As part of the agreement, the two companies will work together with Sonatrach, the Algerian State Oil and Gas Company, in a joint operation of the two projects under development in Algeria. Following this transaction, Statoil will have a 31.85 percent interest in the In Salah revenue sharing contract and a 50 percent interest in the In Amenas production sharing contract.
Gross recoverable reserves for these two projects are estimated to be 2 275 million barrels of oil equivalent, including 170 billion cubic meters of gas (1,070 million barrels of oil equivalent) from In Salah and 140 billion cubic meters of gas (880 million barrels of oil equivalent) and 325 million barrels of liquids from In Amenas.
Statoil and BP will have equal representation on all management committees and boards governing the two projects. In addition, there will be parity in terms of secondees shortly after the start of the operational phase for each project.
The transaction marks Statoil's entry to Algeria and provides an important platform for further organic growth in the country. With leading gas value chain development capabilities, Statoil is well positioned to work with BP and Sonatrach to deliver Algerian gas cost-effectively to the European markets.
As a consequence of the transaction, Statoil will increase its 2007 production target by 50,000 barrels of oil equivalent (boe) per day to 1,350,000 boe per day. This corresponds to an increase in the annual growth rate from five to six percent. The other 2007 key performance targets, including the return on average capital employed (RoACE) of 12.5 percent, will be maintained. Key performance targets for 2004 are based on organic growth and the effects of this transaction will therefore be excluded when reporting against the 2004 targets.
"This transaction gives Statoil an excellent position working with BP and Sonatrach in a major gas province with significant growth potential," says Olav Fjell, chief executive of Statoil. "This is an important step towards fulfilling our international growth and gas strategy, and the transaction supports our key performance targets in 2007."
"We are very pleased to acquire these commercially-attractive growth options at an important stage of their development," says Richard Hubbard, Statoil's executive vice president for International Exploration & Production. "These assets will underpin strong production growth for our international portfolio."
The completion of these negotiations represents an important step for BP and Statoil towards the execution of their respective strategies. Tony Hayward, BP's chief executive of exploration and production, says: "We are pleased to welcome Statoil into these projects and look forward to working with it and Sonatrach to bring the projects on to production in 2004 and 2005."
Production from In Salah is planned to start in mid-2004, with peak production of nine billion cubic meters per annum of gas, and from In Amenas in late 2005, with peak production of nine billion cubic meters of gas per annum plus an additional liquid production of 60,000 barrels per day.
The terms of the agreement will be submitted to the European Commission for clearance of the change of control of the In Salah gas project under EU merger rules. In addition, the terms of the agreement will be submitted to the Algerian Ministry of Energy and Mines, the Algerian oil industry regulator, to obtain the necessary consent and eventual gazettal authorizing the transaction. In addition, Sonatrach has pre-emption rights over the partial assignment of BP's interests in both assets.
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