Colonial Gas Company and Cabot LNG Corporation Announce Joint Venture; New Initiatives Call for 50/50 Ownership of Transgas Inc., Joint LNG Storage Venture.

LOWELL, Mass.--(BUSINESS WIRE)-- May 28, 1996--In a major move designed to capitalize on new opportunities in the increasingly deregulated natural gas industry, Colonial Gas Company and Cabot LNG Corporation announced that they intend to form a joint venture designed to enhance the overall value of liquefied natural gas (LNG) as a competitive supplemental fuel choice.

Through this joint venture, the companies will jointly own Transgas Inc. and a new entity that together will provide LNG trucking, storage and related services to the energy market in the Northeast United States.

Cabot LNG to Buy a 50% Ownership Share of Transgas

Cabot LNG Corporation, the largest importer of liquefied natural gas in the United States, will acquire for $7 million a 50% ownership interest in Colonial's wholly-owned subsidiary, Transgas Inc., the nation's leading LNG trucking company. Colonial Gas Company will recognize a gain of approximately $0.40 per share at the time of the sale. The proceeds from this transaction will provide Colonial with additional financial flexibility necessary to compete effectively in the deregulated energy marketplace.

In addition to enhancing the financial position of Colonial and its shareholders, the transaction also provides clear benefits for both Transgas and its customers. Transgas will continue to operate as an independent business unit, headed by Victor Baur, who will continue as President of Transgas.

New Joint Venture to Provide LNG Storage and Related Services

Colonial and Cabot LNG will create a jointly-owned new business entity that will market LNG storage and related services to energy providers and end-users throughout the region. The yet-to-be named entity will lease for 20 years Colonial's one billion cubic foot LNG storage tank and related facilities; Colonial will continue to operate the facility.

While Colonial's operating and maintenance costs per customer are already the lowest of all New England gas companies, this lease agreement will enable the company to further reduce its costs, augmenting its aggressive efforts to defer a rate increase until the next century. In addition to promoting stable rates, the new joint venture agreement will allow Colonial to continue to meet the supplemental fuel requirements of its customers with the same degree of reliability as in the past.

An Alliance Designed to Meet the Needs of a Growing LNG Market

The extreme weather conditions of this past winter presented the first real test of natural gas resources since Federal deregulation of the interstate natural gas pipeline delivery system in 1993. The extremely high demand for natural gas in the Northeast during prolonged cold snaps demonstrated the value of natural gas storage, particularly "market area" storage of LNG. Colonial's new alliance with Cabot LNG will create an effective network of LNG services to assist suppliers and end-users in satisfying their needs for reliable and flexible market area storage.

Through this strategic initiative, Colonial and Cabot LNG intend to offer expanded LNG services at a time when deregulation is expected to saturate the New England region with growing numbers of gas supply competitors, all of whom will require supplemental fuel capabilities. F.L. Putnam, III, President and CEO of Colonial Gas Company, said, "The combination of Cabot's LNG supply business with Colonial's LNG trucking and storage services will enhance the overall value of LNG as a competitive supplemental fuel source, driving up demand in the wake of deregulation and creating a high-growth environment for both the new LNG storage entity and Transgas."

Gordon Shearer, President of Cabot LNG Corporation, said, "This new venture represents a further commitment by Cabot LNG to develop the market for LNG and related services in the region. With a growing demand for natural gas on a flexible and price competitive basis, Cabot LNG believes that LNG is best positioned to meet these needs. This new venture, along with our commitment to acquire significant volumes of LNG from the Atlantic LNG Project in Trinidad, and the proposed expansion of our Everett LNG terminal underscores our commitment to be a significant gas supplier to the region. It also furthers our relationship with one of our largest and oldest customers." -0-

Colonial Gas Company (NASDAQ:CGES), a Massachusetts corporation formed in 1849, is primarily a regulated natural gas distribution utility. The Company serves over 141,000 utility customers in 24 municipalities located northwest of Boston and on Cape Cod. Through its subsidiary, Transgas Inc., the Company also provides over-the-road transportation of liquefied natural gas, propane, and other commodities.

Cabot LNG Corporation, established in 1989, is a subsidiary of Boston-based Cabot Corporation (NYSE:CBT). The Company imports liquefied natural gas via the Everett, Mass., LNG import terminal owned by its subsidiary, Distrigas of Massachusetts Corporation, to meet the specialized needs of gas and electric utilities, independent power producers and industry. Cabot LNG holds a 10 percent interest in the planned LNG export project being developed by Atlantic LNG Company of Trinidad and Tobago at Point Fortin, Trinidad, and holds purchase contracts for 60 percent of the plant's design capacity of approximately 400 million cubic feet of LNG per day which is targeted for Northeast markets.

CONTACT: Nickolas Stavropoulos Gordon Shearer, President

Executive Vice President - or

Finance, Marketing and Joseph Teves

Chief Financial Officer Executive Vice President

Colonial Gas Company Cabot LNG Corporation

[phone] [phone]