UPDATE 3-Total reports Gabon offshore gas discovery

Mon Aug 19, 2013 2:00pm EDT

Related Topics

* Gas struck in Gabon's pre-salt layer

* Discovery set to galvanise interest in region

By Emma Farge

GENEVA, Aug 19 (Reuters) - French oil major Total said it had discovered gas condensate in deep waters off the coast of Gabon, raising hopes for other explorers in the region.

The discovery, made in a layer of the ocean bed referred to as pre-salt, follows other regional finds in Ghana and Ivory Coast, where Total struck oil earlier this year.

"Situated at more than 100 kilometres from the Gabonese coast, this exploration work revealed an accumulation of gas condensate," Total Gabon said on Monday.

It did not comment on the scale of the find, adding that it was still analysing the data.

Shares fell in Marathon Oil Corp and Cobalt International Energy, which are also partners in the Diaba licence, where the gas was found. Gabon's government owns a 15 percent stake.

"(Marathon) was targeting oil, so the discovery of natural gas and condensate is disappointing," Simmons & Co analyst Travis Frazier said.

Pre-salt exploration in west Africa, which involves expensive drilling thousands of feet below the ocean surface, is at an early stage of development relative to fields in Brazil.

Martin Kelly, lead analyst for sub-Saharan Africa upstream research at Wood Mackenzie, said the find was likely to attract more investment in the region.

"This discovery is good news (for Gabon) as it de-risks the pre-salt play. Companies will be interested in this, especially after Angola's success in deep water," he said.

Angola is also seen as having large pre-salt potential due to its similarities with the geology of Brazil.

Kelly said that gas condensate could take more time to develop than conventional oil.

"There are more commercial challenges to overcome with gas than with oil," he said.

Cobalt's stock was down 14.5 percent and Marathon's down 4.0 percent at 1850 GMT.

"Since the discovery appears to be a combination of condensate (and) natural gas, it is unlikely to be developed on a fast-track basis in our opinion," Wells Fargo analyst Roger read said in a note on Marathon Oil.

Gabon, which produces around 240,000 barrels per day of oil, is planning a licensing round for offshore oil and gas blocks later this year, according to a document sent to the World Trade Organization.

Production in Gabon has been declining and has fallen by around a third from a peak in the late 1990s.

FILED UNDER: