Conoco Announces Second Indonesia Block B Gas Sales Agreement.

Business/Energy Editors

HOUSTON--(BUSINESS WIRE)--March 29, 2001

Conoco (NYSE:COCA) (NYSE:COCB) today announced Indonesian state oil company Pertamina and Malaysian state oil company Petronas have signed final agreements for the long-term delivery of natural gas to Malaysia by pipeline from Conoco-operated South Natuna Sea Block B fields offshore Indonesia. These agreements formally complete the intent established under a Heads-of-Agreement signed between these two national companies on Oct. 5, 2000.

Under the contract, Petronas will purchase 1.5 trillion cubic feet of natural gas, valued at approximately US$4 billion, over the next 20 years. Additionally, more than US$4 billion in oil and natural gas liquids will be produced from Block B along with this gas.

The gas will be supplied from Indonesia's South Natuna Sea Block B, which is operated under a production sharing contract (PSC) between the Indonesian government and the co-venturers Conoco Indonesia Inc. Ltd. (40 percent), Inpex (35 percent) and Texaco (25 percent).

This is the second gas sales agreement relating to Natuna Sea Block B and it involves a US$2.5 billion direct investment by the PSC in field facilities, wells and the installation of a 60-mile pipeline from the newly constructed Hang Tuah moveable offshore gas production unit (MOgPU) to Petronas' Duyong Complex offshore Malaysia. Inaugurated last week in Ulsan, Korea, the Hang Tuah MOgPU will be on stream in Indonesia's Block B by mid-year 2001.

Additionally, a floating, production, storage and offtake, or FPSO, system and liquefied petroleum gas (LPG) facility are being constructed to support the production of more than 170 million barrels of oil and close to 100 million barrels of LPG.

The delivery of gas in support of the Petronas sales agreement is slated for August 2002 at the rate of 100 million cubic feet per day (mmcfd), and then will ramp up with a plateau rate of 250 mmcfd, which likely will be reached by 2007. The gas will be primarily used to fuel new power generation in Malaysia.

"The finalization of this Pertamina-Petronas agreement is another milestone in the development and international commercialization of Indonesia's natural gas," said Rob McKee, Conoco executive vice president, worldwide exploration production. "Conoco played an integral role in bringing together producers and consumers to make this visionary project a reality. Indonesia's valuable, but underutilized natural gas resources can provide an economic, clean-burning fuel to power Southeast Asia's economic growth."

"The fact the project moved forward so swiftly signifies its mutual benefits to all parties and demonstrates Conoco's commitment to maintaining a constructive, long-term presence in the region," McKee added.

"Conoco and our Block B PSC partners have carefully prepared a fast-track for the production efforts that will support this historic agreement," said Pat Meyer, president, Conoco Indonesia. "This project is already sanctioned by Pertamina, and we're well positioned to meet the ambitious 2002 delivery schedule."

First gas was delivered from the Natuna Sea gas fields to Singapore in early January via the 400-mile-long subsea West Natuna Transportation System (WNTS) as part of a 22-year natural gas sales contract between Pertamina and Singapore's SembCorp Gas signed in 1999. The WNTS is a joint venture between Pertamina and three PSC's operated by Conoco Indonesia, Premier Oil and Gulf Indonesia Resources, respectively. Conoco is operator of the WNTS.

Meyer said the 1999 gas sales agreement between Pertamina and SembCorp Gas established key foundational infrastructure which enabled Conoco and its Block B partners to more easily accommodate incremental requirements such as this sale to nearby Malaysia.

Established in 1967, Conoco Indonesia is a wholly owned subsidiary of Conoco Inc., and has been producing oil in the country since 1979.

Conoco is a major, integrated energy company active in more than 40 countries.

This release contains forward-looking statements about Conoco's business plans and operations. These statements are not guarantees of future performance, involve certain risks, uncertainties, and assumptions that are difficult to predict, and are based upon assumptions as to future events that may not prove accurate. Actual outcomes and results may differ materially. Among the factors that could cause such differences are changes in oil and gas prices; unsuccessful development drilling activities; failure to achieve expected reserve or production levels due to operating hazards, drilling risks, and the inherent uncertainties in interpreting engineering data relating to underground accumulations of oil and gas; delays or difficulties in completing production or transportation facilities; interruption of operations due to accidents or political events; and other risks discussed in Conoco's publicly available filings with the Securities and Exchange Commission.