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Arco, Mobil to Link North Sea Gas Operations to Cut Costs

September 30, 1998|NANCY RIVERA BROOKS | TIMES STAFF WRITER

Atlantic Richfield Co. and Mobil Corp. said Tuesday that they will combine their gas operations in the southern part of the North Sea, which will save the two companies a projected $8 million a year.

The agreement, announced in London, is the latest in a series of industry matchups through mergers, such as the pending combination of British Petroleum and Amoco, and more limited joint ventures, such as the refining and sales alliances in the United States and Europe between Royal Dutch/Shell Group and Texaco Inc.

Los Angeles-based Arco is thought to be a potential takeover candidate, and Mobil of Fairfax, Va., has been rumored as a potential suitor. But Arco's management has vowed that the company will remain independent and is developing an extensive cost-cutting campaign that will involve layoffs. Tuesday's announcement is unrelated to that cost-cutting program, Arco said.

The two oil companies said they will jointly manage more than 15 fields producing about 800 million cubic feet of gas a day, a small part of the 8 billion cubic feet a day produced in Britain.

The aim is to reduce costs and enhance business performance, they said. The approximately $8 million in combined savings represents about 10% of current operating and maintenance costs for the two businesses.

The companies said the venture is expected to be completed by next September. No job cuts are expected.

"The best way to maintain or increase production in the southern gas basin is to keep costs down," said Steve Suellentrop, Arco's managing director in Britain. "This cooperation . . . will enable local jobs and investments to continue for many years to come."

Mobil North Sea Ltd. Chairman John Cousins called the deal "good for both Mobil and Arco."

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Bloomberg News was used in compiling this report.

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