Registration document 2007 - Total.com

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Business overview
Base Chemicals - Chemicals
Base petrochemicals
Base petrochemicals encompass the olefins and aromatics
produced by steamcracking petroleum cuts, mainly naphtha, as
well as propylene and aromatics produced in the refineries of the
Group. The economic environment for these activities is
extremely volatile and margins are strongly influenced by the
evolution of the price of naphtha.
The year 2006 was characterized by important fluctuations in the
price of naphtha and a strong global demand in steam-cracker
derivatives, reflecting the healthy economic environment.
In addition, a number of unplanned outages within the industry
disturbed the supply of aromatics in North America and olefins in
Europe, while the start-up of some petrochemical plants in the
Middle East was significantly delayed. These factors combined,
with strong demand and the decrease in the price of naphtha in
the second half of the year, contributed to keeping margins at
high levels throughout the second half 2006.
Olefins production increased by 1% in 2006 compared to 2005,
after having decreased by 1% in 2005 compared to 2004.
Polyethylene
Polyethylene is a plastic produced by the polymerization of
ethylene manufactured in the Group’s steamcrackers. It is
principally intended for the packaging, automotive, food, cable
and pipe markets. Margins are strongly influenced by the level of
demand and by competition from expanding production in the
Middle East, which takes advantage of favorable access to raw
materials (ethylene, made from ethane).
In 2006, strong world demand helped to absorb new production
brought onstream the Middle East and in China as well as
contributing to maintaining margins in spite of the increase in the
raw materials prices. Sales in Europe were negatively affected by
limited availability of ethylene. Nevertheless, TOTAL’s global sales
volumes increased 1.4% in 2006 compared to 2005, after having
decreased by 3% in 2005 compared to 2004.
Polypropylene
Polypropylene is a plastic produced by the polymerization of
propylene manufactured in Group steam-crackers and refineries
and principally intended for the packaging, appliance, car
industry, carpet and household and sanitary goods markets.
Margins are primarily influenced by the level of demand and the
availability and price of propylene.
In 2006, polypropylene demand was strong in Europe, where
supply and demand were generally balanced, and margins
remained satisfactory. However in the United States, both
demand and margins were negatively affected by the volatility
and high price of propylene. In Asia, demand and margins
improved in the second semester after a weak start of the year.
Sales volumes increased by 1.8% in 2006 compared to 2005,
after increasing by 6.6% between 2005 and 2004.
TOTAL – Registration Document 2006
Styrenics
This business unit encompasses styrene monomer and polystyrene.
The elastomers activity was shut-down at the end of 2006.
Most of the styrene produced by the Group is used in the
production of polystyrene. Polystyrene is a plastic principally used
in packaging, domestic appliances, electronics and audio-video.
Margins are strongly influenced by the level of polystyrene demand
as well as by the price of benzene, the principal raw material.
In 2006, the increase in world styrene demand was relatively
weak, approximately 2%, and demand continued to decline in
Europe.
World polystyrene demand varied little after the effect of the
increased competition of other materials, plastics and paper.
Margins were affected by the high prices of raw materials,
ethylene and benzene, and by the high costs of energy.
Nevertheless, TOTAL’s polystyrene sales volumes increased by
0.3% in 2006 compared to 2005, after having decreased by 2%
in 2005 compared to 2004.
Fertilizers
The Fertilizers business unit (Grande Paroisse) manufactures and
markets nitrogen fertilizers made using natural gas, and complex
fertilizers manufactured using nitrogen, phosphorus and
potassium products. Margins are strongly influenced by the price
of natural gas.
In 2006, Grande Paroisse’s sales decreased by 11% compared
to 2005 after having increased by 7% in 2005 compared to
2004. The activity was negatively affected by turnarounds and
various technical problems incurred in the Group’s nitrogen
plants, and also by the weak demand for fertilizers during the first
part of the year. Furthermore, the increase in the price of natural
gas had a negative impact on margins.
In July 2006, Grande Paroisse stopped its French production of
complex fertilizers due to the continuously declining market for
those products and closed its plants in Bordeaux, Basse Indre,
Rouen and Granville. Besides, Zuid Chemie - the Dutch affiliate of
Grande Paroisse - was sold to Rosier, of which Elf Aquitaine
holds a 57% share, to create a more competitive player in the
Benelux market.
Grande Paroisse also unveiled an important plan intended to
support its nitrogen derivatives production and announced the
construction of a new urea plant at Grandpuits as well as a new
world-class nitric acid plant in Rouen. These plants are
scheduled to be brought onstream in 2008, concurrent with the
shutdown of the fertilizers plant in Oissel and four small obsolete
acid nitric lines in Rouen and Mazingarbe.
Grande Paroisse continued to face the consequences of the
explosion which struck its Toulouse plant in September 2001 and
made payments, under the French law presumption of civil
responsibility, over and above the compensation paid by
insurance companies, reaching a cumulative amount
approaching 1,227 M€ as of December 31, 2006.