• sells and markets the Group’s crude oil production;
• provides a supply of crude oil for the Group’s refineries;
• imports and exports the appropriate petroleum products for the Group’s refineries to be able to adjust their production to the needs of local markets;
• charters appropriate ships for these activities;
• undertakes trading on various derivatives markets.

Although the Trading & Shipping division’s main focus is serving the Group, its know-how and expertise also allow this division to extend its scope of operations beyond meeting the strict needs of the Group.

Trading

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

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

All of Total’s trading operations are subject to strict internal controls and trading limits.

Throughout 2010, the Trading division maintained a level of activity similar to the levels attained in 2009 and 2008, trading physical volumes of crude oil and refined products amounting to an average of approximately 5 Mb/d.

In 2010, the oil market was marked by recovering demand, due mainly to economic growth in emerging countries (China, India, Latin America, the Middle East). Meanwhile, crude oil and other liquids production (LPG, LNG, biofuels) outside of OPEC countries grew rapidly while production from OPEC countries increased only slightly despite a softening of quotas that have been effective since year-end 2008. The increase in global oil storage, which has prevailed since early 2008, finally stopped in mid-2010 with a first major decrease mainly due to the strong increase in demand in the third quarter of 2010. Following this reversal, oil storage at year-end 2010 was at the year-end 2009 level.)

Shipping

The Group’s Shipping division arranges the transportation of crude oil and refined products necessary for the Group’s activities. The Shipping division provides a wide range of shipping services required by the Group to develop its activities and maintains a rigorous safety policy. Like a certain number of other oil companies and shipowners, the Group uses freight rate derivative contracts in its shipping activity to adjust its exposure to freight ratefluctuations.

In 2010, the Shipping division chartered approximately 2,900 voyages to transport approximately 119 Mt. At year-end 2010, the Group employed a fleet of fifty-seven vessels chartered under long-term or medium-term agreements (including five LPG carriers and no single-hulled vessels). The fleet has an average age of approximately four yearsapproximately four years.

In 2010, the the tanker freight market suffered strong fluctuations. Highlights of the first half of 2010 included:
– increased crude oil imports to consumer countries, driven by the economic recovery and increased onshore and offshore crude oil storage in the United States, Europe and China; and
– the resumption of crude oil floating storage that involved up to forty-five vessels in early May 2010 and resulted in limited growth of the active fleet of tankers despite the disposal of fewer vessels than expected.

The combination of these two trends led to the relative resilience of the freight market for crude oil transport as recorded in the first half of 2010.
However, from the second half of 2010, the fundamentals of the freight market deteriorated sharply, leading to a collapse of freight rates at the end of July. This trend was the result of the sustained growth of the active fleet due to the significant decrease in floating storage and the continued growth of the fleet.

Throughout 2010, the number of new vessels delivered by shipyards exceeded the number of vessels disposed of, despite the entry into force of the international regulation providing for the gradual disposal of single-hulled vessels, which led to an oversupply of vessels compared to demand for transport..