UPDATE 1-Gabon picks seven companies for final oil block talks

Mon Jul 21, 2014 12:54pm EDT

* Exxon, Petronas and Ophir among the firms chosen

* Gabon hopes to reverse chronic oil decline

* Tough negotiations have lasted nine months (Adds details on contract negotiations, context)

By Emma Farge

DAKAR, July 21 (Reuters) - Gabon has selected seven companies for a final round of negotiations as part of an offshore licensing round the government hopes will reverse a chronic decline in output, the country's oil ministry said on Monday.

The new blocks are located in deep offshore waters - an exploration play that is expensive and uncertain but potentially very rewarding given the similarity of geological structures to oil-rich Brazil, where billions of barrels of oil have been discovered.

Former OPEC member Gabon produces about 230,000 barrels per day (bpd), down from a peak of close to 400,000 bpd in the 1990s.

An oil ministry statement said that Impact Oil & Gas, Repsol , Perenco, ExxonMobil, Marathon, Petronas and Ophir were ranked highest for the nine blocks due to be allocated.

"These companies listed are invited to finalise negotiations for the signature of the relevant CEPPs (exploration and production-sharing contracts) as soon as possible," according to a statement signed by Minister for Oil and Hydrocarbons Etienne Dieudonne Ngoubou.

The statement showed that Cobalt, Noble, Royal Dutch Shell and Total were ranked lower down the pecking order for the blocks. The ministry said it had the right to open negotiations with the lower-ranking contenders if talks with the first-choice companies were unsuccessful.

Bids for another eight blocks offered "did not reach the expectations of the Gabonese Republic", the statement added.

A spokesman for Total, one of the largest producers in the former French colony, said it planned to enter talks with the government for one of these blocks, named F15.

TOUGH NEGOTIATIONS

The deals end nearly nine months of arduous negotiations involving multiple contract revisions, with some prospective investors complaining privately of tough terms.

"It is a very aggressive production-sharing contract. Some of the terms were trending towards a lack of certainty over assets," said a source involved in the negotiations.

The ministry said that it had ranked companies based on a range of criteria including social and environmental responsibility as well as companies' capacity to help to fight piracy and to involve Gabonese companies.

Another source familiar with the talks said that the high number of companies involved in negotiations showed the appeal of Gabon for explorers, despite high-profile disputes with Total and Sinopec's Addax.

"It's not an easy place to do business, but they are still attracting quite a few companies," the source said.

One of the contested points during negotiations has been the participation of the Gabon Oil Company, created in 2011, sources familiar with the talks said.

During exploration, the Gabon Oil Company has the right to acquire a 15 percent stake at market price, according to a draft contract seen by Reuters.

The state has a right to a 20 percent stake from the start of oil output and must contribute to production costs, the same contract showed. It was not clear if these articles had been subsequently revised during negotiations. (Editing by Keiron Henderson and David Goodman)

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