[quote='katytrader' pid='66682' dateline='1455411950']
Patrick Pouyanne's comments on Papua which I noted (but could not copy) in post #3 in this thread can be heard in TOT's Feb 11 webcast following the question from the floor at the 1hour 50 minute mark.
Lucas O. Herrmann - Deutsche Bank AG (Broker UK)
Thank you for that. And then just on LNG, a couple of questions. First, whether Laurent might be able to give us some – what the average realized price for your sales was this year. And how much – what proportion of the contracts have collars? So to what extent can I feel secure around pricing in the current year?
Patrick Pouyanné - Chairman & Chief Executive Officer
Yeah. That's a good question, this one. The realized price we gave you from Patrick presentation, 33% on the world gas portfolio. I'm not sure we want to disclose what is the impact on LNG, but it's true, the 33% is less than the 47% on the Brent, there are two effects. One is a lag time in the formula, the second is that on many LNG formulas, you have what we call the – it's a S-curve, so you have what you call a floor somewhere, and which could be hit and sometimes we don't like it on the – we are not liking the S-curve when it was reaching the high prices. We quite like these ones on the low prices today. So it helps to have this gas price being resilient.
Lucas O. Herrmann - Deutsche Bank AG (Broker UK)
But sorry, did I hear a proportion that are – that have built around an S?
Patrick Pouyanné - Chairman & Chief Executive Officer
I think it's more – quite a high proportion, I think. Yeah? No? Laurent?
Laurent Vivier - President-Gas Division
No – but – yes. Most of the LNG deals do have an S-curve. To give an exact point of inflection, it depends on the history of the contract. So it's really a kind of continuum. But the fact that you have those S-curves, the fact you have as well a few constants in the formulas do help in terms of the resilience of the LNG prices.
Patrick Pouyanné - Chairman & Chief Executive Officer
Yeah. You have constants as well which are almost as important as the S-curve.
Lucas O. Herrmann - Deutsche Bank AG (Broker UK)
And then, Patrick, I mean a more conceptual question, the price moves in a cycle, and I don't think that many of us would disagree with you that prices at some point have got to rebound. But structurally, it feels as though we're probably in – maybe this plays to the point on operating cost, we're now into a period where the industry is quite possibly going to face extended period of price deflation, and that the U.S. will help that price deflation along.
So, where does that leave you when you think about investing into things like Papua, whatever duration type projects where the capital upfront is substantial. The breakeven today may be $7, $8 on gas, but in five years' time, the breakeven on that same project will be $5, $6 gas. And the reality – and the danger is that consequently, you find actually, what looks competitive today is taken away from you very quickly tomorrow.
Patrick Pouyanné - Chairman & Chief Executive Officer
But you know, Papua is a good example of a long cycle investment. So, I'm more nervous today on some short plateau on which even if I benefit some low costs, as the price remain low, I will produce most of my reserves during four years, five years at a low price where it's more risky there. But on Papua, Papua's main challenge for me first is to find the customers with good contracts.
But again, if today, I think in 2018 – 2017, 2018 when we'll go to the market to ask for bids to build a new LNG plant, I'm not sure there will be many projects. And the people, the EPC contractors would be very happy to come to us. And so, we'll be in a pricing power position where we could benefit from low costs.
So, if you keep that perspective, I'm confident, but again, we have to be very serious and disciplined on the costs we obtain in order to maintain the low cost base. But Papua is well positioned near the markets. So, transportation costs are minimum. I think it's a good project. We will not rush on it. We have no – I mean we won't rush. We have first to find the customers and second, to stabilize a scheme so we are – but again, I think, in that case, I'm comfortable with investing in long cycle projects.
