Algeria - Rhourde El-Baguel & BP.

This field (REB) was found in 1962, with 40.2[degrees] API oil produced from a complex Cambrian Fm at a depth of 9,850 ft. The second largest oil producer, REB's recovery rate declined to 18% by 1995. In 1996, it was producing less than 25,000 b/d. On Feb. 15, 1996, Arco of the US (now part of BP) signed a $1.3 bn, 25-year PSA with Sonatrach for the field.

In 1995 Arco paid a signature bonus of $225m and agreed to pay a $300m entrance fee. It was to install an EOR system and further develop the field, with 38 new wells to be drilled. It was to raise REB's capacity to a sustainable level of 120,000 b/d for many years.

BP, however, could only raise the output to 36,500 b/d, as a miscible gas injection system failed to bring about the contracted result.

It was reported in November 2002 that BP had taken a $230m charge against the REB project because of the failure. In early 2000 BP tried but failed to sell a 40% stake in its PSA to Elf before the latter was absorbed by Total.

Sonatrach exercised its legal right of pre-emption and took the equity itself, paying BP in 2001-04 instalments.

At the time of the award in 1996, it was said REB had about 3 bn barrels of oil in place, by then having produced less than 450m barrels since 1963. In its PSA, Arco was to extract over 500m barrels, but it had to find enough gas for re-injection (see background in Vol. 56).

Arco had since 1992 explored several blocks in Hassi Bir Mekaiz (Ghadames basin east of Hassi Messaoud), where BP's partners now are state-owned TPAO of Turkey (25%) and Lundin Oil unit Santa Catalina (25%), under a separate deal with Sonatrach. Sonatrach and BP have made commercial discoveries in these areas and BP continues to explore. In late 1998 Arco relinquished the Guerrara block east of Hassi R'Mel.

Since 2000 BP has been trying to sell its 50% stake in the remaining blocks in these areas, where proven and probable sweet oil reserves have been estimated at 100m barrels. Its operating unit is called Arco Ghadames. BP and StatoilHydro are Sonatrach's partners in the huge sets of In Salah and In Amenas gas fields (see gmt6AlgFieldsFeb9-09).