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Total Joins Tullow, Shell In Oil Block

By REUTERS
Published: December 8, 2009

Filed at 3:47 a.m. ET

LONDON (Reuters) – French oil major Total SA <TOTF.PA> will buy a stake in an oil block in French Guiana from Tullow Oil <TLW.L>, joining the London-listed explorer and Royal Dutch Shell Plc <RDSa.L> in what they hope will be a rich new oil province. Total and Tullow said in statements on Tuesday that France’s largest listed company by market value had agreed to buy a 25 percent stake in the block offshore the French territory, in which Tullow planned to retain 39.5 percent.

The companies gave no financial details but analysts said it was normal in such situations for the “farm in” partner to agree to cover the explorer’s share of seismic survey and early drilling costs.

“We expect a similar arrangement in this case and estimate the value of the farm in (3D seismic plus drilling of one well) in the $100-120 million (61-73 million pound) range,” analysts at Merrill Lynch said in a research note circulated by Tullow.

The partners are betting that big oil finds Tullow made offshore Ghana, including its Jubilee field, will be repeated off the South American coast, given geological similarities between the areas.

Africa and South America separated tens of millions of years ago and their shared history has long excited oil geologists.

Last month, Shell agreed to buy a 33 percent stake in the block from Tullow, which will remain the project operator.

London-listed Northern Petroleum <NOP.L> has a 1.25 percent interest.

Tullow shares traded up 0.4 percent at 1,270 pence against a 0.1 percent rise in the DJ Stoxx European oil and gas sector index <.SXEP>. Total was flat at 43.12 euros.

(editing by John Stonestreet)

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