Operator BG Exploration & Production, and co-venturers Amoco, Fina, Phillips UK, Yorkshire Electricity and Agip (U.K.), today announced that production has started at the £430 million Armada development in the Central North Sea.

Armada commenced operation on schedule, and gas is being delivered to customers as production increases to full capacity. Armada is £107 million below the original budget of £537 million. Peak gas production of 450 million standard cubic feet per day (mmscfd) will be transported through CATS (the Central Area Transmission System) to Teesside. In addition, up to 26,000 barrels per day of condensate (light oil), will be exported through the Forties pipeline system to Cruden Bay in Scotland, and pumped to Grangemouth for processing.

Frank Chapman, Managing Director, BG Exploration & Production, said: "The fact that Armada has commenced production on schedule and is 20 per cent under budget says a great deal about the performance and co-operation of everyone involved. The development has set new standards for cost efficiency in North Sea development, and has pioneered highly successful contracting techniques which have attracted the interest of other operators. We expect operating costs to be among the lowest in the North Sea."

The Armada fields - Fleming, Drake and Hawkins - lie 250 kms north east of Aberdeen. They extend over 31 square kilometres and span five exploration blocks. Discovered in the early 1980s, the fields together hold 1.2 trillion cubic feet of recoverable gas, and 70 million barrels of condensate and natural gas liquids. The gas reserves are sufficient to supply domestic customers in a city the size of Manchester for about 18 years, and the fields are expected to have an operational life of between 20 and 25 years.

Armada received development approval in June 1994, and pre-drilling of the eight wells in the first phase development began in January 1995. Sophisticated extended-reach drilling techniques were required, so that the three fields, the longest of which stretches for 24 kilometres, can be drained from a single platform.

Several of the wells extend to depths of over 10,000 feet, with the longest deviating horizontally over four and a half miles away from the platform.

The gas and condensate are separated offshore, and then piped to the nearby Amoco operated Everest Riser platform, where they enter the CATS and Forties transportation systems.

Designing and constructing Armada has involved more than 2,000 man years of work at the main design and fabrication sites. At the peak of construction effort, the project employed 1500 people - over 1000 of them in Scotland.

The value of contracts exceeded £390 million, and, of this, contracts worth over £290 million were won by UK companies -- £170 million worth of the work going to Scotland. A further £50 million of contracts have been won by European companies.

Notes to Editors

• Armada is the first gas field development in UK waters for which BG E&P has been selected as the operator for a joint venture. Equity interests are:

BG Exploration and Production Limited	45.27%
Amoco (UK) Exploration Company	18.20%
Fina Exploration Limited	12.53%
Phillips Petroleum Company United Kingdom Limited	11.45%
Yorkshire Electricity Ltd	6.97%
Agip (U.K.) Ltd	5.58%

• Before development of Armada began, an agreement was reached between all partners, fixing ownership interests in perpetuity. The agreement, covering three gas reservoirs, and extending across five licence blocks, was a first for the North Sea.

• Under contracts ageed for the first five years of production, five of the Armada co-venturers are selling gas directly to Centrica plc and National Power plc. The sixth, Yorkshire Electricity, will directly market its own gas entitlement.

• The Armada fields are named Fleming, Drake and Hawkins, after three distinguished captains from the Elizabethan fleet which defeated the Spanish Armada in 1588.