Tesoro with Total in Sub-Andean area in Bolivia

June 23, 1997 Tesoro Bolivia Petroleum Company has announced that Tesoro and its partner, Zapata Exploration Company, have reached a farm-out agreement with Total Exploration Production Bolivie S.A.. The agreement covers the western 315,000 acres of Tesoro's 787,350- acre Block 20 contract area in southern Bolivia.
"Tesoro is pleased to have Total as a partner," said Bob Oliver, president of Tesoro Bolivia. "Total has extensive drilling experience in difficult terrains in South America and will bring significant expertise to the partnership. We now have the opportunity to expand exploration into the mountainous, Sub-Andean portion of Block 20. This portion of our block is located on-trend with the prolific Aguarague and Ramos Fields across the border in northern Argentina.
"The cost of drilling in the Sub-Andean farmout area can exceed $ 20 mm per well due to the mountainous location and depth of the objectives. Total will operate the wells drilled in the farmout area but will have no interest in the eastern portion of Block 20, which contains three shut-in discoveries and several promising exploratory prospects," Oliver added. "Tesoro will continue to operate the eastern portion of the block, where it is currently shooting 3D seismic."
Under the farmout agreement, Total has the right to drill, at its sole cost, two exploratory wells during the next four years to earn a 75 % interest in the farmout area. The wells must test the Huamampampa formation, which is the main productive zone in the two Argentine fields. It is anticipated Total will spud the first well by mid-1998.
Upon completion of Total's drilling of the two wells, Tesoro Bolivia Petroleum Company will retain an 18.15 % interest and Zapata Exploration Corporation a 6.85 % interest in the farmout area. The assignment of interest to Total is subject to approval by the Bolivian government.

Tesoro also operates the adjacent, 93,000-acre Block 18, which currently is producing natural gas at a rate of 40 mm cfpd from three fields. Production has been constrained by limited markets for natural gas. Construction is scheduled to start in July on a new line to Brazil, projected to be completed in late 1998, which will significantly increase markets for Bolivian gas producers.