UPDATE 1-Ophir says process under way to sell stake in Tanzanian gas field

By Sarah Young

LONDON, Oct 24 (Reuters) - Africa-focused British oilexplorer Ophir Energy said a process was under way tosell part of its stakes in big gas fields off the coast ofTanzania, raising investor hopes that a long-awaited deal couldbe close.

Ophir's shares were up 9.5 percent in London at 328 pence at1000 GMT after it confirmed media reports of a potential deal,making it the biggest gainer on the FTSE 250 Mid Cap Index.

An Indian media report had said Ophir, which raised over$800 million in a placing and rights issue in March to bolsterits finances, was in talks to sell stakes in the Tanzanianfields to the Indian state-run gas company GAIL. GAILdeclined to comment.

The Tanzanian fields that Ophir discovered with its partnerBG Group, estimated to hold 15 trillion cubic feet ofgas, are its prize assets.

The development of the liquefied natural gas (LNG)facilities required to exploit the fields will cost an estimated$10 billion, encouraging Ophir, a company worth $2.9 billion, tobring in a deep-pocketed partner.

"There is no certainty that this process will concludesuccessfully, nor can there be any certainty over the value ofany such deal," Ophir said in a statement on Thursday.

Ophir flagged in March that its strategy was to look forpartners to bring in to its fields.

Its lack of comment on the progress of a deal at the time ofits half-year results in August worried investors, promptingchief executive Nick Cooper to request patience.

GAIL could face competition from other state-owned Asiancompanies.

"The Indians or the Chinese, the big state-backed oilcompanies, make sense. They've got the big cheque-books," VSACapital analyst Dougie Youngson said.

Ophir said an update on the sale process would be providedas appropriate, adding that the deal related to areas offTanzania known as blocks 1, 3 and 4 in which it owns 40 percentstakes.

Huge gas finds off both Tanzania and Mozambique have inrecent years led to predictions that East Africa could become abig exporter of LNG, but development requires new investors.

This year Italy's Eni sold a 20 percent stake inits Mozambique offshore gas project to China National PetroleumCorp for $4.21 billion.

India's Oil and Natural Gas Corp agreed in Augustto buy a 10 percent stake in a gas field in Mozambique fromAnadarko for $2.64 billion.