NEW YORK (TheStreet) France's Total (TOT - Get Report) has agreed to buy a 61.3% interest in two Papua New Guinean gas fields from InterOil (IOC), in a deal that could be worth $1.5 billion to $3.6 billion, according to the Texan company, or a substantially lower $1.2 billion, according to the French buyer.

The deal, which includes an upfront payment of $613 million, ends the seller's roughly four-year search for a partner to help fund development of the Elk-Antelope fields and provides Total with a potential new liquefied natural gas hub on the edge of Asia.

"Today's transaction was a landmark for investors, who had stuck by the company since its formation in 1997," InterOil Chairman Gaylen Byker said in a statement.

InterOil, which is incorporated in Canada, has been looking for a partner since early 2009 to help fund development of the fields it found in 2006 and 2008. The company said in March this year it was in "final discussions with multiple parties" and in May entered into exclusive - but ultimately abortive - negotiations with ExxonMobil (XOM).

Under the terms of the deal, Total will install itself as the operator of the project, the deal partners agreed in separate statements. But they differed on most other details, and notably on contingent payments for the sites' likely reserves.

InterOil claims those reserves are likely to be between 5.4 trillion and 9 trillion cubic feet of gas equivalent, resulting in contingent payments of between $675 million and $2.78 billion. It also factored into its headline figure payments of $112 million and $100 million due when Total commits to build an LNG plant to process the fields' output and makes a first LNG shipment, respectively.

Total stripped out the combined $212 million of milestone payments, noting that its initial investment "could lead to a final investment decision by 2016." It also struck a more conservative note on the likely reserves, which it estimated will result in a further $590 million payment.

The Paris-based company is also assuming that it will complete a farm-in deal to sell on a 19.3% stake in the fields, reducing its upfront investment to 470 million ($641.9 million).

Total is in talks to sell that stake to Oil Search Ltd., according to a source who asked not to be named as discussions were ongoing. Total already works in Papua New Guinea with Melbourne, Australia-based Oil Search, from which it bought stakes in three oil blocks in October 2012.

"This new an exciting opportunity to develop a new gas production and liquefaction hub in the Asia-Pacific region, where gas demand is very dynamic," Total Yves-Louis, who is president of the group's upstream operations, said in a statement.

Both Total and InterOil could have their stake in the Elk-Antelope fields reduced further if the Papua New Guinean government exercises an option to take a 22.5% holding in the gas project. That would leave Total with 32.5% of the project, InterOil with 30% and the yet-to-be-confirmed third party with 15%.

InterOil said it expected the sale to complete by the end of the first quarter. It took financial advice from Credit Suisse. Total declined to name its advisers.

Shares in InterOil closed in New York on Thursday at $88.63, and traded in the pre-market at $85, down $3.63 or almost 4%. Total shares traded in Paris at 42.83 ($$58.55), up 0.27, or less than 1% on their Thursday close.

--Written by Paul Whitfield In Paris