UPDATE: Chevron Joins Kosmos to Look for Oil Offshore Suriname

--Chevron seeks to enter frontier exploration off Suriname's coast

--Drilling to begin in 2014

--Experts think the Suriname-Guyana basin contains large oil fields similar to those in West Africa

(Adds background, analyst comment, in third through fifth, and seventh paragraphs.)

 
   By Angel Gonzalez 
 

Chevron Corp. (CVX) said it would join with Kosmos Energy Ltd. (KOS) to explore for oil off the coast of Suriname, as the oil giant seeks an entry into what promises to be a prolific new oil basin.

Chevron said it agreed to buy a 50% stake in two Kosmos deepwater leases located about 155 miles from Suriname's capital, Paramaribo. Kosmos, a private equity-backed oil company based in Dallas, will retain the other 50% and remain the operator during the exploration phase. But if any oil is found, Chevron will take the lead in developing the field. Financial terms weren't disclosed.

The move came as the coast off South America garners increasing attention of oil prospectors seeking to tap oil riches buried deep beneath the ocean floor. Experts believe that giant oil fields, such as those found offshore Sierra Leone and Ghana in West Africa, could also be present offshore Suriname and the Guyanas, which lie right across the Atlantic ocean. Both areas interlocked when the continents were united hundreds of millions of years ago.

Last year, Tullow Oil PLC (TUWOY, TLW.LN) and partners Royal Dutch Shell PLC (RDSA, RDSA.LN) and Total SA (TOT, FP.FR) reported finding a good quality reservoir offshore French Guyana. A wide range of oil companies--from Exxon Mobil Corp. (XOM), the world's largest publicly traded oil company, to small Canadian oil company CGX Energy Inc. (CGXEF, OLY.V)--are also looking for oil in the vicinity. But efforts to develop the area face challenges; last week, the French government suspended offshore oil exploration in its South American territory for environmental reasons.

Pioneering an emerging oil region also has its own risks, as shown by the difficulties faced by Petroleo Brasileiro S.A. (PBR, PETR3.BR) and other oil companies at finding oil offshore Brazil, where the richest reservoirs lie buried beneath thick domes of salt that make readings difficult. "Suriname is a textbook frontier-exploration play," research firm Raymond James said in an analyst note. "Exploration results thus far have been choppy."

Dallas-based Kosmos became known for discovering the Jubilee field, off the coast of Ghana, one of the largest oil finds in West Africa in recent history. It acquired the license to explore the two deepwater blocks off Suriname in 2011.

For Chevron, the second-largest U.S. oil company after Exxon Mobil, the move is another bet on a new frontier area in the Atlantic basin. The company is already looking for oil off Liberia. It also has developed massive fields in more-established production areas off Angola, Nigeria and Brazil.

"This agreement enables us to explore for new resources in this frontier basin," said George Kirkland, vice chairman of Chevron, in a statement.

The blocks are located at depths between 650 and 8,500 feet. First drilling is planned for 2014.

In recent trading, Chevron shares were down 0.01% at $104.05. Kosmos was up 0.17% at $12.00.

--Kristin Jones and Daniel Gilbert contributed to this article.

Write to Angel Gonzalez at [e-mail].