TotalEnergies - 20-F annual report

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WASHINGTON, D.C. 20549

TOTAL FINA ELF S.A.

TOTAL FINA ELF S.A.

Securities registered or to be registered pursuant to Section 12(b) of the Act.

          Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

          Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

          705,934,959 Shares, nominal value€ 10 each, as of December 31, 2001

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x Noo.

     Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item 18 x

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* Omitted because item is not applicable

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Basis of Presentation

     In general, financial information included in this Annual Report is presented according to French GAAP and accordingly reflects the pooling of interest method for the acquisition of Elf Aquitaine beginning with fiscal year 2000 (Article 215 of Rule 99-02). In addition, we have included certain operational and financial data of TotalFinaElf, including Elf Aquitaine, for 1999 on a pro forma basis, in order to enable us and the reader to make more meaningful comparisons of year-to-year data for the combined company.

Additional Information

     This Annual Report on Form 20-F reports information primarily regarding TotalFinaElf’s business and operations and financial information relating to the fiscal year ended December 31, 2001. For more recent updates regarding TotalFinaElf, you may read and copy any reports, statements or other information TotalFinaElf files with the Securities and Exchange Commission. All of TotalFinaElf’s Securities and Exchange Commission filings made after December 31, 2001 are available to the public at the Securities and Exchange Commission web site at http://www.sec.gov and from certain commercial document retrieval services. Our website at http://www.totalfinaelf.com includes information about our businesses and also includes recent press releases and other publications of TotalFinaElf, including some of our filings with the Securities and Exchange Commission made prior to December 31, 2001. See also “Item 10. Additional Information — Documents on Display”.

CERTAIN TERMS

     Unless the context indicates otherwise, the following terms have the meanings shown below:

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ABBREVIATIONS

CONVERSION TABLE

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Cautionary Statement Concerning Forward-Looking Statements

     TotalFinaElf has made certain forward-looking statements in this document and in the documents referred to in, or incorporated by reference into, this Annual Report. Such statements are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the management of TotalFinaElf and on the information currently available to such management. Forward-looking statements include information concerning forecasts, projections, anticipation synergies, and other information concerning possible or assumed future results of TotalFinaElf, and may be preceded by, followed by, or otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions.

     Forward-looking statements are not assurances of results or values. They involve risks, uncertainties and assumptions. TotalFinaElf’s future results and stockholder value may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond TotalFinaElf’s ability to control or predict. Except for its ongoing obligations to disclose material information as required by applicable securities laws, TotalFinaElf does not have any intention or obligation to update forward-looking statements after the distribution of this document, even if new information, future events or other circumstances have made them incorrect or misleading.

     You should understand that various factors, in addition to those discussed elsewhere in this document and in the documents referred to in, or incorporated by reference into, this document, could affect the future results of TotalFinaElf and could cause results to differ materially from those expressed in such forward-looking statements, including:

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     For additional factors, you should read the information set forth under “Item 3. Risk Factors,” “Item 4. Information on the Company — Other Matters,” and “Item 5. Operating and Financial Review and Prospects.”

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ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not applicable

ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable

ITEM 3.     KEY INFORMATION

     The following table presents selected consolidated financial data for TotalFinaElf for the five-year period ended December 31, 2001. The historical financial statements of TotalFinaElf for this period, from which the financial data presented below for such period are derived, have been examined by Barbier Frinault & Autres (Ernst & Young Network), independent public accountants and the Company’s auditors. All such data should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto included elsewhere herein.

     The presentation of financial information for 1999, 2000 and 2001 is made on the following basis: Pursuant to Article 215 of the 99-02 Rule of French Accounting Rule Committee, the Total/ PetroFina and TotalFina/Elf Aquitaine combinations have been treated as a pooling of interests under French generally accepted accounting principles (“French GAAP”). Under generally accepted accounting principles applicable in the United States (“U.S. GAAP”):

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Selected Consolidated Financial Data

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EXCHANGE RATE INFORMATION

     On January 1, 1999, eleven of the fifteen members of the European Union established fixed conversion rates between their existing local currencies and the euro, and adopted the euro as their common legal currency. On that date, the euro became available for currency trading on currency exchanges and non-cash transactions. The existing local currencies were scheduled to remain legal tender from January 1, 1999 through January 1, 2002 (the “transition period”). During the transition period, public and private parties were able to pay for goods and services using either the euro or the local currency. Beginning on January 1, 2002, euro-denominated notes and coins were issued for cash transactions. The Company has taken steps to ensure euro compliance in its accounting and information technology systems.

     For additional information regarding the introduction of the euro and the effects of currency fluctuations on TotalFinaElf’s results, see “Item 5. Operating and Financial Review and Prospects.”

     Most currency amounts in this Annual Report on Form 20-F are expressed in euros (“euros” or “€”) or in United States dollars (“dollars” or “$”). For the convenience of the reader, this Annual Report on Form 20-F presents certain translations into dollars of certain euro amounts. Unless otherwise stated, the translation of euros to dollars has been made at the noon buying rate in New York City for cable transfers in euros as certified for customs purposes by The Federal Reserve Bank of New York (the “Noon Buying Rate”) for December 31, 2001, of $ 0.89 per€ 1.00 (or€ 1.12 per $ 1.00). Furthermore, unless otherwise stated, the translation of French francs (“francs” or “FRF”) into euros has been made at the rate of FRF 6.55957 to€ 1.00 (or€ 0.1525 to 1 FRF), as such exchange rate was permanently fixed on December 31, 1998.

     The following tables set out the average dollar/franc exchange rate for 1997 and 1998, based on the Noon Buying Rate expressed in francs per $ 1.00 and the average euro/dollar exchange rate for 1999 through 2001, based on the Noon Buying Rate expressed in dollars per€ 1.00. Such rates are not used by TotalFinaElf in preparation of its Consolidated Financial Statements included elsewhere herein. No representation is made that the franc or euro could have been converted into dollars at the rates shown or at any other rates for such periods or at such dates.

Dollar/Franc Exchange Rates

Euro/Dollar Exchange Rates

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    The table below shows the high and low euro/dollar exchange rates for the previous six months based on the Noon Buying Rate expressed in dollar per€ 1.00.

Euro/Dollar Exchange Rates

     The Noon Buying Rate on May 31, 2002 for the dollar against the euro was $0.93 per€ 1.00.

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RISK FACTORS

LEGAL AND INDUSTRIAL RISKS

Regulation of Exploration and Production Activities

     TotalFinaElf’s exploration and production activities are conducted in many different countries and are therefore subject to an extremely broad range of legislation and regulations. These cover virtually all aspects of exploration and production activities, including matters such as land tenure, production rates, royalties, pricing, environmental protection, export, taxes and foreign exchange. The terms and conditions of the leases, licenses and contracts under which these oil and gas interests are held vary from country to country. These leases, licenses and contracts are generally granted by or entered into with a government entity or state company and are sometimes entered into with private property owners. These arrangements usually take the form of licenses or production sharing agreements.

     Licenses (or concessions) give the holder the right to explore for and exploit a commercial discovery. Under a license, the holder bears the risk of exploration, development and production activities and provides the financing for these operations. In principle, the license holder is entitled to all production minus any royalties that are payable in kind. A license holder is generally required to pay production taxes or royalties, which may be in cash or in kind. In addition, in certain cases the government entity or state company may acquire a participation in the concession. In a few cases, the government entity or state company has an option to purchase a certain share of production.

     Production sharing agreements entered into with a government entity or state company generally obligate TotalFinaElf to provide all the financing and bear the risk of exploration and production activities in exchange for a share of the production remaining after royalties, if any. Usually, a fixed or variable percentage of this production is reserved for the recovery of TotalFinaElf’s cost (cost oil) and the remainder (profit oil) is shared with the government entity or state company on a fixed or volume-dependent basis. The right of TotalFinaElf to recover cost oil is limited in certain cases by a requirement that the cost oil not exceed a maximum percentage of production. This right is also limited in certain cases by a requirement that TotalFinaElf’s costs be amortized over a specified period of time.

     In addition, TotalFinaElf’s profit margin may also be limited in the event of an increase in oil price due to additional payment obligations. In some cases, the government entity or state company will participate in the rights and obligations of TotalFinaElf and will share in the costs of development and production. Such participation can be across the venture or be on a per field basis.

     In certain countries, separate licenses are required for exploration and production activities and, in certain cases, production licenses are limited to a portion of the area covered by the exploration license. Both exploration and production licenses are generally for a specified period of time (except for production licenses in the United States which remain in effect until production ceases). The term of TotalFinaElf’s licenses and the extent to which these licenses may be renewed vary by area.

     TotalFinaElf is required in certain countries to relinquish a portion of the acreage covered by a license as a condition to obtaining a renewal of the license. TotalFinaElf may also be required in certain countries to relinquish acreage (or to surrender a license) under other circumstances. These circumstances, which vary by area, may include the failure to obtain a production license within a specified period of time or the failure to have a field development plan approved within a specified period of time. TotalFinaElf believes that these requirements have not materially affected its operations.

     In general, TotalFinaElf is required to pay income tax on income generated from production activities (whether under a license or production sharing agreement). In addition, depending on the area, TotalFinaElf’s production activities may be subject to a range of other taxes, levies and assessments, including special petroleum taxes and revenue taxes. The taxes imposed upon oil and gas production profits and activities may be substantially higher than those imposed on other businesses.

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Risks Related to Political and Economic Factors

     The oil industry is subject to regulation and intervention by governments throughout the world in such matters as:

     The oil industry is also subject to the payment of royalties and taxation, which tend to be high compared with those imposed in respect of other commercial activities. In particular, substantial portions of TotalFinaElf’s oil reserves are located in countries outside the European Union and North America, certain of which may individually be considered politically and economically unstable. These reserves and the related operations are subject to certain risks, including:

     TotalFinaElf, like other major international oil companies, attempts to conduct its business and financial affairs so as to protect against such political and economic risks. However, because the requirements imposed by such laws and regulations are frequently changed and actions by insurgent or terrorist groups cannot be anticipated, there can be no assurances that such events will not adversely affect TotalFinaElf.

     In August 1996, the United States adopted the Iran and Libya Sanctions Act (the “Sanctions Act”). The Sanctions Act requires the President of the United States to impose two or more of certain enumerated sanctions on any person or company, regardless of nationality, that makes investments in Iran of $20 million or more, or in Libya of $40 million or more, that directly contribute to the enhancement of Iran’s or Libya’s ability to develop their respective petroleum resources. TotalFinaElf has engaged in certain activities in Iran and Libya. In May 1998, the U.S. Department of State issued its determination that the investment made by TotalFinaElf, Gazprom and Petronas in Iran’s South Pars gas and condensate field constituted activity covered by the Sanctions Act, and, at the same time, communicated its decision to waive sanctions under section 9(c) of the Sanctions Act with respect to such investment. The waiver only applies to certain of TotalFinaElf’s activities in the South Pars field, and does not address TotalFinaElf’s other activities in Iran and Libya. The Sanctions Act was renewed for an additional 5 year period in August 2001. TotalFinaElf cannot predict future interpretations, or the implementation policy, of the U.S. Government regarding TotalFinaElf’s other investments that are covered by the Sanctions Act.

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     Relative to the Group’s 2001 results, the financial impact stemming from the recent devaluation of the Argentine peso is not material and has not resulted in a financial charge. However, the evolution of the situation in Argentina could have a material effect on the Group’s business in that country, which is limited as compared to the scale of the Group.

Risks Related to Oil and Gas Exploration and Production

     Oil and gas exploration and production require high levels of investment and have particular economic risks and opportunities. These activities are subject to risks relating to the physical characteristics of an oil and gas field. These operating hazards may include crude oil and natural gas blowouts, explosions, encountering formations with abnormal pressures, cratering and crude oil spills and fires, any of which could result in damage to or destruction of crude oil and natural gas wells, destruction of production facilities, damage to life or property, suspension of operations, environmental damages and possible liability to TotalFinaElf. In accordance with customary industry practices, TotalFinaElf maintains insurance against some, but not all, of such risks and some, but not all, of such losses.

     These activities also involve uncertainties relating to estimating quantities of proven and potential reserves and the capabilities of production facilities as well as uncertainties about the ability to control unit costs in exploration, production, refining and marketing. A high degree of risk of loss of invested capital exists in almost all exploration and development activities that TotalFinaElf undertakes. No assurance can be given that crude oil or natural gas will be discovered to replace reserves currently being developed, produced and sold, or that if crude oil or natural gas reserves are found, they will be of a sufficient quantity to enable TotalFinaElf to recover the substantial sums of money incurred in their acquisition, discovery and development.

     Developing oil fields, construction and drilling activities are subject to numerous risks, including the risk that no commercially productive crude oil or natural gas reservoirs will be encountered. The cost of drilling, completing and operating wells is often uncertain. TotalFinaElf’s operations may be curtailed, delayed or cancelled as a result of numerous factors including title problems, weather conditions, compliance with governmental requirements and shortages or delays in the delivery of equipment.

Risks Related to Downstream and Chemicals Operations

     TotalFinaElf’s downstream and chemicals businesses are subject to significant governmental regulation, particularly in the areas of antitrust and competition regulation, environmental protection and industrial safety. Operational risks can vary widely in nature, insofar as they arise in diverse sectors of activity, such as refining and petrochemicals, intermediate chemicals, and performance and specialty chemicals. Among these operational risks are the risks of explosions or fires involving hydrocarbons or petroleum or chemical products. Likewise, the nature of operational risks arising from transportation depends not only on potential hazards from the type of product transported but also on the means of transportation employed (such as pipelines, shipping whether by sea or river, rail or road), and the quantities of product involved.

     TotalFinaElf seeks to minimize the risks inherent in these activities by putting in place a dedicated internal organization, systems of quality management, and safety and environmental management systems, and by conducting rigorous audits and maintaining a pro-active investment program. In addition, taking into account the wide variety of products transported, the chemicals branch seeks to ensure that its products are stocked, conditioned, handled and transported under the best safety conditions available, using service providers selected according to criteria established by professional organizations.

     TotalFinaElf maintains insurance against some of such risks and losses, but our insurance will not be adequate to cover all potential hazards inherent in these businesses. In addition, our refining and chemicals activities are subject to wide fluctuations in supply and demand in various markets, resulting in earnings volatility. Some of our products are also subject to commercial risk from product liability claims, such as claims regarding defective products.

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     Although we believe that any reasonably forseeable costs and liabilities associated with the foregoing matters will not have a material adverse effect on our consolidated financial position, results of operation or liquidity, there can be no assurance that such costs and liabilities would not have an adverse effect on our business and operations in the future.

Grande Paroisse

     An explosion occurred at one of Grande Paroisse’s industrial site in Toulouse, France on September 21, 2001. Grande Paroisse, an indirect 79.85% held subsidiary of the Company, is principally engaged in the production and sale of agricultural fertilizers. The explosion, which involved a stockpile of ammonium nitrate pellets, destroyed a portion of the site and caused the deaths of 30 people and injuries to many others. Significant damage was inflicted on a portion of the City of Toulouse. All production activity immediately ceased and the site was placed under a strict security regime.

     Investigations regarding the cause of the explosion are still underway. Pursuant to Article 1384 paragraph 1 of the French civil code, Grande Paroisse is presumed to bear sole liability in the first instance, creating an obligation on Grande Paroisse to bear the entire obligation to indemnify damage to third parties (e.g., physical, material and other) caused by the explosion, unless this presumption is ultimately refuted. At this preliminary stage of the proceedings, the Group estimates that the amount of third party claims could reach approximately 1.8 B€, exceeding by 0.95 B€ the Group’s 0.85 B€civil liability insurance coverage. A pre-tax charge of 941 M€ was registered in the accounts of the Company, with a resulting impact on Net Income for fiscal year 2001 of 597 M€. In April 2002, following several months of study and discussion, the Group decided it would not be practicable to reopen its Toulouse site. An additional pre-tax provision in the amount of 153 M€(after tax amount of 102 M€) was accrued in the consolidated financial statements for the fiscal quarter ended March 31, 2002.

Antitrust Investigations

     During 2000, Atofina Chemicals, Inc., a U.S. affiliate of the Company, became the subject of an investigation by the United States Department of Justice (“DOJ”), following the issuance of three subpoenas issued by a grand jury empanelled by the United States District Court of the Northern District of California, regarding certain practices in the chemical industry, to determine whether such practices were in violation of civil and/or criminal laws. A similar investigation covering practices of Atofina S.A. relating to certain chemical products was commenced in 2000 by the European commission. In early 2002, Atofina S.A. entered into a settlement with the DOJ pursuant to which it agreed to pay a fine of $8.5 M. Moreover, three of the employees of Atofina S.A. are the subject of criminal proceedings. Certain companies within the Group have become the subject of civil proceedings.

     While it is not feasible to predict the outcome of the pending claims, proceedings, and investigations described above in connection with Grande Paroisse and Atofina with certainty, management is of the opinion that their ultimate disposition should not have a material adverse effect on the Company’s financial position, cash flows, or results of operations.

Risks Related to the Environment

     TotalFinaElf is subject to extensive environmental laws and regulations concerning land use, air emissions, discharges to waters and the generation, handling, storage, transportation, treatment and disposal of waste materials. Although environmental laws and regulations have an increasing impact on TotalFinaElf’s operations in almost all of the countries in which it operates, it is impossible to predict accurately the effect of future developments in such laws and regulations on TotalFinaElf’s future earnings and operations. Some risk of environmental costs and liabilities is inherent in particular operations and products of TotalFinaElf, as it is with other companies engaged in similar businesses, and there can be no assurance that material costs and liabilities will not be incurred. However, TotalFinaElf does not currently expect any material adverse effect upon its consolidated financial position as a result of compliance with such laws and regulations.

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Sinking of the Erika Tanker

     In 2001, following the sinking of the Erika petroleum tanker which was transporting products belonging to the Group, the Company continued, and nearly completed, the cleaning of the coastline, acting through the Atlantic Coast Task Force. The treatment of the waste removed during the cleaning process required the construction of an industrial treatment center. The perfection of the treatment process has been delayed due to the need to perform some additional technical studies. It is anticipated that it will take about one year to finish treating the waste.

     TotalFinaElf, as a legal entity, as well as five of its employees, have become the subject of a criminal investigation undertaken by a Paris criminal court (Tribunal de Grande Instance de Paris) of the sinking and the resulting pollution. This investigation is still underway. TotalFinaElf believes that the accusations against it and its employees are without merit both in fact and in law.

Insurance Practices

     The Group maintains insurance coverage relating principally to industrial risks, civil liability and other risks and liabilities pertaining to its businesses in amounts and of a nature management believes are adequate. Primary coverage is either retained, in the form of deductibles or self insurance, or purchased from internationally recognized insurance companies.

Other Risks

Risks Related to Competition

     There is strong competition both within the oil industry and with other industries in supplying the energy needs of industry and consumers. TotalFinaElf encounters strong competition from other major oil companies in acquiring properties and leases for the exploration for, and production of, crude oil and natural gas. Competition is particularly intense with respect to the acquisition of desirable undeveloped crude oil and natural gas properties.

Risks Related to Integration of PetroFina and Elf Aquitaine

     TotalFinaElf has substantially increased its operations through the combinations with PetroFina and Elf Aquitaine in 1999 and 2000, respectively. These transactions have required and will require TotalFinaElf to integrate businesses that have previously been operated separately and that together are substantial in scope and size relative to its historic activities. TotalFinaElf has already realized a large portion of the expected synergies from the integration of these activities and continues to pursue integration successfully. However, there can be no assurance that all of the expected cost savings, synergies and operational improvements will be realized.

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ITEM 4.     INFORMATION ON THE COMPANY

     TotalFinaElf, a French société anonyme, together with its subsidiaries and affiliates, is one of the five largest publicly-traded integrated oil and gas companies in the world with operations in more than 120 countries. The Company was incorporated on March 28, 1924 and has a duration until March 22, 2099, unless earlier dissolved or extended to a later date. TotalFinaElf engages in all aspects of the petroleum industry, including upstream operations (oil and gas exploration, development and production); downstream operations (refining and marketing); and the trading and shipping of crude oil and petroleum products. TotalFinaElf also produces Petrochemicals and plastics, Intermediates and performance polymers and Specialty chemicals for industrial and consumer use. In addition, TotalFinaElf has interests in coal mining and in cogeneration and electricity sectors. Until June 1999, the Company operated under the name Total. From June 1999 to March 2000, the Company operated under the name TotalFina.

     The Company began its upstream operations in the Middle East in 1924. Since that time, the Company has grown and expanded its operations worldwide. Most notably, in early 1999 the Company acquired control of PetroFina S.A. (“PetroFina” or “Fina”) and in early 2000, the Company acquired control of Elf Aquitaine S.A. (“Elf Aquitaine” or “Elf”), following which the Company changed its name to Total Fina Elf S.A. The Company currently owns 99.4% of Elf Aquitaine shares and, since early 2002, 100% of PetroFina shares.

     The Company’s strategy is to grow and to improve the profitability of its upstream segment; to reinforce its position as one of the leaders in the worldwide natural gas and LNG markets; to consolidate its position in the European downstream business, while developing its interests in rapidly growing markets (such as the Mediterranean Basin, Africa and Far East); and to rationalize its chemicals portfolio giving priority to improving profitability, expanding petrochemical operations and growing selectively Intermediates and Specialties.

     The Company’s principal address is 2, place de la Coupole, La Défense 6, 92400 Courbevoie, France; its telephone number is 33.1.47.44.45.46 and its website address is www.totalfinaelf.com.

Basis of Presentation

     In general, financial information included in this Annual Report is presented according to French GAAP and accordingly reflects the pooling of interest method for the acquisition of Elf Aquitaine beginning with fiscal year 2000 (Article 215 of Rule 99-02). In addition, we have included operational and financial data of TotalFinaElf, including Elf Aquitaine, for 1999 on a pro forma basis, in order to enable us and the reader to make more meaningful comparisons of year-to-year data for the combined company.

B.  BUSINESS OVERVIEW

     TotalFinaElf’s worldwide operations are conducted through three business segments:

     The Upstream segment includes exploration, development and production activities, as well as TotalFinaElf’s coal and gas and power operations. The Downstream segment sells substantially all of the crude oil produced by TotalFinaElf, purchases most of the crude oil required to supply TotalFinaElf’s refineries, operates refineries and markets petroleum products worldwide through both retail and non-retail activities, and conducts TotalFinaElf’s bulk trading. The Chemicals segment includes Petrochemicals and plastics, which are linked to TotalFinaElf’s refining activities, Intermediates and performance polymers, as well as Specialties, which include rubber processing, resins, paints, adhesives and electroplating.

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UPSTREAM

Overview of Upstream Activities

     TotalFinaElf’s Upstream segment conducts all of the exploration and production activities. In 2001, this segment conducted exploration and production activities in 45 countries and produced hydrocarbons in 29 countries. (See “Presentation of Activities by Geographic Area” below.) The Company’s dual objectives for the Upstream segment are to sustain continued growth and to increase profitability by concentrating primarily on large-scale, low-cost projects.

     The Upstream segment also includes the Company’s gas and power activities and manages the Company’s interests in LNG and LPG processing plants. A strategic focus of the Upstream segment is to emphasize natural gas along its entire value chain, including development and production in the field, liquefaction, transportation, marketing, and power generation.

     The table below presents selected financial information for TotalFinaElf’s Upstream segment for the last three years.

UPSTREAM SEGMENT FINANCIAL DATA(1)

Exploration and Development

     TotalFinaElf evaluates exploration opportunities based on a variety of geological, technical, political and economic factors (including taxes and concession terms), as well as projected oil and gas prices. Discoveries and extensions of existing discoveries accounted for approximately 57% of the 3,852 Mboe added to the Upstream segment’s net proved reserves during the pro forma three-year period ended December 31, 2001 (before deducting production and acquisitions/ sales of reserves in place during this period).

     Unless otherwise indicated, references to TotalFinaElf’s proved reserves, proved developed reserves, proved undeveloped reserves and production are to TotalFinaElf’s share of such reserves or production (net of any crude oil or natural gas taken by third parties as royalties in kind). Only the amount of TotalFinaElf’s net proved reserves of crude oil that are estimated to be recoverable during the remaining terms of the appropriate concessions or production sharing agreement have been included, without taking into account any possible renewals of such concessions or agreements.

     TotalFinaElf had an active exploration program in 2001. Exploration expenditures in 2001 were 770 million euros. Recent operations have been carried out in Norway, the United Kingdom, Nigeria, Angola, Congo, Gabon, Libya, Canada, the United States, Indonesia, Pakistan, Brazil, Venezuela, Colombia, Argentina, Bolivia, Trinidad, Barbados, Kazakhstan and Azerbaijan.

     Development costs of the Upstream segment for its proved reserves amounted to approximately 4.1 B€, 4.1 B€, and 3.8 B€, during 2001, 2000 and 1999 (pro forma), respectively. Development activities were carried out principally in the United Kingdom, Angola, Venezuela, France, Norway, the Netherlands, Nigeria, Congo, Gabon, Libya, Iran, Syria, Yemen, the United States, Indonesia, Thailand, Argentina, Colombia, Bolivia.

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Reserves

     At December 31, 2001, TotalFinaElf’s combined proved reserves of crude oil and natural gas were 10,978 Mboe (of which 53% were proved developed reserves and 47% proved undeveloped reserves). Crude oil and condensates represented approximately 63% of these reserves and natural gas 37%. These reserves are located principally in Europe (Norway, United Kingdom, the Netherlands, France, and Italy), Africa (Nigeria, Angola, Algeria, Congo, Gabon, Libya, and Cameroon), the Far East (Indonesia, Thailand, Myanmar and Brunei), North America (United States), and other regions of the world including the Middle East (United Arab Emirates, Oman, Iran, Qatar, Syria, and Yemen) and other countries (Venezuela, Argentina, Bolivia, Colombia, and Russia).

     The table below sets forth the amount of TotalFinaElf’s worldwide proved reserves as of the dates indicated (including both developed and undeveloped reserves).

NET PROVED RESERVES(1)

    Proved reserves are estimated using geological and engineering data to determine whether the crude oil or natural gas in known reservoirs is recoverable under existing economic and operating conditions. This process involves making subjective judgments; consequently, measures of reserves are not precise and are subject to revision. TotalFinaElf’s oil and gas reserves are reviewed annually to take into account, among other things, production levels, field reassessments, the addition of new reserves from discoveries and acquisitions, dispositions of reserves and other economic factors. TotalFinaElf’s worldwide net proved reserves include the proved reserves of its consolidated subsidiaries as well as its proportionate share of the proved reserves of equity affiliates and two companies accounted for by the cost method. For further information concerning TotalFinaElf’s net proved reserves at December 31, 2001, 2000, and 1999, see “Supplemental Oil and Gas Information (Unaudited)” included elsewhere herein.

     For information regarding TotalFinaElf’s estimate of the Upstream segment’s net proved developed and undeveloped liquids and natural gas reserves, set forth by geographic area, at December 31, 2001, 2000, and 1999, see the tables set forth in “Supplemental Oil and Gas Information (Unaudited)” included elsewhere herein.

Production

     The Upstream segment’s average daily production of liquids and natural gas grew by 3.4% to 2,197 kboe/d in 2001 compared to 2,124 kboe/d in 2000. Liquids accounted for approximately 66% and natural gas accounted for approximately 34% of the segment’s combined liquids and natural gas production in 2001 on an oil equivalent basis.

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     The table below sets forth by geographic area the Upstream segment’s average daily production of crude oil and natural gas for each of the last three years. In those countries where TotalFinaElf operates pursuant to a production sharing contract, TotalFinaElf’s production represents the quantities available to TotalFinaElf under those contracts.

PRODUCTION BY GEOGRAPHIC AREA

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     Consistent with industry practice, TotalFinaElf often holds a percentage interest in its acreage, with the balance being held by other joint venture partners (which may include other oil companies, state oil companies or government entities). TotalFinaElf frequently acts as operator on acreage in which it holds an interest. See “Presentation of Activities by Geographic Area” below for descriptions of the principal producing fields of the Upstream segment.

     Substantially all of the crude oil production of the Upstream segment is sold to the Downstream segment, which in turn uses a portion in downstream operations and markets a portion of the production to customers throughout the world. See “Downstream — Trading and Supply”.

Sales of Natural Gas

     The majority of TotalFinaElf’s natural gas production is sold under long-term contracts; however, its North American production and part of its United Kingdom and Argentine production is sold mainly on a spot basis. The long-term contracts under which TotalFinaElf sells its natural gas and LNG production usually provide for a price related to, among other factors, average crude oil and other petroleum product prices. Although the price of LNG tends to fluctuate in line with crude oil prices, there is a delay before changes in crude oil prices are reflected in long-term natural gas prices. Because of the relation of the contract price of natural gas and crude oil prices, contract prices are not generally affected by short-term market fluctuations in the spot price of natural gas.

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PRESENTATION OF ACTIVITIES BY GEOGRAPHIC AREA

     The table below sets forth by geographic area TotalFinaElf’s principal producing fields, the year in which TotalFinaElf’s activities commenced, the type of the production, and whether TotalFinaElf is operator of the field.

UPSTREAM

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PRINCIPAL ACTIVITIES

Europe

     TotalFinaElf’s average daily production in Europe was 759 kboe/d in 2001, representing 34.6% of its 2001 total production.

     United Kingdom.First production from the giant Elgin and Franklin gas and condensate fields (TotalFinaElf-operated 46.2%) started at the end of the first and third quarters of 2001, respectively. Production from this high-pressure, high-temperature development achieved the projected plateau rate of 220 kboe/d in late 2001. In the offshore Alwyn area, the Company announced in 2001 approval for the

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     Norway. At Ekofisk (TotalFinaElf 39.9%), upgrading and modifications were successfully carried out during the August 2001 shutdown and production resumed, reaching 170 kboe/d (Company share) at year-end. The Glitne (TotalFinaElf 21.8%) and Huldra (TotalFinaElf 24.33%) fields started production in August and November 2001, respectively. The Vesterled pipeline system to the UK became operational in October 2001. Approval for the $5.3 billion Snohvit natural gas and LNG project (TotalFinaElf 18.4%), the first development in the Barents Sea, was received in early 2002. An agreement was signed with Norvegian authorities to rearrange and increase TotalFinaElf’s interests in the fields within the Oseberg zone, such that the Group now holds a 10% interest in each permit in the zone and gains an interest in the Oseberg South field.

     Netherlands.TotalFinaElf is the second-largest gas operator in the Netherlands with operated production of 139 kboe/d, representing net production of the subsidiary of 71 kboe/d in 2001. The first phase of the K4BE field (TotalFinaElf 26%) development was completed in 2001 with the start up of 2 wells. The K1A platform was installed in 2001 and began production in early 2002 with targeted 2003 production plateau of 20 kboe/d. The L7G field (TotalFinaElf-operated 56.2%) development was completed and put on stream in the third quarter of 2001 and ended the year producing 6 kboe/d.

     France.TotalFinaElf, from its main gas fields in Southwest France, Lacq-Meillon (TotalFinaElf-operated 100%), as well as from several small gas and oil fields in the same region and in the Paris Basin, produced 43 kboe/d in 2001 compared to 44 kboe/d in 2000. Substantial quantities of sulfur and other products obtained from the gas fields are processed at the Lacq plant.

     Italy. TotalFinaElf sold all of its gas concessions and permits in 2001 but retained its 12% interest in the SGM gas pipe.

     Romania. In 2001, the Group acquired 4000 kilometers of 2D seismic on the offshore Neptune Block in the Black Sea.

Africa

     TotalFinaElf’s average daily production in Africa was 620 kboe/d in 2001 representing 28% of its 2001 total production. TotalFinaElf has major exploration and production activities in North Africa and Western Africa, particularly in the countries bordering on the Gulf of Guinea.

     Algeria. The Company’s average production of nearly 94 kboe/d in 2001 came essentially from the Hamra and Tin Fouye Tabankort fields. In 2001, TotalFinaElf obtained a new exploration permit for Blocks 432, 444 South and 403 North. Through Cepsa, TotalFinaElf has interests in other upstream projects.

     Angola.TotalFinaElf’s average production rose to about 100 kb/d in 2001, coming primarily from Block 0 (TotalFinaElf 10%) and Block 3 (TotalFinaElf-operated 50%). On the deep-water Block 17 (TotalFinaElf-operated 40%), the first phase of the Girassol field development was successfully achieved with production starting up on December 4, 2001 and reaching 90 kb/d by 2001 year end. The target production plateau of 200 kb/d was reached by early 2002. The development of the Dalia field is expected to be approved in 2002. Twelve discoveries have been made so far on this prolific block including the Rosa, Lirio, Tulipa, Orquidea, Cravo, Camelia, Jasmim, Perpetua, Violetta and Anturio fields. The exploration term of Block 17 was extended to December 31, 2002 by the Angolan Ministry of Petroleum. On Block 14 (TotalFinaElf 20%), the Kuito field, producing since December 1999, increased production to 100 kb/d after the start up of Kuito phase 1C in October 2001. The development of the Benguéla-Belize field is expected to be initiated in 2002 with first production slated by 2006. A total of seven discoveries have been made on Block 14, including Tomboco and Lobito in 2000 and Tombua in 2001. TotalFinaElf is also active in the offshore Angola ultra-deep exploration with interests in Block 31 (5%), Block 33 (15%) and an operatorship of Block 32 (30%); all

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     Cameroon.TotalFinaElf E & P Cameroun, a subsidiary of TotalFinaElf, is 20%-owned by the Cameroon national oil company (SNH) and has interests in most of the exploration licenses and operating concessions granted by the Republic of Cameroon.

     Congo. TotalFinaElf produced 110 kb/d in 2001 and owns interests of 15% to 65% in exploration and production licenses located mainly offshore, including the N’kossa oil field (TotalFinaElf-operated 51%) and the Tchibouela East oil field (TotalFinaElf 65%), which are its main producers. TotalFinaElf disposed of its 65% interest in the Emeraude field in 2000 and released two deep offshore permits (MPS and MPN) in 2000 and early 2001. On the Moho Bilondo development, an appraisal well drilled in late 2001 set the stage for evaluation of reserves in 2002.

     Egypt. In 2001, TotalFinaElf disposed of its 50% nonoperating interest on block “B” located in deep water off the Nile Delta.

     Gabon. On certain licenses, a subsidiary of the Company, Elf Gabon, is associated with the Republic of Gabon and/or other international oil companies. Elf Gabon operates some thirty concessions, exploration and production licenses. TotalFinaElf’s major producing fields are the Rabi-Kounga field (TotalFinaElf 47.5%), the Avocette field (TotalFinaElf-operated 57.5%) and the Anguille and Torpille fields (TotalFinaElf-operated 100%). In 2001, production began on the Atora oil field (Elf Gabon-operated 40%) and achieved by year-end a rate close to 20 kboe/d. Elf Gabon shares, which are listed on Euronext Paris, are held by TotalFinaElf (58%), the Republic of Gabon (25%) and the general public (17%). In addition, Elf Gabon acquired in 2001 a 90% interest in an ultra-deep water exploration block, Olonga Marin, of which a 50% interest was subsequently farmed out.

     Libya. Development plans for structure B on Block C137 (TotalFinaElf-operated 37.5%) were approved in 2000 for a 2003 production start-up and peak rate of 35 kboe/d. On Block NC-186 (TotalFinaElf 24% of the consortium’s 25% share of production) the A-1 oil discovery in 2000 was followed in early 2001 by three other oil discoveries (B-1, A-2 and D1). On the El Sharara field, part of the NC-115 concession (TotalFinaElf 30% of the consortium’s 25% share of production) in the Murzuk Basin, the Group’s net production in 2001 averaged 12 kboe/d. In 2001, TotalFinaElf obtained two new permits as operator, one in the Murzuk Basin (NC 191, formerly known as M2) where it recently began a seismic survey, and the other in the Sirte Basin (NC 192, formerly known as S29).

     Morocco.TotalFinaElf obtained in 2001 an authorization for a reconnaissance survey on Dakhla Offshore zone.

     Nigeria. The fields operated by TotalFinaElf in association with the Nigerian National Petroleum Corporation (NNPC 60%, TotalFinaElf 40%) accounted for about 40% of TotalFinaElf’s total Nigerian 2001 production of 174 kboe/d. The rest of its production is operated by Shell under a partnership with the NNPC and Agip, in which TotalFinaElf has a 10% interest. TotalFinaElf owns a 15% interest in NLNG (Nigerian Liquefaction Natural Gas). The first liquefaction train began operation in late 1999 and the second train started up in early 2000, doubling plant capacity to 6 Mt/y. Gross production in 2001 was 5.9 Mt of LNG and 2.4 Mb of condensate compared to 4.7 Mt of LNG and 1.8 Mb of condensate in 2000. A third LNG train with a capacity of 2.9 Mt/y of LNG and 1 Mt/y of LPG is under construction with a projected completion date in late 2002. The final investment decision to construct trains four and five was taken in March 2002. On the OPL 246 deep-water permit (TotalFinaElf 24%), the AKPO-1 discovery was confirmed with two positive appraisal wells. In shallow waters, development of the Amenam-Kpono field was launched in 2000 with a projected 2003 start-up date and an expected production plateau of 125 kboe/d. Amenam-Kpono straddles two blocks, OML 99 and OML 70, and will be unitized; TotalFinaElf’s initial interest as operator is 31.2%. TotalFinaElf is also partner (12.5%) in the SNEPCO Joint Venture on the deep offshore OML 118 permit in which a new major discovery, Bonga South West, has been made in 2001.

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Rest of the World

Middle East

     TotalFinaElf’s production in the Middle East (including its proportionate share of the production of equity affiliates) was 391 kboe/d in 2001, representing 17.8% of its total 2001 production.

     Iran. TotalFinaElf has four buy-back contracts in Iran. On the Sirri A&E fields (TotalFinaElf-operated 60% interest in the foreign consortium) combined oil production from the two fields reached 94 kb/d in 2001 as development operations were completed. The Sirri operations have been transferred to the state-owned National Iranian Oil Company (NIOC). On the offshore South Pars gas and condensate field development (TotalFinaElf-operated 40% interest) production began in March 2002, building toward a target plateau of 2 Bcf/d and up to 80 kb/d of condensate. Development of the Dorood field (TotalFinaElf-operated 55% interest in the foreign consortium) continued in 2001 with the award of the main EPC contract and drilling activities. Development of the Balal oil field (TotalFinaElf-operated 46.75% interest) is in progress.

     Kuwait. Kuwait Oil Company renewed for three and one-half years, to July 2004, the contract with TotalFinaElf to provide technical assistance and support for the upstream operations in the onshore part of the neutral zone.

     Oman. The Oman LNG plant (TotalFinaElf 5.54%) increased production to 5.8 Mt in 2001 largely due to higher deliveries to Korea and Japan as well as increased spot sales. In early 2002, TotalFinaElf was awarded a 100% interest as operator in the 11,500 square kilometer Block 34 in the South of the Sultanate.

     Qatar. TotalFinaElf has a 20% interest in the upstream operations of Qatargas, which produces natural gas and condensate from part of the offshore North field, and a 10% interest in the Qatargas LNG facility. Three LNG trains produced 7.2 Mt/y in 2001 compared to 6.7 Mt/y in 2000. A project has been launched to increase capacity to 9.2 Mt/y by 2006. In December 2001, a sales contract was signed with Qatar Petroleum that calls for 2 Bcf/d of Qatari gas sales by the Dolphin Project (TotalFinaElf 24.5%) over 25 years starting in 2005 from the North field to the United Arab Emirates and Oman through a proposed 380-kilometer pipeline. The first phase of Dolphin is expected to cost $3.5 billion, and a second phase is anticipated that will add a further 1 Bcf/d of gas sales. On the Alkhalij field (TotalFinaElf-operated 55%), a second development phase is being carried out, setting the stage for production from this field to increase from 25 kboe/d to 60 kboe/d.

     Saudi Arabia. In 2001, the Kingdom awarded an international consortium composed of TotalFinaElf (30%), Shell (40%) and Conoco (30%) the contract for “Core Venture 3”, a project providing for the valorization of gas reserves in the Shaybah region. The consortium will be responsible for exploration activities covering two areas of 140,000 and 50,000 square kilometers in Rub’ al Khali, a feasibility study regarding development of the Kidan sour gas field, the installation of treatment and transport facilities for gas extracted from the Shaybah field, and the construction of a petrochemical plant, a power station and a desalination facility located in Jubail. The overall project, with a total investment of around $6 billion, will be carried out with the participation of Saudi Aramco.

     Syria. TotalFinaElf produces oil from the Jafra/Qahar fields (TotalFinaElf 50%). In 2001, oil production from the Deir Ez Zor permit (TotalFinaElf 50%) totaled 50 kb/d. The Deir Ez Zor gas and condensate project (TotalFinaElf 50%), was put on stream in 2001 to gather, process and transport approximately 175 Mcfd of associated gas from Deir Ez Zor permit.

     United Arab Emirates.TotalFinaElf’s activities are located in Abu Dhabi and Dubai with fields located onshore (Asab, Bab, Bu Hasa, Sahil and Shah) and offshore (Umm Shaif, Zakum, Abu Al Bukhoosh, and Fateh). In addition, TotalFinaElf has a 15% interest in Abu Dhabi Gas Industries (GASCO), which produces butane, propane and condensate from the associated gas produced from onshore fields. TotalFinaElf also has a 5% interest in Abu Dhabi Gas Liquefaction Company (ADGAS), which produces LNG, LPG and condensate from natural gas coming from offshore fields, either non-associated gas or gas associated with oil production and a 30% interest in Ruwais Fertilizer Industries (FERTIL) which produces ammonia and urea from methane delivered by ADNOC. In 2000, a consortium formed of TotalFinaElf and Tractebel was chosen to lead the $1.5 billion Taweelah A1 power desalination project. See “Electricity and Cogeneration” below.

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     Yemen. The East Shabwa permit (TotalFinaElf-operated 28.57%) produced 6 kb/d in 2001 and the Jannah permit (TotalFinaElf 15%) 4 kb/d in 2001. TotalFinaElf is the main shareholder with a 36% stake in the Yemen LNG Company for which the Yemeni government has approved a 5.3 Mt/y LNG export scheme based on the reserves in the Marib region.

Asia (outside Middle East)

     TotalFinaElf’s average daily production in Asia was 219 kboe/d in 2001, representing 10% of its total 2001 production.

     Indonesia.TotalFinaElf’s operations in Indonesia are concentrated on the Mahakam permit (TotalFinaElf-operated 50%), which contains several fields, particularly Peciko and Tunu, the largest gas fields in the East Kalimantan area. TotalFinaElf’s natural gas production is supplied to Pertamina, the national Indonesian oil and gas company, which liquefies most of this gas at Bontang, the largest LNG plant in the world, and then sells this LNG under long-term contracts to customers in Japan, Korea and Taiwan, primarily for use in electricity generation. The total processing capacity of the eight-train Bontang liquefaction plant is 22 Mt/y. Nearly all Bontang’s capacity has been contracted until 2010. TotalFinaElf operated production on the Mahakam permit currently represents around 60% of the gas supplied to Bontang. This contribution is expected to increase to 75% in 2010. Phase 2 of Peciko field development was completed in 2001 (one additional platform). Phase 3 is in progress (one platform and a third treatment train), and Phase 4 was launched in 2001 (two platforms and compression facilities). On the nearby Tunu field, Phase 8 of the development is in progress, and should be started by year-end 2002 (compression facilities on the northern part of the field). In 2001, TotalFinaElf’s production reached a new high of 155 kboe/d. TotalFinaElf was awarded the Donggala deep offshore exploration block in 2001.

     Thailand. Long-term contracts provide for the sale of all of TotalFinaElf’s natural gas production from the Bongkot field (TotalFinaElf 33.33%) to PTT plc, the Thai oil and gas company, which resells the natural gas to several local users. TotalFinaElf’s production on Bongkot field was 38 kboe/d in 2001 compared to 35 kboe/d in 2000.

     Myanmar. The Yadana field, located on Blocks M5 and M6 (TotalFinaElf-operated 31.24%), increased gas deliveries to PTT for the power plants in Thailand to 533 Mcf/d in 2001 (180 Mcf/d in 2000). A “take-or-pay” contract covers deliveries from the Yadana field, and the 1998-2000 committed quantities have been paid for by the customer. TotalFinaElf’s 2001 net production amounted to 16 kboe/d.

     Pakistan.TotalFinaElf operates two 7,500 square kilometer deep-sea exploration blocks in the Sea of Oman (TotalFinaElf-operated 95%). The seismic survey commenced in 2000 was completed early 2001. The geological studies and seismic processing were carried out in 2001. Exploration is to take place in 2002 or 2003.

     Vietnam.TotalFinaElf withdrew from Vietnam in 2001 after disposing of its 70% operating interest in Block 46.

     Brunei. Production from the Maharaja Lela Jamalulalam offshore field (TotalFinaElf-operated 46.0%) was maintained at its plateau contractual level of 106 Mcf/d, and an extension of the contract at the same plateau level beyond 2002 was awarded by the Brunei Petroleum Unit in 2001. TotalFinaElf’s net production was 10 kboe/d in 2001. TotalFinaElf was named operator with a 60% interest in the 5,000 square kilometer deep offshore Block J, subject to negotiating the PSA.

     Malaysia.TotalFinaElf acquired a 42.5% interest in the deep-offshore Block F (subject to the approval of Petronas).

North America

     TotalFinaElf’s average daily production in North America was 49 kboe/d in 2001, representing 2.2% of its total 2001 production.

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     Canada. In 2001, TotalFinaElf continued to participate in a pilot study on upgrading the bituminous Athabasca sands on the Surmount and Keerobert permits to determine the technical and economic feasibility of bitumen production via steam assisted gravity drainage techniques (SAGD). In 2000, the Group obtained non-operating interests in two new offshore exploration licenses located off Cape Breton Island in Nova Scotia.

     United States. In 2001, development of the Matterhorn field in the deep water Gulf of Mexico (TotalFinaElf-operated 100%) was launched with plans to install a tension-leg platform in 850 meters of water that is designed to produce 40 kboe/d by year-end 2003. The Canyon Express subsea natural gas gathering project was launched in 2000 in the deep Gulf of Mexico and is proceeding as scheduled. This project involves the development of the Aconcagua (TotalFinaElf-operated 50%), Camden Hills (TotalFinaElf 16.67%) and the BP-operated 100% King’s Peak gas fields, and the construction of associated gas gathering lines and control systems in more than 2,000 meters of water. Canyon Express (TotalFinaElf 25.8%) is scheduled to begin delivering gas in the second half of 2002. Development of the Virgo field (TotalFinaElf-operated 64%), located in water depth of 345 meters, north of the Mississippi Canyon was completed in 2001. Development of the Maben field (TotalFinaElf 47%) onshore Mississippi is underway using horizontal drilling. After further streamlining the US offshore portfolio, TotalFinaElf owned interests in 135 offshore exploration and 48 offshore production blocks in the Gulf of Mexico at year-end 2001.

South America

     Argentina. The Carina-Aries gas development (offshore Tierra del Fuego) was launched in 2001 (TotalFinaElf-operated 37.5%). Production grew from 56 kboe/d in 2000 to 59 kboe/d in 2001 due to increases at the Cuenca Austral permit (TotalFinaElf-operated 37.5%), the Aguada Pichana field (TotalFinaElf-operated 27.27%) and the San Roque field (TotalFinaElf-operated 24.71%). Upgrade of the export capacity of the Aguada Pichana processing plant from 335 Mcf/d to 406 Mcf/d is underway, with startup scheduled for mid-2002. Additionally, a further upgrade of the Aguada Pichana processing plant was approved in 2001, which is projected to increase the treatment and compression capacity from 406 Mcf/d to 477 Mcf/d and to medium compression for export in April, 2003. TotalFinaElf acquired a 31% interest in the offshore Cuenca Austral Blocks CAA-39, 40 and 46. Exploratory drilling has been carried in the San Roque permit, with the exploratory well ASR XP 106 testing positive in 2001.

     Bolivia. In 2001, TotalFinaElf acquired two new exploration permits: Aquio (TotalFinaElf-operated 100%), located 150 km north of Block XX West, and the Petrobras-operated Rio Hondo (TotalFinaElf 50%), located 750 km northwest of the city of Santa Cruz. This new acreage adds to TotalFinaElf’s four exploration permits in southern Bolivia: Block XX West (TotalFinaElf-operated 41%), Bereti (TotalFinaElf-operated 100%), and two Petrobras-operated permits, San Alberto and San Antonio (TotalFinaElf 15%). With Phase I development for the San Alberto permit, gas production started in early 2001 with a target plateau level of 176 Mcf/d. Production increased to 430 Mcf/d with the January 2002 start-up of the Phase II development, in line with the increase of the gas delivery commitments under the sales contract. On the San Antonio permit, following the 1999 Sabalo X1 gas discovery well and the successful drilling of Sabalo X2 delineation well, a development has been launched in 2001 for production start-up in early 2003 at a targeted plateau level of 340 Mcf/d.

     Brazil. On deep-offshore Block BC-2 (TotalFinaElf-operated 35%) and deep-offshore Block BFZ-2 (TotalFinaElf 15%), 3-D seismic campaigns were conducted in 2000 and drilling programs were conducted in 2001. Further drilling is underway on this Block BC-2. On deep offshore Block BM-C-14 (TotalFinaElf-operated 35%) a seismic campaign is set to start in 2002.

     Colombia. Production from the Cusiana and Cupiagua oil fields (TotalFinaElf 15.2%) averaged 286 kboe/d in 2001. On the Gaitanas permit (TotalFinaElf 70%), exploratory drilling started in 2001 following seismic evaluation in 2000. On the neighboring Guadalupe permit (TotalFinaElf 70%) the acquisition of a 161 km 2D seismic campaign was completed in 2001. TotalFinaElf acquired a 40% interest in the Capachos and San Miguel permits in 2001. Exploratory drilling is ongoing on the Capachos permit. Following the 2001 Bidding Round, TotalFinaElf entered into two Association Contracts for the Tangara and

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     Trinidad and Tobago.In 2001, on Block 2c (TotalFinaElf 30%) located in the shallow offshore waters of Trinidad, the Kairi-1 oil discovery flowed 3 kboe/d and was followed by a second oil discovery, the Canten-1 well that flowed 3.7 kboe/d. In early 2002, a third oil discovery, the Kairi-2 well, flowed 4.4 kboe/d. Also on Block 2c, the Aripo-1 gas discovery was made in 2000 and the Angostura-1 gas discovery was made in 1999. TotalFinaElf was awarded a 10% interest on Block 3a, which is adjacent to Block 2c.

     Venezuela. On the Sincor project (TotalFinaElf 47%) production of 40 kb/d of heavy oil, diluted but untreated, continued throughout 2001. The construction and commissioning of the upgrader was completed on schedule at the end of the year and the first shipment of synthetic crude took place in March 2002. On plateau the Sincor project is expected to produce 200 kb/d of 8 to 8.5 API heavy oil and convert it into 180 kb/d of high quality, low sulfur, 32 API synthetic crude called Zuata Sweet. Production from the Jusepin field (TotalFinaElf-operated 55%) averaged 36 kb/d in 2001 compared to 30 kb/d in 2000, benefiting from a gas and water injection program initiated in 2000 to boost production and recoverable oil reserves. In 2001 TotalFinaElf as a 69.5% partner in a consortium was awarded the Yucal Placer Norte and Yucal Placer Sur blocks, a move that is part of the opening of the Venezuelan gas sector to private investment.

Commonwealth of Independent States (CIS)

     Azerbaijan. In March 2001, TotalFinaElf issued a notice of discovery on the Shah-Deniz permit (TotalFinaElf 10%) and entered into a 30-year development and production period. In 2002, TotalFinaElf ceased exploration on the Lenkoran-Talysh permit (TotalFinaElf-operated 35%) following disappointing drilling results.

     Kazakhstan. In 2001 TotalFinaElf acquired from BP and Statoil additional interests in OKIOC (Offshore Kazakhstan International Oil Company), increasing its share to 16.67% from 14.28% in the Kashagan field after all the partners exercised their preemptive rights. The initial tests of the Kashagan East-1 discovery well in 2000 indicated that the Kashagan field may be the largest oil find of recent decades. Two additional wells were successfully completed in 2001, Kashagan West-1, and Kashagan East-2, both representing progress in determining the future potential of this giant field.

     Russia. In the Timan Pechora basin located in the Autonomous Territory of Nenets in the Arctic region, the Kharyaga field produced 11 kb/d in 2001 (TotalFinaElf-operated 50%). Production is expected to increase to 30 kb/d in 2002 with the launch of Phase 2 development in 2002. TotalFinaElf entered into a cooperation agreement with Yukos to explore and develop the Shatsky zone in the deep waters of Black Sea.

Other Upstream Activities

Crude Oil and Natural Gas Pipelines

     The table below sets forth TotalFinaElf’s ownership interests in crude oil and natural gas pipelines.

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