rest of Europe

TOTAL also holds interests in exploration licenses in Bulgaria and Cyprus.

Middle East

In 2015, TOTAL’s production in the Middle East was 492 kboe/d, representing 21% of the Group’s total production, compared to 391 kboe/d in 2014 and 536 kboe/d in 2013. The two main producing countries in the Middle East in 2015 were the United Arab Emirates and Qatar.

In theUnited Arab Emirates, the Group’s production was 287 kboe/d in 2015 compared to 127 kboe/d in 2014 and 260 kboe/d in 2013. The Group holds, since January 1, 2015, a 10% stake in the Abu Dhabi Company for Onshore Petroleum Operations Ltd. (ADCO) concession for a period of 40 years, which follows a previous onshore concession. This concession covers the 15 main onshore fields of Abu Dhabi and represents more than half of the Emirate’s production.

TOTAL holds a 75% stake (operator) in the Abu Al Bukhoosh field and a 13.3% stake in Abu Dhabi Marine Operating Company (ADMA-OPCO), which operates two fields offshore Abu Dhabi. TOTAL also holds a 15% stake in Abu Dhabi Gas Industries (GASCO), which produces NGL and condensates from the associated gas produced by ADCO. In addition, TOTAL holds 5% of the Abu Dhabi Gas Liquefaction Company (ADGAS), which processes the associated gas produced by ADMA-OPCO in order to produce LNG, NGL and condensates, and 5% of National Gas Shipping Company (NGSCO), which owns eight LNG tankers and exports the LNG produced by ADGAS.

The Group holds a 24.5% stake in Dolphin Energy Ltd. in partnership with Mubadala, a company owned by the government of Abu Dhabi, in order to market gas produced in Qatar primarily to the United Arab Emirates.

The Group also owns 33.33% of Ruwais Fertilizer Industries (FERTIL), which produces urea. The FERTIL 2 project commenced operations in 2013, enabling FERTIL to increase its production capacity to 2 Mt/y.

InIraq, the Group’s production in 2015 was 18 kboe/d compared to 12 kboe/d in 2014 and 7 kboe/d in 2013.

On the Halfaya field in Missan province, following the completion of a negotiation in October 2014, TOTAL’s stake increased from 18.75% to 22.5% in the consortium that was awarded the development and production contract. Production of phase 1 of the project started in 2012 and phase 2 started in 2014, enabling production to reach 200 kb/d in the second half of 2014. In 2015, amid low barrel prices, the commencement of EPCC contracts (engineering, procurement, construction and commissioning) of phase 3 of the project (to increase production to 400 kb/d) was postponed.

In Iraqi Kurdistan, TOTAL holds stakes in several exploration blocks.

 

 

 

(1) 

TOTAL holds an indirect 4% stake in Petroleum Development Oman LLC, operator of Block 6, via its 10% stake in Private Oil Holdings Oman Ltd.

(2) 

TOTAL has an indirect stake via Oman LNG’s stake in Qalhat LNG.

 

2015 Form 20-F TOTAL S.A. 23


Item 4 - B.2. Upstream Segment

 

InOman, the Group’s production in 2015 was 36 kboe/d, stable compared to 2014 and 2013. TOTAL participates in the production of oil principally in Block 6 (4%)(1), but also in Block 53 (2%). The Group also produces LNG through its investments in the Oman LNG (5.54%)/Qalhat LNG (2.04%)(2) liquefaction complex, with an overall capacity of 10.5 Mt/y. The ultra-deep offshore Block 41 license, obtained in 2013, was relinquished in February 2015 following disappointing results.

InQatar, the Group’s production was 134 kboe/d in 2015 compared to 132 kboe/d in 2014 and 137 kboe/d in 2013.

The Group operates the Al Khalij field (40% operator) and participates in the production, processing and exporting of gas from the North Field due to investments in the Qatargas 1 and Qatargas 2 LNG plants and in Dolphin Energy.

 

 

Qatargas 2 (16.7%): the production capacity of train 5 of Qatargas 2 stood at 8 Mt/y. TOTAL offtakes part of the LNG produced under the 2006 contracts that provide for the purchase of 5.2 Mt/y of LNG by the Group. In addition, the Group holds a stake in the Qatargas 1 liquefaction plant (10%) as well as a stake in the corresponding upstream Block NFB (20%).

 

Dolphin Energy (24.5%): the production contract for the Dolphin gas project, signed in 2001 with Qatar Petroleum, provides for the sale of 2 Bcf/d of gas from the North Field for a 25-year period. The gas is processed in the Dolphin plant in Ras Laffan and exported to the United Arab Emirates through a 360 km gas pipeline.

InSyria, TOTAL has a 100% stake in the Deir Ez Zor license, which is operated by the joint venture company DEZPC in which TOTAL and the state-owned company SPC each have a 50% share. Additionally, TOTAL is holder of the Tabiyeh contract which came into effect in 2009. The Group has had no production in the country since December 2011, when TOTAL suspended its hydrocarbon production activities in Syria in compliance with the EU’s regulations regarding this country. For further information regarding international economic sanctions, refer to “Item 3 —C. Risk Factors”, above.

InYemen, the Group’s production was 17 kboe/d in 2015 compared to 84 kboe/d in 2014 and 95 kboe/d in 2013.

Due to the further deterioration in the security situation in the vicinity of its Balhaf site, the company Yemen LNG, in which the Group holds a 39.62% stake, decided to stop its commercial LNG production and export activities. The plant is in a preservation mode. As a consequence of this situation, Yemen LNG declared Force Majeure to its various stakeholders in early April 2015.

The PSA of Block 10 (Masila Basin, East Shabwa permit, 28.57%, operator) expired in late December 2015, and the license was returned to the Yemeni authorities. TOTAL is a partner in Block 5 (Marib basin, Jannah license, 15%) and holds various stakes in four onshore exploration licenses.

 

 

24 TOTAL S.A. Form 20-F 2015


Item 4 - B.2. Upstream Segment

 

2.1.9.Oil and gas acreage

 

As of December 31,

(in thousands of acres at year-end)

 2015 
   Undeveloped
acreage
(a)
  Developed
acreage
 

Europe

 Gross  9,585    703  
  Net  4,518    149  

Africa

 Gross  93,306    1,313  
  Net  53,154    346  

Americas

 Gross  23,881    984  
  Net  9,186    304  

Middle East

 Gross  28,032    2,189  
  Net  3,241    227  

Asia — CIS (excl. Russia)

 Gross  52,596    734  
  Net  28,349    260  

Russia

 Gross  3,659    520  
  Net  729    96  

Total

 Gross  211,059    6,443  
  Net(b)  99,177    1,382  

 

(a) 

Undeveloped acreage includes leases and concessions.

(b) 

Net acreage equals the sum of the Group’s equity stakes in gross acreage.

 

2.1.10.Number of productive wells

 

As of December 31,

(wells at year-end)

  2015 
    Gross
productive
wells
   Net
productive
wells
(a)
 

Europe

  Oil   386     105  
   Gas   283     88  

Africa

  Oil   2,532     624  
   Gas   177     49  

Americas

  Oil   1,092     349  
   Gas   3,903     795  

Middle East

  Oil   7,625     510  
   Gas   80     16  

Asia — CIS (excl. Russia)

  Oil   140     57  
   Gas   2,369     815  

Russia

  Oil   207     42  
   Gas   516     80  

Total

  Oil   11,982     1,687  
   Gas   7,328     1,843  

 

(a) 

Net wells equal the sum of the Group’s equity stakes in gross wells.

 

2015 Form 20-F TOTAL S.A. 25


Item 4 - B.2. Upstream Segment

 

2.1.11.Number of net productive and dry wells drilled

 

As of December 31,

(wells at year-end)

 2015  2014  2013 
   Net
productive
wells
drilled
(a)(b)
  Net  dry
wells
drilled
(a)(c)
  Net  total
wells
drilled
(a)(c)
  Net
productive
wells
drilled
(a)(b)
  Net  dry
wells
drilled
(a)(c)
  Net  total
wells
drilled
(a)(c)
  Net
productive
wells
drilled
(a)(b)
  Net  dry
wells
drilled
(a)(c)
  Net  total
wells
drilled
(a)(c)
 

Exploratory

 

Europe

  1.0    3.6    4.6    1.4    0.2    1.6    1.5    0.2    1.7  
 

Africa

  0.2    2.1    2.3    2.0    3.3    5.3    1.5    5.1    6.6  
 

Americas

  1.4    0.6    2.0    2.1    0.3    2.4    2.9    1.4    4.3  
 

Middle East

  0.3    0.5    0.8    0.3    0.3    0.6    0.6    0.7    1.3  
 

Asia — CIS (excl. Russia)

  2.0    1.9    3.9    1.2    1.1    2.3    1.6    4.3    5.9  
 

Russia

                  0.3    0.3              
  

Total

  4.9    8.7    13.6    7.0    5.5    12.5    8.1    11.7    19.8  

Development

 

Europe

  14.0    0.4    14.4    8.8        8.8    6.9    0.3    7.2  
 

Africa

  21.4        21.4    24.6    1.0    25.6    19.7    0.4    20.1  
 

Americas

  60.6    0.1    60.7    128.1    0.2    128.3    98.0        98.0  
 

Middle East

  36.6    0.6    37.2    36.1    0.2    36.3    42.7    0.3    43.0  
 

Asia — CIS (excl. Russia)

  88.6        88.6    106.2    0.5    106.7    184.2        184.2  
 

Russia

  22.9        22.9    28.8    0.8    29.6    13.8        13.8  
  

Total

  244.1    1.1    245.2    332.6    2.7    335.3    365.3    1.0    366.3  

Total

    249.0    9.8    258.8    339.6    8.2    347.8    373.4    12.7    386.1  

 

(a) 

Net wells equal the sum of the Company’s fractional interests in gross wells.

(b) 

Includes certain exploratory wells that where abandoned, but which would have been capable of producing oil in sufficient quantities to justify completion.

(c) 

For information: service wells and stratigraphic wells drilled within oil sands operations in Canada are not reported in this table ( 34.8 wells in 2015, 90.0 wells in 2014 and 86.2 wells in 2013).

For information on the accounting impacts in 2015 concerning dry wells drilled, refer to Note 4D of the Consolidated Financial Statements.

 

2.1.12.Wells in the process of being drilled (including wells temporarily suspended)

 

As of December 31,

(wells at  year-end)

  

2015

 
       Gross   Net(a) 

Exploratory

 

Europe

   5     1.6  
 

Africa

   25     7.3  
 

Americas

   14     4.6  
 

Middle East

   8     2.5  
 

Asia — CIS (excl. Russia)

   11     3.4  
 

Russia

          
  

Total

   63     19.4  

Other wells(b)

 

Europe

   38     13.6  
 

Africa

   56     14.9  
 

Americas

   63     22.4  
 

Middle East

   158     20.5  
 

Asia — CIS (excl. Russia)

   642     191.7  
 

Russia

   113     17.4  
  

Total

   1,070     280.5  

Total

     1,133     299.9  

 

(a) 

Net wells equal the sum of the Group’s equity stakes in gross wells. Includes wells for which surface facilities permitting production have not yet been constructed. Such wells are also reported in the table “Number of net productive and dry wells drilled”, above, for the year in which they were drilled.

(b) 

Other wells are developments wells, service wells, stratigraphic wells and extension wells

 

26 TOTAL S.A. Form 20-F 2015


Item 4 - B.2. Upstream Segment

 

2.1.13.Interests in pipelines

The table below sets forth interests of the Group’s entities(1)in the main oil and gas pipelines as of December 31, 2015.

 

Pipeline(s) Origin Destination % interest  Operator  Liquids  Gas 

EUROPE

                    

Norway

                    
Frostpipe (inhibited) Lille-Frigg, Froy Oseberg  36.25        x      
Heimdal to Brae Condensate Line Heimdal Brae  16.76        x      
Kvitebjorn pipeline Kvitebjorn Mongstad  5.00        x      
Norpipe Oil Ekofisk Treatment center Teeside (UK)  34.93        x      
Oseberg Transport System Oseberg, Brage and Veslefrikk Sture  12.98        x      
Sleipner East Condensate Pipe Sleipner East Karsto  10.00        x      
Troll Oil Pipeline I and II Troll B and C Vestprosess (Mongstad refinery)  3.71        x      
Vestprosess Kollsnes (Area E) Vestprosess (Mongstad refinery)  5.00        x      

Polarled

 Asta Hansteen/Linnorm Nyhamna  5.11            x  

The Netherlands

                    

Nogat pipeline

 F3-FB Den Helder  5.00            x  

WGT K13-Den Helder

 K13A Den Helder  4.66            x  

WGT K13-Extension

 Markham K13 (via K4/K5)  23.00            x  

United Kingdom

                    

Alwyn Liquid Export Line

 Alwyn North Cormorant  100.00    x    x      

Bruce Liquid Export Line

 Bruce Forties (Unity)  43.25        x      

Central Graben Liquid Export Line (LEP)

 Elgin-Franklin ETAP  15.89        x      

Frigg System : UK line

 Alwyn North, Bruce and others St.Fergus (Scotland)  100.00    x        x  

Ninian Pipeline System

 Ninian Sullom Voe  16.00        x      

Shearwater Elgin Area Line (SEAL)

 Elgin-Franklin, Shearwater Bacton  25.73            x  

SEAL to Interconnector Link (SILK)

 Bacton Interconnector  54.66    x        x  

AFRICA

                    

Gabon

                    

Mandji Pipes

 Mandji fields Cap Lopez Terminal  100.00(a)   x    x      

Rabi Pipes

 Rabi fields Cap Lopez Terminal  100.00(a)   x    x      

AMERICAS

                    

Argentina

                    

TGN

 Network (Northern Argentina)    15.38            x  

TGM

 TGN Uruguyana (Brazil)  32.68            x  

Brazil

                    

TBG

 Bolivia-Brazil border Porto Alegre via São Paulo  9.67            x  

TSB

 

Argentina-Brazil border (TGM)

 Uruguyana (Brazil)  25.00      x  
 Porto Alegre Canoas          

ASIA-PACIFIC

                    

Australia

                    

GLNG

 Fairview, Roma, Scotia, Arcadia GLNG (Curtis Island)  27.50            x  

Myanmar

                    

Yadana

 Yadana field Ban-I Tong (Thai border)  31.24    x        x  

REST OF WORLD

                    

BTC

 Baku (Azerbaijan) Ceyhan (Turkey, Mediterranean)  5.00        x      

Dolphin

 North Field (Qatar) Tahweelah-Fujairah-Al Ain (United Arab Emirates)  24.50            x  

 

(a) 

Interest of Total Gabon. The Group has a financial interest of 58.28% in Total Gabon.

 

 

(1) 

Excluding equity affiliates, except for the Yadana and Dolphin pipelines.

 

2015 Form 20-F TOTAL S.A. 27


Item 4 - B.2. Upstream Segment

 

 

2.2.Gas

 

 

 

The activities of Gas, formerly known as Gas & Power, have a primary objective of contributing to the growth of the Group by ensuring sales outlets for TOTAL’s current and future natural gas production.

Beyond the production and liquefaction of natural gas (refer to “—2.1. Exploration & Production”, above), TOTAL actively markets natural gas, which is sold either by pipeline or in the form of liquefied natural gas (LNG) and develops a downstream portfolio for its trading and shipping activities, as well as regasification terminals.

In order to enhance the value of the Group’s gas resources, the activities of Gas also include the trading and marketing of natural gas, LNG, liquefied petroleum gas (LPG) and electricity as well as shipping of LNG and LPG. The Group also has stakes in infrastructure companies (including regasification terminals, natural gas transportation and storage, and power plants) necessary to implement its strategy.

 

2.2.1.Purchases, sales and shipping of liquefied natural gas (LNG)

A pioneer in the LNG industry, TOTAL is today one of the world’s leading players(1) in the sector and has sound and diversified positions both in the upstream and downstream portions of the LNG chain. LNG development is a key element of the Group’s strategy, strengthening its positions in most major production zones and markets.

Through its stakes in liquefaction plants located in Qatar, the United Arab Emirates, Oman, Nigeria, Norway, Yemen, Angola and Australia and its gas supply agreement with the Bontang LNG plant in Indonesia, the Group markets LNG in all global markets. In 2015, the share of LNG production sold by TOTAL has decreased to 10.2 Mt, compared to 12.2 Mt in 2014 and 12.3 Mt in 2013. This reduction is connected to theforce majeure declared in April 2015 for the Yemen LNG joint venture due to the deterioration of security conditions. The growth of LNG production sold by TOTAL over the coming years is expected to be ensured by the Group’s liquefaction projects under construction in Australia and Russia and by projects being studied, including a new project in Papua New Guinea and the expansion of the Nigeria LNG plant.

 

 

Long-term Group LNG purchases and sales

TOTAL acquires long-term LNG volumes mainly from liquefaction projects in which the Group holds an interest, including Qatargas 2 (Qatar), Yemen LNG (Yemen), Nigeria LNG (Nigeria) and Snøhvit (Norway). These volumes support the expansion of the Group’s worldwide LNG portfolio.

Since 2009, a growing portion of the long-term volume purchased by the Group that was initially intended for delivery to North American and European markets has been diverted to more buoyant Asian markets.

New LNG sources are expected to support the growth of the Group’s LNG portfolio, including Ichthys LNG (Australia), Yamal LNG(2) (Russia), trains 3 and 5 of Sabine Pass LNG (United States) and Cameron LNG (United States).

TOTAL has entered into several significant long-term agreements throughout the world for the sale of LNG from the Group’s global LNG portfolio, notably in China, Indonesia, Japan, Singapore, South Korea and Spain.

 

LNG shipping

As part of its LNG transport activities, TOTAL uses two long-term chartered LNG tankers: since 2006, theArctic Lady, with a capacity of 145,000 m³; and since 2011, theMeridian Spirit, with a capacity of 165,000 m³, primarily for the transport of volumes from Snøhvit in Norway.

TOTAL continues to develop its fleet. The Group also signed a long-term charter agreement in 2013 with SK Shipping and Marubeni for two 180,000 m³ LNG tankers. The vessels will serve to fulfill the purchase obligations of Total Gas & Power Limited, including commitments relating to the Ichthys and Sabine Pass projects. They will be among the largest LNG tankers to navigate the Panama Canal after the canal’s expansion and are expected to be delivered in 2017.

 

2.2.2.Trading

In 2015, TOTAL continued its strategy downstream from natural gas and LNG production by developing its trading, marketing and logistics activities. The aim of this strategy is to optimize access for the Group’s current and future production to markets supplied based on long-term contracts and to markets open to international competition (with short-term contracts and spot sales). The Group also has operations in electricity trading and the marketing of LPG and petcoke, and is disengaging from coal trading activities.

The trading teams, which are located in London, Houston, Geneva and Singapore, conduct their business, in particular, through the Group’s wholly-owned subsidiaries Total Gas & Power Limited, Total Gas & Power North America and Total Gas & Power Asia.

 

 

Gas and electricity

TOTAL is pursuing gas and electricity trading operations in Europe and North America in order to sell the Group’s production, to supply its marketing subsidiaries and to support other entities of the Group.

In Europe, TOTAL traded 849 Bcf (24.0 Bcm) of natural gas in 2015, compared to 911 Bcf (25.8 Bcm) in 2014 and 1,194 Bcf (33.8 Bcm) in 2013. TOTAL also traded 41.1 TWh of electricity in 2015, compared to 44.8 TWh in 2014 and 53.0 TWh in 2013, mainly from external resources.

InNorth America, TOTAL traded 441 Bcf (12.5 Bcm) of natural gas in 2015 from its own production or from external resources, compared to 593 Bcf (16.8 Bcm) in 2014 and 938 Bcf (26.6 Bcm) in 2013.

 

 

LNG

TOTAL operates LNG trading activities through both spot sales and long-term contracts such as those described in “— 2.2.1. Purchases, sales and shipping of liquefied natural gas (LNG)”, above. Significant sales and purchase agreements (SPAs) have permitted appreciable development of the Group’s activities in LNG trading, especially in the more buoyant markets in Asia (China, South Korea, India and Japan). The spot and fixed-term LNG portfolio allows TOTAL to supply gas to its main customers worldwide, while retaining a sufficient degree of flexibility to react to market opportunities.

 

 

28 TOTAL S.A. Form 20-F 2015

 

(1) 

Company data, based on upstream and downstream LNG portfolios in 2015.

(2) 

OAO Yamal LNG, which is developing the Yamal LNG project, is held by OAO Novatek (60%), Total E&P Yamal (20%) and CNODC (20%), a subsidiary of of China National Petroleum Corporation. Novatek’s investment in the company OAO Yamal LNG is to be reduced to 50.1% following an agreement signed in September 2015 for the entry of the Silk Road Fund (9.9%). This agreement is expected to be approved by the authorities in 2016. For information on international economic sanctions against Russia, refer “Item 3 — C. Risk Factors”, above.


Item 4 - B.2. Upstream Segment

 

 

In 2015, TOTAL purchased 64 contractual cargoes from Qatar, Yemen, Nigeria and Norway and 20 spot cargoes, compared to, respectively, 88 and 7 in 2014 and 89 and 9 in 2013. The interruption of deliveries from Yemen LNG led to increased LNG trading activity on the spot market in 2015.

 

 

LPG

In 2015, TOTAL traded nearly 5.8 Mt of LPG (propane and butane) worldwide, compared to 5.5 Mt in 2014 and 5.6 Mt in 2013. Nearly 20% of these quantities come from fields or refineries operated by the Group. This trading activity was conducted by means of 7 time-chartered vessels. In 2015, 292 voyages were necessary for transporting the negotiated quantities, including 196 journeys carried out by TOTAL’s time-chartered vessels and 96 journeys by spot-chartered vessels.

 

 

Petcoke

TOTAL has been trading petcoke produced since 2011 by the Port Arthur refinery in theUnited States. Nearly 1.1 Mt of petcoke were sold on the international market in 2015, compared to 1.3 Mt in 2014 and 1.2 Mt in 2013.

In 2014, TOTAL began trading petcoke from the Jubail refinery inSaudi Arabia. In 2015, nearly 720 kt were sold, compared to 100 kt in 2014.

Petcoke has been sold to cement plants and electricity producers mainly in India, as well as in Turkey, Mexico, Brazil and other Latin American countries.

 

2.2.3.Marketing

To consolidate its position throughout the value chain and to leverage the synergies from the Group’s other activities, TOTAL has been developing the business of marketing natural gas and electricity to end users.

Inthe United Kingdom, TOTAL markets gas and electricity to the industrial and commercial segments through its subsidiary Total Gas & Power Ltd. In 2015, the volumes of gas sold was 140 Bcf (4.0 Bcm), compared to 135 Bcf (3.8 Bcm) in 2014 and 142 Bcf (4.0 Bcm) in 2013. Electricity sales were 6.0 TWh in 2015, compared to 5.3 TWh in 2014 and 4.7 TWh in 2013.

InFrance, TOTAL operates in the natural gas market through its marketing subsidiary Total Energie Gaz, the sales of which were 84 Bcf (2.4 Bcm) in 2015, compared to 95 Bcf (2.7 Bcm) in 2014 and 141 Bcf (4.0 Bcm) in 2013. This decrease in volumes is explained by the strategic repositioning of the subsidiary on the small and medium companies market.

InGermany, Total Energie Gas GmbH, a marketing subsidiary of TOTAL, marketed 31 Bcf (0.9 Bcm) of gas in 2015 to industrial and commercial customers, compared to 24 Bcf (0.7 Bcm) in 2014 and 14 Bcf (0.4 Bcm) in 2013.

In 2015, the volumes of gas delivered to the industrial and commercial segments were 2 Bcf (0.1 Bcm) inBelgium (Total Gas & Power Belgium) and 7 Bcf (0.2 Bcm) inthe Netherlands (Total Gas & Power Nederland B.V.), an increase with respect to 2014. These two subsidiaries started marketing gas in 2013.

In 2015, the natural gas marketing subsidiaries in France, Germany, Belgium and the Netherlands extended their activities to the marketing of electricity to industrial and commercial consumers.

InSpain, TOTAL markets natural gas to the industrial and commercial segments through Cepsa Gas Comercializadora, in which it holds a 35% stake. In 2015, the volume of gas sold was 105 Bcf (3.0 Bcm), compared to 94 Bcf (2.7 Bcm) in 2014 and 101 Bcf (2.9 Bcm) in 2013.

InArgentina, the subsidiary Total Gas Marketing Cono Sur oversees the marketing of gas on behalf of Total Austral, the Group’s production subsidiary in Argentina.

The Group also holds stakes in the marketing companies that are associated with the LNG regasification terminals located at Altamira inMexico and Hazira inIndia.

 

2.2.4.Gas facilities

Downstream from its natural gas and LNG production activities, TOTAL holds stakes in natural gas transport networks, natural gas storage facilities and LNG regasification terminals.

 

 

Transportation and storage of natural gas

The Group holds stakes in several natural gas transportation companies located inBrazil andArgentina. These companies are facing a difficult operational and financial environment in Argentina.

In France, Géosud (TOTAL, 56.1%) is a joint venture that holds 50% of Géométhane. Located in Manosque, Géométhane owns and operates several natural gas storage caverns operating since 1983. Starting in April 2015, the shareholders of Géosud jointly developed a proposed sale covering 98% of the company’s shares. The closing of this sale took place in the first quarter of 2016.

 

 

LNG regasification

TOTAL has entered into agreements to obtain long-term access to LNG regasifcation capacity on three continents that represent the largest consumers of natural gas: North America (United States and Mexico), Europe (France and the United Kingdom) and Asia (India). This diversified market presence allows the Group to access new liquefaction projects by becoming a long-term buyer of a portion of the LNG produced, thereby strengthening TOTAL’s LNG supply portfolio.

InFrance, TOTAL holds a 27.5% stake in the company Fosmax and has, through its subsidiary Total Gas & Power Limited., a regasifcation capacity of 78 Bcf/y (2.25 Bcm/y). The terminal received 46 vessels in 2015, compared to 46 in 2014 and 53 in 2013.

In 2011, TOTAL acquired a 9.99% stake in Dunkerque LNG in order to develop an LNG receiving terminal with a capacity of 459 Bcf/y (13 Bcm/y). Trade agreements have also been signed that allow TOTAL to reserve up to 2 Bcm/y of regasifcation capacity over a 20-year term. The project is underway and commissioning of the terminal is scheduled for 2016.

In theUnited Kingdom, through its equity interest in the Qatargas 2 project, TOTAL holds an 8.35% stake in the South Hook LNG receiving terminal with a total capacity of 742 Bcf/y (21 Bcm/y) and an equivalent access right to the regasifcation capacity. The terminal received 84 cargoes in 2015, compared to 68 in 2014 and 52 in 2013.

InMexico, TOTAL has reserved 25% of the regasifcation capacity of the Altamira receiving terminal,i.e., 59 Bcf/y (1.7 Bcm/y), through its 25% stake in Gas del Litoral.

 

 

2015 Form 20-F TOTAL S.A. 29


Item 4 - B.3. Refining & Chemicals Segment

 

In theUnited States, TOTAL has reserved a regasification capacity of approximately 353 Bcf/y (10 Bcm/y) in the Sabine Pass terminal (Louisiana) for a 20-year period until 2029. In 2012, TOTAL and Sabine Pass Liquefaction (SPL) signed agreements allowing SPL to gradually obtain access to TOTAL’s reserved capacity. Access to 38 Bcf/y commenced in 2012, growing to 195 Bcf/y from the start-up of train 3 and plateauing at substantially all of TOTAL’s capacity from the start-up of train 5. In return, SPL will pay TOTAL a fee linked to the capacity assigned.

InIndia, TOTAL holds a 26% stake in the Hazira receiving terminal, the regasification capacity of which was increased to 244 Bcf/y (6.9 Bcm/y) in 2013. This terminal, located in the Gujarat state, is a merchant terminal with operations that cover both LNG regasification and gas marketing. Due to the Indian market’s strong prospects for growth, a potential expansion project is under study to increase the terminal’s capacity to 343 Bcf/y (9.7 Bcm/y).

 

2.2.5.Electricity generation

In a context of increasing global demand for electricity, TOTAL has developed expertise in the power generation sector, especially through cogeneration and combined-cycle power plant projects.

InAbu Dhabi, the Taweelah A1 gas-fired power plant, which is owned by Gulf Total Tractebel Power Company (TOTAL, 20%),

combines electricity generation and water desalination. The plant, in operation since 2003, currently has a net power generation capacity of 1,600 MW and a water desalination capacity of 385,000 m³ per day. The plant’s production is sold to Abu Dhabi Water and Electricity Company (ADWEC) as part of a long-term agreement.

InNigeria, TOTAL holds a stake in the Afam VI gas-fired combined cycle power plant through its 10% interest in the Shell Petroleum Development Company (SPDC) joint venture. This plant is part of the government’s plan to develop power generation and increase the share of natural gas production for domestic use.

InThailand, TOTAL holds 28% of Eastern Power and Electric Company Ltd which operates the Bang Bo gas-fired combined cycle power plant with a capacity of 350 MW, commissioned in 2003. Production is sold to the Electricity Generating Authority of Thailand (EGAT) under a long-term contract.

 

2.2.6.Coal production and marketing

Following the completion of the sale, in August 2015, of its subsidiary Total Coal South Africa, the Group ceased its coal production activities. In addition, the Group has announced the termination of its coal marketing activities in 2016.

 

 

3.REFINING & CHEMICALSSEGMENT

 

Refining & Chemicals is a large industrial segment that encompasses refining, petrochemicals and specialty chemicals operations. It also includes the activities of Trading & Shipping.

 

3.1.Refining & Chemicals

 

Refining & Chemicals includes the Group’s refining, petrochemicals and specialty chemicals businesses.

 

 

the petrochemicals business includes base petrochemicals (olefins and aromatics) and polymer derivatives (polyethylene, polypropylene, polystyrene and hydrocarbon resins); and

 

the specialty chemicals business includes elastomer processing and electroplating chemistry.

The volume of its Refining & Chemicals activities places TOTAL among the top ten integrated chemical producers in the world(1).

Against the backdrop of rising worldwide demand for oil and petrochemicals driven by non-OECD countries and the entry of new capacities into the market, the strategy of Refining & Chemicals, in addition to the priority given to safety and environmental protection, involves:

 

 

adapting production capacity to changes in demand in Europe by concentrating investments on large integrated platforms. The Group therefore plans to lower its capacity by 20% in Europe by the end of 2016 in comparison with 2011;

 

consolidating industrial means of production and searching for opportunities for growth in the United States; and

 

strengthening TOTAL’s positions in Asia and the Middle East, in particular to gain access to advantaged oil and gas feedstocks and to benefit from market growth.

This strategy is underpinned by an effort to differentiate through the technology used and innovation found in its products and processes.

 

3.1.1.Refining & Petrochemicals

TOTAL’s refining capacity was 2,247 kb/d as of December 31, 2015, compared to 2,187 kb/d at year-end 2014 and 2,042 kb/d

at year-end 2013. TOTAL has equity stakes in 20 refineries (including 9 operated by companies of the Group), located in Europe, the United States, Africa, the Middle East and Asia.

The Refining & Chemicals segment manages refining operations located in Europe (excluding TotalErg in Italy), the United States, the Middle East and Asia, with a capacity of 2,168 kb/d at year-end 2015 (96% of the Group’s total capacity(2)).

The petrochemicals businesses are located mainly in Europe, the United States, Qatar, South Korea and Saudi Arabia. Most of these sites are either adjacent to or connected by pipelines to Group refineries. As a result, TOTAL’s petrochemical operations are integrated within its refining operations, thereby maximizing synergies.

The year 2015 saw the launch of plans to adapt the Lindsey refinery in the United Kingdom and the La Mède refinery in France, as well as the launch of a study to invest in the Donges refinery in France. As part of its European refining and petrochemicals capacity reduction and modernization plan, TOTAL ended steam cracking on the Carling site in France in October 2015. At the same time, the Group began to develop new polymer and specialty resin activities on the site. Finally, TOTAL continued to develop its major investment project launched in 2013 on the Antwerp platform in Belgium.

As part of the active management of its business portfolio, TOTAL finalized the sales of its stake in the Schwedt refinery (Germany) in November 2015 and its majority interest in the capital of the company Geosel (France) in December 2015. TOTAL completed in December 2014 the sale of its subsidiary CCP Composites (100%), which is active in the composite resins segment, and finalized in 2013 the divestment of its Fertilizers activity (Base Chemicals) in Europe.

 

 

 

(1) 

Based on publicly available information, production capacities at year-end 2014.

(2) 

Earnings related to the refining assets in Africa, the French West Indies (up to mid-2015) and the TotalErg joint venture are reported in the results of the Marketing & Services segment.

 

30 TOTAL S.A. Form 20-F 2015


Item 4 - B.3. Refining & Chemicals Segment

 

 

Activities by geographic area

Europe

TOTAL is the largest refiner in Western Europe(1).

Western Europe accounts for 76% of the Group’s refining capacity,i.e., 1,699 kb/d at year-end 2015, compared to 1,736 kb/d at year-end 2014 and at year-end 2013. The decrease observed in 2015 is attributable to the sale of the Group’s stake in the Schwedt refinery in Germany.

The Group operates eight refineries in Western Europe (one in Antwerp, Belgium, five in France in Donges, Feyzin, Gonfreville, Grandpuits and La Mède, one in Immingham in the United Kingdom and one in Leuna, Germany) and owns stakes in the Zeeland refinery in the Netherlands and the Trecate refinery in Italy through its interest in TotalErg.

The Group’s main petrochemical sites in Europe are located in Belgium, in Antwerp (steam crackers, aromatics, polyethylene) and Feluy (polyolefins, polystyrene), and in France, in Carling (polyethylene, polystyrene), Feyzin (steam cracker, aromatics), Gonfreville (steam crackers, aromatics, styrene, polyolefins, polystyrene) and Lavéra (steam cracker, aromatics, polypropylene). Europe accounts for 49% of the Group’s petrochemicals capacity,i.e., 10,394 kt at year-end 2015, compared to 10,909 kt at year-end 2014 and 10,899 kt at year-end 2013.

 

 

InFrance, the Group continues to adapt its refining capacity and to improve its operational efficiency against the backdrop of structural decline in the demand for petroleum products in Europe.

In April 2015, TOTAL announced a significant modernization plan for its refining facilities in France, including:

 

  

in La Mède, a200 million investment project to transform the site and, in particular, to create the first bio-refinery in France, while stopping the treatment of crude oil at the end of 2016. The industrial transformation of La Mède will allow TOTAL to respond to the growing demand for biofuel in Europe. Other activities, such as a logistics and storage platform, a solar energy farm, a training center and an AdBlue production plant(2), will also be developed on the site;

  

in Donges, a400 million investment project for the construction of intermediate feedstock desulfurization units and hydrogen production units. The program, due to be commissioned in 2019, requires the rerouting of the railroad track that currently crosses the refinery. A three-party memorandum of intent to fund this work between the state, local authorities and TOTAL was signed at the end of 2015.

In 2014, the Group completed its industrial plan, launched in 2009, to reconfigure the Gonfreville refinery in Normandy by starting up a new diesel desulfurization unit. At the end of 2014, the Group launched a project to modernize the specialties production scheme of the Normandy complex, notably including a decrease in base oil production capacity as of October 2015.

In petrochemicals, the Group announced an investment plan in 2013 for the Carling platform in Lorraine, France, to adapt its capacity and restore its competitiveness. As part of this project, steam cracking ended in October 2015. New hydrocarbon resin and compound polypropylene production

units are in the process of being built and are expected to be commissioned in 2016.

 

 

InGermany, TOTAL operates the Leuna refinery (100%). In November 2015, the Group completed the sale of its stake in the Schwedt refinery (16.7%).

In petrochemicals, in February 2015, the Group acquired a majority stake in Polyblend, a manufacturer of polyolefin compounds that are mainly used in the automotive industry.

 

 

InBelgium, the Group launched a major project in 2013 to modernize its Antwerp platform. This project consists of two parts:

 

  

the construction of new conversion units, which are expected to be completed in 2016, in response to the shift in demand towards lighter oil products with a very low sulfur content; and

  

the construction of a new unit to convert part of the combustible gases recovered from the refining process into raw materials for the petrochemical units.

As part of this modernization plan, two of the site’s oldest production units were shut down: a steam cracker in 2013 and a polyethylene production line in 2014.

In Feluy, TOTAL built a unit that produces latest-generation gray expandable polystyrene for the fast-growing insulation market; the unit began production in 2014.

 

 

In theUnited Kingdom, in February 2015, TOTAL launched a plan to adapt and secure the future of its Lindsey refinery. In addition to shutting down one of the two crude distillation units and associated units, which will reduce its capacity by 5 Mt/y, the plan aims to improve the conversion block, adapt logistics operations and simplify the refinery’s organization.

In 2013, TOTAL shut down its 70 kt/y polystyrene production site at Stalybridge, while continuing its commercial activity for polymers.

North America

The Group’s main sites in North America are located in Texas, in Port Arthur (refinery, steam cracker), Bayport (polyethylene) and La Porte (polypropylene), and in Louisiana, in Carville (styrene, polystyrene).

Located on the same site in Port Arthur, TOTAL wholly owns a 174 kb/d capacity refinery as well as a 40% stake in a condensate splitter and a steam cracker (BASF Total Petrochemicals, BTP). The Group is working to strengthen the synergies between these two plants.

The new pipeline connecting the Port Arthur refinery to the Sun terminal in Nederland was commissioned in 2014, facilitating access to all domestic crudes, which are priced advantageously compared to the international market. Following investments to adapt its furnaces and the construction of a tenth ethane furnace, which was commissioned in March 2014, BTP’s cracker can now produce more than 1 Mt/year of ethylene, including more than 85% from advantaged feedstock (ethane, propane, butane). BTP thus benefits from favorable market conditions in the United States. In addition, in September 2015, TOTAL launched detailed FEED studies for the construction of a new ethane steam cracker with an ethylene production capacity of 1 Mt/year on the Port Arthur site, in synergy with the refinery and BTP steam cracker. The investment decision is expected to be made in 2016.

 

 

 

(1) 

Based on publicly available information, 2014 refining capacities.

(2) 

Fuel additive intended for road transport and designed to lower nitrogen oxide (NOx) compound emissions.

 

2015 Form 20-F TOTAL S.A. 31


Item 4 - B.3. Refining & Chemicals Segment

 

Asia and the Middle East

TOTAL is continuing to expand in growth areas and is developing sites in countries with favorable access to raw materials.

InSaudi Arabia, TOTAL has a 37.5% stake in the company, SATORP (Saudi Aramco Total Refining and Petrochemical Company), which operates the Jubail refinery. This refinery, fully operational since mid-2014, has a capacity of 400 kb/d and is situated close to Saudi Arabia’s heavy crude oil fields. The refinery’s configuration enables it to process these heavy crudes and sell fuels and other light products that meet strict specifications and are mainly intended for export. The refinery is also integrated with petrochemical units: a 700 kt/y paraxylene unit, a 200 kt/y propylene unit, and a 140 kt/y benzene unit.

InChina, TOTAL holds a 22.4% stake in WEPEC, a company that operates a refinery located in Dalian.

The Group is also active through its 200 kt/y capacity polystyrene plant in Foshan in the Guangzhou region. In September 2014, TOTAL successfully began production on a new 200 kt/y polystyrene plant in Ningbo in the Shanghai region.

Finally, TOTAL is continuing to study a project in Inner Mongolia to produce polyolefins from coal. This project, with a capacity of approximately 800 kt/y of olefins, would use the innovative methanol-to-olefins/olefins cracking process (MTO/OCP), which the Group confirmed in 2013 on a demonstration unit in Feluy, Belgium. The environmental impact assessment was submitted for approval to the Ministry of the Environment in 2015.

InSouth Korea, TOTAL has a 50% stake in Hanwha Total Petrochemicals Co., Ltd. (HTC), which operates a petrochemical complex in Daesan (condensate splitter, steam cracker, styrene, paraxylene, polyolefins). To keep up with growth in Asian markets, two major construction projects were completed in 2014, thereby doubling the site’s capacity compared to 2011. A new aromatics unit (paraxlyne, benzene) supplied by a new condensate splitter, as well as a new EVA unit were successfully started up in 2014. The site’s paraxylene production capacity increased to 1.8 Mt/y as a result of these new units.

InQatar, the Group holds interests(1) in two ethane-based steam crackers (Qapco, Ras Laffan Olefin Cracker (RLOC)) and four polyethylene lines (Qapco, Qatofin), including the Qatofin linear low-density polyethylene plant in Messaied with a capacity of 550 kt/y and a 300 kt/y low-density polyethylene line operated by Qapco, which started up in 2012.

TOTAL holds a 10% stake in the Ras Laffan condensate refinery, which has a capacity of 146 kb/d. The construction project to double the refinery’s capacity started in 2014 and is expected to be completed by the end of 2016.

InSingapore, the Group sold its 95 kt/y capacity polystyrene production site in November 2014.

 

 

Crude oil refining capacity

The table below sets forth TOTAL’s crude oil refining capacity(a):

 

As of December 31(kb/d)  2015   2014   2013 

Nine refineries operated by Group companies

      

Normandy – Gonfreville (100%)

   247     247     247  

Provence-La Mède (100%)

   153     153     153  

Donges (100%)

   219     219     219  

Feyzin (100%)

   109     109     109  

Grandpuits (100%)

   101     101     101  

Antwerp (100%)

   338     338     338  

Leuna (100%)

   227     227     227  

Lindsey – Immingham (100%)

   207     207     207  

Port-Arthur (100%) and BTP (40%)(b)

   198     169     169  

Subtotal

   1,799     1,770     1,770  

Other refineries in which the Group has equity stakes(c)

   448     417     272  

Total

   2,247     2,187     2,042  

 

(a) 

Capacity data based on refinery process unit stream-day capacities under normal operating conditions, less the impact of shutdown for regular repair and maintenance activities averaged over an extended period of time.

(b) 

The condensate splitter held by the joint venture between TOTAL 40% and BASF 60% located in Port-Arthur refinery is taken into account at end 2015.

(c) 

TOTAL’s share in the 11 refineries in which it has equity stakes as of December 31, 2015 ranging from 10% to 55% (one each in the Netherlands, China, Korea, Qatar, Saudi Arabia, Italy and five in Africa). In addition to the sale of its participation in the Schwedt refinery in November 2015, TOTAL completed in May 2015 the sale of its 50% stake in Société Anonyme de la Raffinerie des Antilles (SARA) in Martinique. Moreover, the condensate splitter of Daesan in Korea is taken into account at end 2015, for a capacity of 79 kb/d (in TOTAL share of 50%).

 

 

Refined products

The table below sets forth by product category TOTAL’s net share(a) of refined quantities produced at the Group’s refineries:

 

(kb/d)  2015   2014   2013 

Gasoline

   346     344     340  

Aviation fuel(b)

   172     148     146  

Diesel and heating oils

   812     787     739  

Heavy fuels

   129     134     133  

Other products

   387     329     322  

Total

   1,846     1,742     1,680  

 

(a) 

For refineries not 100% owned by TOTAL, the production shown is TOTAL’s equity share in the site’s overall production.

(b) 

Avgas, jet fuel and kerosene.

 

 

 

(1) 

TOTAL shareholdings: Qapco (20%); Qatofin (49%); RLOC (22.5%).

 

32 TOTAL S.A. Form 20-F 2015


Item 4 - B.3. Refining & Chemicals Segment

 

 

 

Utilization rate

The tables below set forth the utilization rate of the Group’s refineries:

 

On crude and other feedstock(a)(b)  2015  2014  2013 

France

   81  77  78

Rest of Europe

   94  88  87

Americas

   115  106  100

Asia and the Middle East

   75  50  75

Africa

   84  77  78

Average

   89%   81%   84% 

 

(a) 

Including equity share of refineries in which the Group has a stake.

(b) 

Crude + crackers’ feedstock/distillation capacity at the beginning of the year (2014: SATORP refinery’s capacity considered as from January 1).

On crude(a)(b)  2015  2014  2013 

Average

   86  77  80

 

(a) 

Including equity share of refineries in which the Group has a stake.

(b) 

Crude/distillation capacity at the beginning of the year (2014: SATORP refinery’s capacity considered as from January 1).

 

 

 

Petrochemicals: breakdown of TOTAL’s main production capacities

 

    2015   2014   2013 
As of December 31(in thousands of tons)  Europe   

North

America

   Asia and
Middle East
(a)
   Worldwide   Worldwide   Worldwide 

Olefins(b)

   4,384     1,525     1,525     7,433     7,791     7,654  

Aromatics(c)

   2,903     1,512     2,368     6,783     6,773     5,635  

Polyethylene

   1,120     445     773     2,338     2,338     2,289  

Polypropylene

   1,350     1,200     400     2,950     2,950     2,895  

Polystyrene

   637     700     408     1,745     1,805     1,530  

Other(d)

             63     63     63     63  

Total

   10,394     5,382     5,536     21,312     21,720     20,065  

 

(a) 

Including interests in Qatar, 50% of Hanwha Total Petrochemicals Co. Ltd. and 37.5% of SATORP in Saudi Arabia.

(b) 

Ethylene + propylene + butadiene.

(c) 

Including monomer styrene.

(d) 

Mainly monoethylene glycol (MEG) and cyclohexane.

 

 

Development of new avenues for the production of fuels and polymers

In addition to optimizing existing processes, TOTAL is exploring new ways to monetize carbon resources, conventional or otherwise (natural gas, biomass, waste). A number of innovative projects are being examined that entail defining access to the resource (nature, location, supply method, transport), the nature of the molecules and target markets (fuels, lubricants, petrochemicals, specialty chemicals) and the most appropriate, efficient and environmentally-friendly conversion processes. With regards to biomass transformation, TOTAL is involved in the following projects:

 

 Biomassto polymers

TOTAL is actively involved in the development of activities associated with the conversion of biomass to polymers. The main area of focus is the development of the production of new molecules such as polylactic acid (PLA) and the development of drop-in solutions, by incorporating biomass into the Group’s existing units, for example hydrotreated vegetable oil (HVO) or other hydrotreated vegetable oil co-products in a naphtha cracker.

 

 Biomassto fuels

In Europe, TOTAL produces biofuel, namely hydrotreated vegetable oils for incorporation into diesel, and ether produced from ethanol and isobutene (ETBE) for incorporation into gasoline.

In 2015, the Group incorporated:

 

 

in gasoline, 442 kt of ethanol(1) at its European refineries and several depots(2); and

 

in diesel, 1,771 kt of FAME(3) or HVO at its European refineries and several depots(2).

In addition, as part of the La Mède refinery transformation program announced in April 2015, the Group will construct the first bio-refinery in France in 2017. The Group intends to produce almost 500 kt/y of biofuel on this site, mainly high-quality biodiesel (HVO) but also biojet and petrochemical bio-feedstocks. This will therefore allow the La Mède plant to respond to the growing biofuel market.

TOTAL is a member of the BioTFuel consortium, the objective of which is to develop a chain for converting lignocellulose into fungible, sulfur-free liquid products through gasification. The construction of a pilot demonstration unit on the Dunkirk site in France was launched in September 2014.

 

3.1.2.Speciality Chemicals

The specialty chemicals businesses include elastomer processing (Hutchinson) and electroplating chemistry (Atotech). They primarily serve the automotive, construction, electronics, aerospace and convenience goods markets, for which marketing strategy, innovation and customer service are key drivers. TOTAL markets specialty products in more than 60 countries and intends to develop by combining organic growth and targeted acquisitions.

 

 

 

(1)

Including ethanol from ETBE (ethyl-tertio-butyl-ether) and biomethanol from bio-MTBE (methyl-tertio-butyl-ether), expressed in ethanol equivalent and biomethanol. Reference for bio content of ETBE and bio-MTBE is the EU Renewable Energy Directive.

(2)

Zeeland refinery included (TOTAL’s share).

(3)

FAME: fatty-acid-methyl-ester.

 

2015 Form 20-F TOTAL S.A. 33


Item 4 - B.3. Refining & Chemicals Segment

 

This development is focused on high-growth markets and the marketing of innovative products with high added value that meet the Group’s Sustainable Development approach.

In 2015, consolidated worldwide sales of specialty chemicals activities (excluding Bostik) totaled4.8 billion ($5.4 billion), a 9% increase compared to 2014 and up 16% compared to 2013.

In February 2015, TOTAL finalized the divestment of its wholly-owned subsidiary Bostik, specialized in adhesive chemicals. In 2014, Bostik had almost 4,900 employees over 48 production sites in the world and its sales were1.5 billion ($2 billion).

 

 

Elastomer processing

Hutchinson designs and supplies innovative and tailor-made solutions to automotive and aircraft manufacturers and major industries (defense, rail, energy) so that they can offer their clients a greater level of safety and comfort. The company, one of the industry’s global leaders(1), mainly develops vibration and thermal insulation systems as well as fluid management and sealing solutions that combine performance and energy efficiency.

Hutchinson has over 87 production sites and 30,500 employees across the world to cater to its clients.

Hutchinson’s sales were3.8 billion ($4.3 billion) in 2015, up 11% compared to 2014 and 17% compared to 2013. This growth was due to outperformance on the world’s automotive markets, especially among German and Asian manufacturers. In 2015, Hutchinson also performed well on its other markets, particularly civil aeronautics.

In addition, Hutchinson is pursuing the differentiation of its business by investing in several R&D programs that focus on material innovations and solutions that incorporate mechatronic components.

Since 2014, all Hutchinson entities that previously operated under 26 different brand names have been marketed under a unique Hutchinson brand name for greater consistency and visibility.

 

 

Electroplating

Atotech is one of the world’s leading companies in the electroplating sector(1). It is active in the markets for electronics (printed circuits, semiconductors) and general surface treatments (automotive, construction, furnishing).

Atotech has 17 production sites worldwide, including seven in Asia, six in Europe, three in North America and one in South America.

The company’s sales totaled1.0 billion ($1.1 billion) in 2015, up by 4% compared to 2014 and 11% compared to 2013.

In 2015, Atotech successfully pursued its strategy to differentiate its products by offering its customers a complete package in terms

of equipment, processes, facilities design and chemical products and by developing innovative technologies that have less of an impact on the environment. This strategy relies on global coverage provided by its technical centers located near customers.

Atotech intends to pursue its development in Asia, which already represents approximately two-thirds of its global sales.

To strengthen its position in the electronics market, Atotech is increasing and modernizing its production capacity in Asia with two major projects in Malaysia and China (inaugurations planned in 2016 and 2018, respectively). By relocating production as close to its markets as possible, these two projects also adhere to its cost-cutting strategy. Furthermore, the new Atotech Development Center in India is planning to start its operations by 2017 in order to provide for a faster, more sustainable and higher-quality development of products and processes and for a more cost-effective selection of raw materials.

 

3.2.Trading & Shipping

 

Trading & Shipping focuses on serving the Group’s needs by:

 

 

selling and marketing the Group’s crude oil production;

 

providing a supply of crude oil for the Group’s refineries;

 

importing and exporting the appropriate petroleum and refined products for the Group’s refineries to be able to adjust their production to the needs of local markets;

 

chartering appropriate ships for these activities; and

 

undertaking trading on various derivatives markets.

With its acquired expertise, Trading & Shipping is able to extend its scope beyond the aforementioned activities.

Trading & Shipping conducts its activities worldwide through various wholly-owned subsidiaries(2)established on strategically important oil markets in Europe, Asia and North America.

 

3.2.1.Trading

In 2015, Trading benefited from oil price volatility and the contango(3)situation of certain oil indexes (the opposite of the backwardation situation observed in 2014) by better optimizing positions and arbitrage. Significant storage capacities in different parts of the world, made available through leases, contributed to the strong performance of these activities. The Group’s facilities in Houston and Singapore also contributed to the growth of results by expanding their respective activities.

TOTAL is one of the world’s largest traders of crude oil and petroleum products on the basis of volumes traded. The table below presents Trading’s worldwide crude oil sales and supply sources and petroleum product sales for each of the past three years. Trading of physical volumes of crude oil and petroleum products amounted to 5.2 Mb/d in 2015, compared to 4.9 Mb/d in 2014 and to 4.5 Mb/d in 2013.

 

 

 

(1) 

Publicly available information, based on consolidated sales in 2014.

(2) 

These subsidiaries include TOTSA Total Oil Trading S.A., Atlantic Trading & Marketing Inc., Total Trading Asia Pte, Total Trading and Marketing Canada L.P., Total European Trading S.A.S and Chartering & Shipping Services S.A.

(3)

Contango is the price structure in which the prompt price of an index is lower than the future price. For example, the difference between the Brent ICE 1st line and the Brent ICE 12th line was -$6.58/b in 2015, compared with +$1.15/b in 2014. The reverse situation is referred to as backwardation.

 

34 TOTAL S.A. Form 20-F 2015


Item 4 - B.3. Refining & Chemicals Segment

 

 

Trading’s crude oil sales and supply and refined products sales(a)

 

(kb/d)  2015   2014   2013 

Group’s worldwide liquids production

   1,237     1,034     1,167  

Purchased from Exploration & Production

   935     791     916  

Purchased from external suppliers

   2,336     2,227     1,994  

Total of Trading’s crude supply

   3,271     3,018     2,910  

Sales to Refining & Chemicals and Marketing & Services segments

   1,668     1,520     1,556  

Sales to external customers

   1,603     1,498     1,354  

Total of Trading’s crude sales

   3,271     3,018     2,910  

Petroleum product sales by Trading

   1,961     1,854     1,628  

 

(a) 

Including condensates.

 

Trading operates extensively on physical and derivatives markets, both organized and over the counter. In connection with its trading activities, TOTAL, like most other oil companies, uses derivative energy instruments (futures, forwards, swaps and options) with the aim of adjusting its exposure to fluctuations in the price of crude oil and petroleum products. These transactions are entered into with various counterparties.

For additional information concerning derivatives transactions by Trading & Shipping, see Notes 30 (Financial instruments related to commodity contracts) and 31 (Market risks) to the Consolidated Financial Statements.

All of TOTAL’s Trading activities are subject to strict internal controls and trading limits.

 

3.2.2.Shipping

The transportation of crude oil and petroleum products necessary for the activities of the Group is coordinated by Shipping. These

requirements are fulfilled through balanced use of the spot and time-charter markets. The additional transport capacity can also be used to transport third-party cargo. Shipping maintains a rigorous safety policy, mainly through a strict selection of chartered vessels.

In 2015, Shipping chartered approximately 2,900 voyages (relatively constant compared to 2014 and 2013) to transport 126 Mt of crude oil and petroleum products, compared to 122 Mt in 2014 and 115 Mt in 2013. On December 31, 2015, the mid- and long-term chartered fleet amounted to 55 vessels (including 7 LPG vessels), compared to 48 in 2014 and 46 in 2013. None of these vessels are single-hulled and the average age of the fleet is approximately five years.

Like a certain number of other oil companies and ship owners, the Group uses freight rate derivative contracts to adjust Shipping’s exposure to freight rate fluctuations.

 

 

2015 Form 20-F TOTAL S.A. 35


Item 4 - B.4. Marketing & Services Segment

 

 

4.MARKETING & SERVICESSEGMENT

 

The Marketing & Services segment includes worldwide supply and marketing activities in the oil products and services field as well as the activity of New Energies.

 

4.1.Marketing & Services

 

 

The Marketing & Services (M&S) business segment is dedicated to the development of TOTAL’s oil products distribution activities and related services throughout the world. Present in more than 150 countries(1), M&S conveys TOTAL’s brand image to its customers, both private and professional. The brand’s renown, underpinned by large-scale advertising campaigns, substantial R&D spending and an ambitious digital transformation plan all contribute to building its highly visible, innovative and assertive lineup of commercial solutions for its customers.

M&S pursues a proactive, primarily organic, development strategy. M&S aims to consolidate its market share in its six key markets(2) in Western Europe, where it has reached critical mass and is one of the main distributors of oil products(3). M&S continues to develop its activities in high-growth areas, particularly in Africa where it is the leading distributor(4). In 2015, organic investments to the order of $1.1 billion mainly involved the development of retail networks, in particular in Africa.

In 2014 and 2015, M&S disposed of assets to optimize its position in Europe (sales of the liquefied petroleum gas (LPG) marketing subsidiaries in France and Hungary, the LPG/commercial sales activity in Switzerland, and its stakes in the Société Anonyme de la Raffinerie des Antilles and the Société Réunionnaise de Produits Pétroliers). In Turkey, M&S initiated in 2015 the sale of its retail network. At the same time, M&S is making targeted acquisitions in high-growth countries, such as Pakistan, Vietnam, the Dominican Republic, South Africa, Tunisia and Egypt.

M&S’s three main areas of activity are:

 

 

Retail, with a network of slightly more than 16,000 service stations. The Group is focusing on six key markets in Western Europe and continues to develop in Africa, where it is already present in more than 40 countries. In addition to the sale of high-performance fuels and oil products, it is able to capture new customers and build customer loyalty by diversifying its

  

offer in its stores and service stations (e.g., car wash, catering, car servicing) through partnerships with leading brands. The aim of these new offers is to transform service stations into living places where motorists enjoy stopping by. In 2015, the network increased its sales by 6% compared to 2014.

 

The production and sales oflubricants, a highly profitable sector that accounts for almost one third of M&S’s results(5), and in which TOTAL intends to pursue its growth dynamic. M&S has entered commercial and technological partnerships with numerous carmakers. In recent years, contracts with partners and industrial manufacturers in Europe and Asia have completed its long-standing partnerships with French carmakers. Furthermore, M&S will become supplier of first fill oils for BMW’s gasoline engines in its European production plants. With 41 blending plants, including the plant in Singapore commissioned in 2015, and its research investments, M&S is able to supply quality lubricants to its customers worldwide. In 2015, sales of lubricants increased by 3% compared to 2014.

 

The distribution of products and services forprofessional markets. TOTAL is a partner of choice and a local supplier of products (mainly aviation fuel, special fluids, LPG, bitumens, heavy fuels and marine bunkers) and helps its customers to manage all their energy needs with solutions such as the maintenance of oil facilities and the optimization of consumption.

M&S holds interests in five refineries in Africa and one in Europe through its 49% stake in TotalErg.

To meet its customers’ current and future needs, M&S has increased its efforts in R&D by 24% since 2013 to design and develop new product ranges, in particular for the engine technologies of the future.

 

 

4.1.1.Sales of petroleum products

The following table presents M&S petroleum products sales(6) by geographic area:

 

(kb/d)  2015   2014   2013 

Europe

   1,092     1,100     1,139  

France

   541     547     575  

Europe, excluding France

   551     553     564  

Africa

   423     380     326  

Middle East

   85     77     54  

Asia-Pacific(a)

   148     134     144  

Americas

   70     78     86  

 

(a)

Including Indian Ocean islands.

For data on biofuels, refer to “— 3.1.1. Refining & Petrochemicals — Development of new avenues for the production of fuels and polymers”, above.

 

 

(1)

Including via national distributors.

(2)

France, Germany, Belgium, Luxembourg, the Netherlands and Italy.

(3)

Publicly available information, based on quantities sold in 2014.

(4)

PFC Energy and Company data 2014.

(5) 

Adjusted net operating income of M&S, excluding New Energies.

(6) 

In addition to M&S’s petroleum product sales, the Group’s sales also include international Trading (1,538 kb/d in 2015, 1,385 kb/d in 2014 and 1,155 kb/d in 2013) and bulk refining sales (649 kb/d in 2015, 615 kb/d in 2014 and 617 kb/d in 2013).

 

36 TOTAL S.A. Form 20-F 2015


Item 4 - B.4. Marketing & Services Segment

 

 

4.1.2.Service stations

The table below presents the geographical distribution of the Group’s service stations:

 

As of December 31,  2015   2014   2013 

Europe(a)

   8,391     8,557     8,875  

of which France(b)

   3,667     3,727     3,813  

of which TotalErg

   2,608     2,749     3,017  

Africa

   4,058     3,991     3,726  

Middle East

   816     796     770  

Asia-Pacific(c)

   1,531     1,033     1,011  

Americas

   464     452     438  

AS24 network (dedicated to heavy duty vehicles)

   763     740     731  

Total

   16,023     15,569     15,551  

 

(a) 

Excluding AS24 network.

(b) 

TOTAL, Total Access, Elf and Elan-branded service stations.

(c) 

Including Indian Ocean islands.

 

4.1.3.Main activities by geographic area

 

Europe

In Western Europe, the Group continues to optimize its marketing activities in its six main markets. It has a retail network of nearly 8,400 service stations(1) throughout France, Belgium, the Netherlands, Luxembourg, Germany and Italy. TOTAL is regaining market shares in Western Europe by developing an innovative and diversified line of products and services.

 

 

InFrance, the dense retail network includes more than 1,530 TOTAL-branded service stations, 670 Total Access stations (service station concept combining low prices and premium TOTAL-branded fuels and services) and more than 1,300 Elan service stations, which are mainly located in rural areas. Since its launch in 2011, Total Access has led to the Group regaining nearly 3%(2) market share. Developing the range of services in its service stations is one of M&S’s strategic priorities. In France, where new offers and services have been developed for vehicle maintenance, catering and stores, the share of non-oil activities of the network’s income is increasing and already stands at 30%.

In addition, TOTAL promotes a large fuel and service offering to 112,000 customer vehicle fleets. Fuel sales to consumers (B2C) reach more than one million customers.

TOTAL holds stakes in 28 depots in France, 7 of which are operated by Group companies.

 

 

InGermany, TOTAL is the country’s fourth largest operator(3) and continues to expand its network. With about 1,180 service stations at year-end 2015, the Group has gained 1% in market share in two years.

 

In Italy, TOTAL holds a 49% stake in TotalErg, which is the country’s fourth largest operator with more than 2,600 service stations(3).

To distribute its specialty products, the Group benefits from an extensive network in Europe and relies on numerous industrial facilities to produce lubricants (mainly Rouen in France and Ertvelde in Belgium), special fluids (Oudalle in France) and bitumen (Brunsbüttel in Germany).

TOTAL is pursuing its development in high-growth segments throughout Europe, and in particular in lubricants and specialty bitumens on the growing markets in Eastern Europe.

TOTAL is also a major player in the market for fuel-payment cards, with nearly 3.3 million cards issued. With the AS24 card, TOTAL has a dedicated offering for the heavy-duty vehicles segment in 27 European countries. Bolstered by a network of more than 760 service stations, AS24 is expected to continue to grow primarily through expansion in the Mediterranean basin and Eastern Europe and through its toll payment card service, which covers nearly 20 countries.

 

Africa & the Middle East

TOTAL is the leading marketer of petroleum products in Africa and in certain countries in the Middle East, with a 16%(4) average market share in 2015, compared with 13% in 2013. In these regions, it is pursuing a strategy of profitable growth in all its operations.

As part of its dynamic asset management policy and after considering that it would be difficult to reach a sufficient market share in Turkey to achieve the expected level of profitability, TOTAL initiated in 2015 the disposal of its network of 450 service stations.

On high-growth markets, the Group continues its development strategy for its retail network, which grew from approximately 4,400 service stations in 2012, to almost 5,000 in 2015, spread across more than 40 countries. The Group operates major networks in South Africa, Nigeria, Egypt and Morocco.

InEgypt, TOTAL acquired the service station network and commercial sales activities of Shell and Chevron in 2013. The incorporation of these entities enabled the Group to increase its size three-fold and to become the second private operator in Africa’s largest market, with a 14% network market share(3).

Overall, M&S continues to gain market share in the countries where it operates in Africa and the Middle East. On the one hand, M&S has acquired independent petroleum networks in certain countries or is expanding its specialty products portfolio, as illustrated by the acquisition of an LPG activity in Tunisia, and on

 

 

 

(1) 

Excluding AS24 network.

(2) 

Company data.

(3) 

Source: IHS 2014.

(4) 

Market share in the countries where the Group operates, based on 2014 publicly available information on quantities sold.

 

2015 Form 20-F TOTAL S.A. 37


Item 4 - B.4. Marketing & Services Segment

 

the other hand, M&S is deploying a range of innovative products and services through partnerships in catering and stores, as well as in digital solutions. The retail networks in some 20 countries now offer customers to use their smartphones for money transfer services and payments by smartphone are accepted in the service stations of approximately 10 countries.

To strengthen its local presence, M&S began a process of opening up the share capital of select subsidiaries to regional investors, particularly in Morocco and Senegal in 2015. The opening up of the capital resulted in the listing of these two entities, respectively, on the Abidjan stock exchange in February and the Casablanca stock exchange in May.

TOTAL is pursuing a strategy for growth in specialty products markets in Africa and the Middle East. M&S, which relies in particular on lubricants blending plants in Dubai and Egypt, started up a new plant of this type in Saudi Arabia in 2013.

Moreover, TOTAL acts as a leading partner for mining customers in Africa by delivering complete supply chain and management solutions for fuels and lubricants.

Finally, TOTAL continued to develop its Awango by Total solar solutions, expanding this line to 10 new countries in Africa and the Middle East in 2015 (for additional information, refer to“— E.  Other Matters —  4.3.4.5. Giving the most disadvantaged populations greater access to energy”, below.

 

Asia-Pacific

At year-end 2015, TOTAL was present in more than 20 countries in the Asia-Pacific region and continues to strengthen its position in the distribution of fuels and specialty products.

TOTAL operates service station networks in China, Pakistan, the Philippines, Cambodia and Indonesia, and is a significant player in the Pacific islands. The Group network continued to expand, and reached nearly 1,400 service stations at year-end 2015, an increase of nearly 550 compared to 2014.

 

 

InPakistan, TOTAL, with its local partner PARCO, completed the acquisition of Chevron’s distribution network in 2015. This acquisition will expand TOTAL’s network by 500 service stations and strengthen the Group’s distribution and logistics capacities in Pakistan.

 

In thePhilippines, TOTAL is pursuing its development, with the goal of doubling its retail network market share.

 

InChina, the Group was operating more than 200 service stations at year-end 2015 through two joint ventures with Sinochem and a wholly-owned subsidiary.

TOTAL’s share of the inland lubricant(1) market reached 3.4% in 2015 in this region. One of the Group’s largest lubricant production plants started up in mid-2015 inSingapore in order to support M&S’s ambitions for growth in the region. It boasts a capacity of 310 kt/year. In China, a third lubricant production plant with a capacity of 200 kt/year was inaugurated in Tainjin in 2013. TOTAL continues to strengthen its presence on the specialties market in the region, in particular inVietnam, where the Group became number two(2) on the LPG market in 2015 following an acquisition, and in India, with the extension of its LPG distribution to 55 stations.

 

Americas

In theAmericas, TOTAL is active directly in more than 20 countries and indirectly (via distributors) in approximately 20 additional countries. TOTAL operates a large number of

industrial units in these countries including, in particular, the production of lubricants and the storage and bottling of LPG. In addition, the Group has opened new distribution subsidiaries in Peru and the Dominican Republic, in 2013 and 2014, respectively.

In theCaribbean, the Group operates on several islands with more than 450 service stations at year-end 2015. In January 2016, TOTAL strengthened its position with the acquisition of a majority stake of 70% in the fuel marketing leader in the Dominican Republic, which operates a network of 130 service stations, commercial sales and lubricants activities.

InLatin America, TOTAL continues to pursue its growth strategy for specialty products (primarily lubricants and special fluids).

In theUnited States andCanada, TOTAL mainly markets specialty products, particularly lubricants, jet fuels and special fluids. To strengthen its special fluids business, the Group is constructing a special fluids production plant near Houston, Texas, which is expected to be operational in 2016.

 

4.1.4.Products and services developments

The Group develops technologically advanced products, some of which are formulated for use in motor sports before being generally released on the market. In 2015, TOTAL continued its technical partnerships, in particular with Renault Sport F1 (Formula 1) and the PSA Peugeot Citroën group (WRC, WTCC and Rallycross). These partnerships demonstrate TOTAL’s technical excellence in the formulation of fuels and lubricants under extreme conditions and subject to requirements to reduce fuel consumption. At year-end 2014, TOTAL and Renault renewed their global partnership for the next five years in the areas of R&D, business relations with Renault after-sales networks and Formula 1.

In order to respond to developments in world markets and prepare tomorrow’s growth opportunities, TOTAL develops solutions in collaboration with its customers that optimize their energy bills such as the Total Ecosolutions product and service label (refer to “— E. Other Matters — 4.2.3.4. Energy efficiency and ecoperformance”, below). These solutions integrate a diversified range of energy supplies (fuels, gas, photovoltaics and wood pellets) as well as consumption auditing, monitoring and management services. In the realm of consumption management, TOTAL draws on the know-how of its Tenag joint venture in Germany (49% owned) and its 2014 acquisition BHC Energy in France, both of which specialize in energy efficiency.

Looking beyond energy services, TOTAL also relies on digital innovations to develop new offers for its customers, such as money transfers and payment by smartphone in Africa, or online domestic heating oil orders in France. Total’s mobile application “Total Services” has been deployed in 42 countries. For its professional customers, M&S has launched Bitume Online in France, a platform that offers bitumens at fixed rates, and a portal for lubricant distributors deployed in 20 countries, among others. In addition to the offers designed by TOTAL, M&S also supports innovative start-ups in order to encourage the development of new business models and to test the commercial and economic worth of innovative services.

In the longer term, TOTAL also supports the development of alternatives to traditional fuels:

 

 

Gas for transport, a segment in which M&S intends to grow: TOTAL has approximately 400 stations that deliver compressed natural gas in Asia, Africa and Europe. In 2015, TOTAL opened its first liquefied natural gas (LNG) station for

 

 

 

(1) 

For non-maritime transportation and industrial applications.

(2) 

Company data.

 

38 TOTAL S.A. Form 20-F 2015


Item 4 - B.4. Marketing & Services Segment

 

  heavy duty vehicles in the port of Antwerp (Kallo) in Belgium, and its European subsidiaries are keeping an active watch on the potential of LNG as a fuel.
 

Hydrogen: through its Clean Energy Partnership (CEP) in Germany, TOTAL is contributing to the development of a network of hydrogen stations, with the target of opening 50 stations by the end of 2016. In addition, with its partners Air Liquide, Daimler, Linde, OMV and Shell, TOTAL created in 2015 the “H2 Mobility Germany” joint venture, which aims to deploy some 400 hydrogen stations in Germany, with more than 250,000 fuel cell vehicles forecasted by 2023.

 

Electro-mobility: The development and demonstration of the distribution of electricity intended for electric vehicles continued in 2015 in TOTAL’s European subsidiaries. TOTAL has approximately 20 prototype electric vehicle refueling stations in the Netherlands, Belgium, Luxembourg and Germany. A partnership with Sodetrel (EDF) resulted in the installation of 10 fast charging stations in motorway service stations in France in 2015. Industrial partnership projects in France, Benelux and Germany are expected to allow for the installation of 110 additional fast charging stations in 2016.

 

4.2.New Energies

 

The Group, in addition to its activities in hydrocarbons, is active in the development of renewable energies to build a diversified energy mix while generating lower CO2 emissions as a response to the challenge of climate change. To develop robust and profitable New Energies activities, the Group focuses on the following two themes:

 

 

solar energy, a high-growth market in which the Group is positioned among the leaders through SunPower; and

 

the transformation of biomass through biotechnology, a second theme of development over a longer term, which aims to develop new biosourced product solutions for transportation and chemicals.

TOTAL actively follows developments in other renewable energies. In this context, the Group owns a farm of four wind turbines (10 MW near Dunkirk, France) and a stake in marine energy (9.99% in the company Scotrenewables Tidal Power, Scotland).

The Group expects to dedicate to New Energies an annual investment budget of approximately $500 million for the coming years.

 

4.2.1.Solar energy

TOTAL is mainly present in the photovoltaic sector based on crystalline silicon technology through SunPower, in which the Group acquired a majority stake in 2011. The Group is also pursuing R&D investments in this field through several industrial and academic partnerships.

The steady reduction in photovoltaic electricity costs is increasing solar competitiveness in an ever-growing number of markets, in solar farms and residential and commercial applications.

 

SunPower

TOTAL holds 57.48% of SunPower as of December 31, 2015, an American company listed on NASDAQ and based in California. As an integrated player, SunPower operates over the entire solar power value chain. On the one hand, it designs, manufactures and supplies cells as well as the highest-efficiency crystalline silicon-based solar panels on the market. On the other hand, SunPower is active in the design and construction of large turnkey power plants

and in the marketing of integrated solar solutions for decentralized electricity generation.

Upstream, SunPower manufactures all of its cells in Asia (Philippines, Malaysia) and has a total production capacity of 1,360 MW/y. Through its significant R&D program, the company is constantly optimizing its production process to reduce costs while maintaining its technological leadership. The cells are assembled into modules, or solar panels, in plants located in Asia, the United States, Mexico, Europe and South Africa. A 350 MW/y expansion in capacity was approved at the end of 2013 for a production start-up in 2016.

To expand its product offering, SunPower launched at year-end 2015 a module to target the most competitive market sectors while continuing to hold a technical edge over its competitors.

Downstream, SunPower markets its panels worldwide for applications ranging from residential and commercial roof tiles to large solar power plants. As of December 31, 2015, SunPower holds a 40.7% stake in the company 8point3 Energy Partners, initially set up with First Solar. 8point3 Energy Partners, the purpose of which is to acquire and operate solar projects and to redistribute financial flows to its shareholders in the form of a dividend, was listed on NASDAQ in June 2015. Additionally, SunPower completed in 2015 the construction in the United States of the largest solar farm in the world, Solar Star (709 MWc), and the Quinto farm (135 MWc). SunPower continued to expand internationally with the commissioning in Chile of the El Salvador plant (70 MWc) and the starting of construction in South Africa of the Prieska solar power plant (86 MWc).

SunPower is pursuing its development in residential and commercial markets, in particular in the United States, by increasing its service offerings for solar power production, management and financing. SunPower is also developing its Smart Energy activity to permit its residential customers to optimize their power consumption. In 2015, SunPower signed several agreements with companies developing solutions in the field of consumption and storage management.

 

Other solar assets

The Group holds a 20% stake in the solar power plant Shams 1, commissioned in 2013 in Abu Dhabi. With 109 MW of parabolic concentrated solar power, Shams 1 is the largest thermal parabolic concentrated solar power plant in the Middle East.

In line with its CSR approach, the Group continues to install solar solutions through its decentralized rural electrification projects in several countries, especially in South Africa via KES (Kwazulu Energy Services Company), in which TOTAL holds a 35% stake.

 

New solar technologies

In order to strengthen its technological leadership in the crystalline silicon value chain, and in addition to its cooperation with SunPower in the R&D field, New Energies partners with leading laboratories and international research institutes. This work consists of developing and optimizing the photovoltaic solar power chain (from the silicon to the system passing through the wafers, cells and modules) reducing production costs and increasing the efficiency and reliability of the components. The Group is also strengthening its expertise in solar resource evaluation and prediction.

Additionally, downstream, TOTAL is continuing its research efforts on new generations of energy management, control and storage systems for residential applications in order to differentiate

 

 

2015 Form 20-F TOTAL S.A. 39


Item 4 - C. Property, Plant & Equipment

 

SunPower’s offer on the electric market and to lower the cost of energy consumed.

 

4.2.2.Biotechnologies and the conversion of biomass

TOTAL is exploring a number of opportunities for developing biomass depending on its nature, accessibility and sustainability. The objective is to sell high-performance molecules in targeted markets (e.g., fuel, lubricants, special polymers, chemicals). The Group is focused on the biochemical conversion process of this biomass.

As of December 31, 2015, TOTAL holds 31.52% of Amyris, Inc., an American company listed on NASDAQ that was the Group’s first significant equity investment in biotechnologies. Amyris has a plant in Brazil (in production since 2013) that converts 30 million liters of sugarcane juice into molecules of interest for perfumes and cosmetics as well as farnesene, a molecule of interest for a number of chemical or downstream oil markets, including specialty products and fuels (diesel or jet). Biosourced jet fuel produced

from farnesene received the certification required in 2014 to be sold worldwide to airlines, and proved its technical performance through its use on commercial flights, especially with Air France and KLM. Large-scale deployment will take several years, given the cost reduction effort required to make the molecule competitive with fossil jet fuel. TOTAL and Amyris continue their collaboration agreement covering the setting up of a common R&D team for bio-sourced molecules(1).

In addition, the Group participates in R&D collaborations with other partners to develop technologies complementary to those of Amyris: the deconstruction of lignocellulose, synthetic biology and metabolism engineering, especially through partnerships with Joint BioEnergy Institute and Novogy (TOTAL 100%, United States), the University of Wageningen (Netherlands) and the Toulouse White Biotechnology Consortium (France).

The Group is also studying the longer-term potential for developing a cost-effective phototrophic process for producing biomolecules through microalgae bioengineering.

 

 

 

C. PROPERTY, PLANT & EQUIPMENT

 

 

 

The companies of the Group have freehold and leasehold interests in over 130 countries throughout the world, none of which inidividually is material to TOTAL. Operations in properties, oil and gas fields or any other industrial, commercial or administrative facility, as well as the production capacities and utilization rates of these facilities, are described in “— B. Business Overview”, above, for each business segment (Upstream, Refining & Chemicals and Marketing & Services).

A summary of the Group’s property, plant and equipment and their main related expenses (depreciation and impairment) is included in Note 11 to the Consolidated Financial Statements.

Minimum royalties from finance lease agreements regarding properties, service stations, vessels and other equipment are presented in Note 22 to the Consolidated Financial Statements.

Information about the objectives of the Company’s environmental policy, in particular those related to the Group’s industrial sites or facilities, is presented in “— E. Other Matters — 4. Social and environmental matters”, below.

 

 

 

(1) 

For information on the plan to convert the La Mède refinery to a bio-refinery, refer to “— 3.1.1. Refining & Petrochemicals”, above.

 

40 TOTAL S.A. Form 20-F 2015


Item 4 - D. Organizational Structure

 

 

D. ORGANIZATIONAL STRUCTURE

 

 

 

Position of the Company within the Group

TOTAL S.A. is the Group’s parent company.

The Group’s businesses are organized as indicated on the chart in “— Organization chart as of December 31, 2015”, below. The Group’s business segments receive assistance from the corporate functional divisions grouped within TOTAL S.A.

 

Company subsidiaries

A list of the major subsidiaries directly or indirectly held by the Company included in TOTAL S.A.’s scope of consolidation is presented in Note 35 to the Consolidated Financial Statements.

As of December 31, 2015, there were 882 consolidated companies, of which 789 were fully consolidated and 93 were accounted for under the equity method. The principles of consolidation are described in Note 1.A to the Consolidated Financial Statements.

The decision of TOTAL S.A.’s subsidiaries to declare dividends is made by their relevant shareholders’ meetings and is subject to the provisions of applicable local laws and regulations. As of December 31, 2015, there is no restriction under such provisions

that would materially restrict the distribution to TOTAL S.A. of the dividends declared by those subsidiaries.

During fiscal year 2015, TOTAL S.A. neither acquired any stakes in companies with registered offices in France representing more than one twentieth, one tenth, one fifth, one third or one half of the capital of these companies, nor took control of any such companies.

 

Group interests in publicly-traded companies

TOTAL holds stakes in a limited number of companies that issue publicly-traded financial instruments in France or abroad. These companies are mainly the Group’s financing vehicles (Total Capital, Total Capital Canada Ltd., Total Capital International) or the operational subsidiaries in its business segments, in particular in Africa, such as Total Gabon(1).

TOTAL also holds a majority stake in SunPower (57.48% on December 31, 2015), an American company listed on NASDAQ, and minority interests in other companies, including OAO Novatek (18.9% on December 31, 2015), a Russian company listed on the Moscow Interbank Currency Exchange and the London Stock Exchange.

 

 

2015 Form 20-F TOTAL S.A. 41

 

(1) 

Total Gabon is a company under Gabonese law listed on Euronext Paris. TOTAL holds 58.28%, the Republic of Gabon holds 25% and the public float is 16.72%.


Item 4 - D. Organizational Structure

 

Organization chart as of December 31, 2015

 

LOGO

 

42 TOTAL S.A. Form 20-F 2015


Item 4 - D. Organizational Structure

 

 

 

LOGO

 

2015 Form 20-F TOTAL S.A. 43


Item 4 - E. Other Matters - 1. Investments

 

 

 

 

E. OTHER MATTERS

 

Various factors, including certain events or circumstances discussed below, have affected or may affect TOTAL’s business and results.

 

1.Investments

 

 

1.1

Major investments over the 2013-2015 period(1)

 

Gross investments(a)(M$)  2015  2014   2013 

Upstream

   24,270    26,520     29,750  

Refining & Chemicals

   1,843    2,022     2,708  

Marketing & Services

   1,841    1,818     1,814  

Corporate

   79    149     159  

Total

   28,033    30,509     34,431  
     
Net investments(b)(M$)  2015  2014   2013 

Upstream

   21,055    20,756     21,866  

Refining & Chemicals

   (1,645  1,830     2,346  

Marketing & Services

   896    1,476     1,570  

Corporate

   54    78     97  

Total

   20,360    24,140     25,879  
     
(M$)  2015  2014   2013 

Acquisitions

   3,441    2,539     4,473  

Divestments

   5,968    4,650     4,750  

Other operations with non-controlling interests

   89    179     2,153  
     
Organic investments(c) (M$)  2015  2014   2013 

Upstream

   20,508    22,959     24,102  

Refining & Chemicals

   827    1,944     2,530  

Marketing & Services

   1,569    1,424     1,579  

Corporate

   72    104     97  

Total

   22,976    26,430     28,309  

 

(a)Including acquisitions and increases in non-current loans. The main acquisitions for the 2013-2015 period are detailed in Note 3 to the Consolidated Financial Statements.
(b)Net investments = gross investments — divestments — repayment of non-current loans — other operations with non-controlling interests. The main divestments for the 2013-2015 period are detailed in Note 3 to the Consolidated Financial Statements.
(c)Organic investments = net investments, excluding acquisitions, divestments and other operations with non-controlling interests.

 

In 2015, the Group put in place a strong response to the falling Brent price, based in particular on a reduction in organic investments. Including net investments in equity andnon-consolidated affiliates, organic investments were $23.0 billion, in accordance with the $23-24 billion objective. They were $26.4 billion in 2014 after reaching a peak of $28.3 billion in 2013, in line with the Group’s growth strategy. Major projects that will support a production growth of 5% per year on average until 2019(2) are launched, investments drop as they start and additional savings measures are implemented to accelerate this trend.

In the Upstream segment, most of the investments were geared toward the development of new hydrocarbon production facilities, the maintenance of existing facilities and exploration operations. Development expenditure mainly pertained to the nine projects started in 2015 (Ofon 2, Eldfisk 2, West Franklin 2, Surmont, Termokarstovoye, GLNG, Dalia Phase 1a, Moho Phase 1b, Lianzi), the five projects that are expected to start in 2016 (Laggan-Tormore, Vega Pleyade, Incahuasi, Angola LNG and Kashagan) and to other major projects under construction like Moho North in the Republic of the Congo, Ichthys in Australia, Egina in Nigeria and Yamal in Russia.

In the Refining & Chemicals segment, investments were made in facilities maintenance and safety, as well as in projects aimed at

improving the plants’ competitiveness. In 2015, the Group completed the Carling adaptation project, with the closure of the steamcracker in October and the modernization of the Antwerp refinery. The segment also announced in France the transformation of the La Mède refinery into a bio-refinery and the modernization of the Donges refinery, and the 50% capacity reduction of the Lindsey oil refinery in the United Kingdom.

In the Marketing & Services segment, investments in 2015 mainly concerned the network (notably in Africa), logistics and specialty products production and storage facilities, notably the new Singapore lubricant plant inaugurated in July.

While mobilizing its teams for future startups in Upstream and for cost reduction programs, the Group is preparing for the future by expanding its acreage and acquiring stakes in new promising assets. Acquisitions were $3.4 billion, comprised principally of the ADCO license extension in Abu Dabi, the renewal of licenses in Nigeria, the acquisition of an additional stake in OAO Novatek(3) and the carry on the Utica gas and condensate field in the United States.

Gross investments (including acquisitions and changes innon-current loans) fell by 8% to $28.0 billion in 2015 compared to $30.5 billion in 2014.

 

 

 

(1) 

Including acquisitions. The main acquisitions in fiscal years 2013-2015 are detailed in Note 3 to the Consolidated Financial Statements.

(2) 

Compared to 2014.

(3) 

The Group held an 18.9% stake in OAO Novatek as of December 31, 2015.

 

44 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 2. R&D

 

The Group also continued its asset sale program with the finalization of sales totaling $6.0 billion in 2015, comprised essentially of the sale of a 20% interest in Laggan-Tormore in the United-Kingdom, a 10% interest in the Fort Hills project in Canada, the Group’s stake in the Schwedt refinery in Germany, a majority share in Geosel in France and the finalization in 2015 of the sales announced in 2014 (Bostik, participations in Nigerian onshore blocks, coal mines in South Africa and Totalgaz).

The Group confirmed an asset sale target of $10 billion for2015-17. The sales of the FUKA pipeline system in the United-Kingdom, a 15% in the Gina Krog project in Norway and the marketing activities in Turkey were announced in 2015.

Net investments were therefore $20.4 billion in 2015, compared to $24.1 billion in 2014, a decrease of 16%. This decrease was essentially due to the decrease in organic investments.

 

1.2Major planned investments

In response to the falling oil prices, TOTAL announced an organic investments budget for 2016 of approximately $19 billion.

Investments in the Upstream segment are expected to be approximately $16 billion and will mainly be allocated to major development projects, including Vega Pleyade, Incahuasi, Angola LNG and Kashagan that are expected to start in 2016 as well as Ichthys in Australia, Moho Nord in the Republic of the Congo, Egina in Nigeria and Yamal in Russia that are expected to start from 2017. A little over $4 billion will also be allocated to assets already in production, in particular for maintenance capital expenditures and in-fill wells.

The Refining & Chemicals segment has an investment budget of approximately $1.5 billion, which is expected to be allocated to the refining, petrochemicals and specialty chemicals businesses. The modernization of the Antwerp integrated platform, the transformation of the La Mède refinery in a bio-refinery and the adaptation of the Lindsey refinery are the three largest investments in the segment in 2016. A significant portion of the segment’s budget will also be allocated to the maintenance and safety investments required for these types of industrial activities.

The Marketing & Services segment has an investment budget of approximately $1.5 billion, which is expected to finance, in particular, the service station network, logistics, specialty products production and storage facilities, particularly lubricants, and the development of its activities in New Energies. Most of the Marketing & Services budget will be allocated to growth areas (Africa, Middle East, Asia and Latin America).

After 2016, TOTAL expects investments to be in line with a$17-19 billion per year guideline and this level should allow the Group to grow 1-2% per year over the long-term, in line with oil and gas market growth.

TOTAL self-finances most of its investments from its excess cash from operations (refer to Consolidated Statement of Cash Flow for the Years Ended December 31, 2015, 2014 and 2013), which is mainly supplemented by accessing the bond market on a regular basis, when conditions on the financial markets are favorable (refer to Note 20 to the Consolidated Financial Statements). However, investments for joint ventures between TOTAL and external partners are generally funded through specific project financing.

Active management of the asset portfolio, which is fully integrated into the Group’s strategy, creates value and TOTAL has confirmed its 2015-17 asset sale program of $10 billion, including $4 billion announced in 2015. In addition, the Group makes targeted acquisitions, notably to acquire resources discovered by other oil companies, with $2 billion planned in 2016.

As part of certain project financing arrangements, TOTAL S.A. has provided guarantees. These guarantees (“Guarantees given on borrowings”) as well as other information on the Group’s off-balance sheet commitments and contractual obligations appear in Note 23 to the Consolidated Financial Statements. The Group currently believes that neither these guarantees nor the other off-balance sheet commitments of TOTAL S.A. or of any other Group company have, or could reasonably have in the future, a material effect on the Group’s financial position, income and expenses, liquidity, investments or financial resources.

 

 

2.Research & Development

 

 

Certain R&D initiatives of the Group are set forth below. For additional information on the Group’s R&D, see “Item 5 — Research and Development”.

 

2.1.Upstream

In Exploration & Production, the project portfolio was reviewed in 2015 according to what impact the projects have on reducing costs and improving production. More than half the R&D budget is given to improving exploration, seismic acquisition and imaging technologies, appraisal of hydrocarbon reservoirs and simulation of field evolution during operations, especially for low permeability or carbonate reservoirs. Enhancing oil recovery from mature reservoirs remains an active area of research.

A new direction was taken to strengthen R&D activities in offshore at greater distances for multiphase production transport, which is fully in line with the goals of Exploration & Production and supports major technology-intensive assets such as Libra in Brazil.

The oxy-combustion CO2 capture and storage project in the depleted Rousse reservoir in Lacq (France) is still in the monitoring phase, following the injection phase that ended in 2013. The Group now has a strong command of the methods used to characterize reservoirs and their mechanical properties for this type of injection. New projects will look into new capturing solutions.

A sustained effort to adapt mature technologies in order to reduce their costs has been implemented. In particular, new produced water management technologies are now available for new developments. This subject is part of a larger program dedicated to sustainable development.

Finally, R&D programs prepare for the more distant future, whether for developing technologies, such as robotics orhigh-performance computing, or for researching new exploration concepts.

Concerning the activities of Gas, the program to develop new technological LNG solutions is continuing.

 

2.2.Refining & Chemicals

 

2.2.1.Refining & Chemicals (excluding Specialty Chemicals)

The aim of R&D is to support the medium and long-term development of Refining & Chemicals. In doing so, it contributes to the technological differentiation of this business through the development, implementation and promotion of effective R&D programs that pave the way for the industrialization of knowledge, processes and technologies.

In line with Refining & Chemicals’ strategy, R&D places special emphasis on the following four major challenges: take advantage

 

 

2015 Form 20-F TOTAL S.A. 45


Item 4 - E. Other Matters - 2. R&D

 

of different types of feedstock, maximize asset value, continue developing innovative products, and develop bio-sourced products. The medium-term strategy of the project portfolio and its deployment plan will facilitate Refining & Chemicals’ technological differentiation.

To take advantage of different types of feedstock, R&D activities related to the processing of more diversified crudes have increased significantly through a clearer insight into the effect that feedstocks have on equipment and processes at the molecular level. R&D is launching ambitious new programs to develop various technologies for producing liquid fuels, monomers and intermediates from gas.

R&D is developing expertise and technologies with a view to maximizing asset value. Its efforts mainly involve programs focusing on the flexibility and availability of facilities. Advanced modeling of feedstocks and processes helps the units overcome their processing-related constraints and operate while taking these constraints into account in real time. Research conducted on catalysts is helping to increase their resistance, improve catalytic stability and extend the cycle time at a lower cost. Programs are being set up to maximize the value of heavy residues.

To address concerns related to social and environmental acceptability in particular, R&D is focusing its efforts on reducing emissions to minimize facilities’ environmental footprint. In anticipation of long-term challenges and the value of CO2, R&D is pioneering technologies to reduce GHG emissions through carbon capture and recovery by conversion.

Product innovation is a key aspect of research on polymers. R&D draws on its knowledge of metallocenes and bimodality to develop different types of mass consumption polymers that have exceptional properties that allow them to replace heavier materials and compete with technical polymers. Value-added niche polymers are also being developed, whether in the form of blends, compounds or composites. Efforts to diversify into “green” products are focused mainly on bioproducts endorsed by the market: biomonomers, biointermediates and biopolymers. R&D is banking on polylactic acid for the market launch of new polymers that boast enhanced properties. In addition, the development of blends, compounds and composites broadens the scope of application of polylactic acid-based polymers.

With regard to biofuels, R&D has directed its efforts towards gasification and coprocessing to produce liquid fuels from biomass. R&D is also particularly mindful of issues related to blends and product quality raised by the use of biomolecules.

Efficient resource use and end-of-life management for plastics are topics of growing interest. R&D is therefore developing technologies that enable plastics to be used more efficiently as feedstock.

 

2.2.2.Specialty Chemicals

R&D is strategically important for specialty chemical products. It is closely linked to the needs of the subsidiaries and industrial customers.

Material innovation at Hutchinson is gaining pace for raising performance and increasing potential applications, with the development of advanced rubber or thermoplastic formulas, the development of new material formulations based on composite structures, and the development of energy storage applications.

The aerospace and automotive industries face the same challenges, namely mass reduction, energy efficiency, and diagnostic and control functionality. In 2015, Hutchinson improved its expertise in electronics and embedded systems. Hutchinson has also extended its network of partnerships across the American continent and Asia.

Atotech is a global leader in integrated production systems (chemicals, equipment, expertise and service) for industrial surface finishing and the manufacturing of integrated circuits. Given the environmental challenges related to electroplating, nearly half of Atotech’s R&D projects are designed to develop ever cleaner technologies and favor conditions for the sustainable development of these industries.

 

2.3.Marketing & Services

 

2.3.1.Marketing & Services

In 2015, the R&D of the Marketing & Services activities continued to roll out its new roadmap in line with its ambitions.

The roadmap features two focal points: reducing the environmental footprint of products and improving the durability of its end users’ equipment. They include the following developments: energy savings for customers (fuels, lubricants, additives and bitumen), competitive advantage and new solutions (lubricants, bitumen and special fluids), anticipation of changes in legislation (marine lubricants and aviation fuel), and incorporation of bio-sourced molecules (lubricants and racing fuels).

Considerable efforts are therefore being made to develop digital tools that can be used to provide a closer insight into how products work, model their behavior, detect the performance of the different components available and ultimately determine targets for chemists and formulators.

In 2015, a project aimed at pioneering new molecules for future changes to the Total Excellium fuel range was launched, with target areas including chemicals and methods & measurements. Extensive work was also aimed at developing new products and adapting products to the range, mainly for Africa and the Middle East.

In the field of refinery additives, research continued into understanding and modeling the crystallization kinetics of paraffin.

The Fuel Economy range of lubricants continues to expand with many new products designed to comply with the specifications of manufacturers targeted by the Total Lubricants business line in all fields of application (automotive, marine and manufacturing). The key work areas are focusing on the design of breakthrough components used in formulations. Furthermore, new marine lubricants for two-stroke engines are being developed to anticipate changes in fuel specifications (very low sulfur rate in coastal areas) and reduce emissions.

To meet the challenges of competitiveness, sustainable logistics and geographic development in the bitumen sector, researchers mainly concentrated on the prospect of transporting bitumen in solid form and developing Styrelf formulas for the international market.

Cooperation with the Federal Aviation Administration (FAA) continued in the field of unleaded Avgas.

A greater understanding of the molecular composition of fluids, their applicative properties and their method of manufacture paved the way for new innovations, some of which in the field of renewable energy technologies.

 

 

46 TOTAL S.A. Form 20-F 2015

 

(1) 

American company listed on NASDAQ in which the Group holds a 57.48% interest as of December 31, 2015.


Item 4 - E. Other Matters - 3. Insurance and risk management

 

In terms of Formula One racing, closer ties with manufacturers were instrumental in raising engine performance. This collaboration will help target future fuel developments more effectively.

In 2015, the Asia-Pacific Technical Center based in Bombay, India, continued to ramp up its activities and strengthen its skills, mainly in lubricants (including textile lubricants and engine lubricants) and special fluids, including drilling fluids.

French and international skills have been increasingly enlisted in recent years, with a growing number of ties with academia, researchers seconded to universities, and international researchers recruited for the Solaize Research Centre. Cooperation with academia and secondments contribute to core research used to provide scientific support for designing and developing breakthrough products, which is one of Marketing & Services’ objectives.

 

2.3.2.New Energies

New Energies’ R&D effort is focused on the solar value chain from silicon to photovoltaic electricity management systems and on the development of biotechnological methods of converting biomass into products for the Group’s markets.

In the field of solar energy, R&D is striving to improve SunPower’s(1) methods of producing cells and modules in order to drive down costs while enhancing their efficiency and reliability. It is also preparing future generation photovoltaic cells within the framework of several strategic partnerships between TOTAL and renowned academic research institutes. In particular, TOTAL is the founding partner of the Ile de France Photovoltaic Institute, an ambitious project set up in the Paris-Saclay campus.

Downstream in the solar value chain, R&D is monitoring the development of low-cost stationary storage technologies. It is also preparing solutions for supplying solar power and associated services to residential markets, by developing software tools and algorithms for the intelligent management of domestic electricity production and consumption, but also by integrating and testing

systems combining photovoltaics, storage, control of demand as well as pilots for assessing and improving systems and algorithms in contact with customers.

With regard to biotechnologies, the Group is developing methods for converting sugars into biofuels and molecules of interest for chemicals, as well as processes for the deconstruction of lignocellulose into sugars. The Group has set up its own laboratories, including a competence center on fermentation and a laboratory focused on themes shared by New Energies and Marketing & Services (bio-sourced specialties in particular), and a dedicated research team. This research team manages a network of partnerships with research laboratories and startups in the United States and in Europe. The Group mainly works with Amyris(1), a company specializing in biotechnologies (refer to “— B.4.2.2. Biotechnologies and the conversion of biomass, above).

 

2.4.Environment

Environmental issues are important throughout the Group and are taken into account in all R&D projects. R&D’s effort is to manage environmental risks more effectively, particularly with regard to:

 

 

water management, especially by reducing the use of water from natural environments and lowering emissions in compliance with local, national and international regulations;

 

reduction of GHG emissions by improving energy efficiency and monitoring carbon capture and storage and the potential effects of CO2 on the natural environment;

 

detection and reduction of discharges into the air and simulation of their dispersal;

 

prevention of soil contamination and regulatory compliance with regard to historical aspects and the remediation of sites; and

 

changes in the Group’s different products and management of their life cycle, in particular in compliance with the Registration, Evaluation, Authorisation and Restriction of Chemicals regulation (REACH).

 

 

3.Insurance and risk management

 

 

3.1.Organization

TOTAL has its own reinsurance company, Omnium Reinsurance Company (ORC). ORC is integrated within the Group’s insurance management and is used as a centralized global operations tool for covering the Group companies’ insurable risks. It allows the Group’s worldwide insurance program to be implemented in compliance with the specific requirements of local regulations applicable in the countries where the Group operates.

Some countries may require the purchase of insurance from a local insurance company. If the local insurer accepts to cover the subsidiary of the Group in compliance with its worldwide insurance program, ORC negotiates a retrocession of the covered risks from the local insurer. As a result, ORC enters into reinsurance contracts with the subsidiaries’ local insurance companies, which transfer most of the risk to ORC.

At the same time, ORC negotiates a reinsurance program at the Group level with oil industry mutual insurance companies and commercial reinsurance markets. ORC allows the Group to better manage price variations in the insurance market by taking on a greater or lesser amount of risk corresponding to the price trends in the insurance market.

In 2015, the net amount of risk retained by ORC after reinsurance was, on the one hand, a maximum of $53 million per onshore third-party liability insurance claim or $77 million per offshore third-party liability insurance claim and, on the other hand, $75 million per property damage and/or business interruption insurance claim. Accordingly, in the event of any loss giving rise to an aggregate insurance claim, the effect on ORC would be limited to its maximum retention of $152 million per occurrence.

 

3.2.Risk and insurance management policy

In this context, the Group risk and insurance management policy is to work with the relevant internal department of each subsidiary to:

 

 

define scenarios of major disaster risks (estimated maximum loss);

 

assess the potential financial impact on the Group should a catastrophic event occur;

 

help implement measures to limit the probability that a catastrophic event occurs and the financial consequences if such event should occur; and

 

manage the level of financial risk from such events to be either covered internally by the Group or transferred to the insurance market.

 

 

2015 Form 20-F TOTAL S.A. 47

 

(1) 

American company listed on NASDAQ in which the Group holds a 31.52% interest as of December 31, 2015.


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

3.3.Insurance policy

The Group has worldwide property insurance and third-party liability coverage for all its subsidiaries. These programs are contracted with first-class insurers (or reinsurers and oil and gas industry mutual insurance companies through ORC).

The amounts insured depend on the financial risks defined in the disaster scenarios and the coverage terms offered by the market (available capacities and price conditions).

More specifically for:

 

 

third-party liability: since the maximum financial risk cannot be evaluated by a systematic approach, the amounts insured are based on market conditions and oil and gas industry practice. In 2015, the Group’s third-party liability insurance for any liability (including potential accidental environmental liabilities) was capped at $900 million (onshore) and $850 million (offshore). In addition, the Group adopts, where appropriate, the necessary means to manage the compensation of victims in the event of an industrial accident for which it is liable; and

 

property damage and business interruption: the amounts insured vary by sector and by site and are based on the estimated cost and scenarios of reconstruction under maximum loss situations and on insurance market conditions. The Group subscribed for business interruption coverage in 2015 for its main refining and petrochemical sites.

For example, for the Group’s highest risks (North Sea platforms and main refineries or petrochemical plants), in 2015 the insurance limit for the Group share of the installations was approximately $1.75 billion for the Refining & Chemicals segment and approximately $2.15 billion for the Upstream segment.

Deductibles for property damage and third-party liability fluctuate between0.1 and10 million depending on the level of risk and

liability, and are borne by the relevant subsidiaries. For business interruption, coverage is triggered 60 days after the occurrence giving rise to the interruption. In addition, the main refineries and petrochemical plants bear a combined retention for property damage and business interruption of $75 million per insurance claim.

Other insurance contracts are bought by the Group in addition to property damage and third-party liability coverage, mainly in connection with car fleets, credit insurance and employee benefits. These risks are mostly underwritten by outside insurance companies.

The above-described policy is given as an example of a situation as of a given date and cannot be considered as representative of future conditions. The Group’s insurance policy may be changed at any time depending on the market conditions, specific circumstances and on the General Management’s assessment of the risks incurred and the adequacy of their coverage.

TOTAL believes that its insurance coverage is in line with industry practice and sufficient to cover normal risks in its operations. However, the Group is not insured against all potential risks. In the event of a major environmental disaster, for example, TOTAL’s liability may exceed the maximum coverage provided by its third-party liability insurance. The loss TOTAL could suffer in the event of such disaster would depend on all the facts and circumstances of the event and would be subject to a whole range of uncertainties, including legal uncertainty as to the scope of liability for consequential damages, which may include economic damage not directly connected to the disaster. The Group cannot guarantee that it will not suffer any uninsured loss and there can be no guarantee, particularly in the case of a major environmental disaster or industrial accident, that such loss would not have a material adverse effect on the Group.

 

 

4.Social, environmental and societal information

 

 

 

TOTAL puts corporate social responsibility (CSR) at the heart of its activities and conducts its operations according to the following principles of:

 

 

protecting the safety and security of people and its facilities;

 

limiting its environmental footprint;

 

ensuring that its Code of Conduct is applied in its sphere of operations;

 

incorporating the challenges of sustainable development in the exercise of its activities;

 

increasing its local integration by placing dialogue with its stakeholders at the heart of its policy and contributing to the economic and social development of the regions where the Group has operations; and

 

promoting equal opportunities and fostering diversity and cultural mix among its personnel.

The Group’s CSR performance is measured by non-financial rating agencies. TOTAL has been included continuously in the FTSE4Good index (London Stock Exchange) since 2001 and in the Dow Jones Sustainability World Index (DJSI World – New York Stock Exchange) since 2004. TOTAL was listed in the DJSI Europe from 2005 to 2014.

In terms of reporting, TOTAL refers to the IPIECA (global oil and gas industry association for environmental and social issues) guidance and to the Global Reporting Initiative (GRI). Detailed

information on these reporting guidelines is available on theGroup’s website (analystes-csr.total.com).

On September 25, 2015, the United Nations adopted the 17 Sustainable Development Goals (SDGs). These goals acknowledge the determining role corporations play in economic development and growth and ask of them to show creativity and innovation in finding solutions to global sustainable development challenges. TOTAL is continuing its analysis on how to better report, as of 2016, on its contribution toward achieving these SDGs. Detailed information on TOTAL’s implementation of these goals is provided in this section “– 4. Social, environmental and societal information”, particularly with regard to Goal 7 – affordable and clean energy (see “– 4.3.4.5. Giving the most disadvantaged populations greater access to energy”, below) and Goal 13 – climate action (see “– 4.2.3. Climate change”, below).

The reporting scopes and method concerning the information in this section “– 4. Social, environmental and societal information” is presented in “– 4.4. Reporting scopes and method”, below.

The data presented in this section are provided on a current-scope basis.

 

4.1.Social information

The quantitative information set out in this section “– 4.1. Social information” and “Item 6 – D.1. Group employees” regarding the

 

 

 

(1)

Refer to “— 4.4.3.2. Terminology used in social reporting”, below.

 

48 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

Group’s employees worldwide covers all the entities that are fully consolidated in the Group’s financial statements(1). However, some of the data comes from the Group’s Worldwide Human Resources Survey (WHRS), which gathers approximately 100 indicators measuring important aspects of TOTAL’s Human Resources policy. The WHRS is performed on a sample of employees from

representative consolidated companies at the business segment and regional levels; when WHRS is mentioned in this document, reference is made to data related to this sample, which represents 91% of the Group’s employees at 134 subsidiaries in 2015, stable compared to 2014 (91%) and 2013 (90%) despite a decrease in consolidated companies’ payrolls.

 

 

4.1.1.Organization of work

The average work week is determined by applicable local law. It is less than 40 hours in most subsidiaries located in Europe, Japan and Qatar. It is 40 hours in most Asian and African countries, and in North America. It is longer in Latin America (Argentina, Mexico, Brazil) and a few Asian (India) and African (South Africa, Equatorial Guinea, Morocco) countries.

In addition, there are two specific employment regimes within the Group, the “shift”(1)regime and the “rotational”(2) regime. Most shift workers are employed in the Refining & Chemicals and Marketing & Services business segments, while the rotational regime concerns the Upstream segment. New indicators were established in 2015 to monitor these regimes.

Depending on local law, there are several programs that aim to create a better balance between work and private life and/or encourage equal career opportunities. In France, teleworking was introduced in 2012. As of December 31, 2015, there were 454 teleworkers in France (WHRS scope), 27.1% of whom were men, compared to 346 in 2014.

 

   WHRS 2015  WHRS 2014  WHRS 2013 

% of companies offering the option of teleworking

  17.2  16  22

% of employees involved in teleworking of those given the option

  2.5  2.1  2.3

The sickness absenteeism rate is one of the indicators monitored in the WHRS:

 

   WHRS 2015  WHRS 2014  WHRS 2013 

Sickness absenteeism rate

  2.1  2.3  2.5

 

4.1.2.Dialogue with employees

The Group’s employees and their representatives have a privileged position and role among the numerous stakeholders with which TOTAL has regular dialogue (refer also to “— 4.3.2. Dialogue and involvement with stakeholders”, below). In countries where employee representation is not required by law (for example in Myanmar and Brunei), TOTAL strives to set up such representation. There are therefore employee representatives in the majority of Group companies, most of whom are elected. The subjects covered by dialogue with employees vary from company to company, but some are shared throughout, such as health and safety, work time, compensation, training and equal opportunity.

Within the Group, organizational changes are made in consultation with the employee representatives, such as the creation of a new entity in 2014 (Total Global Services) dedicated to shared IT and telecommunications services, and, in 2015, the sale of Totalgaz to Antargaz or the industrial project for the Donges (Loire-Atlantique) and La Mède (Bouches-du-Rhône) refineries to secure the future of operations at these industrial sites. This constructive social dialogue has led to various agreements, for example an agreement regarding commitments in the context of the disposal of Totalgaz and another on employee support measures for the project relating to the future of La Mède (refer to“— B.3.1.1. Refining & Petrochemicals”, above). In 2015, 153 agreements were signed with employee representatives around the world, including 63(3) in France, covering in particular supplemental health insurance, life insurance, teleworking and compensation systems.

 

   WHRS 2015  WHRS 2014  WHRS 2013 

Percentage of companies with employee representation

  76.9  75.5  71.6

Percentage of employees covered by collective agreements

  65.5  67.8  67.0

TOTAL maintains an ongoing dialogue with employees in Europe via negotiations with European trade union federations.

Several agreements have been signed, including, for example, the convention on labor relations and equal opportunities that aims to set up a common social platform applicable to all the Group’s European entities.

A European committee (single representative body for the employees at the group level) has been set up in order to inform employees and hold discussions on the Group’s strategy, its social, economic and financial situation, as well as questions of sustainable development, environmental and societal responsibility, and safety on a European scale. It also examines any significant proposed organizational change concerning at least two companies in two European countries, to express its opinion, in addition to the procedures initiated before the national representative bodies.

In addition, every other year, TOTAL carries out an internal survey (Total Survey) amongst its employees to gather their views and expectations with regard to their work situation and perception of the company, locally and as a Group. The results of the survey conducted in 2015 among 65,000 employees at 508 entities in 115 countries demonstrated that employees have a commitment rate of 75% and that 87% of them are proud to work for TOTAL.

In January 2015, TOTAL signed a global agreement with the worldwide trade union federation, IndustriALL Global Union, which represents 50 million employees in 140 countries. Under this agreement, the Group made a commitment to maintain minimum Corporate Social Responsibility (CSR) standards and guarantees worldwide for subsidiaries in which it has more than a 50% stake, in the areas of occupational health and safety, human rights in the workplace, enhancement of the dialogue with employees, life insurance, professional equality, social responsibility and assistance with organizational changes. The Group also ensures that the principles of the agreement on health, safety and human rights are

 

 

 

(1) 

For employees providing a continual activity with relays between alternating teams to maintain production (two or three 8-hour shifts), for example in plants or refineries.

(2) 

For employees working at a location (town or worksite) far from their place of residence with alternating periods of work and rest.

(3) 

Some agreements cover several companies at once (for example, agreements in the Social and Economic Units or group of companies).

 

2015 Form 20-F TOTAL S.A. 49


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

disclosed to and promoted among its service providers and suppliers. The implementation of this agreement will be monitored annually with representatives who are members of trade unions affiliated with the IndustriALL Global Union and appointed by this federation.

 

4.1.3.Training

The Group has four priorities in the field of training:

 

 

sharing TOTAL’s corporate values, particularly with respect to HSE and ethics;

 

increasing key skills in all business areas to maintain a high level of operating performance;

 

promoting employees’ integration and career development through Group induction and training on management and personal development; and

 

supporting the policy of diversity and mobility within the Group through language and inter-cultural training.

The Group’s efforts in the field of training were still significant in 2015 with 71% of employees having followed at least one training course during the year. Within the scope of the WHRS, 289,000 days of training were followed onsite, compared to 380,000 days in 2014, for a total training budget of approximately170 million, compared to235 million in 2014. This decrease from 2014 to 2015 is due to three main factors: firstly, the divestments of Totalgaz and Bostik in 2015 (which represented in 2014 12,000

training days for approximately2 million) and the completion of specific training sessions in certain subsidiaries of Exploration & Production combined with a decrease in activity (Yemen and Canada); secondly, the increase in at-distance training courses (26,000 days in 2015 compared to 19,000 in 2014), which are gradually being combined with or are replacing on-site courses as part of the Group’s digitalization program; and lastly, the combined effect of optimizing the length of training courses and better selecting these to manage costs.

This shift towards e-learning programs within the Group accelerated in 2015 with the aim to improve the effectiveness of training and reaching the largest number of people as quickly as possible. It has been accompanied by the launch of a digital awareness program in 2015 to support the Group’s goals in this area. As a result, 42,000 people received distance training courses in 2015, compared to 30,000 in 2014.

In addition, Total University offers Group integration programs as well as courses aimed specifically at developing leadership among managers and executive officers. Furthermore, Total University offers specific theme-based conferences, some of which are open to external audiences. These conferences cover strategic topics in the field of energy ranging from technology to geopolitics and societal matters.

 

 

Average number of training days/year per employee(a)
(excluding “Companion” apprenticeships and e-learning)
  WHRS 2015  WHRS 2014  WHRS 2013 

Group average

   3.3    4.2    4.0  

By segment(b)

    

Upstream

   7.0    9.2    9.1  

Exploration & Production

   7.2    9.5    9.5  

Gas

   4.2    2.7    2.4  

Refining & Chemicals

   2.3    3.5    2.9  

Refining & Chemicals

   2.3    3.6    2.9  

Trading & Shipping

   1.4    2.0    1.8  

Marketing & Services

   2.8    2.2    2.7  

Marketing & Services

   2.4    2.9    3.4  

New Energies

   3.8    0.3    0.6  

Corporate

   2.6    3.0    3.3  

By region

    

Africa

   5.5    7.6    8.6  

Asia-Pacific

   4.9    4.6    4.1  

Europe

   2.7    3.5    3.2  

Latin America

   3.7    5.3    4.1  

Middle East

   2.9    6.9    9.4  

North America

   1.1    3.1    3.0  

Oceania

   0.7    0.1    2.3  

French overseas departments and territories

   3.2    1.6    2.2  

Breakdown by type of training given

    

Technical

   37  35  34

Health, Safety, Environment, Quality (HSEQ)

   22  21  22

Language

   11  14  16

Other (management, personal development, inter-cultural, etc.)

   30  30  28

 

(a) 

This number is calculated using the number of training hours, where 7.6 hours equals one day.

(b) 

2014 and 2013 data was restated to allocate TOTAL S.A. data into the business segments to ensure consistency with the activities.

 

4.1.4.Equal opportunity

TOTAL is an international Group in terms of both its operations and its team members. The diversity of its employees and management is crucial to the Group’s competitiveness, innovative capacity, attractiveness and acceptability.

For this reason, TOTAL develops its employees’ skills and careers while both prohibiting any discrimination related to origin, gender, sexual orientation or identity, disability, age or affiliation with a political, labor or religious organization, and promoting proactive

behaviors that allow everyone to feel integrated into the Company. This policy is upheld by the Diversity Council, which is chaired by a member of the Group Performance Management Committee.

Each entity is responsible for defining its own areas of focus based on the legal context and its challenges and for creating a suitable work environment in which it can fully benefit from all the skills and diverse approaches. Two areas are managed at the global level: gender diversity and internationalization, so as to offer all employees, regardless of their gender or nationality, the same career opportunities.

 

 

50 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

 

To this end, the Group’s target for 2020 is to have:

 

 

women represent 25% of senior executives (having represented approximately 5% in 2004 and 19% in 2015);

 

non-French nationals represent 40% of senior executives (having represented approximately 19% in 2004 and 28% in 2015);

 

women represent more than 20% of management committee members (head office and subsidiaries); and

 

local managers represent 50% to 75% of the subsidiaries’ management committee members.

In addition to the Group’s targets, each business segment also sets targets for its senior management.

 

-4.1.4.1. Equal treatment for men and women

In 2010, TOTAL signed the “Women’s Empowerment Principles – Equality Means Business” set out in the United Nations Global Compact, and its commitment to equal treatment of men and women is regularly embodied in agreements, such as the global agreement signed in 2015 with IndustriALL (refer to “— 4.1.2. Dialogue with employees”, above). Specific measures are taken to correct discrepancies, such as salary equality (review and adjustment of compensation in 2013 and again in 2015) and teleworking to improve employees’ work-life balance.

The Group also promotes gender diversity in its professions. In France, TOTAL has partnered withElles bougent since 2011 and served as honorary chairman in 2015: 70 female engineers regularly inform high-school girls about careers in science.

In line with the goal of increasing the number of women in positions of responsibility, the TWICE network (Total Women’s Initiative for Communication and Exchange) aims to promote career development for women and train and educate men and women about gender diversity. Created in 2006, it is currently in place in France and around the world (19 local networks) and has over 3,400 members. As part of this network, a mentoring program is deployed internationally, and has benefited nearly 500 women since 2010 and 182 mentee/mentor pairs in 2015.

TOTAL also participates in the “BoardWomen Partners” program, which aims to increase the proportion of women on boards of directors in large European companies. At the end of 2015, women accounted for 36.4%(1) of TOTAL S.A.’s Board members, compared to 38.5% at year-end 2014 and 33% at year-end 2013. Given the appointment proposals presented to the next Shareholders’ Meeting (refer to “Item 6 — A.1.7. Appointment and renewal of directorships proposed to the Shareholders’ Meeting of May 24, 2016”, below), if the proposed resolutions are approved, the composition of the Board of Directors, following the Meeting, will include six women,i.e., a proportion of 54.54%(1), above the level of 40% set out by law and in the AFEP-MEDEF Code. The Board of Directors will continue its reflections on diversifying its composition in the coming years.

 

% of women 2015  2014  2013 

Open-ended contract recruitment

  34.9%    33.2%    35.9%  

Managers (JL³10(a)) recruitment

  30.6%    27.6%    29.2%  

Employees

  32%    31.1%    30.8%  

Managers (JL³10(a))

  25.1%    24.5%    23.9%  

Senior executives

  18.6%    17.6%    17.0%  

 

(a) 

Job Level of the position according to the Hay method. JL10 corresponds to junior managers (cadre débutant).

-4.1.4.2. Internationalization of management

With employees representing over 150 nationalities, TOTAL enjoys broad cultural diversity and strives to reflect this at all levels of its activities. In 2015, 93.5% of employees hired by the Group and 76.3% of managers hired were non-French nationals.

Several measures have been put in place to internationalize management, including training courses to internationalize careers, increasing the number of foreign postings for employees of all nationalities (nearly 4,600 employees of 102 nationalities are posted in 117 countries), and integration and personal development training organized by large regional hubs (Houston, Johannesburg, Singapore, etc.).

 

% of employees of non-French nationality 2015  2014  2013 

Open-ended contracts

  93.5%    90.5%    90.0%  

Managers (JL³10) recruitment(a)

  76.3%    75.8%    73.1%  

Employees

  68.8%    67.8%    66.6%  

Managers (JL³10)(a)

  60.9%    61.2%    60.9%  

Senior executives

  27.9%    27.2%    26.2%  

 

(a)

Job level of the position according to the Hay method. JL10 corresponds to junior managers (cadre débutant).

 

-4.1.4.3. Measures promoting the employment and integration of people with disabilities

For over 20 years, TOTAL has formally set out its disability policy in France through successive agreements signed with employee representatives to promote the employment of workers with disabilities. Three framework agreements signed for three years (2013-2015) with the French representative unions set out TOTAL’s policy with regard to integrating people with disabilities into the work world. New agreements were signed for the 2016-2018 period. The average Group employment rate of people with disabilities in France (direct and indirect employment) was 4.74% in 2014 (compared to 4.27% in 2013)(2).

TOTAL promotes the direct recruitment of disabled people and cooperation with the sector for disabled workers, while at the same time taking various types of action:

 

 

internally: integration, professional training, support and job retention, communication, awareness sessions organized for managers and teams, human resources managers, etc.; and

 

externally: information and advertising aimed at students, cooperation with recruitment agencies, attendance at specialized forums, etc.

 

-4.1.4.4. Measures promoting non-discrimination

Large-scale initiatives aimed at raising employees’ awareness of diversity are organized on a regular basis: in 2015, more than 180 of the Group’s sites celebrated the third World Diversity Day on the theme of “Diversity makes us better”.

TOTAL is involved in a number of initiatives to promote diversity, including the professional integration of young people in France, for example via thela France s’engage partnership with the French government (refer to “— 4.3.5.2. TOTAL S.A. philanthropy”, below).

In 2014, the Group also signed the LGBT (lesbian, gay, bisexual and transgender) Charter. This document, prepared by theL’Autre

 

 

 

(1) 

Excluding the director representing employees, in accordance with the recommendations of the AFEP-MEDEF Code (point 6.4).

(2) 

The rate for 2015 was not available at the time of the publication of this report.

 

2015 Form 20-F TOTAL S.A. 51


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

Cercle association, establishes a framework for combating discrimination related to sexual orientation or identity in the workplace in France.

 

4.2.Safety, health and environment information

In line with its Code of Conduct, TOTAL has adopted a Safety Health Environment Quality Charter, updated in 2014, covering the areas of safety, security, health, the environment, quality and societal commitment, and on which the Group relies for the conduct of its operations (available on total.com). This Charter represents the common framework of the Group’s management systems. Group directives define the minimum requirements expected in these areas and are designed to be implemented in the business segments, which subsequently factor in the specific characteristics of their operations. Recommendations, guides and manuals, which are the primary documents used for implementing and managing the Group’s policies, are regularly distributed within the different business segments. The Industrial Safety department and the Sustainable Development and Environment department, as well as the Security department, which report to Corporate Affairs, provide support to the segments and oversee the implementation by the segments of policies that reflect the principles of the charter in a concrete, effective manner.

In accordance with oil and gas industry best practices (set out in the IPIECA reporting guidance), the following safety, health and environment information relates to the activities, sites and industrial assets for which TOTAL S.A. or one of the companies it controls is the operator (i.e., operates or has contractual responsibility for managing operations). An exception is made for information related to greenhouse gases, which is also expressed as a Group share of all assets in which TOTAL has a stake.

 

4.2.1.Occupational health and safety

For many years, the Group has been developing a normative framework related to occupational health and safety, security, societal commitment and the environment (H3SE). In this respect, directives have been drawn up for occupational health and safety. These directives set out TOTAL’s requirements in these areas for personnel working on its sites. Since 2013, the three business segments have increased their efforts regarding the frameworks of the H3SE management systems in order to provide greater overall consistency, while at the same time respecting the businesses’ specific characteristics.

Indicators are used to measure the main results in these areas. Monthly reporting of occupational accidents is used to monitor performance at both the global and site levels.

 

 

Safety indicators

  2015   2014   2013 

TRIR(a): number of recorded injuries per million hours worked

   
1.17
  
   
1.30
  
   
1.55
  

- Employees of TOTAL

   0.92     1.06     1.34  

- Employees of external contractors(b)

   1.38     1.51     1.72  

LTIR(c): number of lost time injuries per million hours worked

   0.66     0.74     0.91  

SIR(d): average number of days lost per lost time injury

   30.11     29.74     32.04  

Number of fatalities

   9     9     15  

 

(a) 

TRIR: Total Recordable Injury Rate.

(b)

As defined in “— 4.4.4.1. Industrial Safety definitions and indicators”, below.

(c)

LTIR: Lost Time Injury Rate.

(d)

SIR: Severity Injury Rate.

For more than 10 years, the TRIR and the LTIR have declined continuously. In 2015, the Group regrettably recorded nine accidents that led to nine fatalities. A series of measures was adopted in 2015. These are intended, in particular, to strengthen safety monitoring of external contractor staff, who are the primary victims of fatal accidents. These measures will be gradually rolled out throughout 2016.

The Group’s safety efforts are focused on preventing major accidents and accidental spills (refer to “ — 4.2.2.3. Incident risk”, below, and “Item 15 — 4. Internal control and risk management procedures (Article L. 225-37 of the French Commercial Code)”, below), occupational accidents and transport accidents. They cover both TOTAL employees and employees of external contractors. The external contractors’ safety results are monitored as closely as those for TOTAL employees. These efforts are coordinated by the Group’s Industrial Safety Division and put into practice by the Group’s entities with the support of the HSE departments.

Safety is the subject of regular training activities, in particular at management level (refer to “ — 4.2.2.1. General policy and environmental targets”, below), as well as of a policy that recognizes HSE performance, in particular by taking account of safety-related criteria for the calculation of compensation (refer to “Item 6 — B.1. Employees’ compensation”, below).

Since 2010, the basic rules to be scrupulously followed by all personnel, employees and contractors alike, in all of the Group’s businesses worldwide, have been set out in a safety document entitled “Safety at Work: TOTAL’s Twelve Golden Rules”. According to the Group’s internal statistics, in more than 85% of severe incidents or near misses with high severity potential in the workplace, at least one of the golden rules had not been followed. The proper application of these golden rules, and more generally of all occupational safety procedures, is verified through site visits and internal audits. The World Day for Safety at Work on April 28, 2015, was dedicated to the golden rules and provided an opportunity to assess how well they have been disseminated and understood in the field five years after being introduced. Consequently, so that these rules are better assimilated by all of the Group’s employees as well as by those working for external contractors, and to ensure they are implemented correctly, additional obligations and prohibitions were added to these golden rules. An e-learning program has been developed to train all personnel in the 12 golden rules and will be rolled out in 2016.

Moreover, the reporting of anomalies (770,000 in 2015) and near misses is strongly encouraged and monitored. The ability of each employee to identify anomalies or dangerous situations is one of the measures of the personnel’s involvement and vigilance in accident prevention and reflects the safety culture within the Group. In late 2015, a “stop card” mechanism was implemented throughout the Group. The stop card is the concrete expression of the authority given to any Group employee or employee of an external contractor to stop work in progress if he or she perceives there to be an uncontrolled risk, and guarantees that no sanctions will be applied even if the assessment of the situation proves to be incorrect.

An investigation is generally launched in response to any type of accident whatsoever. The method and scope of investigation depend on the actual or potential severity of the event. For example, a near miss with a high severity potential level is treated in the same way as a severe incident: its analysis is considered to be a key driving force for progress and, depending on its relevance to the Group’s other entities, triggers a safety alert and even the dissemination of a feedback report.

 

 

52 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

Traffic risk management is an important component of the Group’s safety policy. An extensive transporter assessment program, launched in 2012 in Africa and the Middle East, revealed a 40% decrease in the number of serious accidents (roll-overs and collisions) between 2013 and 2015. This program, which includes assistance provided to transporters to help them improve their professional skills, has enabled them to achieve, in particular, higher levels of profitability through the optimization of truck rotation. As a result, transporters have been able to modernize their fleets and ensure their compliance with TOTAL’s safety requirements. Between 2012 and 2015, 98% of the transporters with contracts with Marketing & Services subsidiaries in Africa and the Middle East were inspected and 28% of the contracts were terminated due to proven non-compliance. In 2015, 172 initial and 35 follow-up inspections were performed. Given these results, this program is to be extended to Marketing & Services’ Latin America and Asia-Pacific regions. Within the more general framework of road vehicle handling, and given that driver behavior is a key safety consideration, TOTAL is pursuing its policy of training drivers and demanding that they adhere strictly to the Group’s rules. Building on the approach adopted for assessing transporters, the Africa-Middle East region of Marketing & Services has, as of 2015, introduced a similar process to improve the selection and monitoring of external contractors that perform operations at its sites.

With regard to health, the Group has drawn up a policy to define TOTAL’s minimum requirements in terms of incident prevention and the protection of health. In particular, based on the Industrial Hygiene and Health at the Workplace directive, the Group’s companies are expected to prepare and carry out a formal risk assessment (chemical, physical, biological, ergonomic or psychosocial), create a risk management action plan and provide medical monitoring of staff in line with the risks to which they are exposed.

 

 

Health indicators

  2015   2014   2013 

Percentage of companies included in the WHRS offering employees regular medical monitoring

   99.3%     97%     95%  

Number of occupational illnesses recorded in the year (in accordance with local regulations) per million hours worked

   0.63     0.81     0.68  

In 2015, there was a 27.5% decrease in recorded illnesses compared to 2014 with respect to the main occupational illnesses identified at TOTAL:

 

 

musculoskeletal disorders, the main cause of occupational illnesses, representing 63% of all recorded illnesses in 2015. Following the 65% increase between 2013 and 2014, the 20% decrease recorded in 2015 proves that specific action plans to control risk and improve working conditions must be maintained over the long-term;

 

illnesses related to asbestos exposure decreased by 16% compared to 2014, in line with the continuous decline over several years due to the absence of recent exposure.

A Medical Advisory Committee meets regularly to discuss key health issues that may affect the Group’s employees. It consists of external scientific experts and brings together TOTAL’s management team and the relevant members of the Group. This Committee provides scientific monitoring of health problems that

could impact the Group, thus enabling the best health protection strategies to be put in place when necessary.

In support of the Group’s health policy and to complement the periodic medical surveillance program currently in place and organized by the Group’s medical staff, an employee health observatory has also been set up. This observatory aims at establishing health indicators for keeping track over the long term of any medical conditions that could affect employees using a population-based approach. This program can be used to quickly identify the emergence of certain illnesses and, if applicable, suggest and oversee appropriate preventive measures. Approximately 13% of the Group’s employees worldwide, whatever their position, age or horizon, took part anonymously in this program, thereby providing a representative sample of the Group’s different business segments and professions, including administrative as much as operational staff. Based on the results, actions were taken, particularly in the field of nutrition and quality of sleep.

On a broader level, TOTAL is associated with promoting individual and collective health in the countries where it operates, including flu vaccination campaigns and prevention and screening programs for certain diseases (AIDS, cancer, malaria, Ebola, etc.) for employees, their families and local communities. For several years, awareness campaigns have also been in place concerning, for example, musculoskeletal disorder prevention and lifestyle risks (anti-smoking and anti-drinking campaigns).

 

4.2.2.Environmental protection

 

-4.2.2.1.     General policy and environmental targets

The HSE departments and services within the Group’s entities seek to ensure that both applicable local regulations and internal minimum requirements are being met. The Group steering bodies, led by the Sustainable Development and Environment department, have a threefold task:

 

 

monitoring TOTAL’s environmental performance, which is reviewed annually by the Executive Committee, for which multi-annual improvement targets are set;

 

handling, in conjunction with the business segments, the various environment-related subjects under their responsibility; and

 

promoting the internal standards to be applied by the Group’s business units as set out in the Safety Health Environment Quality Charter.

The Group’s environmental targets, which were redefined in part at the beginning of 2013 for the period up to 2017, were as follows:

 

 

decrease flaring by 50% from 2005 to 2014 (excluding start-ups);

 

improve the energy efficiency of Group facilities by 1.5% on average per year from 2012 to 2017;

 

decrease greenhouse gas emissions (GHG) by 15% from 2008 to 2015;

 

obtain the “Total Ecosolutions” label for more than 50 products or services by 2015;

 

develop a Biodiversity Action Plan by 2015 for all Group industrial sites(1) located in a IUCN(2) I to IV or Ramsar convention protected area;

 

decrease by 40% the volume of hydrocarbons discharged in the Group’s onshore and coastal wastewater from 2011 to 2017;

 

 

 

(1) 

Excluding exploration wells, seismic survey areas and sites for the distribution and storage of products.

(2) 

International Union for the Conservation of Nature.

 

2015 Form 20-F TOTAL S.A. 53


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

 

decrease Group SO2 emissions by 20% between 2010 and 2017; and

 

obtain ISO 14001 certification for 100% of the production sites(1) by 2017.

At year-end 2015, TOTAL had reached, ahead of or on time, all of the environmental targets it had set for 2014 and 2015: reduction of GHG emissions and associated gas flaring; certification of its main operated sites; obtaining the “Total Ecosolutions” label for products and services; and development of a Biodiversity Action Plan for sensitive sites. In addition, the Group is on track for reaching the above-mentioned environmental targets set for 2017 on improving its facilities’ energy efficiency, obtaining ISO14001 certification for its main production sites and reducing SO2 emissions. The 2017 target for the reduction of hydrocarbons discharged into water may not be met until 2018.

In order to pursue its progressive approach, the Group defined in early 2016 a new set of coherent environmental targets aligned with the 2010-2020 period:

 

 

continue its efforts to reduce GHG emissions, particularly through:

 

 1.

an 80% reduction of routine flaring(2) with the aim to eliminate it by 2030, and

 2.an average 1% improvement per year in the energy efficiency of the Group’s operated facilities;

 

 

decrease SO2 air emissions by 50%; and

 

maintain hydrocarbon content of water discharges below 30 mg/l for offshore sites and below 15 mg/l for onshore and coastal sites.

In addition, the Group:

 

 

develops Biodiversity Action Plans for production sites located in protected areas(3);

 

does not conduct oil and gas exploration or production operations at natural sites included on the UNESCO World Heritage List(4) or in oil fields under sea ice in polar areas; and

 

reclaims more than half of its waste and will continue its efforts in this area.

TOTAL is developing a policy to decrease the carbon intensity of the Group’s productions (oil, gas, renewable energies) so as to contribute to the evolution towards a lower carbon energy mix.

With regard more specifically to the certification objective, 100% of the 71 production sites emitting more than 10 kt/year of GHG have ISO 14001 certification since 2013. Overall, at year-end 2015, 290 sites had ISO 14001 certification. In addition, 2 sites in the process of starting up are concerned by the Group’s policy and have been allowed two years to obtain certification. These are CLOV (Angola), which started up in June 2015, and Laggan-Tormorre (United Kingdom), which started up in February 2016.

The environmental risks and impacts of any planned investment, disposal or acquisition subject to Executive Committee approval are assessed and reviewed before the final decision is made (also refer to “Item 15 — 4. Internal control and risk management procedures (Article L. 225-37 of the French Commercial Code)”).

TOTAL seeks to ensure that all employees share its environmental protection requirements. Employees receive training in the required skills. TOTAL also raises employee awareness through internal communication campaigns (e.g., in-house magazines, intranet,

posters) and provides annual information about the Group’s environmental performance.

H3SE training courses are organized for managers and senior executives. In 2015, 48 training sessions were attended by 864 participations in 1,957 training days across 20 countries. Three HSE training courses are made available to the business units: “HSE for Managers”, “HSE Implementation” and “HSE Leadership for Group Senior Executives”. The training session “HSE for Managers” is aimed at senior managers and operational or functional managers who are currently or will in the future be responsible for one of the Group’s business units (four sessions were held in 2015 with 214 participants). “HSE Implementation” sessions are aimed at employees whose job is specifically to handle one or more HSE or operational areas within a business unit (one session was held in 2015 with 17 participants). This offer, recently redesigned and presented to Oléum Dunkerque, completes an existing course for the same target population provided by the Group’s business segments. In addition, the “HSE Leadership for Group Senior Executives” course focusing on management styles has been organized since 2012 (two sessions were held in 2015 with 29 participants). Since 2012, close to 260 senior executives have taken part in this program.

 

-4.2.2.2. Environmental footprint

TOTAL implements an active policy of monitoring, managing and reducing the environmental footprint of its operations. As part of this policy, emissions are identified and quantified by environment (water, air and soil) so that appropriate measures can be taken to better control them.

Water, air

The Group’s operations generate emissions such as fumes at combustion plants, emissions into the atmosphere from the various conversion processes and discharges into wastewater. In addition to complying with applicable legislation, the Group’s companies actively pursue a policy aimed at reducing emissions. Sites use various treatment systems that include organizational measures (such as using predictive models to control peaks in SO2 emissions based on weather forecast data and the improvement of combustion processes management) and technical measures (such as setting up wastewater treatment plants, using low NOx burners and the biological treatment of processed water).

The Refining & Chemicals segment has partnered with Ondeo Industrial Solutions (Suez group) for an ambitious European project launched in June 2013 called “E4Water” aimed at saving large quantities of drinking water and reducing discharges of effluents. Seven pilot research projects are being conducted at the petrochemicals plant on the Normandy platform. A1.2 million budget was allocated to test three water treatment processes (wastewater from the site’s water treatment plant, cooling water and cooling blowdown). The pertinent technical knowledge identified by this research could be used to reduce the water footprint of facilities.

To ensure the quality of its wastewater discharge, TOTAL has set, for all of its offshore exploration and production operations, a target of complying with the hydrocarbon concentration requirements set out in the OSPAR standard (less than 30 mg/l), which is only mandatory in the North Sea. The Group has achieved this goal for the past six years based on yearly averages.

 

 

 

(1) 

Defined as sites emitting more than 10 kt/year of GHG, with a 2-year tolerance for sites in the process of starting up or recently acquired.

(2) 

Operated routine flaring, in accordance with the World Bank’s Zero Routine Flaring initiative.

(3) 

Sites located in a IUCN I to IV or Ramsar convention protected area.

(4) 

Natural sites included on the UNESCO World Heritage List of June 4, 2013.

 

54 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

 

Chronic emissions into the atmosphere
(excluding GHG) and discharged water quality
 2015  2014  2013 

SO2 emissions (kt)

  59    65    75  

NOx emissions (kt)

  82    93    91  

Hydrocarbons in discharged water (rivers, waterways and coasts) (t)

  324    295    306  

 

N.B.: Because of the divestures made in the Specialty Chemicals activity over the past years, it has been decided that the chemical oxygen demand in discharged water will no longer be measured as of 2015.

The amount of hydrocarbons discharged in rivers, waterways and coasts increased in 2015. This increase, despite good performances in Gabon, is mainly due to the increase in treated water volumes due to the aging of the field in Indonesia and a deterioration in the Republic of the Congo, which led to the decision to commission floaters on the Djeno site. This implementation, planned in 2016, should enable to reduce the quantity of hydrocarbons discharged.

Below are the Group’s achievements at year-end 2015 based on the objectives for air and water set at the beginning of 2013:

 

 

16% reduction in hydrocarbon discharges in water (rivers, waterways and coasts) since 2011, down from the -40% target set for 2017; this target may not be reached until 2018;

 

40% reduction in SO2 emissions compared to 2010, considerably above the -20% target set for 2017.

Soil

The risks of soil pollution related to TOTAL’s operations come mainly from accidental spills (refer to “— 4.2.2.3. “Incident risk”, below) and waste storage (see “Waste” below).

The Group’s approach to preventing and controlling these types of pollution is based on four cornerstones:

 

 

preventing leaks, by implementing industry best practices in engineering, operations and transport;

 

carrying out maintenance at appropriate intervals to minimize the risk of leaks;

 

overall monitoring of the environment to identify any soil and groundwater pollution; and

 

controlling pollution from previous activities by means of containment or reduction operations.

In addition, a Group directive published in 2014 defines the following minimum requirements:

 

 

systematic identification of each site’s environmental and health impacts related to possible soil and groundwater contamination;

 

assessment of soil and groundwater contamination based on various factors (extent of pollution inside or outside the site’s boundaries, nature and concentrations of pollutants, presence of a vector that could allow the pollution to migrate, use of the land and groundwater in and around the site); and

 

management of health or environmental impacts identified based on the use of the site (current or future, if any) and the risk acceptability criteria recommended by the World Health Organization (WHO) and the Group.

Lastly, decommissioned Group facilities (i.e., chemical plants, service stations, mud pits or lagoons resulting from hydrocarbon extraction operations, wasteland on the site of decommissioned refinery units, etc.) impact the landscape and may, despite all the precautions taken, be sources of chronic or accidental pollution. TOTAL has a site remediation policy with the aim to, in agreement with the authorities, allow new operations to be set up once the future use of the land has been determined. These remediation operations are conducted by the Group’s specialized entities. The

Group’s provisions for the protection of the environment and site remediation are detailed in Note 19 to the Consolidated Financial Statements.

Waste

The Group’s companies are focused on controlling the waste produced at every stage in their operations. This commitment is based on the following four principles, listed in decreasing order of priority:

 

 1.reducing waste at source by designing products and processes that generate as little waste as possible, as well as minimizing the quantity of waste produced by the Group’s operations;
 2.reusing products for a similar purpose in order to prevent them from becoming waste;
 3.recycling residual waste; and
 4.recovering energy, wherever possible, from non-recycled products.

A Group directive revised in 2014 sets out the minimum requirements related to waste management. It is carried out in four basic stages: waste identification (technical and regulatory); waste storage (soil protection and discharge management); waste traceability, from production through to disposal (e.g., notes, logs, statements); and waste treatment, with technical and regulatory knowledge of the relevant processes, under the site’s responsibility.

TOTAL is especially committed to managing and treating waste classified as hazardous. Due to its nature, hazardous waste is mainly treated outside the Group by specialized companies (202 kt in 2015 compared with 223 kt in 2014 and 232 kt in 2013).

 

 

Waste treatment processes  2015   2014   2013 

Recycling

   42%     47%     37%  

Waste-to-energy recovery

   13%     9%     7%  

Incineration

   7%     8%     12%  

Landfill

   14%     20%     23%  

Environmental nuisance

The environmental nuisances resulting from TOTAL’s operations, which may be sound or odor nuisances or the result of vibrations or road, sea or river traffic, are monitored at the Group’s main industrial sites.

Monitoring systems can be put in place (sound level measurements at the site perimeter, networks of “noses” to determine the origin and intensity of odors, etc.). In addition, most sites have a system for receiving and handling residents’ complaints, the aim of which is to gain a clearer insight into the different types of nuisances and minimize them (refer to “— 4.3.3. Controlling the impact of the Group’s activities”, below).

 

-4.2.2.3. Incident risk

The Group has management structures and systems that present similar requirements and expectations across all the entities. TOTAL strives to minimize the potential impacts of its operations on people, the environment and property through a major risk management policy. This policy draws on a shared approach that includes, on the one hand, risk identification and analysis, and on the other hand, the management of these risks.

This structured approach applies to all of the Group’s operated businesses exposed to major risks. It first sets out an analysis of the risks related to these industrial operations based on incident scenarios for which the probability of occurrence and the severity of the consequences are assessed.

 

 

2015 Form 20-F TOTAL S.A. 55


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

Based on these parameters, a prioritization matrix is used to determine whether further measures are needed in addition to compliance with the Group’s standards and local regulations. These mainly include preventive measures but can also include mitigation measures.

In addition to its drilling and pipeline transport operations, the Group has 232 entities corresponding to:

 

 

Seveso industrial sites (upper and lower threshold) and their equivalents outside the EU; and

 

offshore and onshore operating activities in Exploration & Production.

The management of major risks also hinges on:

 

 

staff training and raising awareness (refer to “— 4.2.2.1. General policy and environmental targets”, above);

 

a coherent event reporting and indicators system;

 

systematic, structured event analysis, particularly to learn lessons in terms of design and operation; and

 

regularly tested contingency plans and measures.

In terms of monitoring indicators, the Group reports the number of Tier 1 events as defined by the API and the IOGP. Despite the increase observed in 2015 compared to 2014, the number of losses of primary containment was lower than in 2013. Like others in the industry, TOTAL believes that process safety indicators cover a long cycle and progress is to be assessed over the long term. In addition to the 51 Tier 1 operational events indicated in the table below, the Group recorded two other Tier 1 events due to sabotage or theft in 2015.

 

 

Loss of containment  2015   2014  2013 

Loss of primary containment (Tier 1)

   51     39(a)   66  

 

(a)

After reclassifying two events that occurred in 2014 in Marketing & Services, the figure given for 2014 was revised to 39 events (compared to 37 initially).

In accordance with industry best practices, TOTAL also monitors accidental liquid hydrocarbon spills of more than one barrel. Spills that exceed a certain severity threshold (whether in terms of volume spilled, toxicity of the product in question or sensitivity of the natural environment affected) are reviewed on a monthly basis and annual statistics are sent to the Group Performance Management Committee. All accidental spills are followed by corrective actions aimed at returning the environment to its original state as quickly as possible.

 

 

Accidental hydrocarbon spills(a)  2015   2014  2013 

Number of hydrocarbon spills

   128     129    169  

Total volume of hydrocarbon spills (thousands of m³)

   1.4     1.3(b)   1.8  

 

(a) 

Accidental spills with an environmental impact and of more than one barrel. Soil on sites is deemed to form part of the natural environment unless sealed.

(b) 

The 2014 volume was revised: the spill into the natural environment resulting from the leak in the Île-de-France pipeline is estimated at 500 m3. This event led to remediation operations that enabled nearly all spilled hydrocarbons to be recovered, along with the unspilled contents of the pipeline (i.e., a total of 5,000 m3 as initially reported).

In addition, the Group has set up a crisis management process with a dedicated organization (also refer to “Item 15 — 4.3.1. Monitoring of risk management systems”, below). As part of this process, TOTAL regularly trains in crisis management on the basis of risk scenarios identified through analyses. Based on feedback from past events, in 2014 the Group restructured the crisis management center at the head office to enable the management of two simultaneous crises. In particular, the Group has emergency plans and procedures in place in the event of a hydrocarbon leak

or spill. For accidental spills that reach the surface, anti-pollution plans are regularly reviewed and tested during exercises. These plans are specific to each company or site and are adapted to their structure, activities and environment while complying with Group recommendations.

 

 

Oil spill preparedness  2015   2014   2013 

Number of sites whose risk analysis identified at least one scenario of major accidental pollution to surface water

   167     155     150  

Proportion of those sites with an operational anti-pollution plan

   98%     90%     87%  

Proportion of those sites that have performed at least one anti-pollution exercise during the year

   98%     82%     82%  

A plan to mobilize resources against pollution (PARAPOL) is available to the Group’s companies, which also have assistance agreements with the main third-party bodies specializing in oil spill management (refer to “Item 15 — 4.3.1. Monitoring of risk management systems”, below).

In 2014, the last of the four capping systems resulting from the work carried out by the Subsea Well Response Project, a consortium of nine oil companies including TOTAL, was deployed. These systems are positioned in various parts of the world (South Africa, Brazil, Singapore, Norway) to provide solutions that can be launched into action in the event of deep offshore drilling pollution incidents. In addition, TOTAL is building its own capping equipment as part of its Subsea Emergency Response System project. A portion of this equipment was delivered to Angola in 2015 and another one will be delivered to Nigeria in 2016.

With regard to shipping, the Group has an internal policy setting out the rules for selecting vessels. These rules are based on the recommendations of the Oil Company International Marine Forum (OCIMF), an industry association consisting of the main global oil companies that promotes best practices in oil shipping, and on its Ship Inspection Report (SIRE) Programme. TOTAL does not charter any single-hulled vessels for shipping hydrocarbons and the average age of the fleet chartered on time by TOTAL’s Shipping division is approximately five years.

 

-4.2.2.4.    Sustainable use of resources

Water

To determine which facilities are most affected by the availability of fresh water, TOTAL conducts identification procedures of water withdrawals and discharges across all of its sites.

 

 

Water-related indicator  2015   2014   2013 

Fresh water withdrawals excluding cooling water (million m³)

   118     112     126  

The increase in water withdrawals between 2014 and 2015 is due mainly to the increase in activity of certain refineries in maintenance shutdown in 2014, the consolidation of Sobegi (France) within the operated scope of Exploration & Production and, to a lesser degree, the increase in New Energies’ solar business.

From 2012 to 2015, TOTAL used the World Resource Institute’s Global Water Tool, WRI Acqueduct and, since 2013, has been identifying the risk levels of its sites with withdrawals of more than 500,000 m³/year located in areas of potential risk to the water resource. The Local Water Tool (LWT) developed by the Global Environmental Management Initiative (GEMI) is more suitable and is now used to perform these water risk assessments and to guide the actions needed to reduce these risks in order to optimize the use of water resources at these sites.

 

 

56 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

At year-end 2015, 10 of the Group’s sites (8 in Refining & Chemicals and 2 in Exploration & Production) were assessed for their level of water risk. These assessments will be progressively extended to priority sites and accompanied by an action plan to reduce risk and optimize water resource use at these sites.

In Exploration & Production operations, reinjecting water extracted along with hydrocarbons (known as produced water) back into the original reservoir is one of the methods used to maintain reservoir pressure. The technical specifications in force in the Group stipulate that this option be prioritized over other methods. The Group’s R&D programs make it possible to examine the best techniques for treating this produced water so as to facilitate its reinjection or consider its recovery and otherwise discharge it into the natural environment while respecting natural and regulatory constraints.

Efforts to optimize water risk management tools are being made both internally, with the LWT (used as a multi-site notice board), and externally, via the IPIECA, which is developing an e-learning module to extend and facilitate access to these tools.

Approximately 83% of the fresh water withdrawals were taken from the Refining & Chemicals segment in 2015. At refineries and petrochemicals sites, water is mainly used to produce steam and for cooling units. Increasing recycling and replacing water cooling with air cooling, such as at the Normandy (France) and Antwerp (Belgium) refineries, are TOTAL’s preferred approaches for reducing fresh water withdrawals.

Soil

TOTAL uses the ground surface that it needs to safely conduct its industrial operations and, to date, does not make extensive use of ground surfaces that could substantially conflict with various natural ecosystems or agriculture.

For open-pit oil sands mining projects, TOTAL strives to ensure that environmental issues are managed by the operator, in particular with regard to the remediation of affected soils.

Raw materials

Hydrocarbons, an energetic material, are the Group’s main raw material. Optimum use of hydrocarbons therefore lies in what is known as “energy efficiency”, as described in “— 4.2.3.4. Energy efficiency and ecoperformance” below.

 

Raw material loss rate

  2015   2014   2013 

Hydrocarbon production business

   2.5%     2.4%     2.5%  

Refining business

   0.5%     0.5%     0.5%  

 

-4.2.2.5.    Protecting biodiversity and ecosystem services

Given their nature, the Group’s projects, and particularly Exploration & Production projects, may be located in sensitive natural environments. TOTAL’s operations can therefore have an impact on ecosystems and their biodiversity.

TOTAL is aware of these challenges and takes biodiversity and ecosystem services into account in its guidelines and operations:

 

 

in the Safety Health Environment Quality Charter, which specifies that TOTAL “is committed to managing (…) its use of natural resources and its impact on biodiversity” and, therefore, supports ecosystem services; and

 

in the biodiversity approach, set within the Group’s environmental framework, which incorporates the following core principles for action:

 

 1.Deploy the “avoid – mitigate – compensate” hierarchy: TOTAL applies this approach for the duration of its projects’ lifecycle to minimize the impact of its activities on biodiversity.
 2.Take into account environmental sensitivity of ecosystems: as part of the course of its business, TOTAL identifies and takes into account the diversity and sensitivity of various environments in terms of biodiversity.
 3.Manage biodiversity: TOTAL incorporates the biodiversity impact and risk management into its environmental management systems and refers to good practices within the industry.
 4.Report: TOTAL reports to its stakeholders on its biodiversity performance.
 5.Improve knowledge of biodiversity: TOTAL participates in the improvement of knowledge of biodiversity and ecosystem services as well as managing the stakes involved, through R&D initiatives taken with local and international partners, professional associations and the Total Foundation.

The Group made a commitment not to engage in oil and gas exploration or extraction operations at natural sites included on the UNESCO World Heritage List of June 4, 2013; in addition, TOTAL currently does not conduct any exploration activities in oil fields under the sea ice in polar areas. In the Democratic Republic of the Congo, TOTAL made the commitment to not carry out any exploration activity in the Virunga National Park, partly located in Block III of the Graben Albertine.

To develop its projects located in sensitive habitats, TOTAL developed, based on the sensitivity and impact analysis, a Biodiversity Action Plan for Group operated sites located in the most sensitive protected areas corresponding to IUCN I to IV or Ramsar categories. Two biodiversity action plans were developed in 2015, in Gabon (Atora) and the Republic of the Congo (Djeno); other plans are expected to be developed, such as in Uganda and Papua-New-Guinea.

The Group actively contributes to the development of best practices related to biodiversity and ecosystem services management in the extractive industry through its partnerships with IPIECA, the Cross-Sector Biodiversity Initiative (which brings together the Equator Principles signatory banks and the mining and oil industries), the United Nation Environment Programme’s World Conservation Monitoring (UNEP-WCMC) and other work groups on biodiversity bringing together stakeholders from the private sector (international NGOs, governments, universities, the World Bank, etc.). In France, TOTAL continues its partnership with theFondation pour la Recherche sur la Biodiversité (Foundation for biodiversity research) and theCentre Vétérinaire de la Faune Sauvage et des Ecosystèmes des Pays de la Loire.

 

4.2.3.Climate change

The Group’s strategy incorporates the challenges of climate change using the International Energy Agency 2°C scenario (450 ppm) as a point of reference. TOTAL’s challenge is to contribute to satisfying the demand for energy of the world’s growing population while providing concrete solutions to limit the effects of climate change.

To do so, the Group focuses its actions around the following key points:

 

 

developing natural gas as the primary fossil energy source due to its lower carbon intensity;

 

selecting and developing hydrocarbon projects based on their economic merit order, which incorporates their resistance to low price scenarios;

 

developing the solar energy offer as the renewable energy of choice in the evolution of the energy mix, as well as the production of biofuels from biomass;

 

 

2015 Form 20-F TOTAL S.A. 57


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

 

improving the energy efficiency of the Group’s facilities, products and services, and maintaining efforts to reduce direct emissions of greenhouse gases (GHG);

 

increasing access to more sustainable energy, for as many people as possible, particularly by means of an innovative solar energy solution; and

 

stimulating initiatives in the oil and gas sector and supporting the implementation of an international framework on climate.

To ensure that investment projects are as profitable as anticipated in the desirable event that the international community agrees to put a cost on CO2 emissions, investments have been valued since 2008 generally based on a cost of25 per ton of CO2 emitted. As of 2016, new investments projects presented to the Executive Committee are evaluated using a cost of $30 to $40 per ton of CO2 emitted depending on the price scenario retained. This cost bracket is consistent with the prices generally required to favor, on the one hand, gas over coal for producing electricity and, on the other hand, R&D in new low-carbon technologies.

 

-4.2.3.1.    The role of gas

Natural gas rose from 35% in 2005 to nearly 50% of TOTAL’s production in 2015 and is expected to contribute to approximately half of the Group’s production in the coming years.

The Group believes in the essential role of natural gas as one of the solutions to climate change issues. Indeed, replacing coal with natural gas at power plants could help reduce worldwide CO2 emissions by 5 Bt/y,i.e., approximately 10% of worldwide emissions(1). The reduction of GHG emissions linked to the use of gas requires limiting methane losses to less than 3% throughout the entire production value chain. Since methane’s global warming potential is 25 times higher than CO2(2)and given its short life span in the atmosphere, a reduction in methane emissions is expected to play a significant role in the fight against climate change.

Due to the nature of its activities, the Group’s methane losses are structurally less than 1%. The Group strengthened its commitment on this theme of methane losses in 2014 by becoming one of the first members of the partnership between governments and industry companies regarding the improvement of tools to measure and control methane emissions set up by the Climate and Clean Air Coalition and promoted by the UN Environment Programme and the non-profit organization Environmental Defense Fund.

 

-4.2.3.2.    Project selection

Particular care is taken when selecting and developing the Group’s oil projects, based on their economic merit incorporating their resistance to low price scenarios. This notably involves giving priority to low cost oil projects.

In Canada, in the context of the lower oil prices, the Group decided to limit its exposure to oil sands and reduced its interest in the Fort Hills project from 39.2% to 29.2% in November 2015. On the Joslyn (38.25%, operator) and Northern Lights (50% operator) oil sands licenses, the projects were suspended and works have been strictly limited to legal and contractual obligations, and maintaining safety.

In the United-States, R&D-stage oil shale projects (in situ andex-situ production technology) in which the Group holds a stake (through American Shale Oil LLC, 55.7%, and the 50/50 joint

venture with the company Red Leaf Resources), including the development of the Red Leaf pilot, have been deferred.

Beyond its oil projects, the Group has ceased its coal production activities following the sale in August 2015 of its subsidiary Total Coal South Africa and, in addition, has announced the termination of its coal marketing activities by year-end 2016.

 

-4.2.3.3.    Developing renewable energies

For some 15 years, TOTAL has been committed to developing renewable energies. The Group’s activities in this area are set out in “— B.4.2. New Energies”, above. The Group’s priority strategic development is solar energy through its interest in SunPower, 57.48% owned by the Group as of December 31, 2015).

In addition to solar energy, biomass is TOTAL’s second strategic development area in the field of renewable energies. In general, biomass represents approximately 10% of worldwide energy consumption and is mostly used for heating or cooking purposes. Biomass is the only renewable alternative to fossil resources for the provision of liquid fuel for transport (biodiesel, bioethanol, biokerosene), lubricants and base molecules for chemicals (solvents or polymers).

TOTAL invests in R&D to reduce direct GHG emissions into the atmosphere by other means. For example, through Total Energy Ventures (TEV), its venture capital firm created in 2008, the Group supports the development of companies that offer innovative technologies or business models in such areas as renewable energies, energy efficiency, energy storage and sustainable mobility. For instance, in 2015 TEV acquired a stake in Off-Grid Electric, a supplier of electricity produced by solar energy in African rural areas that have no or poor grid connection. At year-end 2015, TEV had made 24 investments.

 

-4.2.3.4.    Energy efficiency and ecoperformance

In its scope of activities, TOTAL has made reducing GHG emissions one of its priorities. The Group exceeded its objective of reducing GHG emissions from its operated activities by 15% from 2008 to 2015. The reduction of GHG emissions entails reducing continuous flaring and improving energy efficiency.

 

GHG emissions and flaring

  2015   2014   2013 

Operated direct GHG emissions (Mt CO2 equivalent) (100% of emissions from sites operated by the Group)

   42     44     46  

Daily volumes of gas flared(a) (million m³ per day)

   7.2     9.8     10.8  

Group share of direct GHG emissions (Mt CO2 equivalent)

   50     54     51  

 

(a) 

Continuous, safety and operational flaring (including during the start-up of facilities phase).

Reducing continuous flaring

Since 2000, TOTAL has made a commitment to stop continuous flaring of gas associated with crude production for its new projects. The Group’s objective to reduce continuous flaring by half between 2005 and 2014 has been achieved. The flaring objective was redefined (refer to “ — 4.2.2.1. General policy and environmental targets”, above): the new objective is to reduce routine flaring(3) for the 2010-2020 period by 80%, for this to be eliminated by 2030.

 

 

 

(1)

Source: IEA.

(2) 

Source: fifth assessment report of the Intergovernmental Panel on Climate Change (IPCC).

(3) 

Operated routine flaring, in accordance with the World Bank’s Zero Routine Flaring initiative.

 

58 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

For over 10 years, as part of the Global Gas Flaring Reduction program, TOTAL has worked alongside the World Bank to help producing countries and industrial players control continuous flaring of associated gas.

Flaring of associated gas declined sharply in 2015 (-27% compare to 2014), in particular due the end of flaring related to the start-up (in 2014) of CLOV in Angola as well as operational improvements carried out in Nigeria at the Ofon offshore field, which ceased its continuous flaring. Excluding volumes related to the start-up of facilities, the volumes of flared associated gas totaled 6.8 Mm³/d in 2015.

Improving the energy efficiency of the Group’s facilities

One of the Group’s performance targets is to better control energy consumption. Internal documents (roadmaps and guides) describe the challenges and set out methodologies and action plans. Since the beginning of 2013, a Group directive has defined the requirements to be met by year-end 2016 at operated sites that use more than 50,000 tons of oil equivalent per year of primary energy (approximately 40 sites).

In early 2013, the Group set an objective to improve energy efficiency by 1.5% per year on average between 2012 and 2017 within Exploration & Production, Refining and Petrochemicals. These activities represent over 95% of the Group’s net primary energy consumption. A Group Energy Efficiency Index (GEEI) was created in early 2013 to assess the Group’s performance in this area. It consists of a combination of energy intensity ratios (ratio of net primary energy consumption to the level of activity) per business, reduced to base 100 and consolidated with a weighting by each business’s net primary energy consumption. Its value was defined as 100 in 2012 and the goal is therefore to reach 92.5 by 2017. Within the scope of the alignment of the Group’s objectives for the 2010-2020 period, the objective for this period is an average 1% improvement per year in the energy efficiency of the Group’s operated facilities.

 

Energy efficiency

  2015   2014   2013 

Net primary energy consumption (TWh)

   153     153     157  

Group Energy Efficiency Index (base 100 in 2012)

   91.9     101.0     102.3  

The Group’s very good energy efficiency performance in 2015 is the result of the end of start-up flaring of the CLOV field in Angola, and the commissioning of the gas exportation project from the Ofon site in Nigeria to the Bonny natural gas liquefaction plant, as well as permanent efforts to improve the availability rate of the Group’s facilities.

The Group is implementing energy management systems based on ISO 50001. The Leuna refinery and Brunsbüttel bitumen plant (Germany) were certified, as well as several Marketing & Services sites in France in 2015: the Solaize research center, the Saint-Martin d’Hères site, as well as 7 depots and 193 service stations. At Exploration & Production, Total ABK (Adu Dhabi) also received this certification in early 2016.

Improving the environmental footprint of products and services

Approximately 85% of GHG related to the use of oil and gas are emitted during the customer usage phase, compared to 15% during the production phase. For this reason, in addition to the measures taken by TOTAL at its industrial sites, the Group believes that improving the environmental footprint of its products is a key factor in the fight against climate change.

The Group has acquired energy service subsidiaries in France and Germany, working mainly for European customers, as well as in Africa and the Middle East. These service companies use results obtained in-house to give industrial customers advice on improving their performance and energy efficiency.

In France, Energy Efficiency Certificates (Certificats d’économies d’énergie – CEE) are awarded by the authorities in recognition of energy-saving activities and, within this framework, TOTAL has encouraged its customers to reduce their energy consumption. Action taken since 2011 has led to a reduction in its French clients’ energy consumption of 10 Twh/y and its German clients’ power bill of approximately150 million.

Through the “Total Ecosolutions” program, the Group is also developing innovative products and services that perform above market standards on the environmental front, in particular in terms of reducing energy use, GHG emissions and the impact on human health. At year-end 2015, 81 products and services bore the “Total Ecosolutions” label, well above the target of 50 products and services. They relate to a variety of sectors, including mobility, agriculture, buildings, packaging, infrastructure and industrial manufacturing. For example, Total Amyris biodiesel and biocomponent for aviation fuel are produced from renewable raw materials that allow a significant reduction in GHG emissions over their life cycle (compared to the fossil equivalent). Some of the products result in reduced energy consumption, such as Total Excellium fuel, Total Quartz Fuel Economy lubricant, and the Azalt® ECO2 and Styrelf® ECO2 bitumen ranges.

The CO2 eq emissions avoided throughout the life cycle by the use of “Total Ecosolutions” products and services, compared to the use of benchmark products on the market and for an equivalent level of service, are measured annually based on sales volumes. This represented 1.7 Mt CO2 eq in 2015.

 

-4.2.3.5.    Access to energy

The World Bank estimate for the number of people without access to electricity has exceeded 1.3 billion. In 2011, TOTAL therefore launched a range of innovative solar energy solutions, accessible to the greatest number of people, led by its flagship projectAwango by Total (refer to “ — 4.3.4.5. “Giving the most disadvantaged populations greater access to energy”, below).

 

-4.2.3.6.    Sector initiatives and international framework

In 2014, TOTAL decided to join the call of the UN Global Compact, which encourages companies to consider a CO2 price internally and publicly support the importance of such a price via regulation mechanisms suited to the local context. TOTAL also works alongside the World Bank as part of the Carbon Pricing Leadership Coalition. In particular, TOTAL advocates the emergence of a balanced, progressive international agreement that prevents the distortion of competition between industries or regions of the world. Drawing attention to future constraints on GHG emissions is crucial to changing the energy mix. TOTAL therefore encourages the setting of a worldwide price for each ton of carbon emitted, provided that great care is taken to protect “sectors exposed to carbon leakage” (as defined by the EU). To this end, six oil industry leaders, including that of the Group, called for the setting up of carbon pricing mechanisms at the UN Framework Convention on Climate Change in June 2015.

According to the IEA, the electricity-generating sector is the sector that must contribute most to the decrease of CO2 emissions in the world by 2035 in order to remain within the 450 ppm of CO2 scenario (electricity generation contributes more than 65% to the emission reduction effort, compared to 11% for the industrial

 

 

2015 Form 20-F TOTAL S.A. 59


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

sector, 16% for transport and 4% for the construction sector). Substituting coal for gas in the electricity-generating sector is currently the fastest and cheapest way to reduce worldwide CO2 emissions. This solution is immediately available and offers the necessary flexibility to electric networks, which supplements intermittent energies. As a result, TOTAL supports standards that impose emission ceilings on electricity generation. Such standards are being discussed in the United States and the United Kingdom.

In 2014, TOTAL was actively involved in launching and developing the Oil and Gas Climate Initiative (OGCI), a global industry partnership announced at the UN Climate Summit in New York on September 23, 2014. The aim of this initiative, which at year-end 2015 included 10 major international energy players, is to share experiences, advance technological solutions and catalyze meaningful action in order to assist the evolution of the energy mix in a manner compatible with climate change issues. In September 2015, the executives of the member companies published the first OGCI report, accompanied by a joint declaration of their support for an ambitious climate agreement, during a debate on energy and climate issues with international experts.

TOTAL actively followed the deliberations of the United Nations Framework Convention on Climate Change during the COP21 conference held in Paris, which, on December 12, 2015, resulted in the Paris Agreement, the first universal agreement on climate change.

TOTAL also actively participates in the debate on climate issues and has long-term partnerships with key stakeholders. For example, TOTAL funds research programs in France conducted by the ADEME, Paris-Saclay and the Climate Economics Chair at Paris-Dauphine University, as well as the Massachusetts Institute of Technology (MIT) in the United States. TOTAL has also been an active member of the World Business Council for Sustainable Development since 2014. Lastly, TOTAL offers training and makes presentations at several universities, thereby taking part in the debate.

 

4.3.Societal information

 

4.3.1.TOTAL’s societal approach

In line with the values and principles set out in its Code of Conduct and Safety Health Environment and Quality Charter, TOTAL places its commitment to community development at the heart of its corporate responsibility in order to create shared value with people living near its facilities, its customers and suppliers, and its employees. Dialogue with stakeholders, impact management and the creation of shared value are the pillars of the Group’s societal policy.

This approach, which is deployed in direct relation with operations, encompasses all actions taken by the Group to improve the way it is integrated in the countries where it operates. In line with the strategic priorities defined by senior management, reporting tools are used to track and monitor overall societal performance. Eight indicators, which are based on the societal policy, cover the quality of dialogue with stakeholders, the management of the impact of the Group’s activities, socioeconomic development projects and access to energy. Four topics have been identified as “Group Priorities”: education, employment, road safety, and access to energy.

 

4.3.2.Dialogue and involvement with stakeholders

Openness, dialogue and engagement are essential for developing long-term, constructive and transparent relations with stakeholders. For the past 20 years or so, changes in the regulatory framework have promoted information, consultation and dialogue prior to high-impact decisions being made.

In addition to complying with regulations, TOTAL encourages dialogue at every level of its organization. The foremost

requirement of the societal directive is that “each asset must consult its stakeholders regularly to gain a clearer understanding of their expectations and concerns, measure their level of satisfaction regarding the Group and identify avenues of improvement for its societal strategy”.

 

-4.3.2.1.    Stakeholder consultation

In Exploration & Production, dialogue is initiated within the framework of societal baseline studies carried out to identify at a very early stage, even before the start of operational activities, stakeholders that may potentially be affected and to understand the human socioeconomic context of the area in question. The Community Liaison Officer (CLO) maintains a dialogue between the subsidiary and the local communities. CLOs, who are employees of TOTAL, are members of the local community and therefore speak the local language and understand local customs; as such they often play a key role in facilitating the company’s integration into the local context. To formalize and organize relations with stakeholders, agreements may also be signed and meetings held, such as public consultations.

In the Democratic Republic of the Congo, a Consultation Committee composed of 10 members (5 women and 5 men) elected from among those living in the permit area was set up. The first Committee meeting was held in the presence of the Territory Administrator and representatives of the Ministry of Hydrocarbons.

In Azerbaijan, the consultation of local stakeholders (administration, nearby industrial players, the public, existing training centers, local NGOs, etc.) continued in 2015 in preparation for the development of the deep offshore discovery in the Absheron Block, which includes the construction of an onshore terminal.

In addition to holding regulatory forums for dialogue, Refining & Chemicals has voluntarily set up structures for dialogue with local stakeholders (such as Community Advisory Panels in the United States and special commissions for some European platforms). In 2015, Refining & Chemicals signed the Responsible Care® Global Charter for its worldwide operated petrochemical activities, thereby reaffirming its commitment to the safe handling of chemicals. One of the principles of this Charter is to engage stakeholders in order to understand and respond to their concerns on improving operational and product safety.

 

-4.3.2.2.    Implementation of the SRM+ tool

To put its societal approach on a professional footing, TOTAL has applied its internal Stakeholder Relationship Management (SRM+) methodology since 2006. The aim of this methodology is to identify and map the main stakeholders, schedule meetings with them, understand their views and issues, and then define an action plan for building a long-term relationship. It makes it possible to establish a trust-based relationship and work with complete transparency. These discussions allow the Group to identify expectations to which it can respond and consolidate the societal strategy of the subsidiaries and sites. Since 2006, SRM+ has been implemented in over 100 entities.

In 2015, in Exploration & Production, this was the case in Papua New Guinea, where the methodology was adapted to carry out due diligence in order to better understand the societal practices of the former operator and to consult with those living around the site.

In Refining & Chemicals, the methodology was implemented in France on the Donges platform in the Loire-Atlantique region.

In Marketing & Services, a specific module was set up for small sites, allowing 11 subsidiaries of the Africa – Middle East division to begin a consultation process with stakeholders in 2015 at

 

 

60 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

33 sites (service stations, depots and head offices). Four countries (Algeria, Lebanon, Democratic Republic of the Congo and Mauritania) launched this initiative for the first time, while others are implementing it for new sites or have relaunched a consultation procedure after several years. A total of 39 countries have implemented SRM+ in this region.

In 2015, a new and more streamlined SRM+ guide and manual for managers and operational staff was drawn up to include new developments made since the tool was first launched in 2007.

 

-4.3.2.3.    Respecting the rights of indigenous peoples

TOTAL is aware of the specificities of indigenous and tribal peoples (as referred to in International Labour Organization’s Convention No. 169) and has developed a charter of principles and guidelines regarding indigenous and tribal peoples to be followed with communities that are in contact with its subsidiaries. This Charter encourages the use of experts in order to identify and understand these peoples’ expectations and specificities, consult with them and contribute to their socioeconomic development.

Convinced that respect for the human rights of local populations is a cornerstone of its industrial projects, TOTAL participated in the work of IPIECA (the global oil and gas industry association for environmental and social issues) to develop the guide entitled “Indigenous peoples and the oil and gas industry: context, issues and emerging good practices”. The Group thus shared its experience with the Guarani people in Bolivia. Partnerships have been forged with institutions known to be experts in their field in order to enhance the societal team’s professionalism in implementing projects and allow for benefits to be shared equitably and transparently. A number of socioeconomic development initiatives have been launched to support the fight against discrimination, especially gender discrimination.

A chance archaeological discovery (bones, ceramic fragments, etc.) made by Total E&P Bolivia at the Incahuasi field during construction work was managed in collaboration with the Bolivian authorities and the local Guarani communities. Social and environmental monitors from these communities provided oversight of the archaeological site. At the request of the Guarani communities, TOTAL changed the architecture of its construction project and agreed to re-bury the remains in the same place where they were found and ensure communities retained access to this sacred place.

 

4.3.3.Controlling the impact of the Group’s activities

To better control the impact of its operations, the Group has integrated its societal approach into its operational processes via the Group’s H3SE (industrial hygiene, safety, security, societal and environment) management system, known as MAESTRO (Management And Expectations Standards Towards Robust Operations). Audits conducted with MAESTRO give rise to recommendations and strengthen efforts in order to better manage the societal impacts of the Group’s operations.

 

-4.3.3.1.    Conducting impact assessments

An understanding of the socioeconomic context is gained through a baseline study, which is generally accompanied by a consultation phase involving local stakeholders.

In Exploration & Production, impact assessments are carried out before any operation to avoid, reduce and compensate for negative impacts. In 2015, a team of some 20 people in Papua New Guinea was recruited to prepare geotechnical studies and undertake societal and environmental assessments of the potential Papua LNG project sites. The technical team used the results of the assessment to minimize the potential impacts on the local population.

In Uganda, the results of the societal and health baseline study were incorporated into an Environmental, Social and Health Impact Assessment and specifications were submitted to the government for approval. A Preliminary Resettlement Action Plan was developed along with a risk identification methodology. Following the exploration phase, the subsidiary commissioned a consultant (ASLO) and an international NGO (International Alert) to conduct an ex-post assessment of its societal performance with an analysis based on consultation of the local populations.

In addition, to assess the impact of its operations in host countries, the Group regularly works with CDA, an independent non-profit organization. In 2015, CDA conducted an assessment in Argentina and a number of recommendations were made in a report to better integrate operations into the local socioeconomic fabric. CDA impact assessments systematically produce reports, which are available online on the organization’s website.

Finally, the MOST (Management Operational Societal Tool) now offers a standard version that allows users to manage stakeholder relations, site-related grievances and societal projects. Specific modules (access to land, compensation and employment) can be added to this common framework. Societal data is geo-referenced, with automatic display in a geographic information system. MOST generates reports that serve as a basis for the analysis of societal performance. This tool is used as part of the professionalization of local teams. In 2015, this tool was used in 13 countries and will be implemented more widely in 2016.

 

-4.3.3.2.    Handling grievances from local communities

A grievance mechanism is gradually being introduced at all the Group’s subsidiaries and sites. These systems are already in place at all Refining & Chemicals platforms.

In Exploration & Production, a guide on the handling of grievances, inspired by the UN Guiding Principles on Business & Human Rights, was drawn up in 2013. In Denmark, for example, grievances received during the drilling of an exploration well were recorded in MOST and follow-up action was taken by the CLO. This grievance mechanism was also implemented in 2015 in Papua New Guinea and the Democratic Republic of the Congo. The Group’s expertise contributed to the development by IPIECA of a Community Grievance Mechanism Toolbox that is now available on its website. In 2014, Marketing & Services published a brochure to raise awareness of grievance management to allow the segment’s subsidiaries and operating sites to become familiar with this subject and introduce a dedicated system separate from the one used to handle commercial complaints. This mechanism was incorporated into Marketing & Service’s societal framework.

 

-4.3.3.3.    Improving road safety

Road safety is one of the Group’s priorities (also refer to “— 4.2.1. “Occupational health and safety”, above), particularly in terms of societal matters.

To mobilize the public and private sectors, TOTAL created in 2012 an independent organization known as Safe Way Right Way with a view to mobilize partners, raise funds, set up training and awareness initiatives and improve regulations and their implementation.

TOTAL is a member of the Global Road Safety Partnership (GRSP). The aim of this public-private partnership is to improve road safety and share expertise in this area. In this context, the Group has partnered with Toyota to help implement the “Safe to school – Safe to home” program developed by the GRSP in Zambia. TOTAL also co-financed the African Road Safety 2015 conference organized by the GRSP in Lusaka, during which public

 

 

2015 Form 20-F TOTAL S.A. 61


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

authorities, international institutions and the private sector were able to discuss their policies regarding road safety in Africa.

The “Safety Cube”, a box containing fun educational materials, supports road safety awareness campaigns in schools. Made available by the subsidiaries in 37 countries in the Africa – Middle East region in partnership with education and transport ministries and local NGOs and through the active involvement of employees, this program has grown and supports such initiatives as the opening of the Children’s Road Safety Education Center in Senegal. This program was also deployed in Asia, where 3,000 children have already been made aware of road safety issues in around 10 countries over the past two years. In total, nearly 440,000 children were made aware of the dangers of the road.

A qualitative study was carried out in 2015 by the GRSP with four subsidiaries (South Africa, Kenya, Morocco and Zambia) on the use of the Cube. The purpose of this study was to receive feedback on how the project is perceived by the schools in which the program was deployed. The large majority of teachers stated they were satisfied and felt that the educational content was pertinent and effective. One suggested area for improvement is to integrate this project into a wider road safety strategy that includes action on schools surroundings and involves local communities more.

In France, TOTAL has, since 1995, contributed to the10 de Conduite Jeune training operation for young drivers in cooperation with the French national police, Groupama and Renault. Each year, this initiative raises awareness among more than 10,000 junior and secondary school students.

 

4.3.4.Creating local value

TOTAL’s goal is to act and be recognized both as a partner in the long-term economic and social development of the communities and regions in which the Group operates, and as a key player in access to energy. The Group has a special responsibility to the communities living close to its facilities and endeavors to make its activities a source of value and opportunity for them.

TOTAL is building a global, integrated local development approach (“In-Country Value”) that creates synergies among all the value-creating elements for host countries (infrastructures, support for local industries, employment, subcontracting, socioeconomic development projects, education, access to energy, etc.) by promoting the Group’s industrial know-how. This approach is reflected in two key strategies: on the one hand, the Group’s commitment to local content and, on the other hand, support for the implementation of socioeconomic programs, including in particular the implementation of access-to-energy programs.

 

-4.3.4.1.    Committing to local content

TOTAL is committed to: employing more local staff and subcontracting more work to local businesses wherever the operating constraints of its activities allow, particularly through training and support programs intended for small and medium-sized enterprises (SME) and companies that shape the local economy; helping to diversify the economies of the regions in which it operates by supporting local initiatives; and contributing to human development, mainly by focusing on education and strengthening local development skills and capacities.

To this end, Exploration & Production is shifting from a local content approach (focused mainly on direct and indirect local employment) to an In-Country Value approach geared toward local value creation. It has also developed a roadmap centered on four main areas: publishing future industrial and manpower needs; using a unique supplier database for each subsidiary; developing a

large-scale program for training technicians; and comprehensively studying local value creation. TOTAL participated in the development of the IPIECA “Local content strategy guide” and helped update this document in 2015.

In Papua New Guinea, where TOTAL opened a subsidiary in 2014, the Elk-Antelope project team is working on a local value creation strategy aimed at integrating local businesses and professionals from the facilities construction phase. To this end, TOTAL conducted a national industrial survey in 2015 that enabled it to identify avenues for developing the country’s industrial fabric and the skills of its workforce.

Training and education are the key pillars of the In-Country Value approach. For instance, in Marketing & Services in Africa and the Middle East, the “Young Dealers” program aims to help young service station employees gain promotion to management positions. Approximately 20% of the service stations in Africa – Middle East are managed by young dealers. Another program launched in 2014, the “Young Graduate” program, is intended for young graduates from Africa or the Middle East with five years of higher education and less than one year of professional experience. This career trajectory strengthens their skills and makes it easier to recruit young people with high potential. Currently, 140 “Young Graduates” are working in retail, operations or finance. More than 40 of them have taken up a position outside their country of origin.

 

-4.3.4.2.    Boosting regional development and supporting industrial restructuring

TOTAL has set up a program to pre-qualify and certify French SMEs, in line with Group standards, in order to work with more local suppliers. In addition to the jobs generated by its activities, the Group, as a responsible company, supports SMEs, mainly in France, through its Total Développement Régional (TDR) entity. The Group relies on TDR for the local implementation of agreements signed with the French government and local public players in connection with its industrial conversion projects. These included, for example, the conversion of the ICD platform in Dunkirk and the future Carling Saint-Avold and La Mède platform projects.

This support is a major element in TOTAL’s commitment to its industrial and economic responsibilities and takes a number of different forms within TDR. These include financial assistance for the setting up, development or takeover of SMEs in the form of loans, industrial conversion assistance alongside local development bodies, assistance in the development of export activities and international trade, and help for innovative SMEs. These programs help create long-term jobs. Over the past three years (2013-2015), TDR has issued a total of21.2 million in loans to 419 SME projects, thereby supporting nearly 8,000 jobs.

To maintain industrial activities and jobs once refining operations at the Flanders facility end, two industrial projects are underway: construction of a dietary phosphate production plant by 2017 (Ecophos), and construction of a pilot biodiesel and biofuel production plant in which the Group has a stake (BioTfueL). The activities maintained at the Flanders facility currently provide 260 positions and 130 subcontracting jobs.

In Carling, the steam cracker was permanently shut down in October 2015. To adapt the platform and ensure its future by restoring its competitiveness, TOTAL expects to invest180 million by the end of 2016 to develop new activities in the growing hydrocarbon resins (Cray Valley) and polymers markets. TOTAL has made a commitment to implement this industrial conversion without any lay-offs and to fulfill all of its contractual obligations with its clients and partner companies, particularly

 

 

62 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

through a support fund. In addition, TOTAL commits to improving the industrial platform’s attractiveness by developing a shared services offer, with the aim to help new economic stakeholders establish in the area. In this way, TOTAL confirms its responsibility towards the employment areas in which the Group operates as well as its commitment to maintain a strong and sustainable industrial presence in the Lorraine region. A framework agreement signed in early 2015 between the Chairman of the Lorraine region and TOTAL aims to leverage the Group’s expertise and financial means to develop the area’s industrial fabric.

In 2015, TOTAL announced its plan to adapt its operations in La Mède by stopping refining activities and investing in converting the platform to renewable energies and high value-added products. This project will be completed without any lay-offs. TDR will be involved to help minimize the impact on subcontractors.

 

-4.3.4.3.    Acting as a partner for human, social and economic development

TOTAL’s contribution to the socioeconomic and human development of the countries in which the Group operates is reflected in its involvement in local development programs.

In 2015,384 million ($426 million) was spent on societal projects, compared to459 million in 2014 and357 million in 2013. Certain expenses are managed directly by host countries in application of contractual provisions, for example in Nigeria (Niger Delta Development Committee) or the Republic of the Congo (Provisions d’investissements diversifiés). In 2015, 3,063 societal actions were reported. These programs support local populations and fall into three main categories: local economic development, human and social development, and citizenship. Approximately 85% of expenditure for societal projects goes to countries outside the OECD.

Two cross-functional priorities underlie these projects: partnerships and skills development. Built on constructive dialogue and the determination to forge long-term relationships of trust with stakeholders, partnerships with local institutions and organizations guarantee the long-term success of projects. In all its actions, TOTAL ensures that it does not take the place of local authorities and teams up with NGOs that have solid field experience. In the same vein, TOTAL promotes actions that help strengthen the ability of individuals and local bodies to organize their own development independently in order to ensure sustainability.

The Group’s expertise is based on the continued professionalization of its societal teams through structuring projects, setting goals and monitoring performance indicators. At the Group’s head office, an individual is dedicated to relations with NGOs. In Exploration & Production, more than 400 people are involved in societal matters, with over 360 involved on a full-time basis. In 2015, some 100 employees involved in societal projects from many of the Group’s entities attended a Group Societal Seminar to share experiences, followed by a training session on human rights presented by the Danish Institute of Human Rights. Several in-house training modules have been created for all Group employees, including an e-learning launched in 2015 on the Group’s societal commitment.

 

-4.3.4.4.    Supporting education

Education is key to creating shared value by helping host countries develop the skills of their young people and training the future employees that industry will need. TOTAL’s contributions to education are framed within existing local systems, adapted to local realities and always undertaken in the form of partnerships. In addition to support for primary and secondary education where needs have been identified, the Group’s educational initiatives are

built around four core international programs: scholarships, partnerships with universities, teaching and research chairs, and professional training.

TOTAL promotes the internationalization of its management, the recruitment of local personnel and their access to positions of responsibility, particularly within their original subsidiaries. To achieve this, the Group offers local, regional and international scholarships prior to recruitment. Each year, these scholarships enable several thousand young people to pursue their studies throughout the world and, since 2004, over 1,000 students from the Group’s host countries have been able to prepare for qualifications (doctorates, MBAs, Master’s degrees, engineering schools, bachelor’s degrees and university institutes of technology) at the best institutions, mainly in France or other European countries.

To help the companies recruit qualified local staff, TOTAL helps to strengthen the African continent’s universities by making the Group’s technical and scientific expertise available to them. Twenty-nine framework agreements have been signed with leading institutes of higher education, such as the 2IE Institute in Burkina Faso and the universities of Cape Town and Witwatersrand in South Africa. The university partnership program launched in Africa in 2010 has been extended to all of Europe, Asia and the Middle East and now includes 80 establishments that maintain a regular dialogue with TOTAL. In addition, professional training programs adapted to the needs of each country are organized in cooperation with local actors and allow trainees to obtain diplomas and recognized professional qualifications. Thus, the Group’s entities have introduced a large number of training schemes adapted to meet the specific local context, particularly in Africa.

TOTAL supports teaching and research chairs, and in particular research and innovation at 32 institutions, to address the needs of the business world.

These programs are complemented by “TOTAL associate teachers” (TOTAL professeurs associés). This original initiative is a non-profit association run by current or retired employees of the Group who teach courses free of charge in schools and universities. Over 250 teachers give courses and lectures inoil-related fields. Since 2001, more than 160,000 students throughout the world have benefited from this expertise.

Finally, to help provide access to education to as many people as possible, TOTAL broke new ground in 2015 by contributing to the creation of a free massive open online course (MOOC) on the oil chain entitled “Oil & Gas: from Exploration to Distribution”, afour-week online course taken by more than 21,800 learners worldwide, half of whom were from the African continent.

 

-4.3.4.5.    Giving the most disadvantaged populations greater access to energy

For more than 10 years, several Group subsidiaries have been engaged in various one-off access-to-energy projects, usually in cooperation with neighboring communities and local authorities in host countries, without always aiming to economic viability and sustainability objective. To improve its societal performance and structure its approach, TOTAL aims to develop models that are both profitable and sustainable. For this reason, in 2010 the Group launched the “Total Access to Energy” program, a source of initiatives for identifying and testing solutions that facilitate access to energy for the poorest populations.

Awango by Total, a new business model

The first large-scale achievement to come out of this program,Awango by Total is a business response to a societal problem. This innovative, sustainable and reproducible business model

 

 

2015 Form 20-F TOTAL S.A. 63


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

offers a range of solar solutions for lighting and recharging small electrical appliances such as mobile phones.

Launched in 2011 in four pilot countries, this offer was sold in over 30 countries in 2015, including 6 where it is currently being launched. At the end of 2015, 1.3 million lamps have been sold, improving the day-to-day lives of six million people and exceeding the target set in 2012 at the Rio+20 conference. The distribution networks used are both TOTAL’s traditional networks (service stations) and “last mile” networks built with local partners to bring these solutions to isolated areas. Reseller networks are then set up and programs developed with the support of external partners to recruit and train “Young Solar Resellers”.

This model is based on innovative partnerships with various stakeholders: development experts, NGOs, manufacturers, institutional bodies and associations, microfinancing institutes, etc. In 2014, TOTAL and the IFC entered into a 3-year partnership to support the Lighting Global program. On the ground in Uganda,Awango by Total lamps have been sold since 2013 in the Lake Albert region through partnerships with local villager associations and the Caritas Arua NGO.

In Haiti, a partnership with Entrepreneurs du Monde led to the development of a social business (Palmis Eneji) through the use of microfinance mechanisms. A pilot project is also underway in the Philippines with Entrepreneurs du Monde to measure the societal impact of solar solutions on populations that use them (e.g., health, education, savings, revenue generated).

The Group’s goal is to further develop this program with a target of five million lamps sold in Africa by 2020, benefiting 25 million people on a continent that is at the core of TOTAL’s global strategy.

In 2015, Babyloan, a European leader in crowdfunding, and TOTAL teamed up to develop the first crowdfunding platform dedicated to access to energy. This partnership aims to accelerate access to energy and related financing solutions, particularly in Africa, Asia and Latin America, where the need is greatest. This brings together Babyloan and TOTAL’s complementary expertise: in crowdfunding and microfinance for Babyloan, and in access to energy for TOTAL. This collaboration aims to support the creation of local microbusinesses that will develop distribution networks towards isolated communities and better face of last mile distribution challenges.

Fighting fuel poverty and developing more inclusive mobility

The aim of the “fuel poverty and inclusive mobility” project in France is to reduce heating costs (via thermal renovation) and enhance mobility for low-income households.

To respond to the issue of fuel poverty, the Group is working alongside the French government and other energy producers in the “Living Better” program, which has allowed 150,000low-income households(1) to benefit from thermal renovation since its creation in 2011. In addition, the 90 energy efficiency ambassadors at PACT and FACE (agreement signed in 2014 with the French Ministry for the City, Youth and Sport) have helped to identify and support households affected by energy poverty in 30 departments in France (assistance with building renovation formalities, financing solutions, training in eco-friendly behaviors).

The Wimoov association provided mobility advice and solutions to 7,500 people(1) in 2015, 50% of whom found jobs or new

employment. As a result of TOTAL’s support, new mobility platforms were opened and developed. In 2015, the Inclusive Mobility Laboratory created by TOTAL and Wimoov welcomed five new members – the Red Cross, FARE (French federation of road associations for education), Michelin, Keolis and Transdev – and worked on the global recognition of mobility advisors and innovative services available to vulnerable groups, including local support via community services and tailored digital solutions that bring together transport operators and players in the social economy. The call for projects issued in partnership with the French Ministry for the City, Youth and Sport (Experimental Youth Development Fund) has made it possible to fund and support, via the Agence Nationale des Solidarités Actives (national agency for active inclusion), 16 innovative youth initiatives throughout France until the end of 2016.

Finally, TOTAL launched a social business model involving service stations with reduced investment and operating costs for municipalities (two openings in 2015) to facilitate access to fuel in rural areas in France.

 

4.3.5.Partnerships and philanthropy

In addition to the societal initiatives that are directly related to the Group’s industrial activities, TOTAL has also been committed for over 20 years to taking general-interest measures in the countries where it has operations. These actions are essentially conducted by the Total Corporate Foundation and the Philanthropy Department of TOTAL S.A.

 

-4.3.5.1.    Total Corporate Foundation

For the period of 2013-2017, the Group has renewed its commitment to its Corporate Foundation, which has a 5-year budget of50 million. The Foundation is active in four fields: health, solidarity, oceans and marine biodiversity, culture and heritage.

In the health field, the Group has been a partner of the Pasteur Institute since 2005. The aim of this partnership, renewed for 2015 to 2017, is to support projects to combat childhood diseases as well as research programs and field actions in partnership with the Group’s subsidiaries, mainly in Africa and South-East Asia.

In the field of solidarity, the Foundation encourages Group employees to engage with the community through support for projects championed by non-profit organizations with which they volunteer on a personal basis. In 2015, the Foundation supported 42 employee projects in 33 countries.

With regard to marine biodiversity, the Foundation funds research programs undertaken to improve knowledge about marine species and ecosystems and challenges related to their protection and enhancement. For the 51 projects supported in 2015, the Foundation ensures the sharing of knowledge through awareness and education campaigns. In particular, it backed the Lengguru scientific expedition in West Papua. Led by the Institute of Research for Development, the Indonesian Institute of Sciences and the Sorong Fisheries Academy, this project mobilized more than 70 European and Indonesian researchers.

In the culture and heritage field, the Total Foundation partly funded 12 exhibitions in 2015 that helped to showcase the cultures of the countries in which the Group operates. In 2015, the Total Foundation and the Fondation du Patrimoine (heritage foundation) renewed their partnership for the fourth time for the 2015-2017

 

 

 

(1) 

Source: Wimoov, an association that accompanies audiences from difficult situations (people with disabilities, people needing integration into the professional world, the elderly, etc.) to give them more mobility.

 

 

64 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

period. The partnership primarily focuses its activities on the rehabilitation of the country’s industrial, craft, port and maritime heritage converted for sociocultural purposes and on work sites designed to further professional training and social integration. Since 2006, more than 155 projects, including 29 worksites for employment integration, spread across France, have received nearly21 million in funding from this partnership.

 

-4.3.5.2.    TOTAL S.A. philanthropy

In the field of solidarity, the Philanthropy Department has forged a number of major institutional partnerships in France. Since 2009, it has worked with the French government and the ministry responsible for youth to promote the social, professional and civic integration of young people through programs that have already benefited over 200,000 people. This partnership, with an overall budget of60 million and the experimental youth development fund as its primary technical and financial tool, has enabled the financing of more than 260 projects since its creation. In 2014, the program was renamed “La France s’engage”.

In the field of marine biodiversity, the Group has been a partner of the French Society of Sea Rescuers (SNSM) since 2008. Through its funding and expertise, it plays a role in improving the safety of rescue operations and training volunteers. Thanks to its support, the Sea Rescuers have a center equipped with a state-of-the-art navigation and vessel handling simulator. Each year, more than 300 rescuers have access to this training.

In the field of culture, convinced that access to culture from a very young age is key to self-confidence and respect for others, the Group supports numerous initiatives designed to instruct young people in the worlds of art and culture. In total, nearly 75,000 children from metropolitan France and the Overseas Departments have benefited from these projects.

 

4.3.6.Contractors and suppliers

TOTAL’s activities generate hundreds of thousands of direct and indirect jobs worldwide. The Group’s purchases alone represented approximately $40 billion worldwide in 2015. The average breakdown, at the Group level, of expenditure for purchases of goods (products, materials, etc.) is approximately 25% and of services (including consulting services, work with supply of materials, transport, etc.) is approximately 75%, excluding crude oil materials. The number of hours worked by subcontractors is monitored for large projects. This involves a range of environmental, social and societal impact concerns addressed by TOTAL when dealing with its suppliers via its principles, purchasing commitments and sustainable procurement initiatives.

TOTAL’s societal commitment is shared by the Group’s employees, partners, customers and suppliers, in particular by employing more local staff and subcontracting more work to local businesses wherever the operating constraints of its activities allow. The Group’s societal directive stipulates that purchasing processes must be adapted as required in cases where a societal action plan has been implemented.

TOTAL has created a map of the CSR risks and opportunities in the Group’s main purchasing categories to identify key issues in three areas: ethics and human rights, environmental impact and the creation of value with local communities. Pilot projects were implemented in certain purchasing categories to integrate the monitoring of CSR aspects into the purchasing process through concrete measures (e.g., specific questionnaire focusing on the Fundamental Principles of Purchasing, drafting of suitable contract clauses, good practices guide for purchases from the disabled and sheltered employment sectors). For example, for a multi-country “car wash” call for tenders, typical of Marketing & Services’

activities, the map encouraged the buyer/internal client team to take a “total cost of ownership” approach (calculated by adding to the initial purchase price costs incurred by the client when using and disposing of the product: power and water consumption, end-of-life processing costs, etc.) and incorporate environmental criteria into the specifications and then into the contract. The map was updated in 2015 to reflect the Group’s main purchasing categories and presented to the buyers, the Group Purchasing Committee and the Ethics Department.

 

-4.3.6.1.    Monitoring responsible practices among suppliers

In its Code of Conduct, TOTAL states that it works with its suppliers to ensure the protection of the interests of both parties on the basis of clear and fairly negotiated contractual conditions. This relationship is founded on three key principles: dialogue, professionalism and adherence to commitments.

TOTAL expects its suppliers to:

 

 

adhere to principles equivalent to those in its own Code of Conduct, such as those set out in the Fundamental Principles of Purchasing directive; and

 

agree to be audited, be particularly attentive to the human rights-related aspects of their standards and procedures, in particular their employees’ working conditions, and ensure that their own suppliers and contractors respect equivalent principles.

The Fundamental Principles of Purchasing, launched in 2010 and formally set out in a Group directive in 2014, specify the commitments that TOTAL expects of its suppliers in the following areas: respect for human rights at work, health protection, assurance of safety and security, preservation of the environment, prevention of corruption, conflicts of interest and fraud, respect for competition law, as well as the promotion of economic and social development. TOTAL’s suppliers must be made aware of the rules it contains, which apply to all the Group’s companies, by including them, suitably transposed if necessary, into the agreements concluded with these suppliers. These principles are available for consultation by all suppliers in both French and English on TOTAL’s website (under “Suppliers”).

Questionnaires focused on environmental and societal issues are used to gather more in-depth information from suppliers about their approach to these subjects, either during pre-qualification or as part of an audit. Supplier relations are also considered from an environmental and societal perspective on occasion as part of ethical assessments of Group subsidiaries and entities undertaken by GoodCorporation (refer to “ — 4.3.7.2. “Respect for human rights”, below) in all continents in which the Group is present.

In 2015, TOTAL signed an agreement with the worldwide trade union federation, IndustriALL Global Union, which marks a major step in TOTAL’s commitment as a responsible employer (refer to “Item 6 — B.1. Employees’ compensation”, below). In addition, TOTAL is committed to disclosing and promoting the principles of this agreement to its service providers and suppliers.

Despite a difficult economic environment, certain one-off initiatives were launched. In October 2015, a suppliers day at Exploration & Production, which brought together 300 people, including 200 representatives of approximately 100 suppliers, was focused around two main themes: HSE and economic performance. Also in October 2015, a suppliers day at Refining & Chemicals, which brought together over 250 representatives from its main European suppliers, was held to present them with Refining & Chemicals’ strategy and safety, availability and cost-cutting goals.

 

 

2015 Form 20-F TOTAL S.A. 65


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

The deployment of the anti-corruption policy in purchasing continued in 2015 with the dispatching of specific questionnaires to select service providers and, in some cases, external controls. An initiative was launched in 2014 in which service providers working on Group sites were asked to take a training module similar to the Group’s anti-corruption e-learning module. CDs of this e-learning course were also distributed by several entities to their suppliers.

In addition, pursuant to Rule 13p-1 of the Securities Exchange Act of 1934, as amended, which implemented certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, TOTAL has submitted since 2014 to the SEC an annual document relating to certain minerals (deemed “conflict minerals”(1) by this Rule) sourced from the Democratic Republic of the Congo or a neighboring country. The document indicates whether TOTAL S.A. or one of its affiliates had, during the preceding calendar year, used any such minerals that were necessary to the functionality or production of a product manufactured or contracted to be manufactured by the Group. In addition, the document states whether such minerals were sourced from the Democratic Republic of the Congo or a neighboring country. The main objective of the rule’s obligation to publish this information is to prevent the direct or indirect funding of armed groups in central Africa. For more information, refer to TOTAL’s most recent publication available at: http://csr-analysts.total.com/ or http://www.sec.gov/.

 

-4.3.6.2.    Promoting sustainable procurement

An interdisciplinary working group dedicated to the issue of sustainable procurement and representing the various business segments as well as the Purchasing, Legal and Sustainable Development Departments is tasked with strengthening TOTAL’s policy in this area based on initiatives developed by each segment.

The Group’s buyers take part in international working groups on sustainable procurement. TOTAL is an active member of IPIECA’s Supply Chain Task Force. In 2015, TOTAL participated in the two special workshops on Operationalization of the UN Guiding Principles organized by the IPIECA, aimed at both oil and gas companies and engineering, procurement, construction (EPC) contractors. TOTAL is also represented in the French delegation to the international group that is considering the forthcoming ISO 20400 standard on sustainable procurement. The aim of this standard is to transpose the concept of social responsibility – as defined in ISO 26000 – to purchasing activities. Forty-one countries from every continent, as well as international organizations such as the OECD, the UN and the International Labour Organization, are involved in drafting this standard.

Sustainable procurement targets are integrated into the central buyers’ annual appraisals. Twelve sustainable procurement training

sessions have been held in France since 2013, with a total of 130 Group employees receiving training. Half of buyers responsible for a category at the head offices of the various business segments took part in this training and have been able to apply the corresponding good practices to their categories. To accompany these training events, practical tools (country factsheets including local laws and regulations, internal feedback and methodology sheets) were developed and used both before and after the learning phases.

As part of the new Corporate Purchasing training program, an inductione-learning course entitled “Purchasing at TOTAL” has been made available to all buyers and is mandatory for all new buyers. This module covers, in particular, the Group’s ethical commitments and the Fundamental Principles of Purchasing.

In France, the Group’s purchases from the disabled and protected employment sectors enabled the achievement of an indirect employment rate of nearly 1% in 2015. TOTAL is a member of the Pas@Pas association and provides its buyers with an online directory that can be used to identify potential suppliers and service providers from the disabled or protected employment sectors by geographical area and by category. A new training course on purchasing from the disabled and protected employment sectors was launched in 2015 and attended by nearly 100 people, including the Group’s Chief Purchasing Officer. Courses in the regions of France where TOTAL operates (Pau, Lyon, Nantes and Le Havre) were held throughout the year. These sessions form part of TOTAL’s sustainable procurement approach and further reflect its focus on regional development. In addition, in Belgium, Refining & Chemicals uses the services of companies that give priority to the employment of disabled individuals.

 

-4.3.6.3.    Acting as a responsible partner in relation with suppliers

TOTAL received the “Responsible supplier relationships” label in 2014 for its Holding and Marketing & Services activities in France. This label, awarded by the French authorities, recognizes companies that maintain sustainable and balanced relationships with their suppliers. Eligibility for this label is reviewed every year and was confirmed in 2015.

The general terms and conditions of purchase were updated in 2014 to ensure a sharper focus on balanced contractual relations. This balance is monitored in particular by an interdisciplinary working group dedicated to the issue of payment terms, set up in 2014. It involves the Purchasing and Finance departments at the French head offices of all the Group’s business segments and has the aim of monitoring payment terms, reporting and improving the processing of invoices.

 

 

The breakdown of TOTAL S.A.’s accounts payable as of December 31, 2015 and December 31, 2014, in application of the provisions of Article D. 144-4 of the French Commercial Code, is as follows:

 

(in M)

  2014   2015 
  Group   non-Group   Total   Group   non-Group   Total 

Balance

   286     1,101     1,387     307     930     1,237  

Overdue as of Dec. 31

   3     1     4     3     1     4  

0 to 30 days

   281     309     590     228     177     405  

Over 30 days

   0     302     302     0     348     348  

Not yet received

   2     489     491     76     404     480  

 

 

(1)

Rule 13p-1 defines “conflict minerals” as follows (irrespective of their geographical origin): columbite-tantalite (coltan), cassiterite, gold, wolframite and their derivatives, which are limited to tantalum, tin and tungsten.

 

66 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

 

Regarding the support given to French SMEs, TOTAL is a member of the “Pacte PME” association and was positively rated by its Monitoring Committee in 2015. One example is the support the Group gives to the international development of SMEs, including a number of its own suppliers, through TDR. More than 150 SMEs were thus able to take advantage of a range of programs in 2015: temporary reception of a Volunteer for International Experience (VIE) to represent them in one of the Group’s subsidiaries, access to a network of contacts consisting of Group employees at overseas subsidiaries, and the organization of joint operations in countries in which the Group is present in order to gain a better understanding of the local economic context (refer to “— 4.3.4.2. “Boosting regional development and supporting industrial restructuring”, above). Finally, the identification of innovative SME suppliers takes place through the appointment of innovation correspondents within each Purchasing department of TOTAL’s business segments.

Together with GEP-AFTP, TOTAL was involved in the creation of OG2P (Oil and Gas Partnering Platform). This is an onlineIn-Country Value partnering platform launched in October 2015. It allows SMEs in France and other European countries to build relationships with SMEs in producing countries.

To contribute toward the development of good practices in business relations, TOTAL launched an initiative to raise its employees’ awareness of mediation as an alternative method for resolving disputes with suppliers. Each year since 2013, a training day to raise awareness of mediation has been organized, and in 2015 two events were held. Each session brings together employees of the Group, lawyers and suppliers. This day enables employees to gain an understanding of mediation and its advantages, in particular in cementing long-term business relations, and includes practical exercises. A brochure designed to increase awareness of the mediation process is also made available to all employees. In addition, an e-mail address is available on the Group website (under “Suppliers”). It can be used to contact the Group’s internal mediator, whose task is to facilitate relations between the Group and its French and international suppliers. Finally, the general purchase terms and conditions also mention the possibility of recourse to mediation.

 

4.3.7.Fair operating practices

 

-4.3.7.1.    Preventing corruption

The oil industry must be particularly vigilant concerning the risk of corruption, especially given the scale of investments and the number of countries in which operations are conducted. Preventing corruption is therefore a major challenge for the Group and all its employees.

TOTAL’s stance on the issue of corruption is based on clear principles set out in its Code of Conduct: “The Group adopts a ‘zero tolerance’ approach to corruption and adheres to the strictest integrity standards”. This Code sets out the principles governing the actions and individual behavior of each person, both in their day-to-day decisions and in their relations with the company’s stakeholders. In it, TOTAL also reiterates its support for the OECD Guidelines and the Tenth Principle of the United Nations Global Compact, which urges businesses to work against corruption in all its forms.

The Group’s commitment has led to a number of actions, including:

 

 

the adoption by the Executive Committee in 2009 of a corruption prevention policy and the implementation of a dedicated compliance program; and

 

the establishment of a specific organization including, in particular, a Compliance and Social Responsibility Department, which is responsible for rolling out a robustanti-corruption compliance program via a network of 370 Compliance Officers wherever TOTAL operates.

The corruption prevention program is based on the very highest standards including, in particular:

 

 

a framework of internal rules that allow employees, with the support of their Compliance Officer, to identify risk situations, conduct due diligence and implement appropriate actions, particularly in the cases of: representatives dealing with public officials, purchasing/sales, gifts/invitations, donations/philanthropy, acquisitions, joint ventures, conflicts of interest and human resources;

 

activities designed to raise awareness among all employees: an initial e-learning course was rolled out in 2011 in 12 languages, followed by a more in-depth e-learning module in December 2015. This module is accessible to all employees and mandatory for the target groups (approximately 30,000 employees);

 

more targeted training activities intended for the most highly exposed positions (particularly for implementation of new rules) and in-depth training for all Compliance Officers;

 

the prohibition of “facilitation payments”;

 

regular reporting and incident feedback mechanisms, including an ethics alert system;

 

audits dedicated to compliance (six to eight per year) covering all the Group’s activities. These audits are followed up the next year to verify that the recommendations have been implemented. In addition, missions carried out by the Group Audit Department include, depending on their purpose, controls to ensure compliance processes are being followed; and

 

the application of suitable sanctions.

In 2015, significant internal communications took place to emphasize once again the importance the Group attaches to these issues. For the UN’s International Anti-Corruption Day and International Human Rights Day (both observed annually in December), TOTAL held its first Business Ethics Day, which focused on these two themes. This event was organized at Group level and relayed locally by the subsidiaries to remind employees how to react appropriately and to encourage dialogue.

Under the settlements reached in 2013 between TOTAL, the U.S. Securities and Exchange Commission and the U.S. Department of Justice, an independent monitor was appointed for three years to conduct a review of anti-corruption compliance and related internal control procedures implemented by the Group and to recommend improvements, when necessary. The monitor assumed his position at the end of 2013 (refer “Item 15 — 4.3. Risk assessment and management”, below) and issued an initial report to the authorities in July 2014. As the monitor had to relinquish his duties for health reasons, a new monitor was appointed in early 2015 to continue the review. A second report was issued in October 2015, in which the monitor completed his recommendations and indicated that“TOTAL has considerably improved its anti-corruption program by implementing the recommendations outlined in the first report”.

 

-4.3.7.2.    Respect for human rights

Activities of companies can affect the human rights of employees, partners and local communities in numerous ways. TOTAL’s proactive approach to human rights reflects its ethical commitment and helps to establish and maintain successful relationships with all stakeholders, which is essential for the Group to operate effectively.

 

 

2015 Form 20-F TOTAL S.A. 67


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

TOTAL’s approach to respect for human rights is based on several pillars, described below.

Written commitments

The Group’s Code of Conduct was revised in 2014 to reinforce TOTAL’s commitments in terms of respect for human rights. It sets out the Group’s adherence to international standards such as the UN Guiding Principles on Business and Human Rights and the Voluntary Principles on Security and Human Rights (VPSHR). In the event of any discrepancy between legal provisions and the Code of Conduct, the highest standard of protection of human rights is applied.

Human rights are now one of the priority business principles, alongside integrity (preventing corruption and fraud and anti-competitive practices) and HSE standards (health, safety/security and environment). The Group ensures that employees’ rights are protected and prohibits any form of discrimination against them, including due to sexual orientation or identity. It demands that they themselves respect human rights. TOTAL also expects its suppliers to respect standards equivalent to its own and pay particular attention to their employees’ working conditions. In addition, while respecting the sovereignty of the host countries in which it operates, the Group reserves the right to express its conviction on the importance of respecting human rights in matters concerning it. Finally, TOTAL respects the rights of local communities by identifying, preventing and limiting the impacts of its activities on their way of life and remediating them.

Some of these principles are set out in the “To find out more” section of the Code of Conduct and are detailed in TOTAL’s Human Rights Guide, as updated in December 2015 (available in English, French, Spanish and Chinese at total.com).

In 2013, the Group developed a strategic human rights roadmap to better integrate respect for human rights into its various risk and impact management systems. This roadmap, approved by the Executive Committee, is implemented by various Group entities (in particular the Legal, Ethics, Sustainable Development, Purchasing and Safety Departments). For example, a practical guide was published in 2015 to help the Group’s teams responsible for business acquisitions and disposals better incorporate human rights into the various due diligence processes that apply.

A dedicated organization

The Ethics Committee and the “Ethics and Human Rights” unit within the Compliance and Social Responsibility Department advise employees, help operatives and monitor efforts to promote respect for human rights. In particular, they run a human rights committee that coordinates the actions taken internally and externally by the various Group entities. The Ethics Committee is a central, independent structure that represents all of TOTAL’s business segments. Its role is to listen and support. Both employees and people outside the Group can refer matters to it by email at ethics@total.com. The Committee maintains confidentiality with regard to referrals, which can only be lifted with the agreement of the person in question. At the local level, mechanisms for handling grievances raised by local communities are also implemented by subsidiaries exposed to societal risks.

Awareness and training

To ensure its adopted principles are disseminated in-house, TOTAL raises employee awareness via corporate communications channels such as the Ethics and Security intranet site and through events such as the Business Ethics Day (refer to “— 4.3.7.1. Preventing corruption”, above) at which a new version of the Group’s Human Rights Guide was released. The Group has also produced several videos on three human rights topics that are key for TOTAL:

responsible security, prevention of societal impacts on local communities, and working conditions, both for its own employees and within its supply chain. The Group also offers some employees special training tailored to the challenges faced in the field, such as the Responsible Leadership for a Sustainable Business program. Finally, actions are taken to raise awareness among the Group’s external stakeholders, such as training related to the VPSHR for its security providers.

Assessments and reporting

Tools are used to regularly assess the subsidiaries’ human rights practices and the risks they may have to face. Their objective is to analyze the societal impacts of a project at the local level or to verify that the subsidiaries’ practices are in line with the Group’s ethical standards. TOTAL commissions approximately 10 ethical assessments per year, with more than 120 subsidiaries evaluated since 2002. These assessments are undertaken by GoodCorporation (GoodCorp), a qualified ethics expert. Certain assessments are also conducted in partnership with the Danish Institute for Human Rights, a Danish public non-profit organization. A reference catalog containing approximately 90 questions relating to human rights, labor law and rules on competition, is used on site, and numerous internal and external stakeholders are interviewed by GoodCorp over the course of several weeks. GoodCorp then issues a final report identifying points requiring improvement and good practices. The entity is then given several months to correct any issues that have been identified. A follow-up report is issued by GoodCorp for the subsidiaries that were assessed. Other non-profit partner organizations, such as the CDA Corporate Engagement Project, also contribute by evaluating the societal impact of the Group’s activities on nearby local communities, for example by surveying the populations in question. CDA’s reports are published online on their website.

At end-2013, the Group also commissioned the British NGO International Alert to conduct an impact study focusing on human rights in the Democratic Republic of the Congo. Even though the Group had not yet conducted any operations nor had any subsidiaries in the area in question at that time, more than 300 people – a quarter of whom were women – were consulted by the NGO. The aim of this study was to enable the Group to better understand the country’s complex dynamics in order to limit any negative impact and maximize any positive impact the Group’s exploration activities may have on this sensitive environment. The NGO’s report is available online. Action based on the NGO’s recommendations were carried out by Total E&P RDC before the start-up of the seismic campaign.

Participation in external initiatives

TOTAL is actively involved in numerous initiatives and working groups on human rights that bring together various stakeholders, including Global Compact, Global Compact LEAD (initiative for sustainable leadership), Global Business Initiative on Human Rights, IPIECA and non-profit organizations such as Shift.

 

-4.3.7.3.    Consumer health and safety

Many of the products that TOTAL markets pose potential risks; for example, if they are used incorrectly. The Group therefore aims to meet its current and future obligations with regard to information and prevention in order to minimize the risks throughout its product’s life cycle. TOTAL’s health and products directive sets outs the minimum requirements for marketing the Group’s products worldwide in order to reduce potential risks to consumer health and the environment.

TOTAL identifies and assesses the risks inherent to its products and their use, and then informs customers and users of these risks

 

 

68 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

and the applicable prevention and protection measures. The material safety data sheets (MSDS) that accompany all products marketed by the Group (in at least one of the languages used in the country) and product labels are two key sources of information in this regard. All new products comply fully with the regulatory requirements in the countries and markets for which they are intended.

 

4.4.Reporting scopes and method
4.4.1.Reporting guidance

The Group’s reporting is based:

 

for social indicators, on a practical handbook titled “Corporate Social Reporting Protocol and Method”;

 

for Industrial Safety indicators, on the Corporate Guidance on Event and Statistical Reporting; and

 

for environmental indicators, on a Group reporting procedure, together with segment-specific instructions.

These documents are available to all TOTAL companies. The environmental and social reporting handbooks can be consulted at Corporate headquarters, in the relevant departments.

4.4.2.Scopes

In 2015, environmental reporting covered all activities, sites and industrial assets in which TOTAL S.A., or one of its companies it controls, is the operator (i.e., either operates or contractually manages the operations): 803 sites as of December 31, 2015. Greenhouse gas (GHG) emissions “based on the Group’s equity interest” are the only data which are published for the “equity interest” scope. This scope, which is different from the “operated domain” mentioned above, includes all the assets in which TOTAL has a financial interest with rights over all or part of the production (financial interest without operational responsibility nor rights on all or part of the production do not lead to the incorporation of GHG emissions).

Safety reporting covers all TOTAL employees, employees of contractors working at Group-operated sites and employees of transport companies under long-term contracts. Each site submits its safety reporting to the relevant business unit. The data is then consolidated at the business level and every month at the Group level. In 2015, the Group safety reporting scope covered 508 million hours worked, equivalent to approximately 283,000 people.

Reporting on occupational illnesses covers only the Group’s personnel and illnesses reported according to the regulations applicable in the country of operation of each entity. Each site sends its reporting on occupational illnesses to the operational entity it reports to. Statistics are consolidated at business segment level and reported to the Group once a year.

Social reporting is based on two resources – the Global Workforce Analysis and the Worldwide Human Resources Survey.

The Global Workforce Analysis is conducted twice a year, on June 30 and December 31, in all fully consolidated companies at least 50% owned and consolidated by the global integration method. The survey mainly covers worldwide workforces, hiring under permanent and fixed-term contracts (non-French equivalents ofcontrats à durée déterminée orindéterminée) as well as employee turnover. This survey produces a breakdown of the workforce by gender, professional category (managers and other employees), age and nationality.

The Worldwide Human Resources Survey is an annual survey which comprises approximately 100 indicators in addition to those used in the Global Workforce Analysis. The indicators are selected in cooperation with the business segments and cover major components of the Group Human Resources policy, such as mobility, career management, training, work conditions, employee

dialogue, Code of Conduct application, human rights, health, compensation, retirement benefits and insurance. The survey covers a representative sample of the consolidated scope. The data published in this Registration Document are extracted from the most recent survey, carried out in December 2015 and January 2016; 134 companies in 54 countries, representing 91% of the consolidated Group workforce (87,341 employees) replied to the survey. With regard to training only, this scope covers 90.5% of the Group’s consolidated workforce and 133 companies.

Both surveys are conducted using a new information system implemented at TOTAL in 2015, which strengthens coherency controls and develops the internal control process by adding levels of validation.

 

-4.4.2.1.     Consolidation method

For the scopes defined above, safety indicators and social data are fully consolidated. Environmental indicators consolidate 100% of the emissions of Group operated sites for the “operated” indicators. GHG emissions are also published on an equity interest basis,i.e., by consolidating the Group share of the emissions of all assets in which the Group has a financial interest or rights to production.

-4.4.2.2.     Changes in scope

For social and environmental indicators, the indicators are calculated on the basis of the perimeter of the Group as of December 31, 2015. For safety indicators, acquisitions are taken into account as soon as possible and at the latest on January 1 of the following year, and divestments are taken into account at the end of the quarter preceding their effective date of implementation. Restatement of previous years published data, unless there is a specific statement, is now limited to changes of methodology.

4.4.3.Principles
-4.4.3.1.     Indicator selection and relevance

The data published in the Registration Document are intended to inform stakeholders about TOTAL’s Corporate Social Responsibility performance for the year in question. The environmental indicators include Group performance indicators in line with the IPIECA reporting guidance, updated in 2015. The indicators have been selected in order to monitor:

 

TOTAL’s commitments and policies, and their effects in the safety, environment, social, etc., domains;

 

performance relative to TOTAL’s main challenges and impacts; and

 

information required by legislative and regulatory obligations (Article L. 225-102-1 of the French Commercial Law).

 

-4.4.3.2.     Terminology used in social reporting

Outside of France, management staff refers to any employee whose job level is the equivalent of 300 or more Hay points. Permanent contracts correspond tocontrats à durée indéterminée (CDI) and fixed-term contracts to contrats à durée déterminée (CDD), according to the terminology used in the Group’s social reporting.

Managed scope: all subsidiaries in which one or more Group companies own a stake of 50% or more,i.e., 453 companies in 123 countries as of December 31, 2015.

Consolidated scope: all companies fully consolidated by the global integration method,i.e., 314 companies having employees in 102 countries as of December 31, 2015.

Employees present: employees present are employees on the payroll of the consolidated scope, less employees who are not present,i.e., persons who are under suspended contract (sabbatical, business development leave, etc.), absent on long-term sick leave (more than six months), assigned to a company outside the Group, etc.

 

 

2015 Form 20-F TOTAL S.A. 69


Item 4 - E. Other Matters - 4. Social, environmental and societal information

 

-4.4.3.3.     Methods

The methods may be adjusted to reflect the diversity of TOTAL’s activities, recent integration of subsidiaries, lack of regulations or standardized international definitions, practical procedures for collecting data, or changes in methods.

 

-4.4.3.4.     Consolidation and internal controls

Environmental, social and industrial safety data are consolidated and checked by each business unit and business segment, and then at Group level. Data pertaining to certain specific indicators are calculated directly by the business segments. These processes undergo regular internal audits.

 

4.4.4.Details of certain indicators

 

-4.4.4.1.     Industrial Safety definitions and indicators

TRIR(Total Recordable Injury Rate): number of recorded injuries per million hours worked.

LTIR(Lost Time Injury Rate): number of lost time injuries per million hours worked.

SIR(Severity Injury Rate): average number of days lost per lost time injury.

Employees of external contractors: any employee of a service provider working at a Group-operated site or assigned by a transport company under a long-term contract.

Tier 1: indicator of the number of loss of primary containment as defined in standards API 754 (for downstream) and IOGP 456 (for upstream).

Near miss: event which, under slightly different circumstances, could have resulted in a serious accident. The term “potential severity” is used for near misses.

Incidents and near misses are assessed in terms of actual or potential severity based on a scale that consists of six levels. Events with an actual or potential severity level of four or more are considered serious.

-4.4.4.2.     Environmental indicators

ISO sites: sites covered by an ISO 14001 certificate that is valid, some certificates may cover several sites.

Fresh water: water with salinity below 1.5 g/l.

Hydrocarbon spills: spills with a volume greater than 1 barrel (159 liters) are counted. These are accidental spills of which at least part of the volume spilled reaches the natural environment

(including non-waterproof ground). Spills resulting from sabotage or malicious acts are included. Spills which remain in a confined watertight containment system are excluded.

Waste: the contaminated soil excavated and removed from active sites to be treated externally is counted as waste. However, drilling debris, mining cuttings or soil polluted in inactive sites are not counted as waste.

GHG: the six gases of the Kyoto protocol, which are CO2, CH4, N2O, HFCs, PFCs and SF6, with their respective GWP (Global Warming Potential) as described in the 2007 GIEC report.

GHG based on the Group’s equity interest: GHG emissions of non-significant assets are excluded,i.e., assets in which the Group’s equity interest is less than 10% and for which the Group share of emissions are less than 50 kt CO2 eq/year. TOTAL relies on the information provided by its partners who operate its non-operated assets. In cases where this information is not available, estimates are made based on past data, budget data or by pro rata with similar assets.

Material loss rate: this rate corresponds to the net sum of materials extracted or consumed which are neither auto-consumed energy nor sold to a client, divided by the sum of transformed material. This rate is only significant for hydrocarbon exploration, production and refinery activities.

Oil spill preparedness:

 

an oil spill scenario is deemed “important” as soon as its consequences are on a small scale and with limited impacts on the environment (orders of magnitude of several hundred meters of beaches impacted, and several tons of hydrocarbons);

 

an oil spill preparedness plan is deemed operational if it describes the alert mechanisms, if it is based on pollution scenarios that stem from risk analyses and if it describes mitigation strategies that are adapted to each scenario, if it defines the technical and organizational means, internal and external, to be implemented and, lastly, if it mentions elements to be taken into account to implement a follow-up of the environmental impacts of the pollution; and

 

oil spill preparedness exercise: only exercises conducted on the basis of one of the scenarios identified in the oil spill preparedness plan and which are played out until the stage of equipment deployment are included for this indicator.

 

 

70 TOTAL S.A. Form 20-F 2015


Item 4 - E. Other Matters - 5. Iran and Syria

 

5.Information concerning certain limited activities in Iran and Syria

 

Provided in this section is certain information concerning TOTAL’s activities related to Iran that took place in 2015 that is required to be disclosed pursuant to Section 13(r) of the Securities Exchange Act of 1934, as amended (“U.S. Exchange Act”). In addition, information for 2015 is provided concerning the various types of payments made by Group affiliates to the government of any country identified by the United States as a state sponsor of terrorism (currently, Iran, Syria and Sudan(1)) or any entity controlled by those governments. TOTAL believes that these activities are not sanctionable and has not been informed that it is at risk of possible imposition of sanctions for activities previously disclosed. For more information on certain U.S. and EU restrictions relevant to TOTAL in these jurisdictions, see “Item 3 — C. Risk Factors”, above.

 

Iran

The Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”) added Section 13(r) to the U.S. Exchange Act, which requires TOTAL to disclose whether it or any of its affiliates has engaged during the calendar year in certain Iran-related activities, including those targeted under ISA, without regard to whether such activities are sanctionable under ISA, and any transaction or dealing with the Government of Iran that is not conducted pursuant to a specific authorization of the U.S. government. While neither TOTAL S.A. nor any of its affiliates have engaged in any activity that would be required to be disclosed pursuant to subparagraphs (A), (B) or (C) of Section 13(r)(1), affiliates of the Company may be deemed to have engaged in certain transactions or dealings with the government of Iran that would require disclosure pursuant to Section 13(r)(1)(D), as discussed below.

Upstream

The Group has no upstream activities in Iran and maintains a local office in Iran solely for non-operational functions. Some payments are yet to be reimbursed to the Group with respect to past expenditures and remuneration under buyback contracts entered into between 1997 and 1999 with the National Iranian Oil Company (“NIOC”) for the development of the South Pars 2&3 and Dorood fields. With respect to these contracts, development operations were completed in 2010 and the Group is no longer involved in the operation of these fields. In 2015, Total E&P Iran (100%), Elf Petroleum Iran (99.8%), Total Sirri (100%) and Total South Pars (99.8%) collectively made payments of approximately IRR 4 billion (approximately $0.1 million(2)) to (i) the Iranian administration for taxes and social security contributions concerning the personnel of the aforementioned local office and residual buyback contract-related obligations, and (ii) Iranian public entities for payments with respect to the maintenance of the aforementioned local office (e.g., utilities, telecommunications). TOTAL expects similar or slightly higher payments to be made by these affiliates in 2016. Neither revenues nor profits were recognized from the aforementioned activities in 2015.

In the context of the then-anticipated suspension of part of the sanctions targeting Iran following the adoption of the JCPOA on July 14, 2015, there were contacts in 2015 between representatives of certain wholly-owned affiliates of TOTAL S.A and representatives of the Iranian Government and NIOC within the framework of delegations organized by French authorities or

during public international events. During the course of these contacts, such affiliates received in 2015 verbal information of a general nature concerning certain oil and gas fields and projects in Iran and no information not permitted by applicable international economic sanctions was provided to Iranian authorities for the development of Iranian hydrocarbons. Neither TOTAL S.A. nor any of its affiliates recognized any revenue or profit from this activity in 2015. Following the suspension of certain international economic sanctions against Iran on January 16, 2016 (refer to “Item 3 – C. Risk Factors”, above), TOTAL entered into a Memorandum of Understanding (“MOU”) with NIOC and a framework agreement for the purchase of crude oil for French and European refineries, in particular. Pursuant to the MOU, NIOC will provide technical data on certain oil and gas projects so that TOTAL can assess potential developments in Iran in compliance with the remaining applicable international economic sanctions.

Total E&P UK Limited (“TEP UK”), a wholly-owned affiliate of TOTAL, holds a 43.25% interest in a joint venture at the Bruce field in the UK with BP Exploration Operating Company Limited (37.5%, operator), BHP Billiton Petroleum Great Britain Ltd (16%) and Marubeni Oil & Gas (North Sea) Limited (3.75%). This joint venture is party to an agreement (the “Bruce Rhum Agreement”) governing certain transportation, processing and operation services provided to a joint venture at the Rhum field in the UK that is co-owned by BP (50%, operator) and the Iranian Oil Company UK Ltd (“IOC”), a subsidiary of NIOC (50%) (together, the “Rhum Owners”). TEP UK owns and operates the Frigg UK Association pipeline and St Fergus Gas Terminal and is party to an agreement governing provision of transportation and processing services to the Rhum Owners (the “Rhum FUKA Agreement”) (the Bruce Rhum Agreement and the Rhum FUKA Agreement being referred to collectively as the “Rhum Agreements”). To TOTAL’s knowledge, provision of all services under the Rhum Agreements was initially suspended in November 2010, when the Rhum field stopped production following the adoption of EU sanctions, other than critical safety-related services (i.e., monitoring and marine inspection of the Rhum facilities), which were permitted by EU sanctions regulations. On October 22, 2013, the UK government notified IOC of its decision to apply a temporary management scheme to IOC’s interest in the Rhum field within the meaning of UK Regulations 3 and 5 of the Hydrocarbons (Temporary Management Scheme) Regulations 2013 (the “Hydrocarbons Regulations”). Since that date all correspondence in respect of IOC’s interest in the Rhum Agreements has been with the UK government in its capacity as temporary manager of IOC’s interests and TEP UK has had no contact with IOC in 2015 regarding the Rhum Agreements. On December 6, 2013, the UK government authorized TEP UK, among others, under Article 43a of EU Regulation 267/2012, as amended by 1263/2012 and under Regulation 9 of the Hydrocarbons Regulations, to carry out activities in relation to the operation and production of the Rhum field. In addition, on September 4, 2013, the U.S. Treasury Department issued a license to BP authorizing BP and certain others to engage in various activities relating to the operation and production of the Rhum field. Following receipt of all necessary authorizations, the Rhum field resumed production on October 26, 2014 with IOC’s interest in the Rhum field and the Rhum Agreements subject to the UK government’s temporary management pursuant to the Hydrocarbons Regulations. Services have been provided by TEP UK under the Rhum Agreements since

 

 

2015 Form 20-F TOTAL S.A. 71

 

(1)

Since the independence of the Republic of South Sudan on July 9, 2011, TOTAL is no longer present in Sudan.

(2)

Unless otherwise indicated, all non-USD currencies presented in “—Information concerning certain limited activities in Iran and Syria” were converted to USD using the prevailing exchange rates available on February 29, 2016.


Item 4 - E. Other Matters - 5. Iran and Syria

 

that date and TEP UK has received tariff income from BP and the UK government (in its capacity as temporary manager of IOC’s interest in the Rhum field) in accordance with the terms of the Rhum Agreements. In 2015, these activities generated for TEP UK gross revenue of approximately £4.6 million (approximately $6.4 million) and net profit of approximately £1.4 million (approximately $2.0 million). On August 27, 2015, TEP UK signed a sale and purchase agreement to divest its entire interest in the Frigg UK Association pipeline and St Fergus Gas Terminal to NSMP Operations Limited (“NSMP”). Upon completion of the divestment, TEP UK’s interest in the Rhum FUKA Agreement will be novated to NSMP whereupon TEP UK’s only interest in the Rhum FUKA Agreement will be in relation to the settlement of historicalforce majeure claims with the Rhum Owners relating to the period when the Rhum field was shut down. Subject to the foregoing, TEP UK intends to continue such activities so long as they continue to be permissible under UK and EU law and not be in breach of remaining applicable international economic sanctions.

Downstream

The Group does not own or operate any refineries or chemicals plants in Iran and did not purchase Iranian hydrocarbons when prohibited by applicable EU and U.S. economic and financial sanctions (refer to “Item 3 — C. Risk Factors”, above).

Hutchinson, a wholly-owned affiliate of TOTAL, conducted, in conjunction with a delegation of international companies (Fédération des Industries des Equipements pour Véhicules), two visits in Iran in 2015 to discuss business opportunities in the Iranian car industry sector with several companies, including some having direct or indirect ties to the government of Iran. Hutchinson recognized no revenue or profit from this activity in 2015 and expects to continue such discussions in the future.

Until December 2012, at which time it sold its entire interest, the Group held a 50% interest in the lubricants retail company Beh Total (now named Beh Tam) along with Behran Oil (50%), a company controlled by entities with ties to the government of Iran. As part of the sale of the Group’s interest in Beh Tam, TOTAL S.A. agreed to license the trademark “Total” to Beh Tam for an initial3-year period for the sale by Beh Tam of lubricants to domestic consumers in Iran. In 2014, Total E&P Iran (“TEPI”), a wholly-owned affiliate of TOTAL S.A., received, on behalf of TOTAL S.A., royalty payments of approximately IRR 24 billion (nearly $1 million(1)) from Beh Tam for such license. These payments were based on Beh Tam’s sales of lubricants during the previous calendar year. In 2015, royalty payments were suspended due to an adjustment procedure concerning these payments brought by the Iranian tax authorities against TEPI, which TEPI expects will be settled in 2016. Therefore, TEPI expects royalty payments may resume in 2016. In addition, representatives of the Group and Beh Tam met several times in 2015 to discuss the local lubricants market and further discussions are expected to take place in the future.

Total Liban, a Lebanese company wholly-owned by the Group, is a member of a consortium with five other companies for the purpose of providing services for fueling facilities at Beirut International Airport (“BIA”) to the members of the consortium. The consortium members assume, on a rotating three-year term, ministerial and administrative responsibilities (including supervision

of fuel services) in connection with the consortium. Until October 2015, Total Liban served in this capacity. During this period, another consortium member had a fuel supply contract with Iran Air. Total Liban did not receive, directly or indirectly, any profit or remuneration in connection with the fuel sold to Iran Air by this other consortium member.

Total Marketing Middle East FZE (“TMME”), a wholly-owned affiliate of the Group, sold lubricants to Beh Tam in 2015. The sale in 2015 of approximately 299 t of lubricants and special fluids generated gross revenue of approximately AED 2 million (approximately $0.5 million) and net profit of approximately AED 1.7 million (approximately $0.5 million). TMME expects to continue this activity in 2016.

Total Marketing France (“TMF”), a French company wholly-owned by Total Marketing Services (“TMS”), itself a French company wholly-owned by TOTAL S.A. and six Group employees, provided in 2015 fuel payment cards to the Iranian embassy in France for use in the Group’s service stations. In 2015, these activities generated gross revenue of approximately25,000 (approximately $27,200) and net profit of approximately1,000 (approximately $1,100). TMF expects to continue this activity in 2016.

Total Belgium (“TB”), a Belgian company wholly-owned by the Group, provided in 2015 fuel payment cards to the Iranian embassy in Brussels for use in the Group’s service stations. In 2015, these activities generated gross revenue of approximately23,100 (approximately $25,100) and net profit of approximately1,600 (approximately $1,700). TB expects to continue this activity in 2016.

Proxifuel, a Belgian company wholly-owned by the Group, sold in 2015 heating oil to the Iranian embassy in Brussels. In 2015, these activities generated gross revenue of approximately2,400 (approximately $2,600) and net profit of approximately200 (approximately $220). Proxifuel expects to continue this activity in 2016.

Caldeo, a French company wholly-owned by TMS, sold in 2015 domestic heating oil to the Iranian embassy in France, which generated gross revenue of nearly3,500 (approximately $3,800) and net profit of approximately700 (approximately $760). Caldeo expects to continue this activity in 2016.

Total Namibia (PTY) Ltd (“TN”), a wholly-owned affiliate of Total South Africa (PTY) Ltd (of which the Group holds 50.1%), sold petroleum products and services during 2015 to Rössing Uranium Limited, a company in which the Iranian Foreign Investment Co. holds an interest of 15.3%. In 2015, these activities generated gross revenue of approximately N$115 million (approximately $7.3 million) and net profit of nearly N$5 million (approximately $0.3 million). TN expects to continue this activity in 2016.

 

Syria

Since early December 2011, TOTAL has ceased its activities that contribute to oil and gas production in Syria and maintains a local office solely for non-operational functions. In 2015, TOTAL made payments of approximately SYP 37 million (approximately $0.2 million) to Syrian government agencies in the form of taxes and contributions for public services rendered in relation to the maintenance of the aforementioned office and its personnel. In late 2014, the Group initiated a downsizing of its Damascus office and reduced its staff to a few employees.

 

 

 

 

(1) 

Based on an average daily exchange rate of $1 = IRR 0.000039 during 2014, as published by Bloomberg.

 

72 TOTAL S.A. Form 20-F 2015


Items 4A - 5

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

This section is the Company’s analysis of its financial performance and of significant trends that may affect its future performance. It should be read in conjunction with the Consolidated Financial Statements included elsewhere in this Annual Report. The Consolidated Financial Statements are prepared in accordance with IFRS as issued by the IASB and IFRS as adopted by the EU.

This section contains forward-looking statements which are subject to risks and uncertainties. For a list of important factors

that could cause actual results to differ materially from those expressed in the forward-looking statements, see “Cautionary Statement Concerning Forward-Looking Statements” on page iii.

Effective January 1, 2014, TOTAL changed the presentation currency of the Group’s Consolidated Financial Statements from the Euro to the US Dollar and applied IFRIC 21. Comparative 2013 information has been restated.

 

 

 

OVERVIEW

 

 

 

TOTAL’s results are affected by a variety of factors, including changes in crude oil and natural gas prices as well as refining and marketing margins, which are all generally expressed in dollars, and changes in exchange rates, particularly the value of the euro compared to the dollar. Lower crude oil and natural gas prices generally have a negative effect on the income of TOTAL, since its Upstream oil and gas business is negatively impacted by the resulting decrease in revenues realized from production. Higher crude oil and natural gas prices generally have a corresponding positive effect. The effect of changes in crude oil prices on TOTAL’s Refining & Chemicals and Marketing & Services activities depends upon the speed at which the prices of refined petroleum products adjust to reflect such changes. TOTAL’s results are also significantly affected by the costs of its activities, in particular those related to exploration and production, and by the outcome of its strategic decisions with respect to cost reduction efforts. In addition, TOTAL’s results are affected by general economic and political conditions and changes in governmental laws and regulations, as well as by the impact of decisions by OPEC on production levels. For more information, see “Item 3 — C. Risk Factors” and “Item 4 — E. Other Matters”.

The year 2015 was marked by the sharp decline of oil prices, in a context of global abundance of supply. The Brent oil price averaged $52/b in 2015, almost 50% less than in 2014. In the downstream, the environment was favorable. Margins in refining, petrochemicals and retail were sustained by strong demand. The competitiveness of European activities improved, notably due to the lower cost of raw materials and a favorable euro-dollar exchange rate.

In this context, TOTAL’s net income (Group share) in 2015 increased by 20% to $5,087 million from $4,244 million in 2014, mainly due to a less negative impact on net income (Group share) in 2015 of special items, with the strong performance of the Group’s integrated model and its cost reduction program being demonstrated despite the 47% drop in the average Brent price. For additional information, refer to “—Results 2013-2015”, below, and to Note 4D to the Consolidated Financial Statements. Adjustments to net income (Group share), which include special items and the after-tax inventory valuation effect, had a negative impact of $5,431 million in 2015. Excluding these items, adjusted net income (Group share) declined by 18% to $10,518 million in 2015 compared to $12,837 million in 2014, primarily due to the impact of lower Brent prices on Upstream results, partially offset by a higher contribution from downstream activities.

Discipline on spending was reinforced in 2015. The cost reduction program allowed the Group to save $1.5 billion, above the objective of $1.2 billion. Organic investments(1) were $23 billion, a decrease of close to 15% compared to 2014.

In the Upstream segment, adjusted net operating income was $4.8 billion in 2015, a decrease of 55% compared to 2014 essentially due to lower oil and gas prices. Upstream production increased by a record 9.4%. Nine projects were started up globally: Ofon 2 in Nigeria, Eldfisk 2 in Norway, West Franklin 2 in the United Kingdom, Termokarstovoye in Russia, Dalia Phase 1a in Angola, Surmont 2 in Canada, GLNG in Australia, Lianzi located in the unitized zone between Congo and Angola, and Moho phase 1b in Congo.

The Group was able to prepare its future with a reserve replacement rate of 107%. It continued its exploration program and made discoveries in Argentina, Myanmar and Nigeria.

In the Refining & Chemicals segment, adjusted net operating income was $4.9 billion in 2015, almost twice the level of 2014. Strong operational performance, with a utilization rate averaging 89% for the year, enabled the segment to fully benefit from high margins. The segment also benefited from the ramp-up of SATORP in Saudi Arabia. Modernization projects have been launched, with the conversion of La Mède into a bio-refinery in France, the Lindsey restructuring in the UK and the Antwerp refinery modernization.

In the Marketing & Services segment, adjusted net operating income was $1.7 billion in 2015, an increase of 35% compared to 2014. This good performance was due to the growth in sales and margins in a favorable environment and to the contribution of the SunPower affiliate with the finalization of the Quinto solar farm in the United States.

Divestments were $6 billion, essentially comprised of the finalization of the Bostik disposal, onshore blocks in Nigeria, Totalgaz, the Schwedt refinery, Geosel oil storage facilities, coal production activities in South Africa and partial interests in Laggan-Tormore and Fort Hills.

Acquisitions were $3.4 billion, essentially comprised of the ADCO license extension in the United Arab Emirates, the acquisition of an additional 0.7% interest in the capital of Novatek in Russia (increasing the Group’s interest to 18.9%), and the carry on the Utica field in the United States.

 

 

2015 Form 20-F TOTAL S.A. 73

 

(1) 

Organic investments = net investments, excluding acquisitions, divestments and other operations with non-controlling interests (refer to “Item 4 – E. Other Matters – 1. Investments”).


Item 5 - Critical Accounting Policies

 

The net-debt-to-equity ratio at year-end decreased to 28% as a result of a financial policy which is designed to maintain a strong balance sheet through the cycle.

In the numerous countries where its projects are conducted, the Group also places an emphasis on Corporate Social Responsibility (CSR) challenges and the development of local economies.

 

Outlook

In 2015, the return on equity for the Group was 11.5%. TOTAL resisted the drop in prices by leveraging the effectiveness of its integrated model and its strong operational performance. The Group will further pursue this strategy and all of the necessary actions will continue to be implemented to reduce costs and maintain a solid balance sheet, demonstrating once again the Group’s capacity to adapt.

In 2016, the Group will reduce its organic investments to around $19 billion, a reduction of more than 15% compared to 2015. This marks a transition to a sustainable level of investments of$17-19 billion from 2017 onwards. The cost reduction program

launched in 2014 will be reinforced, enabling Opex savings of $2.4 billion in 2016 and underpinning the objective of more than $3 billion in 2017. The asset sales program will continue in line with the plan, with $4 billion expected in 2016, the same level as 2015.

In the Upstream, five major start ups are planned in 2016. The first of these, Laggan-Tormore, took place on February 8. Production is expected to grow by 4% in 2016 compared to 2015, following more than 9% in 2015 compared to 2014, confirming the growth target of 5% per year on average between 2014 and 2019.

In the Downstream, the target to reduce European refining capacity by 20% will be achieved by end-2016, one year ahead of the initial plan announced in 2012. The cessation of traditional refining activities at La Mède in view of its conversion to abio-refinery, the restructuring of the Lindsey refinery and the modernization of the Antwerp refinery will be finalized before the end of the year, with the first benefits expected from 2017.

The strategy implemented by the Group in 2015 based on its four priorities of Safety, Delivery, Costs and Cash, will continue in 2016, notably for the benefit of its shareholders.

 

 

 

CRITICAL ACCOUNTING POLICIES

 

 

 

A summary of the Group’s accounting policies is included in the Introduction and Note 1 to the Consolidated Financial Statements. Management believes that the application of these policies on a consistent basis enables the Group to report useful and reliable information about the Group’s financial condition and results of operations.

The preparation of financial statements in accordance with IFRS requires the executive management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of preparation of the financial statements and reported income and expenses for the period. Management reviews these estimates and assumptions on an ongoing basis, by reference to past experience and various other factors considered as reasonable which form the basis for assessing the carrying amount of assets and liabilities. Actual results may differ significantly from these estimates, if different assumptions or circumstances apply.

Furthermore, where the accounting treatment of a specific transaction is not addressed by any accounting standard or interpretation, management applies its judgment to define and apply accounting policies that provide information consistent with the general IFRS concepts: faithful representation, relevance and materiality.

The following summary provides further information about the critical accounting policies that involve significant elements of management judgment, and which could have a significant impact on the results of the Group. It should be read in conjunction with Note 1 to the Consolidated Financial Statements.

The assessment of critical accounting policies below is not meant to be an all-inclusive discussion of the uncertainties in financial results that can occur from the application of the full range of the Company’s accounting policies. Materially different financial results could occur in the application of other accounting policies as well. Likewise, materially different results can occur upon the adoption of new accounting standards promulgated by the various rule-making bodies.

 

Successful efforts method of oil and gas accounting

The Group follows the successful efforts method of accounting for its oil and gas activities. The Group’s oil and gas reserves are estimated by the Group’s petroleum engineers in accordance with industry standards and SEC regulations. Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Estimated oil and gas reserves are based on available reservoir data and prices and costs in the accounting period during which the estimate is made and are subject to future revision. The Group reassesses its oil and gas reserves at least once a year on all its properties.

Exploration leasehold acquisition costs are capitalized when acquired. During the exploration phase, management exercises judgment on the probability that prospects ultimately would partially or fully fail to find proved oil and gas reserves. Based on this judgmental approach, a leasehold impairment charge may be recorded. This position is assessed and adjusted throughout the contractual period of the leasehold based in particular on the results of exploratory activity and any impairment is adjusted prospectively.

When a discovery is made, exploratory drilling costs continue to be capitalized pending determination of whether potentially economic oil and gas reserves have been discovered by the drilling effort. The length of time necessary for this determination depends on the specific technical or economic difficulties in assessing the recoverability of the reserves. If a determination is made that the well did not encounter oil and gas in economically viable quantities, the well costs are expensed and are reported in exploration expense.

 

 

74 TOTAL S.A. Form 20-F 2015


Item 5 - Critical Accounting Policies

 

Exploratory drilling costs are temporarily capitalized pending determination of whether the well has found proved reserves if both of the following conditions are met:

 

 

the well has found a sufficient quantity of reserves to justify, if appropriate, its completion as a producing well, assuming that the required capital expenditure is made; and

 

satisfactory progress toward ultimate development of the reserves is being achieved, with the Company making sufficient progress assessing the reserves and the economic and operating viability of the project.

The Company evaluates the progress made on the basis of regular project reviews which take into account the following factors:

 

 

First, if additional exploratory drilling or other exploratory activities (such as seismic work or other significant studies) are either underway or firmly planned, the Company deems there is satisfactory progress. For these purposes, exploratory activities are considered firmly planned only if they are included in the Company’s 3-year exploration plan/budget.

 

In cases where exploratory activity has been completed, the evaluation of satisfactory progress takes into account indicators such as the fact that costs for development studies are incurred in the current period, or that governmental or other third-party authorizations are pending or that the availability of capacity on an existing transport or processing facility awaits confirmation.

The successful efforts method requires, among other things, that the capitalized costs for proved oil and gas properties (which include the costs of drilling successful wells) be amortized on the basis of reserves that are produced in a period as a percentage of the total estimated proved reserves (unit-of-production method). The impact of changes in estimated proved reserves is dealt with prospectively by amortizing the remaining book value of the asset over the expected future production. If proved reserve estimates are revised downward, earnings could be affected by higher depreciation expense or an immediate write-down of the property’s book value. Conversely, if the oil and gas quantities were revised upwards, future per-barrel depreciation and depletion expense would be lower.

 

Valuation of long-lived assets

In addition to oil and gas assets that could become impaired under the application of successful efforts accounting, other assets could become impaired and require write-down if circumstances warrant. Conditions that could cause an asset to become impaired include lower-than-expected commodity sales prices, changes in the Group’s business plans or a significant adverse change in the local or national business climate. The amount of an impairment charge would be based on estimates of the higher of the value in use or the fair value minus cost to sell compared with its book value. The value in use is based on the present value of expected future cash flow using assumptions commensurate with the risks involved in the asset group. The expected future cash flow used for impairment reviews is based on judgmental assessments of future production volumes, prices and costs, considering information available at the date of review.

 

Asset retirement obligations and environmental remediation

When the Group has a present obligation (legal or constructive), upon application of International Accounting Standard (IAS) 37 and IAS 16, it records provisions for the future decommissioning of production facilities at the end of their economic lives. Management makes judgments and estimates in recording these liabilities. Most of these removal obligations are many years in the future and the precise requirements that will have to be met when the removal event actually occurs are uncertain. Asset removal technologies and costs are constantly changing, as well as political, environmental, safety and public expectations.

The Group also makes judgments and estimates in recording costs and establishing provisions for environmental clean-up and remediation costs, which are based on current information on costs and expected plans for remediation. For environmental provisions, actual costs can differ from estimates because of changes in laws and regulations, public expectations, discovery and analysis of site conditions and changes in clean-up technology.

 

Pensions and post-retirement benefits

Accounting for pensions and other post-retirement benefits involves judgments about uncertain events, including estimated retirement dates, salary levels at retirement, mortality rates, determination of discount rates for measuring plan obligations, healthcare cost-trend rates and rates of utilization of healthcare services by retirees. These assumptions are based on the environment in each country. The assumptions used are reviewed at the end of each year and may vary from year-to-year, based on the evolution of the situation, which will affect future results of operations. Any differences between these assumptions and the actual outcome will also impact future results of operations.

The significant assumptions used to account for pensions and other post-retirement benefits are determined as follows.

Discount rates are determined by reference to the high quality rates of AA-rated corporate bonds of a duration equivalent to that of the plan obligations. Inflation rates reflect market conditions observed on a country-by-country basis.

Salary increase assumptions (when relevant) are determined by each entity. They reflect an estimate of the actual future salary levels of the individual employees involved, including future changes attributed to general price levels (consistent with inflation rate assumptions), productivity, seniority, promotion and other factors.

Healthcare cost trend assumptions (when relevant) reflect an estimate of the actual future changes in the cost of the healthcare-related benefits provided to the plan participants and are based on past and current healthcare cost trends including healthcare inflation, changes in healthcare utilization, and changes in health status of the participants.

Demographic assumptions such as mortality, disability and turnover reflect the best estimate of these future events for the individual employees involved, based principally on available actuarial data.

The effect pensions had on results of operations, cash flow and liquidity is fully set out in Note 18 to the Consolidated Financial Statements. Net employee benefit expense in 2015 amounted to $345 million and the Company’s contributions to pension plans were $311 million.

Differences between projected and actual costs and between the normative return and the actual return on plan assets routinely occur and are recognized in the statement of comprehensive income, with no possibility to subsequently recycle them to the income statement.

The past service cost in respect of defined benefit plans is recorded immediately in the statement of income, whether vested or unvested.

For defined contribution plans, expenses correspond to the contributions paid.

 

Income tax computation

The computation of the Group’s income tax expense requires the interpretation of complex tax laws and regulations in many taxing jurisdictions around the world, the determination of expected outcomes from pending litigation, and the assessment of audit findings that are performed by numerous taxing authorities. Actual income tax expense may differ from management’s estimates.

 

 

2015 Form 20-F TOTAL S.A. 75


Item 5 - Results 2013-2015

 

 

RESULTS 2013-2015

 

 

 

As of and for the year ended
December 31, (M$, except per
share data)
 2015  2014  2013 

Non-Group sales

  165,357    236,122    251,725  

Net income (Group share)

  5,087    4,244    11,228  

Diluted earnings per share

  2.16    1.86    4.94  

 

Group results 2015 vs. 2014

Market conditions were less favorable in 2015, with the average Brent price having decreased by 47% to $52.4/b in 2015 compared to $99.0/b in 2014. In 2015, TOTAL’s average liquids price realization(1) decreased by 47% to $47.4/b from $89.4/b in 2014. TOTAL’s average natural gas price realization for the Group’s consolidated subsidiaries decreased in 2015 by 28% to $4.75/Mbtu from $6.57/Mbtu in 2014. In the downstream, the Group’s European refining margin indicator (“ERMI”) more than doubled to $48.5/t in 2015 compared to $18.7/t in 2014. In the fourth quarter of 2015, the ERMI was $38.1/t. Petrochemical margins in Europe increased in 2015 due to a strong demand for polymers and the decrease in raw material costs.

The Euro depreciated in 2015 compared to the US Dollar, with the euro-dollar exchange rate averaging $1.11/ in 2015 compared to $1.33/ in 2014.

In this context, non-Group sales in 2015 were $165,357 million, a decrease of 30% compared to $236,122 million for 2014, due mainly to the decrease of oil and gas prices, with non-Group sales decreasing 28% for the Upstream segment, 33% for the Refining & Chemicals segment and 27% for the Marketing & Services segment.

Net income (Group share) in 2015 increased by 20% to $5,087 million from $4,244 million in 2014, mainly due to a less negative impact on net income (Group share) in 2015 of special items, with the strong performance of the Group’s integrated model and its cost reduction program being demonstrated despite the 47% drop in the Brent price. Adjustments to net income