Registration document 2007 - Total.com

TOTAL, like other major international oil 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 such political and economic risks.
However, there can be no assurance that such events will not
adversely affect the Group.
Geopolitical situation in the Middle East
In 2006, the Middle East represented 17% of the Group’s
production of oil and gas and 7% of the Group’s net operating
income. The Group produces oil and gas in the United Arab
Emirates, Iran, Oman, Qatar, Syria and Yemen. TOTAL cannot
predict developments of the geopolitical situation in the Middle
East and its potential consequences on the Group’s activities in
this area.
Regulations concerning Iran
In September 2006, the U.S. legislation implementing sanctions
against Iran and Libya (Iran and Libya Sanction Act, referred to as
ILSA), was amended and extended until December 2011.
Pursuant to this statute, which now concerns only Iran (Iran
Sanctions Act, referred to as “ISA”) the President of the United
States is authorised to initiate an investigation into the possible
imposition of sanctions (from a list that includes denial of
financing by the U.S. Export-Import Bank and limitations on the
amount of loans or credits available from U.S. financial
institutions) against persons found, in particular, to have
knowingly made investments of $20 million or more in any
twelve-month period in the petroleum sector in Iran. In May 1998
the U.S. government waived the application of sanctions for
TOTAL’s investment in the South Pars gas field in Iran. This
waiver, which has not been modified since it was granted, does
not address TOTAL’s other activities in Iran, although TOTAL has
not been notified of any related sanctions.
In November 1996, the Council of the European Union adopted
Council Regulation No. 2271/96 which prohibits TOTAL from
complying with any requirement or prohibition based on or
resulting directly or indirectly from certain enumerated legislation,
including ILSA. It also prohibits TOTAL from extending its waiver
for South Pars to other activities.
In each of the years since the passage of ILSA (now ISA), TOTAL
has made investments in Iran (excluding South Pars) in excess of
$20 million. In 2006, TOTAL’s average daily production in Iran
amounted to 20 kboe/d, approximately 1% of its average daily
worldwide production. TOTAL expects to continue to invest
amounts significantly in excess of $20 million per year in Iran in
the foreseeable future. TOTAL cannot predict interpretations of or
the implementation policy of the U.S. government under ISA with
respect to its current or future activities in Iran. It is possible that
the United States may determine that these or other activities
constitute activity prohibited by ISA and will subject TOTAL to
sanctions.
Risk Factors
Other specific risks
TOTAL does not believe that enforcement of ISA, including the
imposition of the maximum sanctions under the current law and
regulations, would have a material negative effect on its results of
operations or financial condition.
Furthermore, the United States currently imposes economic
sanctions, which are administrated by the U.S. Treasury
Department’s Office of Foreign Assets Control and which apply to
U.S. persons, with the objective of denying certain countries,
including Iran, Syria and Sudan, the ability to support
international terrorism and, additionally in the case of Iran and
Syria, to pursue weapons of mass destruction and missile
programs. TOTAL does not believe that these sanctions are
applicable to any of its activities in these countries.
On February 27, 2007, pursuant to resolution 1737 of the
Security Council of the United Nations, dated December 23,
2006, the European Union adopted sanctions that restrict the
travel of certain individuals associated with Iranian nuclear
proliferation activities as well as restricting trade and financing
related to these activities. Additionally, a new French decree
entered into effect on February 8, 2007 to reinforce the
monitoring of financial relations between France and Iran. In
addition, the Security Council of the United Nations adopted
resolution 1747 on March 24, 2007 which extends the scope of
resolution 1737. The Group believes that these measures, under
their current terms, are not applicable to TOTAL’s activities in Iran.
Geopolitical and economic situation in South
America
In 2006, South America represented 10% of the Upstream
segment’s oil and gas production and 5% of the Group’s net
operating income. The Group produces in Argentina, Bolivia,
Colombia, Trinidad & Tobago, and Venezuela.
4
The circumstances under which the Group operates in Bolivia are
described on page 26 of this Registration Document. In Bolivia,
TOTAL signed six new exploration and production contracts in
October 2006. Although these contracts were approved by the
Bolivian legislature on December 3, 2006, they will not become
effective until an additional legislative ratification has been
completed.
On March 31, 2006, the Venezuelan government terminated all
operating contracts signed in the nineteen-nineties and decided
to transfer the management of fields concerned to new mixed
companies to be created with the state-owned company PDVSA
(Petroleos de Venezuela S.A.) as the majority owner. The
government and the Group did not reach an agreement on the
terms of the transfer of the Jusepin field under the initial
timetable. However, subsequent negotiations have led to a
settlement, announced in March 2007, under which the
government has committed to pay the Group $137.5 million.
TOTAL – Registration Document 2006 87