French energy giant Total SA said it expects to make a final investment decision by mid-2009 on a major natural-gas cooperation project with China National Petroleum Corp in northern China.

After two and a half years of joint evaluations of the South Sulige block, Total has submitted a development plan pending approval from the Chinese government and CNPC, which is the parent of PetroChina Co, Total said in a statement.

A spokeswoman for Total China said US$1.5 billion to US$2 billion will be initially invested in the project if the development program secures approval.

Total plans to drill around 2,000 wells at South Sulige, located in Inner Mongolia Autonomous Region, over a projected life of 20 years to 25 years for the field, and the gas produced by Total will be sold to PetroChina, she added.

"We are looking forward to obtaining approval of the program and having other necessary agreements in place, prior to making the final investment decision," Denis P. de Besset, general manager of Total E&P Chine, said in the statement.

Total E&P Chine, a Total unit which led the evaluation exercise, is the only partner of CNPC in the South Sulige project and acts as the operator.

China aims to significantly boost the portion of the clean-burning gas in its whole energy mix, and it has opened up several onshore blocks to foreign partners because Chinese state companies lack expertise in developing deep reserves in a harsh operating environment and gas with high sulfur content.

PetroChina has difficulty in monetizing the Sulige reserves because it is "tight gas" trapped in very impermeable rock layers, thus limiting its flow rate, while Total has proven expertise in this area, CLSA analyst Gordon Kwan said. Kwan said output could begin as early as 2011.

The South Sulige block, covering about 2,390 square kilometers, is part of the Sulige field, one of China's most resource-rich areas.

(Shanghai Daily November 28, 2008)