UPDATE 1-Oil Search fights sale of PNG gas field stake to France's Total

* Oil Search fights over loss of right to match Total offer

* Battle over gas for PNG LNG expansion or rival project

(Adds grounds for dispute, InterOil comment)

By Sonali Paul

MELBOURNE, March 28 (Reuters) - Papua New Guinea energy company Oil Search Ltd OSH.AX launched a fight on Friday to contest French oil giant Total SA's TOTF.PA purchase of a 40 percent stake in PNG's biggest undeveloped gas field.

The dispute surrounds stakes in the Elk and Antelope fields, coveted for both a possible expansion of a $19 billion liquefied natural gas (LNG) project that ExxonMobil Corp XOM.N is building with Oil Search, and for a rival project.

Oil Search recently bought into the Elk and Antelope fields, controlled by PNG's InterOil Corp IOC.N , which this week signed a final agreement selling down its stake to Total.

Total and InterOil want to use the gas from the fields for a new LNG plant that would compete against ExxonMobil's PNG project, which is due to start exporting around July.

Oil Search said on Friday it had filed a notice of dispute to InterOil surrounding Total's acquisition. The dispute would need to be resolved by international arbitration.

The fight centres on the vehicle that InterOil used to sell down its stake in the Elk and Antelope license to Total, rather than selling a direct stake in the asset, effectively circumventing pre-emptive rights Oil Search expected to have to the InterOil stake.

Oil Search used a similar strategy to buy its stake in the Elk-Antelope joint venture. It paid $900 million to take control of Pac LNG Group Companies, which held the 22.8 percent interest in Elk-Antelope, rather than buying the asset stake directly itself.

If InterOil had sold a stake in the Elk-Antelope asset directly to Total, it would have been obliged to offer Oil Search the opportunity to match that offer, a right Oil Search said it would have when it bought into the joint venture.

InterOil had no immediate comment on the dispute but was expected to release a statement later on Friday. Oil Search's spokeswoman declined to comment on the dispute as it is the subject of legal action.

Total investor relations contacts in Houston and Paris were not immediately available for comment.

(Reporting by Sonali Paul; Editing by Stephen Coates and Kenneth Maxwell)

((Sonali.Paul@thomsonreuters.com)(+61 3 9286 1419)(Reuters Messaging: sonali.paul.thomsonreuters.com@reuters.net))

Keywords: PAPUA OILSEARCH/TOTAL