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BP Agrees on Terms for $2.7 Billion

August 13, 2001

LONDON (AP) _ BP PLC and an Algerian partner have agreed on final terms for a $2.7 billion project to pump and export natural gas from remote fields in the Sahara Desert, a company spokesman said Monday.

BP’s 15-year deal with the state-owned oil and gas company Sonatrach aims to produce 318 billion cubic feet of gas from the In Salah region of south central Algeria by the year 2004.

The project will boost Algerian gas exports by 15 percent and make a ``significant″ increase to BP’s own production, spokesman Barry Halton said.

Most, if not all, of the gas will be sold in Europe, where Algeria is already the largest non-European source of gas. BP and Sonatrach made their agreement formal at a weekend ceremony in Algiers, Algeria.

The companies also awarded work contracts for the construction and operation of the project during its initial, three-year phase.

During this first phase, the pair will invest $1.7 billion to bring gas onstream from the three most northerly fields at In Salah. The ``centerpiece″ of this part of the project will be a 310-mile pipeline connecting the fields to an existing network, which will transport the gas northward for export to Spain, Italy and elsewhere, Halton said.

BP will cover 65 percent of the project’s cost, while Sonatrach is to pay for the remainder. The companies will split their revenues 50-50, he said.

The project’s second phase, worth $1 billion, will add an additional four fields to the pipeline network and be completed within eight years.

BP and Sonatrach first signed a joint venture agreement for Ensalah in December 1995. They completed a study of the area’s gas potential last February.

As part of the project, the two companies have awarded three main engineering contracts. A consortium of three firms _ JGC of Japan plus two U.S. concerns Brown and Root and M.W. Kellogg _ is to build the facilities at In Salah.

Bechtel, also of the United States, will build the main export pipeline, and Algeria’s Enafor will do the drilling for gas.

ENEL of Italy has agreed to buy 141 billion cubic feet of the annual In Salah production. Sonatrach will buy the remaining 177 billion cubic feet of gas and sell it in Europe, Halton said.

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