WHEN Total announced plans in the early 1990s to build up its reserves outside the Middle East it was seen by some as a rejection by the French oil company of the region where it had made its fortune. For Christophe de Margerie, executive vice-president for the Middle East, nothing could be further from the truth. 'Total is not turning its back on the Middle East,' he says. 'It is investing heavily.'

What the company has done is to diversify its upstream interests - it is now active in 20 countries outside the Middle East - boosting its gas assets in particular. But the Middle East still accounts for nearly 50 per cent of reserves and the rest of its worldwide interests are spread across four continents. 'No country outside the Middle East accounts for more than 15 per cent of production,' says Daniel Valot, president of the exploration and production division. And, as the spread of Middle East assets shows, Total is building up its regional holdings, not running them down (see table).

Total's regional gas strategy, developed around liquefied natural gas (LNG) in Abu Dhabi, Oman, Qatar and Yemen, and two offshore projects in Iran, is particularly aggressive. Selling itself as a company that is active all along the energy chain, Total's ambitions do not stop there - it is bidding for Abu Dhabi's first independent power project (IPP) with Belgium's Tractebel, chasing Oman's second IPP and even dangled an offer in front of a Saudi Arabian utility to develop a gas field and power station at Tabuk.

'We think there is an opportunity to enter Saudi Arabia through the electricity sector,' says De Margerie. 'It might...one day lead to gas business as the [power] projects are gas-based,' says Valot. Saudi ministers have repeatedly ruled out any upstream opening for international energy companies but Total executives seem to delight in courting controversy.

Total's strategy in Iran is a striking example of its willingness to play for high stakes. Though it began before the grip of US sanctions tightened around Iran, threatening to penalise any company investing more than $20 million a year in oil and gas projects, Total's offshore activity is testing the limits of US extra-territorial law making. The Sirri field development was signed in 1995 before the D'Amato act was adopted by the US Congress but the South Pars gas scheme, for which engineering, procurement and construction (EPC) offers will be invited in July, is a direct challenge to the US law. Total can count on substantial support in resisting US protests or penalties, from the French government and the EU, and is making the most of an opportunity that others have shied away from. 'Our policy is to build a long-term presence in Iran,' Total chairman Thierry Desmarest said in mid-March. 'Our ambition isn't to stop after those two contracts.'

Total believes that Gulf gas assets are grossly underestimated and there is room for major cross-border development in which it hopes to play a pivotal role. 'Lots of things can be done between the emirates and Iran, Qatar and Iran, Oman and Iran,' says De Margerie. The Total strategy is rooted in a conviction that Iran's gas potential is much greater than commonly assumed while the UAE, which has a lot of 'bad' gas, has not got enough for its own long-term needs. Even Saudi Arabia, which relies mostly on associated gas, will face difficulty catering for growing domestic demand. Oman's reserves are modest, at 16-18 trillion cubic feet, and there are constraints in Kuwait, which depends on associated gas and no longer imports gas from Iraq.

The immediate challenge is to seal a deal with Dubai for the delivery of gas from Sirri. The first production platform will be in place this summer - two more are to follow later in the year - with the aim of producing 120,000 barrels a day by mid-1999. Total is relying on Dubai to take the gas although hard bargaining means that a sales agreement has yet to be signed. 'We will do a deal with Dugas to extract liquids and LPG which we will sell, leaving dry gas for the national grid,' says De Margerie. He says there are no plans to reinject the gas into Dubai's Conoco-operated offshore fields, where Total is a shareholder and production is falling sharply, although a pilot scheme is under way to establish whether reinjection makes economic sense. Dubai receives gas from neighbouring Sharjah and is due to get gas from Abu Dhabi, but the import of gas from Iran's Sirri field by the Dubai Supply Authority would be the first from outside the UAE. Delivery would be relatively simple as it would only need a short pipeline to link Sirri to the Fateh infrastructure.

Total's next big project is the $2,000 million South Pars scheme, which is scheduled to go to tender later this year (see Iran). The vast gas concession accounts for about a third of the reserves of the North field, most of which is in Qatari territory. A first phase has been developed by National Iranian Oil Company, and Total will be developing the second and third phases in two blocks. The first delineation well is to be drilled this summer with production due to start in June 2001, 44 months after the contract signature. Total will be the operator until start-up and provide technical assistance thereafter. Gas will be delivered to the Kangan processing plant and consumed in Iran. The payback for Total and its co-investors - Petronas of Malaysia and Gazprom of Russia - will be in condensate, with an allowance for topping up with crude oil should condensate volumes or prices drop below an agreed floor. Contractors are being prequalified for the four major EPC tenders and Total aims to make the awards by the end of 1998. The company says it has no doubt at all about the ability of its partners, with 30 per cent of the project each, to deliver their commitments. Total is funding its investment entirely from equity. De Margerie is equally dismissive of the threat to South Pars from US legislation. 'We refuse to talk to people who are talking about sanctions,' he says.

The bullish tone on Iran is offset by the downbeat prospects for the Yemen LNG scheme, which is struggling to sign up a single customer. 'It's an important project for the success of our global strategy,' says De Margerie. With stakes in Qatargas, Adgas and Oman LNG, Total is acutely aware that both Japan and Korea are saturated with LNG and the launch strategy for Yemen LNG, which brought in Korean investors, will have to be reconsidered. 'We had very good prospects in Korea but then came the Asian crisis,' says Valot. 'It will be delayed until we find buyers ready to sign long-term take or pay agreements.' A memorandum of understanding with Botas of Turkey that expired at the end of last year has not been renewed. 'They still plan an LNG terminal in the Izmir region but it is not clear where they intend to get the gas,' says Valot. Yemen LNG has also been marketed to China, India and Lebanon. Says Valot: 'I am convinced China will eventually emerge as a huge LNG customer.' Total's senior management is equally convinced that Yemen LNG will eventually emerge as the fourth pillar of its high-profile Middle East LNG strategy. The timing is another matter.