Total S.A. (TOT) said Wednesday it will partner with IDT Corp. (IDT) to develop shale oil in western Colorado.

Under the agreement, Total will acquire a 50% stake in IDT's American Shale Oil, LLC (AMSO) subsidiary, which holds leases for shale oil properties on federal lands. Total will provide the funding to develop new oil production technology on the AMSO property.

Total and IDT said the deal is expected to close later in the first quarter.

Total's venture with IDT is a sign of growing interest from integrated oil and gas companies in developing shale oil, or oil buried deep within rock formations. Shale oil is more difficult and costly to extract than oil from conventional reservoirs.

AMSO is one of three companies holding 10-year leases from the U.S. Bureau of Land Management to assess, test and demonstrate the potential for commercial shale oil production in western Colorado. The other leaseholders are Royal Dutch Shell Plc (RDS.A) subsidiary Shell Exploration & Production Co. and Chevron Corp. (CVX) subsidiary Chevron USA.

Government reports estimate shale oil development could add as much as 800 million barrels of oil to U.S. reserves. U.S. crude oil in storage totaled just over 1 billion barrels as of Jan. 2, including the Strategic Petroleum Reserve, according to the U.S. Energy Information Administration.

-By Christine Buurma, Dow Jones Newswires; 201-938-2061; christine.buurma@dowjones.com

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