Home | News    Tuesday 13 February 2007

Total may offer South Sudan stake in disputed oil block

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Feb 12, 2007 (PARIS) — French oil major Total SA (TOT) could consider giving the Southern Sudan government a stake in an exploration permit the company is claiming there, in order to oust small U.K. company White Nile Ltd. (WNL.LN) and start exploring a promising area, a Total executive told Dow Jones Newswires.

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Jean-Francois Lassalle

"We could consider ways to get the Southern Sudan government financially interested in the project," said Jean-Francois Lassalle, public relations director for Total’s exploration and production unit.

Total is in dispute with White Nile, a small company run by a former England cricketer Phil Edmonds, over the right to drill in a politically troubled but promising region of Southern Sudan, covering about 118,000 square kilometers.

Total was awarded the block by the central government in Khartoum in 1980 and performed seismic work until the country’s civil war broke out in 1985. Total’s partners in the block are U.S. oil company Marathon Oil Corp. (MRO) and the foreign arm of Kuwait Petroleum Corp.

Total decided to suspend its work during the war, but paid a retainer fee to the Khartoum government to keep its rights to the block.

When the war ended in 2002, Total aimed to restart exploration there, and entered into talks with Khartoum to amend parts of the existing contract.

But in 2005, White Nile signed a deal with the Sudanese People’s Liberation Movement, a former southern rebel group that now shares powerwith the Khartoum government.White Nile was granted a 60% stake in the block, the remaining 40% being held by Nile Petroleum Corp., the southern government’s own national oil company.

A spokeswoman for White Nile said that the company "has been assured by the Southern Sudan government" that it has the right to explore the disputed block and said the company is "confident it will be able to resist any sort of claims."

White Nile is planning to start exploratory drilling in the block in the first quarter of this year, she said, adding that "a rig is on its way."

Total has brought the case before the U.K. courts, arguing that its 1980 contract is still valid under the peace agreement signed by the Khartoum government and the southern leadership in 2005. White Nile declined to comment further.

The troubled zone, where there are still a few skirmishes, offers great potential, even though the geology, mostly swamps, means challenges from a technology perspective, said Lassalle, who formerly headed Total’s Sudanese operations.

Discoveries by Malaysian oil company Petronas (5681.KU) and Chinese company China National Petroleum Corp., which are also exploring in the region, helped to propel Sudan’s hydrocarbon output to 500,000 barrels a day last year.

The country’s total output is expected to soar to 650,000 barrels of oil equivalent a day in 2007, and 800,000 boe/d in 2008, Lassalle said.

Last week, the Court of Appeal in London granted Total the right to get White Nile to unveil documents, in a pre-action disclosure proceeding ahead of a potential legal suit against White Nile, Lassalle said.

Total has asked to see documents answering questions such as when the directors of White Nile first made contact with the Southern Sudaneseleadership, with whom the directors had contact, what was the nature and the scope of discussions and proposal, and whether the directors had prior knowledge of Total’s rights to the field.

A spokeswoman for White Nile wouldn’t comment on whether the company would appeal the decision before the House of Lords.

Spokesmen for the South Sudanese government weren’t available for comment Monday.

(Dow Jones)

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