TLM

Talisman Energy Inc. (TLM) said Thursday there is good interest from potential buyers of its 25% stake in the Kitan oil development in the Timor Sea, and it is expecting final bids toward the end of this month.

The auction comes as benchmark oil prices continue to be above $100 a barrel as demand recovers in major markets such as the U.S. and unrest in the Middle East and North Africa clouds the outlook for supply, especially in Libya where crude exports have stopped.

Oil projects in Southeast Asia, including Kitan in the joint development area between Australia and East Timor, tend to be sought after by investors because they are close to major markets like China. Unlike crude shipments from the Middle East, tankers don't have to pass through the potential choke point of the Malacca Strait, near Singapore.

The Kitan oil field, discovered early in 2008 in permit area JPDA 06-105, is due to start up in the second half of this year at an initial rate of 40,000 barrels of crude a day.

The block contains a further five oil discoveries that could feed the Glas Dowr floating production vessel located above the Kitan field, which contains an estimated 34.6 million barrels of oil alone.

"We are not prepared to talk to the number of bidders or who is on the shortlist--except to say good interest in the asset and we are expecting final bids in the latter part of June," said David Mann, Talisman's vice-president of corporate communications.

Kitan is operated by Italy's Eni SpA (E) with a 40% stake, and Japan's Inpex Corp. (1605.TO) holds the remaining 35% interest.

Inpex President Toshiaki Kitamura described Kitan "as a very good project" when contacted by Dow Jones Newswires, but declined to comment on whether the company would be interested in increasing its stake. Eni couldn't be reached for comment.

Calgary-based Talisman's energy assets in Australia include minority stakes in the producing Laminaria and Corallina oil fields, operated by Woodside Petroleum Ltd. (WPL.AU).

In recent years, Talisman has also aggressively bought natural gas discoveries and permits in the western region of Papua New Guinea, with a view to converting output to liquefied natural gas for export.

Talisman is being advised about the sale of its interest in the Kitan oil development by Macquarie Tristone, a unit of Macquarie Group Ltd. (MQG.AU).

-By David Winning, Dow Jones Newswires; +61-2-82724688; david.winning@dowjones.com

--Mari Iwata in Tokyo contributed to this story.

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