Arco Launches $248-Million Offer for Aran : Energy: Ireland-based holder of oil exploration leases says it won’t sell without a fight.

Los Angeles-based Atlantic Richfield Co. has launched a $248-million hostile offer to buy Aran Energy, a holder of exploration leases in a promising oil field off the Shetland Islands.

The bid for Dublin, Ireland-based Aran is another signal of the oil industry’s enthusiasm for the Shetland region, with its largely untapped fields deep below turbulent waters 150 miles north of Scotland. British officials think the region’s oil deposits could rival the North Sea’s.

For Arco, a find of a billion barrels or more at Shetland could help make up for declining reserves in Alaska, where it tapped the 12 billion-barrel Prudhoe Bay field 26 years ago.

“There is significant potential, given the geology,” said Michael Humphries, director of international financial strategies at Petroleum Finance Co., a Washington-based consulting firm. Some in the industry speculate that the prospect could include giant fields of as much as 1.5 billion barrels of oil, he said.

Officials at tiny Aran indicated they won’t sell without a fight. In a terse statement, the company’s board said the Arco bid was unsolicited, unwelcome and “fails to reflect Aran’s true value.”

Oil companies have known for years that there was a lot of petroleum west of the Shetland. It wasn’t until technological advances made it less costly to produce oil in deep, harsh waters that companies looked to develop their reserves there.

One of those companies, British Petroleum, on Monday announced the results of a well at the Schiehallion field, one of the biggest Shetland fields tapped to date. BP said a well produced up to 20,000 barrels of oil a day during a seven-week test, a rate indicative of a huge field.

Reserves at Schiehallion, where Amerada Hess Corp. also has a stake, are estimated at up to 500 million barrels. Aran has a 17.65% stake in a Hess-operated corner of the field. It also was recently awarded seven exploration licenses in the area in partnership with Chevron Corp., Texaco and Hess.

“It’s a very rich offer for Aran’s production assets, but the value is in the exploration upside,” said Nick Antill, an oil analyst at Barclays de Zoete Wedd. “The real reason for doing it is to get into the west of Shetland.”

Arco, the second-biggest oil producer in Alaska behind British Petroleum, said the proposed acquisition is a step toward expanding its oil and natural gas interests outside the United States, where its petroleum reserves have been declining.

“We’ve been trying to expand internationally for 10 years now,” Terry Dallas, Arco’s vice president and treasurer, said during a conference call with reporters.

Aran, which is small compared to Arco’s worldwide oil and gas production of about 900,000 barrels a day, has oil and gas output equal to about 15,000 barrels a day, with 13,000 of that coming from Britain. It has reserves of 42 million barrels.

Arco, which became the seventh-largest U.S. oil company on the strength of its Prudhoe Bay discoveries, has had the hardest time of any of the big U.S. oil companies in trying to find new reserves. Shares of Arco closed up 87.5 cents at $110.875 in trading Monday.