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Will it be Transocean to the Rescue, or Perhaps Rowan? Total Considers Options at Elgin

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March 27, 2012

(Dow Jones) French oil major Total SA (TOT, FP.FR) may hire Transocean Ltd. (RIG, RIGN.VX) and Rowan Cos. (RDC) to drill relief wells to end an ongoing gas leak at its Elgin platform in the North Sea, a person familiar with the situation said Tuesday.

Total has said it is studying all options including drilling a relief well to end the leak. A spokesperson said a decision hasn’t yet been made on whether to drill a relief well and noted it could take time to do so. The company said it is flying in international experts to assist in addressing the issue.

However, the proximity of vessels owned by the two firms to the affected Elgin site may sway Total’s decision.

Transocean’s Sedco 714 semisubmersible rig is on contract to Total for work in the North Sea, while Rowan has a jackup rig that was used at Elgin to do intermittent drilling work.

Shares in Paris’s Total fell 6% Tuesday after the company said it was studying many options including the time-consuming operation of drilling a relief well to intercept the leaking borehole and seal it with cement.

After its Gulf of Mexico oil spill in 2010, BP PLC (BP, BP.LN) took three months to drill a relief well under similar reservoir depth and pressure conditions to the ones Total could face at Elgin.

Total has rejected comparisons with BP’s Macondo well blowout, which killed 11 men and spilled tens of thousands of barrels of oil a day from the seabed.

Total has said it believes the gas at Elgin is leaking on the platform, having originated from a zone of rock above the main reservoir. The leak comes from a well known as G4 that was plugged about a year ago.

Tuesday’s decline in Total’s shares amounted to their biggest one day drop since late 2008. Analysts warned there was still considerable uncertainty around the situation.

“A best case is that the leak stops naturally within a number of days,”Sanford C. Bernstein & Co. said in a note to clients. “The worst case is that Total is forced to drill a relief well.”

-By Alexis Flynn of Dow Jones Newswires and Tom Fowler of the Wall Street Journal

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