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Occidental Petroleum Corporation of Los Angeles this week signed a five-year oil exploration contract with Algeria. Under the contract, the company will invest at least $32 million in prospecting for oil in 8,800 square miles near Hassi R'Mel in the Sahara.

Under the agreement, Occidental pledged to sink 10 exploration wells and carry out detailed seismic surveys over a distance of 600 miles and other surveys extending beyond 3,000 miles.

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Sonatrach, the Algerian oil company, agreed to carry out gas exploration in the same area.

Since 1986, Algeria has sought to attract foreign companies to carry out exploration to increase its oil and gas reserves, on which most of its wealth depends.

It has signed several exploration contacts covering 30,000 square miles, notably with Spanish, French, and Italian companies and one other American firm, Anadarko, in 1989.

Algerian oil production stood at 780,000 barrels a day late last year.

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