Date 3 July 2000
Number 69/00
BHP TO PROCEED WITH OHANET DEVELOPMENT
The Broken Hill Proprietary Company Ltd (BHP) today announced it has signed a
Risk Service Contract (RSC) with the Algerian national oil company, SONATRACH,
for the development of four gas/condensate reservoirs in the Ohanet region of
Algeria.
The Ohanet development represents a large, relatively stable earnings and cash
flow generator within the BHP portfolio and marks a major step for the Company
in establishing a core business in Algeria. It also provides an important
balance to other projects ensuring downside protection to low oil price
environments.
The participants in the venture - which is now subject to formal gazettal by
the Algerian Government - are BHP 60 per cent, Japan Ohanet Oil & Gas Co. Ltd.
30 per cent (50 per cent JNOC, 35 per cent ITOCHU, 15 per cent Teikoku) and
Petrofac Resources (Ohanet) LLC 10 per cent.
The total cost of developing the Ohanet reservoirs will be around US$1.0
billion (BHP share US$618 million). In return the participants will be
entitled to recover their investment - together with an agreed fixed profit
consideration - over a target eight-year period from the start of production.
All participants' monetary entitlement will be translated into volumes of
condensate, butane and propane (at prevailing market prices) which will be
lifted from export ports on the Algerian coast.
Speaking at the contract signing in Algeria, President BHP Petroleum Philip
Aiken said the go-ahead for Ohanet marked a critical point in BHP's efforts
to create a core business in Algeria through hydrocarbon exploration and
development activities.
"Ohanet augments our involvement in the ROD integrated oil field development,
which we announced at the end of last month, and is consistent with BHP's
strategy of accessing large but undeveloped resources," he said.
"Our commitment to Algeria - which began more than a decade ago - is finally
reaping its reward; we have secured two projects which both provide attractive
rates of return, deliver strong earnings profiles and generate significant
cash flows.
"I look forward to continuing our relationship with SONATRACH and the Algerian
government in the years to come as we move ahead with other value creating
opportunities in the country."
The Ohanet fields are estimated to contain total proven and probable reserves
exceeding 3.4 trillion cubic feet of pipeline quality gas, 107 million barrels
of condensate and 116 million barrels of LPG.
The structure of the RSC means that BHP's reserves entitlement fluctuates with
movements in hydrocarbon prices and the Company expects to book proved reserves
in the range of 55 million to 75 million barrels of oil equivalent. (Grossed up
for Algerian tax which is paid by SONATRACH on behalf of the foreign
participants.)
Ohanet is located in the Illizi province of Algeria, approximately 1300km south
east of Algiers and 100km west of the country's border with Libya. The fields
were originally discovered in the late 1950s and early 1960s and have since
been appraised and delineated by more than 65 wells.
Ohanet will be the seventh wet gas field development in the area south east of
the Hassi R'Mel complex.
First production is scheduled for October 2003 and peak liquids production will
be around 58 000 barrels per day, which will be shared by the foreign partners
according to their equity interests.
Further Information and other BHP News Releases can be found on our internet
site at:
http://www.bhp.com.au/press/news.htm
Melbourne
Media Relations: Investor Relations:
Dr Malcolm Garratt Dr Robert Porter
Group Manager External Affairs Vice President Investor Relations
Phone: + 61 3 9652 6872 Phone: + 61 3 9609 3540
Mobile: + 61 419 582 255 Mobile: + 61 419 587 456
Mandy Frostick
Manager Media Relations
Phone: + 61 3 9609 4157
Mobile: + 61 419 546 245
London
Christopher Huntley
Manager External Affairs
Phone: + 44 20 7802 7331
Mobile: + 44 780 23 23 118
Candy Ramsey
BHP Investor Relations Houston
Tel: (713) 961-8640
EMail: [email protected]
