Total SA (NYSE: TOT) and Oil Search Ltd. (ASX: OSH) – Papua New Guinea’s biggest oil and gas producer – have entered into a joint venture to prospect for natural gas in the Gulf of Papua.
The news sent Oil Search stock soaring 3.2 percent (the most in over two months) to A$7.78 at the close of day in Sydney on Tuesday. Benchmark index rose by 0.5 percent.
Oil Search is a partner in a $15.7 billion liquefied natural gas venture that’s led by Exxon Mobil (NYSE: XOM), operating in Papua New Guinea. Its objective is to identify and develop a second massive LNG project in that country.
This deal is the first venture by Total into Papua New Guinea. Total is, of course, Europe’s third-largest oil firm.
Under the terms of the deal, the two companies hold equal stakes in five licenses spread over the gulf, and they will jointly explore other license options in the Pacific region. An offshore drilling program should commence operations in the first quarter of 2013.
If drilling ends up in the approval of an LNG project, then Total will develop and operate downstream plants. The overall agreement, however, is still contingent upon several conditions, including approval from Papua New Guinea’s minister for petroleum and energy.