Simple -get the correct 02 sensor socket (for easier install) or you can use the appropriate sized regular socket, but will need to cut the wires from the old o2.
The o2 is behind the engine in the tail of the rear exhaust manifold. Not easy to get at, but easier than the rear spark plugs. Will need at least 12 inches of extensions and possibly a breaker bar for more leverage. These can be in there pretty good -especially with 160k.
On a side note -my gas mileage in my L36 was down to around 16-18mpgs for the past 2-3 weeks, but last night when I drove to Apple Valley for the MN Bonneville Club dinner at BWW'* I managed around 23 mpg with the cruise set at 80 mph on the way home -on the way there I averaged 90-95 mph behind some truck from ND and a radar detector in the windshield with a Valentine One decal on the rear window. Was nice being behind him until I turned off in St. Augusta to meet up with CSFiend in my old 1994 SLE. I bet I would have gotten closer to 27-28 if I'd had the cruise set at 7-75 the whole time going both ways. That and all the speeding up and slowing down in the traffic on 494.