ARCO Signs Production Sharing Contract with Sonatrech for Major Enhanced Oil Recovery Project in Algeria

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15 February 1996

ARCO (NYSE: ARC) announced today that it has signed a production-sharing contract with Sonatrach, the Algerian state oil company, to undertake a major Enhanced Oil Recovery (EOR) project in the Rhourde El Baguel Oil Field.

Located 450 miles southeast of Algiers, Rhourde El Baguel is Algeria's second largest oil field. More than 450-million barrels have been produced from the field since its discovery in 1962 with three billion barrels of oil in place.

ARCO said its EOR efforts, using in-fill drilling and miscible gas injection technology developed by ARCO in oil fields around the world, should yield over 500 million total barrels of crude oil equivalent over the 25-year life of the project and increase production rates from the current 25,000 barrels per day to a peak of 125,000 barrels per day sometime early in the next century.

The agreement provides for a $225 million bonus payment to Sonatrach, followed by an investment of over $1.3 billion in the project. Under the production sharing contract, ARCO will receive up to 49% of the project's annual production. The ARCO investment is believed to be one of the largest investments by a foreign company in Algeria.

ARCO expects to award the main engineering, procurement and construction management contract early in 1996 and thereafter to begin immediate work on in-fill drilling and miscible gas injection.

"The agreement is the culmination of three years of hard work and complex negotiations between ARCO and Sonatrach," said Jay Cheatham, President of ARCO International Oil and Gas Company, the international oil and gas exploration and production division of Los Angeles-based ARCO.

"We are excited about the project, and our people are anxious to begin work," Cheatham added. "We are confident that the miscible gas injection technology developed by ARCO in Alaska and elsewhere will lead to increased production from Rhourde El Baguel. We will start seeing production increases in 1996 due to in-fill drilling."

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