An ambitious strategy
Rapid implementation of the 2000 merger of Totalfina's and Elf Aquitaine's downstream activities was aimed at creating the leader in the Refining and Marketing sectors in Europe.
In European refining, the Group accelerated its optimization program through the formation of hubs offering integrated management of neighboring facilities and enabling major synergies to be realized quickly. This policy leads to optimized logistics on a wider base, integrated procurement processes and product trading, and also leverages the benefits of integration of refining with the Group's other operations, especially petrochemicals.
In marketing, TotalFinaElf successfully merged the operations of Totalfina and Elf Aquitaine in countries where both groups were present with, notably, the combining of all subsidiary head offices on a single site.
Synergies and productivity
TotalFinaElf's Downstream operations make a major contribution to the planned synergies that have been announced and, combined with productivity gains, are expected to enable a recurrent improvement of 1.7 billion euros/year in income from operations as of 2003. At the same time, the Group is maintaining the productivity programs initiated by all the operational units, as well as a selective growth strategy for Downstream operations in Africa, Asia and in high value-added specialty products. In 2000, the synergy and productivity plans implemented in the Downstream sector resulted in an improvement of about 600 million euros in income from operations, or, in line with the initial timetable, 35% of the Synergies/Productivity program announced for 2003.
Maintaining strict investment discipline
For several years, TotalFinaElf has maintained strict investment discipline in its Downstream operations, and the continuation of this policy within the new Group will keep capital employed at a constant level. In refining, for example, the Group has set the objective of limiting its investments to $3 per ton of annual refining capacity, including investments to meet the new European specifications in 2005.
In 2000, within the limits of this strict discipline, TotalFinaElf continued to adapt its base and has become one of the best-placed European refineries to contend with the entry into force of the Auto-Oil I specifications. The Group now has inte-grated facilities capable of sustaining its environmental policy and the continuous improvement of its product quality.
Significantly higher income from operations in 2000
The environment surrounding TotalFinaElf Downstream operations in 2000 was characterized by a substantial improvement in European refining margins, although marketing margins were adversely impacted by high oil and product prices. The rise of the dollar against the euro during the year also had a significant positive impact on income from Downstream operations.
The overall positive contribution of changes in the economic environment, combined with in-house action plans relating to synergies, productivity and growth, contributed to a sharp rise in income from Downstream operations that, excluding non-recurring items, tripled from 1999 (pro forma) to 2000 to 3.1 billion euros.
Assertive asset management
In August 2000, TotalFinaElf signed a contract to sale the Big Spring refinery in Texas, along with related pipeline and marketing assets.
In addition, within the framework of the European Commission decision of February 9, 2000, which authorized the merger of Totalfina with Elf Aquitaine, TotalFinaElf committed itself to a number of asset sales in France, which were completed in the course of the year. Transactions approved by the European Commission included the sale of interests in oil pipelines and certain finished product warehouses, third party access to refueling infrastructure at the Lyon and Toulouse airports, the sale of 70 expressway service stations flying the Total, Fina and Elf flags, and the sale in mainland France of Elf Antargaz and Elf Aquitaine's associated LPG logistics.
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