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Total, CNPC in Talks on Iran, Venezuela Deals; China Gas

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Orinoco Belt Regions
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South Pars Field, Offshore Iran
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BEIJING (Dow Jones), Dec. 21, 2009

France's Total SA is planning a joint bid with China National Petroleum Corp. for a Venezuela oil block, is talking to CNPC about joining an Iranian gas project, and hopes to agree within weeks on terms on jointly developing part of China's biggest gas field, the company's chief executive said Monday.

The three projects, two of them in politically sensitive areas, are among a raft of ventures the French company is working with CNPC on, and which it will be discussed in Beijing this week.

The executive is among a team of executives accompanying Prime Minister Francois Fillon on a trip to China.

Total had advanced technology and deep experience internationally and "there is a real opportunity for Chinese companies and Total to work together...in countries where we have experience, like in Africa, in Latin America, definitely we are better together than separately," Chief Executive Christophe de Margerie told Dow Jones.

Earlier this month, Total and CNPC lost out in their joint bid to develop Iraq's super-giant Majnoon oil field, but the two, in partnership with Malaysia's Petronas, won the rights to the smaller Halfaya oil field.

Total and CNPC, China's largest oil producer by capacity, will make a joint bid to develop a heavy oil block in Venezuela, in that country's Carabobo oil licensing round, he confirmed.

"We are with CNPC on Carabobo...we have decided to bid with CNPC," de Margerie said, referring to the expected auction early in 2010 of several heavy oil blocks in the eastern Orinoco region.

Each block could cost between $10 billion and $20 billion, and could include construction of an upgrader to turn the tar-like crude into lighter oil.

He said Total is talking to CNPC about possibly joining it in developing part of Iran's giant South Pars gas field and exporting liquefied natural gas from it.

Any deal would require Iranian government approval, and "Iran, for the time being, has stopped discussing about LNG...frankly, to say we are active (in talks with Iran) would be a little bit too much."

In June, Iran and CNPC signed a contract for the upstream development of phase 11 of South Pars, replacing Total, which had long been in negotiations with Tehran about its role in an integrated development of the huge gas field.

"We have been always favoring the full integrated project (in South Pars). Upstream, downstream, production, liquefaction, export. And we've always been very strict in saying...we consider that an integrated chain is bringing more value to the country and to the partners," de Margerie said. "CNPC and Iran separated the two, upstream from LNG, and we've said that was not our cup of tea."

He also said he was confident Total and CNPC would by end-January 2010 agree terms on a multibillion dollar project to develop part of China's biggest gas field.

Once CNPC and Total finalize the plan for the technically difficult South Sulige gas field in northern China's Ordos Basin, the project would go to the government's economic planning agency for its approval.

"Jan. 31 is the deadline for CNPC and Total to agree (on) the terms for the project and for submitting it to the National Development and Reform Commission," he said.

Asked whether the project would get the green light, he replied: "Yes...I'm always confident. I don't think it (NDRC approval) will be the most difficult part. The NDRC has been supporting it from day one."

Total has been doing advance work for several years on the 2,390 sq. km block, after having signed an initial agreement in March 2006.

Total's investment in the South Sulige project "will be multibillions of dollars...it is several billion, but for the initial investment, this is far less, but still more than $1 billion," he said.

In May, 2009, CNPC said once the South Sulige project is formally launched, Total could drill around 2,000 wells over the life of the field, projected at 20-25 years.

CNPC said peak production from is forecast at near 3 billion cubic meters annually.

The Sulige reserve is characterized as a "tight" gas area, as the impermeability of the rock layers in the area means many more wells are needed to extract the gas than is the case usually.

Total's chief representative in China, Jacques de Boisseson, said Monday he didn't expect production from South Sulige before 2013.

Beijing wants natural gas to account for 10% of the nation's energy mix by 2020, up from 3% in 2005.

It is doing this by building a network of liquefied natural gas import terminals, by importing gas by pipeline from central Asia -- and in due course from Myanmar -- and by developing domestic reserves, partnering with foreign companies in technically difficult projects.

In November, CNPC and Chevron Corp. got approval from the NDRC for the first phase of a $4.7 billion, 30-year pact to develop a gas field in central China's Sichuan province.

Copyright (c) 2009 Dow Jones & Company, Inc.

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