BG International Limited has today reached agreement with Tesoro Petroleum Corporation to buy Tesoro Bolivia Petroleum Company (Tesoro Bolivia) for US$100 million payable in cash. The transaction is scheduled for completion by the end of 1999. Under the terms of the agreement, the sales price will be adjusted for transaction costs and certain purchase price adjustments for business activity occurring between 1 July 1999 and completion.

This acquisition is key to developing BG's upstream portfolio in Bolivia and complements BG's other gas interests in the Southern Cone of South America. It is expected Tesoro Bolivia will enhance BG's planned leadership in the integrated development and supply of gas markets in the region and will enable BG to participate in the development of the new Itau field.

Tesoro Bolivia has net certified proven and probable reserves of 1.8 trillion cubic feet in discoveries and an additional 450 billion cubic feet in producing fields. There is also substantial exploration potential throughout Tesoro Bolivia's acreage portfolio. The fields in production have sales that are contracted to the Bolivia-Brazil Pipeline market.

Frank Chapman, BG plc Executive Director and President, BG International said: "The purchase of Tesoro Bolivia is another key element of our overall strategy in South America. These interests, alongside our interests in the region's two gas hubs of São Paulo and Buenos Aires, and in major pipeline projects linking Argentina, Uruguay, Brazil and Bolivia, reinforce BG's position as the leading player in the Southern Cone's fast developing natural gas market.

"The completion of the Bolivia-Brazil Pipeline in July this year has opened up a new market for Bolivian gas. This provides BG with an excellent opportunity to monetise its existing gas reserves in Bolivia and capitalise on the purchase of E&P interests from Tesoro."

The gas market in São Paulo, accessed through BG's purchase of Comgas - Brazil's biggest gas distribution company - in April 1999, will underpin the continued development of the pipeline from Bolivia to Brazil. Long term the increased demand for gas in the Brazilian market and the operation of the Bolivia-Brazil Pipeline will continue to open up the market for Bolivian gas reserves.

The Tesoro Bolivia upstream interests include a 25 per cent interest in the Itau discovery to the north of the Petrobras San Alberto discovery, and 100 per cent interest in four producing fields and exploration potential identified on Tesoro's acreage.

Following the Margarita X-1 onshore discovery in southern Bolivia in 1998, BG is drilling two appraisal wells. Margarita X-3 has proved successful, testing at 70 million standard cubic feet of gas per day (mmscfd) and 2000 barrels of condensate per day. Margarita X-3 is currently being deepened to evaluate additional targets. Margarita X-2 operations are continuing and results are being evaluated.

Tesoro Petroleum Corporation - is a natural resource company engaged in petroleum refining, distribution and marketing of petroleum, providing marine logistics and the exploration and production of natural gas and crude oil.

BG has purchased 100 per cent of the shares in Tesoro Bolivia Petroleum Company, which holds Bolivian assets.

BG plc in the Southern Cone

Exploration - BG holds interests in two blocks in Bolivia, both close to the route of the Bolivia-Brazil pipeline. In 1998, BG (37.5 per cent) and its partners successfully tested the Margarita X-1 onshore exploration well located in the Caipipendi block in the foothills of the Andes. The well flowed at a rate of 23 mmscfd and two appraisal wells, Margarita X-2 and X-3, are currently drilling. BG also has a 20 per cent interest in the Charagua block adjoining the Caipipendi block.

BG has 100 per cent interest in the Los Tordillos Oeste exploration block, central Argentina, and the Barranca Yankowsky block, southern Argentina. In addition, BG holds a 20 per cent interest in the offshore CAA 39 and CAA 40 blocks and has applied for a further 20 per cent in CAA 46.

Bolivia-Brazil pipeline - BG is a member of the international consortium (BTB Group), selected by the Brazilian state energy company, Petrobras, as its partner to develop the US$1.8 billion Bolivia-Brazil pipeline. First gas to São Paulo flowed through the pipeline in July 1999. The second stage of the pipeline, taking gas to Porto Alegre in southern Brazil, is expected to be completed in 2000.

Cruz del Sur pipeline - BG (40 per cent), Pan American Energy and the Uruguayan state energy company, ANCAP, are working together on the construction and operation of a gas pipeline linking Buenos Aires to Montevideo. Construction of this phase of the pipeline is expected to begin shortly. Engineering studies for extending the pipeline from the River Plate crossing for a further 920 km to Porto Alegre in southern Brazil are nearing completion.

Comgas - In April 1999 a consortium, (BG with 95 per cent, Shell with 5 per cent), purchased 52.7 per cent controlling stake in Comgas, Brazil's biggest gas distribution company. Since the initial acquisition BG has purchased a further 10% of the shares in Comgas, taking BG's total interest to 60.1 per cent. The Comgas concession is a 30-year franchise, with a potential for a further 20 years. It is expected the consortium will seek to develop rapidly the gas market during the first five years with continuing expansion throughout the period of the concession.

MetroGas - BG has a controlling interest (44 per cent) in MetroGas S.A., which supplies 1.9 million customers in the Buenos Aires area. MetroGas is the largest buyer of gas and gas transportation capacity in the Southern Cone countries, and the region's largest holder of 'interruptible' gas transportation capacity.