Ladies and gentlemen, welcome to Total 2007 Second Quarter and First Half Results Conference Call. I now hand over to Mr. Robert Castaigne, Chief Financial Officer. Sir, please go ahead.

Good, thank you. Hello and thank you for calling in. Before we review the results, I would like to start the call today with a few comments on our recent highlights. The past few months have been very exciting to us at Total because of several events that are important both operationally and as milestones in the development of the company. In fact since the start of the second quarter, Dalia reached its plateau of 240,000 barrels per day; Rosa and Dolphin started up successfully; we were able to clarify the new terms and conditions for our Sincor operations in Venezuela; we launched the development of Ofon II in Nigeria, we began construction of our Lindsey refinery in the U.K.; we signed an agreement with Gazprom to study the development of phase one of the giant Shtokman Field which subject to final investment decision would bring us close to 1 billion barrels of oil equivalent of reserves in Russia. And finally, we entered into an agreement with Sonatrach to build a new world-class petrochemical complex. That is a lot of important news and I believe that all of this highlights our abilities in terms of project management skill and competitive positioning for the short and the long-term. These actions, particularly the agreement that we have been able to make with national oil companies also add significantly to an already very strong and diversified portfolio. So now we can go to the second quarter results. The oil market environment was volatile but at very strong levels in the second quarter. Sequential price was $69 per barrel, which is in line with the same quarter last year and about 20% higher than in the first quarter. Our average oil price validation moved in line with spreads. Our average natural gas price however,…

(Operator Instructions) We have a question from Mr. Mark Hume from Credit Suisse. Sir, please go ahead.

Hello Mark.

Hello.

Hello, can you hear me?

Yes, I can hear you Robert.

Okay. Yes good afternoon Mark.

Good afternoon. Two questions please, Robert. First of all, I just wondered if you might be kind enough to give us some indication of what you are seeing in terms of industry inflation on operating costs both the cash and non-cash elements? And secondly, I appreciate that there are a number of moving parts as to production thus far this year in terms of unexpected shut-ins and so on. And I know that you have indicated that you'll provide a more detailed update on the growth trajectory in September in Paris. I just wondered in terms of how you will be communicating that update, will you stick to giving point targets as you have done thus far such as the 5.5% long-term growth, or will you start sort of gating toward more of a range of some of your peers have been doing recently?

Okay, concerning the second question, I will come back after the inflation. Concerning the production, you are right to say that in fact in the second quarter on one side, we were I think lucky with all the new starting ups as the evolution of the new production that started up last year. But is clear that this growth has been affected by OPEC Qatar, by changes in parameter, by the difficulty we had in Congo with Nkossa, and also by a further reduction of our onshore production in Nigeria especially in SPDC. I think that what is important -- you know that in addition to that, we have had just recently new starting ups, clearly this will have a positive impact in the evolution of the production in the second part of the year. And the difficulty is in fact to assess what could be the recovery of our production in Nigeria, what will be the evolution of the OPEC Qatar in the rest of the year. And this is why I think that we are cautious to be more specific but I think that we will get into more detail in September. Concerning the production for the long-term, result that is to say that period 2007, 2010. I think in fact we will have to review our assumption, first assumption whether it will stay to $40 per barrel or to $60 per barrel, probably we will move to 60 as we do not see really how we could come back with $40 per barrel especially for the medium term. Of course we will have the possibility to take into account the change that has happened in Venezuela as well the change that has taken place in Dubai. And probably also our appreciation of the situation in Nigeria, it's…

Sure, sure. And not to labor the point too much on the production growth targets, but as we know I'm sure you'll do a thorough level of due diligence before delivering the new targets. Should we expect to see the same degree of confidence in your new revised targets that you've had in the past?

For the long-term the answer is yes. Is yes because quite frankly if I refer to the situation as it is now, all the bad news are coming from the parties from Qatar, it's not really bad news because of counterparties good oil price. The difficulty in Congo but I think its alive unfortunately and I would say a lot of what I will call long recurrent issues but globally on the long-term, I do not see why we shouldn't speak with figures that we have announced with a few corrections that should have finally a limited impact on the figure of 5% that we have announced for the evolution of the production between 2006 and 2010.

Thank you very much, Robert.

Thank you.

We have a question from Mr. Jason Kenney, ING. Sir please go ahead.

Hi, it's Jason from ING and Robert, congratulations on your return to growth and long may it continue. I have a question on Canadian oil sands. Some of your competitors in Canada heavy oil are accelerating plans and investment in adding integration to those projects and looking to leverage from self-owned to capacity and upgrading. I wondered if you'd progressed your plans in this arena and also if you felt it necessary to split out the heavy oil operations into a separate reporting division which obviously Venezuela is going to be equity affiliated? So we could see that but maybe Canada could be separated out from Upstream, I don't know. Is this something that you have considered?

No, it's not something that we consider to separate Canada in our reporting. Concerning the development of operation, yes, we start having now a bit of view especially with regard to the up graders that we have in mind to build at Edmonton. But we are still studying the process and we start having in mind a sure figure concerning the cost of this project as well as a cost for the development of the upstream part of the project.

If I may, what kind of pressures do think there will be?

Excuse me, what kind of?

What kind of pressures do you think there will be for construction capability or demands on manpower? I mean obviously a lot of people are getting in there trying to buck up capability in Qatar?

I think we'll have some pressure on logistics like everybody but I think the oil industry has been able by the way to move something like 80,000 people to work on their project in Qatar. So I do not see how we shouldn't manage to serve this logistic issues and the human resources issues in Canada. The only point is that maybe it will take a little bit more time. It will be a little bit more costly but I think it is something that we shouldn't manage to solve.

Okay, many thanks, Robert.

We have a question from Mr. Neil McMahon, Sanford Bernstein. Sir please go ahead.

Good afternoon, Neil.

Good afternoon. I have few questions. First of all, could you give us some guidance on where you are with the Sanofi stake? And how should we think about buybacks through the end of this year and next year presuming that the Sanofi stake moves -- you start selling that? And I've got a follow-up question as well?

Okay. So concerning Sanofi, I think that our position has not changed. The non-core asset is that it will divest progressively in opportunity. Up to now we are still with our 13% stake in Sanofi and 20% (inaudible). We are a bit disappointed with the present level of the share price of Sanofi and I think that we have to make up our mind at the time when we think it should be justified to start this disposing part of our stock in Sanofi. And quite frankly, we will not make of course any announcement before doing that. Concerning the level of buyback, I think that without any divestment in Sanofi, we should more or less arrange the second part of the year what we have had in the first part of the year. Everyone knows that we bought back something like 14 million shares without the shares that we bought to cover our plan for the employees. So I think we should be supported. We remain with the type of price that we have now, we should be at that level. That is to say an additional 14 million shares.

I thought we should be still thinking over the next 18 months that you are going to start divesting your Sanofi stake?

I would say possibly but again, it is something that is very sensitive and at least for this only reason it's difficult for me to say more.

Okay, maybe shifting gears just to Iran and maybe if you could tell us the current status of the Pars LNG scheme and your investments in the oil fields there. Have you -- are you still investing at the pace you originally planned to invest there? Maybe just an overall philosophy about how you work currently in Iran?

Concerning Iran, as you know clearly we remain with a very -- we have to choose in Iran. It is a political situation, the situation which clearly is not in our hands. And then the cost of the project. The cost -- the studies concerning the cost of this project were completed in 2006 and clearly we are now with cost which is high and we have to see how we could manage to reduce the cost of this project in order to improve the profitability that we should expect out of this project. So I think we are reviewing our field studies and I think that it would take a little bit of time and we will come back to you when we think we have more valuable information on these specific issues.

Okay, thank you.

Sorry not to be more specific. Thank you.

We have a question from Mr. Alastair Syme from Merrill Lynch. Sir, please go ahead.

Good morning Alastair.

Good afternoon, Robert. Can I just come back to the issue of CapEx because you made the point in your prepared speech about development costs being similar to levels a year ago? But it's not kind of the feedback we get from some levels of the industry in looking at capital inflation in some projects like Usan and some of the LNG projects. Where are you seeing the pressure points on development costs?

Yes, note that I just said that we have a feeling that the situation we have now is not very different from the situation we had at the end of last year, no more. Concerning the CapEx by the way, for 2007, as you may have seen, we are I would say a little light compared to our budget but I think that we should recover more or less, a figure in line with our budget. For the years to come, let's say clearly we do not see decrease of the level of our CapEx for the years to come. I just said that we have the feeling that especially for a grading platform, we should be now more or less at -- we should more or less remain at the high-level that we have registered over this over the last month. That is all I wanted to say, no more.

Can I ask if you are seeing quite significant inflation in costs between the feed stage and the FID of projects?

Excuse me, for which project?

Just in general between when you do your feed study and then you go back to FID at values -- seeing quite significant capital inflation still?

You really, so the feed study, of course, we launched the tenders and it shows that in the last two years, our estimations were lower than the final edits of these tenders. But I have in mind a good example of one development that we have just approved. Initially, we receive tenders that appear to us too high and finally, we renegotiate the contracts, the contract that was proposed to us. We saw modification and we managed finally to reach an agreement with a price maybe 15% lower than as a result of the first tenders. Which means that, if we have had some significant increase, we see we still see some possibilities finally to have better management of the contract in order to stabilize the cost of construction, the high-level of cost of construction that we have reached now. And what is important to note or so is that we have been able to launch all the development that we have with us in our plants, while having satisfactory profitability meeting our investment criteria. We think this is very important. Up to now we never had to postpone any investment because the CapEx were too high to justify a satisfactory profitability.

Just as a follow-up, can I just ask where you are seeing the biggest pressure point on CapEx inflation then?

In the past, it was clearly for drilling platforms. Now, I think it is probably for the subsea equipments.

Thank you very much. It’s very helpful.

Thank you.

We have a question from Mr. Neil Perry from Morgan Stanley. Sir please go ahead.

Robert, it's Neil Perry. I just wanted to ask about two things. One is in Russia, historically you've had a lot of trouble in Russia and not -- you've fallen behind your peers. You seem to have a bit of a run of success there. Can you try and explain what you think it is that has led to this flip around in Russia? And secondly, you started off your comments with a very positive outlook in terms of the activity levels. And then you gave a very bullish outlook for oil prices. I mean is there any discussion internally about adjusting your strategy to invest more rather than return as much to shareholders? Because if you've got lots to do and you think the oil price is going to remain high, surely you should be spending it rather than giving it back?

Concerning Russia, I think it is clear that in the past, as you know, we have had several difficulties. First when we wanted to acquire 25% of Novatek. After that in Vanco (ph). And remember it was a time when clearly as a government of Russia, decided clearly to control the main oil and gas fields in Russia. Now I think it seems that we have been chosen by Russia to participate to the development of Shtokman especially because total is considered or was considered as one of the best companies from a technical point of view to participate to this development. And we have been able to negotiate a contract that should bring us a satisfactory profitability. Suppose that by the way the feed studies are positive, and we are able to consume our participation to this project, and quite frankly we remain optimistic with this regard. And we see, I think that we have now to study the project and in the contract that we have negotiated, clearly Russia will keep the control of the reserves. But I think that there is a possibility to play our role to contribute our technology and to have our share of the profit, which I think, is very important. And we will have of course as a consequence of that the possibility to book the reserves in the production. Concerning the -- as the second question, oil price. It is clear that for the years to come, we are clearly bullish -- I would prefer to say confident. We think that we should remain clearly with an oil price certainly not lower than the levels $50, $60 per barrel for many reasons, especially because we do not see how production capacity could increase by more than 1% per year. And in…

Thank you.

We have a question from Mr. Colin Smith from Dresdner. Please go ahead.

Good afternoon. I have slightly more technical one. I just wonder if you could explain to us how the Sincor compensation is going to be shown in the accounts, in particular whether you are going to carry on showing the volume of oil associated with the piece at that PDVSA now gets equity production or not?

After the move, in fact we will remain with 30% of the mixed company. I think there have been a new name that has been given -- that will be given to this company. And our share in the profits, in this -- our participation in this company will be treated from an accounting point of view as an equity participation. Concerning the indemnities that we will receive, first, it will be both accounting value, so we will register capital gain. This indemnity will be paid in kind that is to say, in oil and the value of the 17% that we will have to transfer to PDVSA will be amortized from an accounting point of view at the same pace, as we will be paid in kind through shipments of crude oil. But -- so there will be again, that should be registered at the time of the closing of the operation. I don't know if it will take place in the third or fourth quarter and that's all.

So to be clear, you expect to book a profit on the disposal? But also just on the volume of oil that you receive in the indemnity, will that continue to show up as part of your production figures?

The answer is yes, yes. The answer is yes so that in 2008 and 2009 finally, it is clear that on one side we will lose part of our production in Sincor as our interest will be reduced from 47% to 30%. But on another part, we will receive some production in order to compensate in order to be indemnified, and this production more or less will compensate for 2008 and 2009. So, production that we will have lost as a consequence of the reduction of our stake from 47% to 30%.

Thanks very much.

We have a question from Mr. Dan Barcelo from Banc of America. Sir please go ahead.

Thank you, good afternoon.

Good afternoon Dan.

A question regarding the downstream in the second quarter. When I look at refined product sales, particularly in the Americas, there's a big drop from 1Q and also from the year ago period. I was under the impression Port Arthur had completed most of its turnarounds at the one quarter stage, so why wouldn't there be more volume? And then also if you could comment on the trading volumes were up very large also in the second quarter. Was this inventory movements?

No, I think that the reduction of the volume that you mentioned is due fundamentally to the trading of -- excuse me, I must admit that I have to count on my colleagues for that. But clearly, there has been an increase of the trading of gasoline in the U.S. of volume now of gasoline in the U.S. this quarter I think compared to what it was in the first quarter. In fact, we were led to increase the trading of gasoline in the U.S. but I think it's just a consequence of the reduction of the European market of gasoline. So I think that more in more we are led to export the parts of the production of our gasoline to the U.S. and now I think I have in mind one refinery which exports in Europe 70% of its production of gasoline to the U.S.

Okay, thank you very much.

We have a question from Mr. Jon Rigby from UBS. Sir, please go ahead.

Good afternoon Jon.

Hi, Robert. Just a couple of questions. The first is on the Downstream and the two projects you mentioned earlier, Jebel and the Port Arthur for Coker (ph) and I just wonder whether if you could share with us now any views on the downstream market? Clearly it’s a while since you fided very early into the cycle the hydrocracker in Normandy and whether what your impressions are of how the market has changed since then and the last very big investment you did? The second is just to come back to Sanofi again. I think your answer your stock answer you repeated quarter after quarter that is that you think the shares are undervalued or you are slightly disappointed, whatever, and you'd look for an opportunity to sell. Well, one could say that there's an opportunity to sell would have been when it was €10 higher a quarter ago. So I wonder whether your revisiting the methodology by which you asset whether you think there is an opportunity to sell or not? I don't want you to comment specifically because I'm aware that whatever you say goes straight onto the screen.

Clearly Sanofi, we were disappointed with the news on regarding volume in the U.S. Clearly this was not expected and we had no reason to expect that especially if we consider that the commercialization of this product in Europe and in Japan is going fairly well. I think this is relatively new and we have to take that into account but we remain positive despite the fact, despite this situation that clearly was not expected and we had no reason to expect that, in fact. So, I think it is true what you say but we also must admit that we clearly we are fundamentally we are not in a hurry to move. And just a question of time to find what could be as the best way to manage from a financial point of view our stake in Sanofi and up to now we have not moved and I will not repeat what I just said before. Now with your first question was, yes, the downstream environment. I think what is important to have in mind for the two projects that you mentioned, the Coker at Port Arthur and the Jebel refinery. In both cases this investment of economics that in fact are economics of conversion, that is to say linked to the different sort of price between heavy oil and light oil. And this differential is itself linked to the general level of your price. And this is why fundamentally we remain optimistic for the environment for these two projects in the medium to long term. If I look now at the situation of the refining margin in Europe, I see that it was very volatile especially in July, by the way, when I think there original level was some single I speak for TRCV $13 per tonne. In fact, in TRCV you have the CNV which is in fact a part of the margin which is due to conversion operations and this part finally is not so much volatile, but what is very volatile is the topping and reforming part. But for the two projects that you mentioned, in fact for them mostly it’s conversion project with equity mix linked clearly on the general level of the oil price.

Okay, thank you very much.

Your next question is from Jean-Luc Romain (ph) from CM-CIC Securities. Sir please go ahead.

Good afternoon, Jean

Good afternoon. I would like to know if you could give us a figure of almost why your exploration expenses in the quarter as you announced it had increased? And also there was in the note here an exploration in the decline of production compared to last year's second quarter. Is that only more maintenance or there are things going on there?

Okay. Concerning the exploration expenses for the second quarter, I think it was about $400 million. This figure is slightly higher more especially because there has been some adjustments but I wouldn't want to, in fact the precise figure is more $550 million. And I think that we had to make some adjustments because we had to take into account the news that we are bought by some additional wells. I have in mind one particular case. But I think there is nothing very specific, there is no conclusion to draw out of this figure which I remind you is $450 million and not $560 million. So this was for your question, concerning the acceleration of North Sea decline. Globally speaking the difficulty in fact is always to make the distinction between the new productions and the former one. It is not very easy but what I can say is that if we exclude totally the new production in North Sea, I would say that on a average over the period 2007, 2010, the net decline should be in the range of 8% to 9% which is not something new. I think previously I had the opportunity to mention something like around 8%. It is clear that this may be slightly higher figure is also partly due to some difficulties that we have had from a political point of view. But if I take into account the contribution of the new developments such as Jebel, I think the picture is a bit different and instead of 8% to 9%, we should have for the period 2007, 2009 by memory something like minus 3.5%.

Thank you very much.

Thank you.

We have a question from Mr. Irene Himona from Exane BNP Paribas. Please go ahead.

Good afternoon, Robert.

Good afternoon.

I have a question on E&P affiliates. You mentioned in your opening statement that the contribution is going up.

Yes.

Indeed we see that Q2 net income is up about 60% year-on-year. I also note that for the first time you started disclosing this quarter the production from equity affiliates. That has varied in the past. It's actually been pretty steady, 13% to 14%. So, I wonder if you can give us some guidance as to how the affiliates' production as a percentage of the group out of oil increase over the next few years?

First, concerning the evolution of the reserves of equity affiliates, in fact, equity affiliates in orders, and there are two things. First, very significant increase of the reserves of our equity affiliates especially due to our share in Nigeria LNG. We also have share in some of the LNG companies in the Middle East but the bulk is clearly in Nigeria. In addition to that, I think that in the orders we had last year a negative impact that has disappeared in the second quarter 2007. I think there is nothing less to say. I think the figure that you have now for the second quarter is clearly maybe more representative of the situation that it is now. Your second question was about our intent to segregate in the coming years the production coming from equity affiliates. I think it’s something that you should be able to find globally speaking it’s true, page 13 of our Communiqué French version. Well it's true that we don't give the detail of the production for equity affiliates by geographical area but the figures that you having find in the coming years it should be some other things they should increase clearly. And now it is something, which is relatively small. In the future there will be also in addition to that the contribution of Sincor, of Yemen and of Qatar Gas 2, so clearly the share of the contribution of the equity affiliates in the production should increase very significantly in the future.

Thank you, Robert.

We have a question from Mr. Mark Gilman from Benchmark. Sir, please go ahead.

Good afternoon, Robert.

Good afternoon, Mark.

A couple of specific things if I could? Regarding the equity affiliates earnings and the LNG component in particular, were there sales out of inventory that helped make that figure as large as it was?

No, no, no.

No? If not…

The answer is no.

Okay. Secondly, at current price levels, can you give us a rough idea when your entitlement in Dalia will drop down either as a result of reduced profit splits or capital cost recovery?

I think we should remain with the production that we have clearly for a certain period of time and it will not decrease before a few years, three to four years something like that significantly.

Okay, and that is at current prices, Robert?

Yes, this is at current prices.

Okay. Thirdly, you talked about a significant new discovery at Moho Bilondo. I'm wondering is that a new structure entirely or were you commenting on an appraisal well?

Yes, I think it is a new structure, yes. The answer is yes.

My final one relates to the Gulf of Thailand where I believe you recently successfully negotiated the extension of your concession. Will you be booking significant additional reserves at year-end associated with this and do you expect production increases in the Gulf of Thailand from Bonkai (ph)?

On the ground the answer is yes. But will it take place by the end of this year? Quite frankly it seems yes it will be if we have the possibility to develop that, the answer is yes. But quite frankly may I suggest that I think the answer is yes. But may I suggest that you come back to the higher division to have a confirmation because I think this is also linked to the decision of development and I don't know it hasn't been taken place. But probably there is a good chance that it is taken before the end of the year.

Okay, thank you, Robert.

Thank you.

We have a question from Mrs. Lydia Rainforth from Lehman Brothers. Please go ahead.

Hi, Robert. Good afternoon.

Good afternoon, Lydia.

Just a couple of things. Are you concerned by the reports that the current government wants to renegotiate some of the terms of the Kashagan contract? And the secondly, on Nkossa I think you mentioned that that would reach about 45,000 barrels a day in the fourth quarter. I was just wondering when you expected that to be back at the 60,000 barrel a day capacity?

I would say in 2008 surely. And we will see if we can be more specific. I speak for the 60,000 barrels per day. Let's just hope that we have the ability to be more specific at the beginning of September. Concerning our Kashagan project, what you have to know is that the new plant has been submitted by the operator to the Kazakh authorities recently I think in June with a new time schedule for the production, higher CapEx. And the idea is that there should be a meeting between the Kazakh authorities and the participants that should take place let's say in probably in the third quarter. What I would like to add is that this is clearly a difficult development and we clearly also need to have a good framework in order to be able to proceed in satisfactory conditions. I think I cannot say more now and we have to wait a little to be more specific with this project.

Okay that’s great. Thank you.

We have no further questions.

Okay. So I would like to thank you very much for being with us today at the beginning of August where many people, especially in France are on holiday. So thank you for being with us today. Goodbye.

Ladies and gentlemen, thank you all for attending. You may now disconnect.