Decree Clears Way for ARCO, Agip to Begin Pipeline, Oil Field Development in Ecuador

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07 March 1997

The Ecuadorian Ministry of Energy and Mines has issued a decree which clears the way for ARCO Oriente, Inc and its partner Agip Petroleum (Ecuador) Ltd, to begin development of the Villano oil field in eastern Ecuador.
ARCO Oriente, Inc., is a subsidiary of Los Angeles-based ARCO (NYSE: ARC).

The decree authorizes modifications to ARCO/Agip's existing development plan to include the construction of a 130 kilometer (81 mile) secondary pipeline to transport oil from the planned Villano field processing facilities to the Transecuadorian Pipeline System (SOTE). These modifications were agreed upon in June 1996, but have awaited ministerial authorization to proceed.

Detailed engineering and environmental impact studies for both the pipeline and oil field development will be completed over the next six to seven months 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, the Ecuadorian state oil company, they expect to recover 160 million barrels of 21-degree API-standard gravity oil.

The secondary pipeline will be designed 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 in the area as well as giving ARCO/Agip the potential to increase production from the Villano oil field.

"We intend to begin development of the Villano field as soon as detailed engineering and environmental studies are completed," said Jay Cheatham, President of ARCO International Oil and Gas Company. "We are extremely pleased with the quick actions of the new government which have allowed this project to move forward."

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 after development is complete and production begins.

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