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ALGERIA - Zarzaitine & Sinopec.

Sinopec of China in September 2002 got the contract to boost the oil recovery rate at Zarzaitine, which is near Hassi Messaoud, from 40% to 50%. Sinopec is contributing 75% of the $525m upgrade cost, with Sonatrach providing the balance. Sinopec was chosen ahead of competition from Repsol-YPF of Spain.

Zarzaitine, found in 1957, produces 42.5 deg. API oil from a Devonian Fm at a depth of 4,700 ft. The reservoir of Zarzaitine, near the Tunisian border, extends to Tunisia where it is called El Borma. Agip found the extension on the Tunisian side in 1964 (see survey of Tunisia in Vol. 62, Nos. 13-15).

Rhourde El Baguel & BP: This field (REB) was found in 1962, with 40.2 deg. 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. The goal was to raise REB's capacity to a sustainable level of 120,000 b/d for many years. But BP 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.

REB has about 3 bn barrels of oil in place, 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 reinjection (see background in Vol. 56).

Arco had since 1992 explored several blocks in Hassi Bir Mekaiz (Ghadames basin east of Hassi Messaoud), where its partners are TPAO of Turkey (25%) and Lundin Oil unit Santa Catalina (25%), under a separate deal with Sonatrach. It 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 these blocks, where proven and probable sweet oil reserves have been estimated at 100m barrels. Its operating unit is called Arco Ghadames.

BP and Statoil are Sonatrach's partners in the huge sets of In Salah and In Amenas gas fields (see Gas Market Trends).
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Publication:APS Review Oil Market Trends
Date:Feb 7, 2005
Words:490
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