Industry Trend Analysis - Quick View: Oil Ban Has Little Clout - NOV 2017

The Latest: Environment minister Nicolas Hulot has presented a draft bill to cabinet, which will ban all exploration and production of oil and gas by 2040, both on the French mainland and in its territories overseas.

Implications: The move is consistent with the broader push towards carbon neutrality in France, which was a key tenet of President Macron's electoral campaign. The bill - slated to be passed in 2017 - would ban the issuance of new exploration and production permits and gradually phase out the renewal of existing ones. It does not have any significant impact on the outlook on oil and gas production in France, which at less than 60,000 barrels of oil equivalent per day (boe/d) is marginal, declining and satisfies only a fraction (<2%) of domestic consumption.

The only significant impact of the ban could be on exploration in French Guiana, where French major Total holds a 25% stake in the deepwater Guyane Maritime permit. Given that deepwater developments have multi-year lead times and are highly capital intensive, the probability of further drilling has shrunk considerably. For Total to spud, the company would have to believe that development would be economic given a production lifespan of less than 20 years. This is, in our view, unlikely. In addition, drilling to-date has been somewhat mixed, with 72m of net oil pay discovered in 2011, followed by a dry well in 2013.

Output Negligible
France Oil & Natural Gas Production & Consumption Forecast
f = BMI forecast. Source: BMI, EIA

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