Agreement Clears Way for ARCO, Agip to Build Crude Oil Pipeline in Ecuador

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20 June 1996

ARCO Oriente, Inc., and its partner Agip Petroleum (Ecuador), Ltd signed an agreement with the government of Ecuador today that will allow ARCO/Agip to build a 170-kilometer (105-mile) secondary pipeline to transport crude oil from the Villano field to the Transecuadorian Pipeline System.

ARCO Oriente, Inc., is a subsidiary of Los Angeles-based ARCO (NYSE: ARC).

The agreement amends ARCO/Agip's existing service contract with Petroecuador, the state oil company, to include the secondary pipeline. Detailed engineering and environmental impact studies for both the pipeline and oil field development will be completed over the next six to seven months, according to an ARCO spokesman, and the pipeline will be operative by 1999.

ARCO and Agip have discovered a major petroleum reservoir at Villano in Oriente province. Over their 20-year contract with Petroecuador, they expect to recover 160 million barrels of 21-degree API-standard gravity oil.

The pipeline will be constructed to carry 80,000 barrels per day of crude oil, but will initially carry 30,000 b/d. The excess capacity will be available for other developments or will give ARCO/Agip the potential to increase production from the Villano oil field.

"We are delighted that we now have a green light to proceed with development of the Villano field," said Jay Cheatham, president of ARCO International Oil and Gas Company. "Our team is in place in Quito and will begin development soon."

ARCO Oriente holds a 60% share of the partnership with Agip and will operate the Villano field and secondary pipeline. The oil itself is owned by the Ecuadorian government which will reiumburse the two partners for their investment in oil exploration, development and production when development is complete and production begins.

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