In an indication of how El Paso Corp. intends to turn around its troubled and heretofore U.S.-centered oil and gas production business, subsidiary El Paso Production Co. announced late Monday that it will purchase the rest of a joint oil and natural gas operation that it operates in Brazil with Unocal Corp.

El Paso will pay Unocal $61 million and up to $19 million in additional payments that are contingent on certain natural gas price or volume thresholds. The news precedes an 8:30 a.m. EST scheduled conference call on Tuesday to discuss the production company’s future.

Unocal indirectly holds a 50% interest in Brazilian-based UnoPaso, and up to now, El Paso has reported its UnoPaso investment as an equity interest. Following the completion of the transaction, El Paso will own 100% of UnoPaso. The sale, which is subject to approval by Unocal’s board of directors, is expected to close by July 31.

The acquisition will add 71 Bcfe of proved reserves to El Paso’s reserve base and will increase production by 27-30 MMcfe/d, El Paso said in a statement. UnoPaso owns six exploration and development concessions, all of which are located offshore northeast Brazil. Additionally, El Paso is acquiring Unocal’s 30% interest in an adjacent exploration block. UnoPaso owns a 35% interest in some producing concessions associated with the Pescada-Arabaiana field, which is operated by Petrobras.

“Strategic acquisitions such as this one are a key step in our plan to turn around El Paso’s production business,” said Lisa Stewart, president of El Paso Production and Non-regulated Operations. She took over the troubled production unit early this year (see Daily GPI, Jan. 13). “In addition to expanding our reserve base and increasing our production, the UnoPaso acquisition solidifies our position in Brazil and provides us with substantial future drilling opportunities.”

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