Atlantic Richfield - Drilling Report

RNS No 3725x
ATLANTIC RICHFIELD COMPANY
2nd September 1997
 
 
ARCO CONFIRMS AT LEAST 13 TRILLION CUBIC FEET OF GAS RESERVES IN EASTERN
INDONESIA
 
Discovery is Third Largest in ARCO's history
 
Los Angeles, September 2 - ARCO (NYSE: ARC) today announced proved and
probable reserves in excess of 13 trillion cubic feet (TCF) of natural gas in
support of a major liquefied natural gas (LNG) project in Irian Jaya in
eastern Indonesia.
 
The discovery, which ARCO confirmed in 1995, ranks among the largest natural
gas discoveries in the world in recent years.
 
In recognition of its size and economic importance to Indonesia, President
Suharto officially named the project "Tangguh" (signifying strength) during a
meeting today with ARCO Chairman and Chief Executive Officer Mike R. Bowlin.
The project was previously known by the well site designations of Weriagar and
Vorwata.
 
On an oil equivalent basis (13 TCF of gas equating to almost 2.2 billion
barrels of oil), Tangguh is the third largest discovery of hydrocarbons in
ARCO's history, surpassed only by the giant Prudhoe Bay and Kuparuk River oil
discoveries in Alaska during the 1960s.
 
The Tangguh reserves, located on the Weriagar and Berau blocks onshore and
offshore Irian Jaya, were estimated by the Dallas-based independent petroleum
engineering consulting firm of DeGolyer & MacNaughton (D&M). Given appraisal
drilling to date, consisting of 11 ARCO wells and two earlier wells, D&M also
estimated that there may be an additional 6.5 TCF of possible reserves beyond
the 13 TCF of proved and probable reserves.
 
Development plans call for LNG production to begin in time for anticipated
increases in market demand around 2003. With the Berau Bay region emerging as
a major new gas basin, ARCO plans continued exploration drilling to assess the
ultimate potential of the area.
 
The Tangguh project will provide Indonesia with a significant resource base to
expand Indonesia's LNG market share. Through its state oil company, Pertamina,
Indonesia is the largest marketer of LNG in the world, with a 50% market share
in the Asia-Pacific region.
 
At the meeting at the Presidential palace in Jakarta at which he presented the
D&M findings to President Suharto, Chairman Bowlin said: "This is a milestone
in ARCO's global growth agenda and our continuing relationship with Indonesia,
where we have been Pertamina's partner for three decades. Indonesia will
continue to be a major focus area for ARCO well into the next century.
 
"LNG development in Irian Jaya will give ARCO another anchor field development
to broaden our income generation overseas," noted Bowlin. "Such developments
are characterized by long-term, stable cash flow which would contribute
substantially to ARCO's international growth objectives.
 
"Natural gas developments, whether pipeline or LNG, rank very high on our
global growth agenda. This is especially true in the Pacific Rim area. Simply
stated, if a project is economic and there's a market for the gas, we want to
develop it as soon as possible."
 
Leon Codron, President of Atlantic Richfield Indonesia, Inc. (ARII), said,
"Irian Jaya is ideally located to service expanding Asian markets, where
energy growth is forecast to remain robust. ARCO and our partners will drill
more wells to certify additional reserves for a multiple-train LNG project -
the first of its kind in eastern Indonesia."
 
ARCO is now working with Pertamina on a declaration of commerciality and on
marketing LNG from the project. The Tangguh project would add a third
independent production source to Indonesia's two existing LNG production
centres in Arun and Bontang.
 
Herb Vogel, ARII Vice President and manager of the Tangguh project, said that
the Pertamina-ARCO partnership is ideal for the project. Pertamina and ARCO
have over 30 years of experience partnering in Indonesia. "Pertamina has over
20 years of operations and marketing experience in LNG and operates two of the
largest LNG plants in the world," Vogel said. "ARCO has worldwide upstream
experience in managing large gas projects, and we are already the leading
provider of natural gas to Indonesian domestic markets."
 
Vogel added that ARCO's recent greenfield international gas projects include
the Pagerungan field development in Indonesia and the Yacheng field in the
South China Sea which began producing in 1994 and 1996 respectively.
 
Codron gave considerable credit for the initiation of ARCO's exploration
program in Irian Jaya to Pertamina and the Indonesian Ministry of Mines and
Energy. "In 1993 the government provided additional incentives for companies
to engage in riskier frontier exploration in areas such as eastern Indonesia,"
Codron said. "The resulting improvement in contractor economics was a key
factor in ARCO's decision to establish an active exploration program in Irian
Jaya."

Codron stated that ARII currently has 2,200 employees in Indonesia, where it
recently produced its billionth barrel of oil. Total ARCO investment in
Indonesia over the past three decades has been nearly $3 billion. The Tangguh
project is expected to require several billion $ of investment.
 
Partners in the Berau block are ARCO (48%), Occidental Berau of Indonesia,
Inc. (22.856%), Nippon Oil Exploration (Berau) Ltd. (17.144%), and KG Berau
Petroleum, Ltd. (12%). ARCO holds an 80% interest in the Weriagar block in
partnership with KG Weriagar Petroleum, Ltd.'s 20% interest.
 
ARCO is the operator of both blocks through its Atlantic Richfield Berau, Inc.
and Atlantic Richfield Weriagar Inc. subsidiaries.
 
Note to Editors: For a menu of ARCO's news releases or to retrieve a specific
release, visit the Company's Web site at http://www.arco.com on the Internet.
 
Contact: Albert Greenstein, tel Los Angeles 001 213 486-3384, or Frank Kryza,
tel [phone].
 

END