Middle East oil producers look downstream for future growth

2
NewBase July 30, 2018 - Issue No. 1191 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Middle E. oil producers are looking downstream for their future
Paul Hickin is associate director for oil at S&P Global Platts.
The region’s national oil companies have embarked on a new phase of investment in refining and
petrochemicals projects both at home and overseas. Their goals are to secure markets for the
region’s crude grades and ample supply of products to meet rising domestic demand.
With the commissioning of several new refineries, the Middle East is set to become not only the
largest crude oil exporter but also the largest oil product exporter in the world. Refineries in the
region consume around a quarter of the crude oil produced domestically, and the Paris-based
International Energy Agency predicts the share rises to more than one-third by 2040 as more than
4 million barrels per day of net refining capacity is added.
Earlier this year Saudi Arabia’s state-owned giant said it had agreed to develop a $44 billion mega-
refinery on India’s west coast capable of processing 1.2 million bpd of crude. This ranks it “among
the largest world refining and petrochemical projects”, Saudi Aramco noted.
And the downstream deals look set to continue, with Saudi Arabia looking to consolidate at home
as well as abroad. Aramco recently said it is looking to take a stake in petrochemical maker Saudi
Basic Industries Corp (Sabic). Aramco aims to up its refining capacity to between 8 million and 10
million bpd, from around 5 million bpd, and double its petrochemicals output by 2030.

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While Opec’s biggest producer is the most active in the area, Abu Dhabi National Oil Company
(Adnoc) aims to invest $45bn over the next five years to create the world’s single largest integrated
refining and petrochemicals destination at Ruwais with a capacity of 1.5 million bpd.
This will help the UAE gain market share dominance, especially in Asia-Pacific, with India and
China the biggest consumers of Middle East crude and its products.
Adnoc has also signed a strategic cooperation agreement with China National Petroleum Corp,
which again is likely to be win-win for both producer and consumer, securing supply and
developing downstream opportunities as part of the plan.
Aramco is leading the way with its strategic reach as it mulls expanding its 600,000 bpd Texan
refinery which is the largest in the US by capacity. The Saudi company part owns US subsidiary
Motiva, which wants to take advantage of natural gas from US shale fields to develop plastics. With
the Middle East facing competition from cheap US shale gas, Aramco’s longstanding presence in
the US is a crucial advantage.
The region’s refineries are also increasingly more sophisticated. New facilities are designed to
minimise fuel oil output and maximise diesel and petrol production. The International Maritime
Organisation’s new sulphur regulations for the shipping industry in 2020 could result in a glut of
excess fuel oil.
S&P Global Platts Analytics estimates the cost of the IMO sulfur cap at $1 trillion over the next five
years as refiners and shippers scramble to meet the 0.5 per cent sulphur cap on fuel that is set to
transform global oil markets.
The downstream diversification will enable the region to meet other significant demand trends and
be nimble enough to adapt to ever changing conditions. Take plastics for instance, with global
demand for polyethylene having almost doubled in the past couple of decades and this could
continue even with the environmental pressures to recycle.
“As long as GDP growth remains strong demand for petrochemicals will remain strong,” said S&P
Global Platts Analytics’ Jennifer Van Dinter, noting the infrastructure isn’t there to turn the tide

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against plastics just yet. The Middle East plans to build out new petrochemical capacity in the early
2020s and take advantage of this key source of demand growth.
As oil majors have witnessed, having a foot in both the upstream and downstream camps helps
guard against volatility in oil prices. While oil producers are more content with prices above $70 a
barrel again, it was those producers that had greater diversification in refining that tended to be
better placed after prices hit a nadir of below $30 in early 2016.
With radically changing oil demand trends, the Middle East petroleum sector is adapting fast.
The upcoming projects landscape for the medium-term (2016–2021) for OPEC Member Countries’
downstream sector is affected by two factors: the lifting of international sanctions on Iran, and the
return of Gabon to the Organization.
A significant number of new investments are set to occur in OPEC Member Countries. Almost 8
mb/d, of potential refining projects in OPEC Member Countries with a relatively new surge in
capacity additions from Iran, if all projects are implemented as planned.
However, a review of viability of these projects suggests that around 2.2 mb/d of distillation units
will be added to the refining sector in OPEC Member Countries in the period 2016–2021. This
combines around 1.7 mb/d of additional crude distillation capacity and 0.44 mb/d in the form of
condensate splitters. Condensate splitters additions are planned in Iran and Qatar and set to start
falling off by 2020.
The overall OPEC Member Countries’ distillation capacity (including splitters) is set to reach a level
of 13.3 mb/d by 2021. An important set of secondary units will also be undertaken during the period
2016–2021, the bulk, around 1.9 mb/d, will be added in the form of desulphurization units, and the
rest, estimated at around 1.2 mb/d, will come in the form of conversion capacity (0.62 mb/d), and
octane units (0.63 mb/d).

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The additional refining capacity in OPEC Member Countries will come from condensate splitters,
new greenfield and ‘grassroots’ projects, supplemented by expansions at existing facilities. The
largest OPEC Member Countries’ new refineries are megaprojects, expected to come on stream
during the medium-term period; these are in Kuwait (Al Zour project), Saudi Arabia (Jizan project)
and Venezuela (Anzoetagui).
Other relatively sizable projects, with a common trend among crude producers to process heavy
crudes domestically and also aiming to satisfy increasing local demand, include new refineries in
Lobito, Angola; Manabi (Refinery del Pacifico), Ecuador; Khozestan and Kermanshah projects in
Iran; Fujairah and Dubai projects in the UAE. Algeria has chosen to settle for medium capacity
refineries in Arzew, Hassi Messaoud and Tiaret to satisfy its growing local refined products
demand.
No clear picture can be envisaged yet from projects in Libya. The total estimated additions will
bring OPEC Member Countries’ base capacity to over 13.3 mb/d in 2021 and will require a level of
investments of $66.5 billion in order to implement the foreseen additions (distillation and secondary
units) between 2016 and 2021. It is worth recalling that this is part of OPEC’s ongoing efforts to
support market stability by supplying required products to consumers.
UAE:Borouge EPC contract to build 5th polypropylene plant
ABU DHABI, 24th July, 2018 (WAM) -- Borouge has awarded the Engineering, Procurement and
Construction, EPC, contract for an additional Polypropylene Plant, PP5, to be integrated with the
existing Borouge 3 complex in Ruwais and grow the polymer production capacity to almost 5
million tonnes per annum by 2021.

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The EPC contract has been awarded to Tecnimont SPA, a subsidiary of Italy’s Milan-based Maire
Tecnimont, that provides engineering, procurement, and construction services to oil, gas,
petrochemical, and chemical industries.
Borouge, a joint venture of ADNOC and Borealis was established 20 years ago and production has
progressively increased as the Borouge 1, 2 and 3, plants have come on stream. Borouge 2030
Growth Strategy aims to double the production capacity by 2030.
Commenting on the announcement, Abdulaziz AlHajri, Director of ADNOC’s Downstream
directorate, said, "At the heart of the downstream strategy is an AED165 billion (US$45 billion)
investment, over the next five years, that will create the world’s largest integrated refining and
petrochemicals hub in Ruwais, where ADNOC will convert 20% of its crude to chemicals, tripling
petrochemical production capacity to 14.4 million tonnes per year, by 2025. In parallel, ADNOC
intends to build an international, integrated downstream presence, including securing additional
crude refining capacity in growth markets."
Under ADNOC’s In-Country Value, ICV, programme, this project will maximise spend on local
products, manufacturing, services and infrastructure. The ICV initiative also seeks to catalyse
socio-economic development, improve knowledge transfer and create additional employment for
UAE nationals.
Based on Borealis Borstar technology, the new plant will have a nameplate capacity of 480,000
tonnes per annum and is expected to come on stream in Q3 2021. With this investment the total
polypropylene production capacity of Borouge will grow to 2.24 million tonnes per annum.
In turn, Ahmed Omar Abdulla, CEO of Abu Dhabi Polymers Company, Borouge, said, "Today’s
announcement is a significant milestone in the expansion of Borouge’s growth ambition to become
the recognized leader in creative plastics solutions that have a positive impact on society today and
tomorrow."
"The awarding of the PP5 EPC contract, after a rigorous and robust competitive tendering process,
is not only a signal of our intent to grow our position as a reliable provider to petrochemical
products but also a signal of the further growth of Ruwais as the biggest world-class petrochemical
complex."
Building this new capacity in the UAE will help Borouge to expand its product portfolio and deliver
leading edge solutions to its customers across the globe, supporting our customers’ growth
ambitions in the transportation and energy markets as well as rigid and flexible packaging sectors,
infrastructure and agricultural film.
The awarding of the EPC contract comes one year after Borouge shareholders ADNOC and
Borealis, announced plans for the construction of a Borouge 4 complex in Ruwais, which will
encompass a world-scale, mixed feedstock cracker and downstream derivatives units for both
polyolefin and non-polyolefin products.
Increasing petrochemical production capacity is a key pillar of ADNOC’s aggressive downstream
expansion strategy, which will see it become a world class producer, supplier and trader of refined
and petrochemical products as it focuses on markets in Asia, including China.

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U.S. distillate fuel inventories are low for this time of year
Source: U.S. Energy Information Administration, Petroleum Supply Monthly and Short-Term Energy Outlook
Inventories of distillate fuel, a category that includes both diesel and home heating oil, were 117.7
million barrels at the end of June, the lowest end-of-June level since 2004. Distillate inventories
have generally been lower than the previous five-year (2013–2017) average throughout 2018.
Relatively low inventory levels reflect growth in distillate consumption during 2018 that has not
been fully offset by increased domestic refinery production or by lower net exports of distillate.
EIA estimates that U.S. consumption of distillate fuel averaged 4.12 million barrels per day (b/d)
during the first half of 2018, which was 190,000 b/d (5%) higher than in the same period of 2017.
This increase is largely attributable to an increase in trucking activity, which is the leading use of
diesel fuel. Demand for trucking services tends to be closely correlated to economic growth and
industrial activity, both of which have been higher in the first half of 2018 compared with the first
half of 2017.
Cold January temperatures in the Northeast also led to more heating oil consumption. In January
2018, temperatures in the Middle Atlantic and New England—regions with relatively high shares of
homes using heating oil—were 25% and 21% colder, respectively, than in January 2017.
On the supply side, EIA estimates that refinery production of distillate fuel in in the United States
averaged 5.0 million b/d in first six months of 2018, which was 30,000 b/d higher (1%) than in the
same period of 2017. Net exports (gross exports minus gross imports) of distillate fuel averaged
1.1 million b/d in the first half of the year, which was 80,000 b/d (7%) lower than in the first half of
last year. The lower net exports largely reflected an increase in imports during the first quarter of
the year to meet increased demand for home heating oil.
The increase in domestic distillate consumption relative to supply has contributed to diesel prices
rising by more than crude oil prices (the main input cost in distillate production) over the past year.
The spot price of Brent crude oil averaged $71 per barrel (b) in the first half of 2018, an increase of
$19/b, or 46 cents/gallon from the first half of 2018. The retail price of diesel averaged $3.11/gallon
from January through June 2018, up 55 cents/gallon from January through June 2017.

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NewBase 30 July 2018 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil Prices Brent settling at $74,25 US crude settling at $68.69
US crude drops 1.3%, settling at $68.69 and posting fourth straight weekly decline as stock market slumps
• Oil prices fell on Friday in quiet trading after three days of gains, weighed down by a
weakness in equity markets.
• Crude futures earlier drew support from easing trade tensions and a temporary shutdown by
Saudi Arabia of a key crude oil shipping lane.
• Russian energy minister Alexander Novak said on Friday the market remained volatile, but
had priced in risks related to U.S. sanctions against Iran.
Oil prices fell on Friday, weighed down by a drop in the U.S. stock market, but drew support from
easing trade tensions and a temporary shutdown by Saudi Arabia of a key crude oil shipping lane.
Oil price special
coverage

9
U.S. West Texas Intermediate futures ended Friday's session down 92 cents, or 1.3 percent, at
$68.69, posting a fourth straight week of declines, falling 2.5 percent. Brent futures fell 25 cents to
$74.29, but posted a 1.7-percent weekly increase, breaking a three-week losing streak.
"That could show some sign of a slowdown in the economy, which could in turn affect oil
consumption," said Phillip Streible, senior market strategist at RJO Futures. The oil market largely
brushed off government data on Friday that said the U.S. economy grew in the second quarter at
its fastest pace in nearly four years.
"It was a strong number that suggests strong energy demand into the end of the year," said Phil
Flynn, analyst at Price Futures Group in Chicago. "The reason why we're not rallying off that is
because it came in line with expectations, but when you're running that kind of a GDP, that's a lot
of oil."
U.S. energy companies added three oil rigs in the week to July 27, the first time in the past three
weeks that drillers have added rigs, General Electric Co's Baker Hughes energy services firm said
on Friday.
Russian energy minister Alexander Novak said on Friday the market remained volatile and
responded to verbal interventions. He added that the market had priced in risks related to U.S.
sanctions against Iran.
He said the Organization of the Petroleum Exporting Countries and its allies were not discussing
an option to boost production by more than 1 million barrels per day. OPEC and other producers
led by Russia agreed last month to ease production curbs. The deal effectively increases combined
output by 1 million bpd, with Russia's share at 200,000 bpd.
Saudi Arabia earlier in the week said it was suspending oil shipments through the Red Sea's Bab
al-Mandeb strait, one of the world's most important tanker routes, after Yemen's Iran-aligned
Houthis attacked two ships in the waterway.
Any move to block the strait would virtually halt oil shipments through Egypt's Suez Canal and the
SUMED crude pipeline linking the Red Sea and Mediterranean.
An estimated 4.8 million bpd of crude oil and refined products flowed through the Bab al-Mandeb
strait in 2016 toward Europe, the United States and Asia, according to the U.S. Energy Information
Administration.
A breakthrough in U.S.-EU trade talks also lent support to oil prices this week. U.S. President
Donald Trump and Jean-Claude Juncker, president of the European Commission, reached a
surprise agreement on Wednesday that alleviated the risk of an immediate trade war.
"If the U.S.-EU trade talks pull a rabbit out of the hat, that could be very positive for risk appetite,
and that could certainly help oil," BNP Paribas oil strategist Harry Tchilinguirian told the Reuters
Global Oil Forum.
'Oil prices continued to increase, averaging 74 $/b
in the second quarter, supported notably by
inventory reductions and geopolitical tensions.

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Oil Bulls Get Back in the Game as Supply Risks Rattle Market
Bloomberg
Oil bulls are venturing back into the market as global conflict sparks concern that supply
disruptions will leave buyers scrambling for barrels.
Money managers boosted their net-long position -- the difference between bets on rising prices and
wagers on a decline -- in Brent crude by 4.1 percent after cutting them the most since 2016 a week
earlier.
Geopolitical tensions have roiled the crude market, sending Brent prices higher since mid-July as
global supplies tighten. U.S. plans to reimpose sanctions on Iran may sharply curtail the nation’s oil
exports, stoking concern that OPEC won’t have enough spare capacity to meet rising demand.
Saudi Arabia, meanwhile, temporarily halted shipments via a key Red Sea shipping lane after it
said two tankers were attached by Yemen’s Houthi militia.
“The risk premium for Brent is definitely on right now given the war of words we’ve seen against
Iran -- in general, political instability,” said Ashley Petersen, lead oil analyst at Stratas Advisors in
New York. “I don’t think markets are expecting that to get any better anytime soon.”
Iran has renewed threats to block the Strait of Hormuz since the U.S. announced its plan to
reinstate sanctions and cut shipments from OPEC’s third-largest producer to zero from about 2.5
million barrels a day now. U.S. efforts to cut Iran’s oil exports are expected to contribute to global
oil price volatility in the short term, according to the International Energy Agency.
And concern persists that there won’t be enough spare OPEC capacity to make up for losses from
producers like Venezuela.
The Brent net-long position rose to 367,640 contracts, the first gain in three weeks, ICE Futures
Europe data show.

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“It lines up with our call to buy the dip in July,” said Chris Kettenmann, chief energy strategist at
Macro Risk Advisors LLC. “We’ve been pretty vocal about adding to length through the July sell-
off.”
Oil’s Bull Trend
Goldman Sachs Group Inc. said while U.S. policies may weigh on crude prices in the near term,
prices are poised to re-test $80 a barrel later this year.
“OPEC could bring back 1 million barrels a day, but any barrels brought back by Saudi, Russia,
Kuwait, those might just offset barrels lost from Iranian sanctions,” said Noah Barrett, an energy
research analyst at Janus Henderson Investors. Due to bottlenecks in the Permian Basin, “U.S.
production will continue to grow, but it probably won’t exceed expectations. It’s more likely it will
disappoint to the downside.”
Though a shortage of pipelines persists in the Permian Basin of West Texas and New Mexico,
domestic crude production is hovering near a record 11 million barrels a day, according to the
latest Energy Information Administration data.
Hedge funds’ net-long position in West Texas Intermediate crude fell 2.4 percent to 392,147
futures and options during the week ended July 24, according to the U.S. Commodity Futures
Trading Commission. Longs fell and shorts rose.
“There’s just kind of an acknowledgment that there is still a lot of supply in Texas, so it’s not clear
sailing for prices,” Petersen said.
Total positioning on the U.S. benchmark and Brent slid to the lowest level since 2016.
The reduction in participation shows that “the summer-time doldrums are here and there’s not a lot
of direction for this market at the moment,” said John Kilduff, a partner at New York-based hedge
fund Again Capital LLC.

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NewBase Special Coverage
News Agencies News Release 30 July 2018
Total announces second quarter and first half 2018 results
Source: Total
Total has announced its second quarter and first half 2018 results. Commenting on the results,
Chairman and CEO Patrick Pouyanné said:
'Oil prices continued to increase, averaging 74 $/b in the second quarter, supported notably by
inventory reductions and geopolitical tensions.
Total benefited fully from this by remaining focused on operational efficiency:
• adjusted net income was $3.6 billion,
• a 44% increase from a year ago, and
• the return on equity for the past 12 months rose to 10.9%.
In line with objectives for the year, the Group generated $6.8 billion of cash flow (DACF) in the
second quarter 2018, an increase of 20% compared to the first quarter, while oil prices increased
by only 11%. Discipline on spending is resolutely maintained and the organic pre-dividend
breakeven continues to decrease, to less than 25 $/b in the quarter.
Production strongly increased by 8.7% from a year ago to 2.7 Mboe/d, due to the contribution from
Maersk Oil and the ramp up of new projects, including Yamal LNG, Moho Nord and Fort Hills.
Adjusted net operating income from Exploration & Production doubled from a year ago to $2.7
billion in the second quarter 2018, and the segment generated $5.1 billion of cash flow in the same
period. Total also launched the development of the Zinia 2 project in Angola, after reducing the
cost by more than 50%.

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The Group is continuing to actively expand along the gas and electricity value chain. Total became
the second-largest player in the fast growing global LNG industry by finalizing the acquisition of
Engie LNG. The Group also announced its entry with a 10% stake in the giant Arctic 2 LNG project
in Russia.
In addition, it finalized the acquisition of 73% of Direct Energie to accelerate the downstream
integration in the gas-electricity chain, and it launched an offer for the remaining shares.
In an environment with European refining margins of 35 $/t, the Downstream generated $1.7 billion
of cash flow in the second quarter, in line with the objective for the year. Notably, Marketing &
Services continues to deliver steady and profitable growth. The Group is preparing for its future in
petrochemicals by launching studies for a new giant complex integrated into the SATORP refinery
with Saudi Aramco and a new project in Algeria with Sonatrach.
In line with the announced shareholder return policy, the Group has bought back all the shares
issued during the year for the scrip dividend. In addition, it bought back shares for $600 million to
share with shareholders the benefit realized from higher prices.'
Key figures

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Highlights since the beginning of the second quarter 201810
• Engie LNG acquisition closed July 13, 2018: Total becomes world No.2 in LNG
• Finalized acquisition of 73% of Direct Energie and launched mandatory public offer
for remaining shares
• Expanded partnership with Novatek through the Arctic 2 LNG project in Russia
• Strengthened presence in deep-offshore Gulf of Mexico by increasing interest in
the North Platte discovery to 60% and the Anchor discovery to 32.5%
• Launched the Zinia 2 project on Block 17 in Angola
• Strengthened cooperation with Sonatrach in Algeria by extending license for the
TFT gas field and launched engineering studies for petrochemical project at Arzew
• Signed MOU with Saudi Aramco to build petrochemical complex at Jubail in Saudi
Arabia
• Acquired 25% of Clean Energy to accelerate use of natural gas for heavy-duty
trucks in the United States
• Expanding LNG as marine fuel in Singapore in the framework of cooperation with
Pavillion
• Signed an agreement to sell interest in Dunkirk LNG terminal
Analysis of business segments
Exploration & Production
> Environment – liquids and gas price realizations*
2Q18 1Q18 2Q17
2Q18
vs
2Q17
1H18 1H17
1H18
vs
1H17
74.4 66.8 49.6 +50% Brent ($/b) 70.6 51.7 +37%
69.5 60.4 45.1 +54% Average liquids price ($/b) 65.3 47.1 +39%
4.49 4.73 3.93 +14% Average gas price ($/Mbtu) 4.61 4.01 +15%
54.3 47.3 35.5 +53% Average hydrocarbon price ($/boe) 50.9 36.7 +39%
* Consolidated subsidiaries, excluding fixed margins.
> Production
2Q18 1Q18 2Q17
2Q18
vs
2Q17
Hydrocarbon production 1H18 1H17
1H18
vs
1H17
2,717 2,703 2,500 +9% Combined production (kboe/d) 2,710 2,534 +7%
1,582 1,481 1,298 +22% Liquids (kb/d) 1,532 1,300 +18%
6,176 6,664 6,500 -5% Gas (Mcf/d) 6,419 6,696 -4%
Hydrocarbon production was 2,717 thousand barrels of oil equivalent per day (kboe/d) in the second quarter

16
2018, an increase of close to 9% compared to the second quarter 2017, due to:
• +7% due to new project start-ups and ramp-ups, notably Moho Nord, Yamal LNG,
Edradour-Glenlivet, Kashagan, Fort Hills, Timimoun and Libra;
• +6% portfolio effect, mainly due to the integration of Al-Shaheen in Qatar, the
Maersk Oil assets, Waha in Libya, and Lapa and Iara in Brazil, which were partially
offset by the expiration of the Mahakam permit in Indonesia at the end of 2017;
• -4% due to heavier seasonal maintenance activity, the PSC price effect and natural
field decline.
• In the first half 2018, hydrocarbon production was 2,710 kboe/d, an increase of 7%
compared to the first half 2017, due to:
• +7% due to new project start-ups and ramp-ups, notably Moho Nord, Yamal LNG,
Edradour-Glenlivet, Kashagan, Fort Hills and Libra;
• +3% portfolio effect, mainly due to the integration of Al-Shaheen in Qatar, the
Maersk Oil assets, Waha in Libya, and Lapa and Iara in Brazil, which were partially
offset by the expiration of the Mahakam permit in Indonesia at the end of 2017;
• -3% due to heavier seasonal maintenance activity, the PSC price effect and natural
field decline.
> Results
2Q18 1Q18 2Q17
2Q18
vs In millions of dollars, except effective tax rate 1H18 1H17
1H18
vs
2Q17 1H17
2,687 2,183 1,359 +98% Adjusted net operating income* 4,870 2,741 +78%
575 446 373 +54% including income from equity affiliates 1,021 688 +48%
46.3% 48.1% 36.2% Effective tax rate** 47.1% 39.3%
2,980 5,871 3,448 -14% Investments 8,851 6,084 +45%
500 2,251 132 x3.8 Divestments 2,751 245 x11.2
2,114 2,057 3,296 -36% Organic investments 4,171 5,802 -28%
5,115 4,265 3,580 +43% Operating cash flow before working capital changes
***
9,380 6,916 +36%
4,628 3,569 2,836 +63% Cash flow from operations *** 8,197 5,637 +45%
* Details of adjustment items are shown in the business segment information annex to financial statements.
** Tax on adjusted net operating income / (adjusted net operating income - income from equity affiliates - dividends received from investments -
impairment of goodwill + tax on adjusted net operating income).
*** excluding financial charges
Exploration & Production adjusted net operating income was:
• 2,687 M$ in the second quarter 2018, or practically double the second quarter 2017. The Group
benefited fully from the increase in hydrocarbon prices, thanks to higher production and lower costs,
despite an increase in tax rates over the year to 46.3% in line with increasing hydrocarbon prices.
• 4,870 M$ in the first half 2018, an increase of 78% compared to the first half 2017, for the same reasons.
Operating cash flow before working capital changes was 5.1 B$ in the second quarter 2018 and 9.4 B$ in the
first half, an increase of 43% and 36%, respectively. Exploration & Production generated 5.2 B$ of cash flow
after organic investments in the first half 2018.

17
Gas, Renewables & Power
> Results
2Q18 1Q18 2Q17
2Q18
vs
2Q1
7
In millions of dollars 1H18 1H17
1H18
vs
1H1
7
193 115 95 +103% Adjusted net operating income* 308 156 +97%
79 249 77 +3% Inves tments 328 392 -16%
405 78 23 x17.6 Divestments 483 27 x17.9
60 77 68 -12% Organic investments 136 170 -20%
177 49 124 +43% Operating cash flow before working capital changes** 226 159 +42%
104 (179) (100) n.s. Cash flow from operations** -75 40 n.s.
* Detail of adjustment items shown in the business segment information annex to financial statements.
** excluding financial charges
Adjusted net operating income for Gas, Renewables & Power was 193 M$ in the second quarter 2018 and 308
M$ in the first half 2018, thanks to an increased contribution from the gas business and better performance
from new energies.

18
Refining & Chemicals
> Refinery throughput and utilization rates*
2Q18 1Q18 2Q17
2Q18
vs
2Q17
1H18 1H17
1H18
vs
1H17
1,734 1,832 1,672 +4% Total refinery throughput (kb/d) 1,784 1,796 -1%
569 624 574 -1% France 597 600 -1%
670 746 684 -2% Rest of Europe 708 742 -5%
495 462 414 +20% Rest of world 479 454 +6%
83% 87% 81% Utlization rate based on crude only** 85% 86%
* Includes share of TotalErg, and African refineries reported in the Marketing & Services segment.
** Based on distillation capacity at the beginning of the year.
Refinery throughput:
• increased by 4% in the second quarter 2018 compared to the second quarter 2017, notably as a result of higher
throughput at SATORP after debottlenecking increased its capacity by more than 10%.
• stable in the first half 2018 compared to the first half 2017. Lower throughput in Europe linked to planned
maintenance, notably at Antwerp, was offset by higher throughput in the rest of the world.
> Results
2Q18 1Q18 2Q17
2Q18
In millions of dollars
1H18
vs
except the ERMI
1H18 1H17 vs
2Q17 1H17
34.7 25.6 41.0 -15% European refining margin indicator - ERMI ($/t) 30.1 40.0 -25%
821 720 861 -5% Adjusted net operating income* 1,541 1,884 -18%
404 332 401 +1% Investments 736 667 +10%
324 25 20 x16.2 Divestments 349 2,760 -87%
386 308 381 +1% Organic investments 694 603 +15%
1,018 920 1,347 -24% Operating cash flow before working capital changes** 1,938 2,378 -19%
999 (1,109) 1,967 -49% Cash flow from operations** (110) 3,729 n.s.
The Group’s European refining margin indicator (ERMI) decreased by 15% from a year ago to 34.7 $/t in the
second quarter 2018, and it decreased by 25% from a year ago to 30.1 $/t for the first half 2018. Petrochemical
margins continue to benefit from a favorable environment, notably in the United States and Asia-Middle East, but
margins in Europe were lower compared to a year ago mainly due to an increase in feedstock prices.
In this context, Refining & Chemicals adjusted net operating income was:
• 821 M$ in the second quarter 2018, a decrease of 5% compared to the second quarter 2017.
• 1,541 M$ inthe first half 2018, a decrease of 18% compared to the first half 2017.

19
Marketing & Services
> Petroleum product sales
2Q18 1Q18 2Q17
2Q18
vs
2Q17
Sales in kb/d* 1H18 1H17
1H18
vs
1H17
1,799 1,801 1,760 +2% Total Marketing & Services sales 1,800 1,744 +3%
1,001 993 1,039 -4% Europe 997 1,039 -4%
798 808 721 +11% Rest of world 803 705 +14%
* Excludes trading and bulk refining sales, includes share of TotalErg.
Petroleum product sales:
• increased by 2% in the second quarter 2018 compared to the second quarter 2017, despite the sale of TotalErg
in Italy, due to growth in the business, notably in Asia and Africa.
• increased by 3% in the first half 2018 compared to the first half 2017 for the same reasons.
> Results
2Q18 1Q18 2Q17
2Q18
vs
2Q17
In millions of dollars 1H18 1H17
1H18
vs
1H17
478 367 433 +10% Adjusted net operating income* 845 734 +15%
310 228 258 +20% Investments 538 697 -23%
45 228 182 -75% Divestments 273 218 +25%
205 136 185 +11% Organic investments 342 280 +22%
646 430 624 +4% Operating cash flow before working capital changes** 1,076 1,053 +2%
841 -60 251 x3.4 Cash flow from operations** 781 582 +34%
Adjusted net operating income for the Marketing & Services segment was:
• 478 M$ in the second quarter 2018, an increase of 10% compared to the second quarter 2017, due to volume
growth in a context of favorable margins, notably in Africa.
• 845 M$ in the first half 2018, a 15% increase compared to the first half 2017, for the same reasons.
Group results
> Adjusted net operating income from business segments
Adjusted net operating income from the business segments was:
• 4,179 M$ in the second quarter 2018, a 52% increase compared to the second quarter 2017, essentially due to
the strong performance of Exploration & Production, which doubled its contribution compared to a year ago,
thanks to increasing production in a context of higher hydrocarbon prices and lower costs.
• 7,564 M$ in the first half 2018, a 37% increase compared to the first half 2017 for the same reasons.
> Adjusted net income (Group share)
Adjusted net income was:
• 3,553 M$ in the second quarter 2018, an increase of 44% compared to the second quarter 2017, essentially due
to 52% increase in the contribution of the segments, partially offset by higher net cost of net debt, mainly due
to an increase in dollar interest rates.
• 6,437 M$ in the first half 2018, a 28% increase compared to the first half 2017 for the samereasons.
Adjusted net income excludes the after-tax inventory effect, special items and the impact of changes in fair
value11
.

20
• 168 M$ in the second quarter 2018.
• -80 M$ in the first half 2018.
The effective tax rate for the Group was:
• 38.6% in the second quarter 2018, compared to 28.2% a year ago, due to the increase in the effective tax rate
for Exploration & Production, in line with higher hydrocarbon prices, and the larger contribution of this segment
to the Group’s results this quarter.
• 39.2% in the first half 2018, compared to 29.9% in the first half 2017, for the same reasons.
> Adjusted fully-diluted earnings per share and share buyback
Adjusted earnings per share:
• increased by 36% to $1.31 in the second quarter 2018, calculated based on a weighted average of 2,646 million
fully-diluted shares, from $0.97 in the second quarter2017.
• increased by 22% to $2.41 in the first half 2018, calculated based on a weighted average of 2,608 million fully-
diluted shares, from $1.98 in the first half 2017.
On June 30, 2018, the number of fully-diluted shares was 2,644 million.
Within the framework of the shareholder return policy announced in February 2018, the Group bought back shares
for cancellation. The buyback is comprised of repurchasing shares issued as scrip dividend to eliminate dilution
and additional shares to share with shareholders the benefit resulting from higher oil prices.
• 18.6 million shares repurchased in the second quarter 2018, including additional shares for 299 M$;
• 28.4 million shares repurchased in the first half 2018, including additional shares for 589 M$.
> Divestments – acquisitions
Asset sales:
• 693 M$ completed in the second quarter 2018, comprised mainly of SunPower’s sale of its interest in 8point3,
and the sale of the Bayport (US) polyethylene plant to the joint venture formed with Borealis and Nova in which
Total holds 50%.
• 2,862 M$ completed in the first half 2018, comprised mainly of the items above plus the high-cost Martin Linge
field in Norway, an interest in Fort Hills in Canada and the marketing activities of TotalErg in Italy.
Acquisitions:
• 426 M$ completed in the second quarter 2018, comprised mainly of offshore assets from Cobalt in the Gulf of
Mexico, notably including 20% interest in the North Platte and Anchor discoveries, and an interest in Clean
Energy in the United States to expand into marketing natural gas for vehicles.
• 4,114 M$ completed in the first half 2018, comprised mainly of the items above plus interests in the Iara and
Lapa fields in Brazil, two new 40-year concessions in offshore Abu Dhabi, and the Waha field in Libya.
> Net cash flow
The Group’s net cash flow13 was:
• 3,886 M$ in the second quarter 2018 compared to 1,489 M$ in the second quarter 2017, thanks mainly to a
20% increase in operating cash flow before working capitalchanges.
• 5,117 M$ in the first half 2018 compared to 5,396 M$ in the first half 2017. Net investments increased by 2,027
M$ compared to the first half 2017 due to an increase in completed acquisitions, in line with the strategyof the
Group to invest counter-cyclically in 2016-17. This well-timed investment effortwas partially offset by a 1,748 M$
increase in operating cash flow before working capital changes.

21
Profitability
Return on equity for the twelve months ended June 30, 2018, was 10.9%, an increase compared to the same
period a year ago.
In millions of dollars July 1, 2017 to April 1, 2017 to January 1, 2017
Return on average capital employed was 10.1% for the twelve months ended June 30, 2018, an increase
compared to the same period a year ago.
In millions of dollars
July 1, 2017 to April 1, 2017 to January 1, 2017
June 30, 2018 March 31, 2018 December 31, 2017
Adjusted net income 12,299 11,150 10,762
Average adjusted shareholders' equity 113,251 111,522 106,078
Return on equity (ROE) 10.9% 10.0% 10.1%
June 30, 2018 March 31, 2018 December 31, 2017
Adjusted net operating income 13,748 12,428 11,958
Average capital employed 136,355 136,384 127,575
ROACE 10.1% 9.1% 9.4%

Copyright © 2015 NewBase www.hawkenergy.net Edited by Khaled Al Awadi – Energy Consultant All rights reserved. No part of this publication may be reproduced, redistributed,
or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this
publication. However, no warranty is given to the accuracy of its content. Page 22
Summary and outlook
Supported by inventory reductions and geopolitical tensions, Brent continued to
trade at around 70 $/b at the start of the third quarter, despite the announced
increase in production by OPEC. The Group, however, resolutely continues to
implement programs to improve operational efficiency and to reduce its breakeven
so as to remain profitable whatever the market context.
The Upstream is well positioned to take advantage of the increase in oil prices
thanks to production growth which should be above 7% in 2018. It will benefit in the
coming months from the start-ups of Kaombo, Tempa Rossa, Ichthys and Egina,
which are all strong cash flow generators, as well as ramping production up at
recent start-ups like Yamal LNG, Fort Hills and Timimoun.
Since the start of the third quarter, European refining margins have been around 35
$/t. While still favorable, petrochemical margins are lower in Europe compared to a
year ago.
The cost reduction program is on track to surpass the $4 billion objective for the
year and reach $4.2 billion of cost savings over the 2014-18 period. The Group
confirms that investments (organic and net acquisitions) should be between $16-17
billion in 2018.
Conforming to the announced shareholder return policy, the Group will continue to
buy back shares issued as scrip dividend to eliminate dilution. It will also continue to
buy back additional shares for an amount of up to $5 billion over the period 2018-
20.
• • •

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Your partner in Energy Services
NewBase energy news is produced daily (Sunday to Thursday) and
sponsored by Hawk Energy Service – Dubai, UAE.
For additional free subscription emails please contact Hawk Energy
Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
Mobile: +97150-4822502
khdmohd@hawkenergy.net
khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 27 years of experience in
the Oil & Gas sector. Currently working as Technical Affairs Specialist for
Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy
consultation for the GCC area via Hawk Energy Service as a UAE
operations base , Most of the experience were spent as the Gas Operations
Manager in Emarat , responsible for Emarat Gas Pipeline Network Facility &
gas compressor stations . Through the years, he has developed great
experiences in the designing & constructing of gas pipelines, gas metering &
regulating stations and in the engineering of supply routes. Many years were spent drafting, &
compiling gas transportation, operation & maintenance agreements along with many MOUs for the
local authorities. He has become a reference for many of the Oil & Gas Conferences held in the
UAE and Energy program broadcasted internationally, via GCC leading satellite Channels.
NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase K. Al Awadi

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Middle East oil producers look downstream for future growth

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