French oil major Total SA (TOT) expects to continue growing despite a fragile economic environment, and it will continue to adapt its downstream refining and distribution operations, as well as its chemicals businesses to reflect market developments, the company's chief executive says in a newsletter to shareholders released Friday.

"In an environment that is still fragile in the short term despite the fact that we are emerging from the crisis, I am confident in the Group's ability to continue to generate growth thanks to the quality and diversity of our portfolio of projects," Total CEO Christophe de Margerie said in the fall edition of the company's investor newsletter. "In the long term, faced with a changing economic, geopolitical and technological environment, our watchwords are twofold--to adapt and anticipate."

De Margerie said BP PLC's (BP) oil spill catastrophe in the U.S. Gulf of Mexico has led Total to undertake a full review of its drilling procedures. He said the company's exposure to the Gulf is limited at 1% of the company's production and that Total no longer is an operator in Gulf fields.

"We still have three assets: Tahiti operated by Chevron (CVX), Chinook, a field in development operated by Petrobras (PZE), and since April 2009, we share mining rights with Cobalt (CIE) for about 200 operating permits in which we hold a 40% stake," the Total chief said, adding: "The moratorium affects this exploration campaign which is presently stalled, as well as the Tahiti project where the drilling of two wells could be delayed."

With the capping of the runaway BP well off the coast of Louisiana , the administration of President Barak Obama has recently lifted the restrictions on new offshore drilling in the U.S. ; but oil companies fear that heightened government oversight will slow and complicate the approval process for new drilling.

Elsewhere in its investor newsletter, Total said the company is rethinking its marketing strategy in France and has been experimenting by offering low-priced fuels at 36 of its Total service stations around the country. "The increased market share of low-price players--like the hypermarkets and supermarkets--and the altered purchasing behavior of individuals, who are consuming less and for whom the top criteria is increasingly becoming about choice, is prompting Total to try out a new marketing positioning while maintaining the quality of the service and products," the company said.

"With an 18% market share, Total is France 's leading fuel distribution network. But faced with an environment undergoing profound change, the strategy adopted by the France Network, part of the Group's Refining & Marketing division, must adapt," Total added. It said it expects to have closed over 150 service stations in France by the end of 2010 and around 50 more in early 2011. But Total said it is "doing everything possible to preserve the density of its network, and is strengthening its positions by investing in new stations.

In exploration and production, "resources are still difficult to access, and new players are appearing," de Margerie said, adding: "In order to ensure the replacement of our reserves, we must not only be more daring in exploration, but we must also enter into more innovative partnerships." He said that the company will intensify its diversification strategy through research in the new energies.

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