RAE Systems Awarded Contract by PetroChina's Dushanzi Petrochemical Project.

RAE Systems to Supply $2 Million in RAEGuard Fixed Gas Monitors

SAN JOSE, Calif. -- RAE Systems Inc. (AMEX:RAE), a leading global provider of rapidly deployable sensor networks that enable customers to identify safety and security threats in real time, today announced the award of an exclusive contract with the Dushanzi division of PetroChina to provide fixed toxic and combustible gas detection equipment at the construction site for a new refinery in Dushanzi, Xinjiang, China.

The value of the initial contract is estimated at $2 million. Bidding for the contract began in October 2006, with final selection made in late December. RAE Systems' China subsidiary, RAE-KLH, will supply a 1,600-point combustible and toxic gas detection system along with field services and technical support in 2007 and 2008. Ongoing annual services, spares and support contract revenues are projected to be eight percent per year of operation. In addition, RAE-KLH will be the preferred supplier for portable gas monitors and personal protection equipment.

"We are pleased to have had the opportunity to compete and win the supply contract for a project of this magnitude, said Robert I. Chen, chief executive officer of RAE Systems. "This is another example of the value of our more than ten-year investment in China and our ability to participate in China's vast industrialization. Our proven fixed-sensor technology is now seeing deployment in China's largest petrochemical plant."

PetroChina's Xinjiang Dushanzi Petrochemical Company manages one of the largest petrochemical projects in China. The new plant will refine sulfur-containing crude oil supplied through a pipeline from Kazakhstan. The facility will have the capacity to refine 10 million tons of oil and produce 1.2 million tons of ethylene per year. Project completion will take about three years, with production scheduled to begin in 2008.

Fixed gas detection systems consist of many sensor heads that are connected to a programmable logic controller and power lines through an explosion-proof conduit. The sensor head sends an analog signal (e.g., 4 to 20mA) or a digital signal via a serial port such as RS485 to the controller, or computer, in the control room. These systems are highly flexible and can automatically activate alarms, ventilation, fire suppression and safety lights. Fixed gas detection systems are best suited for situations requiring continuous monitoring of known toxic gases, such as oil refineries. A key advantage of wired systems is the ability to place sensor heads in remote areas and thus eliminate risk to workers."

The RAEGuard family of permanently mounted toxic gas monitors are housed in an explosion- proof enclosure. Sensors deployed in this project will include Lower Explosive Limit (LEL) and Non-Dispersive Infrared (NDIR) for combustible gases as well as electrochemical and photoionization detectors (PID) for monitoring toxic gases and volatile organic compounds (VOCs). RAEGuard monitors are equipped with a local digital display of gas concentration and functional keys for performing calibration.

For more information on RAEGuard, the RAE Systems family of fixed toxic gas sensor solutions please go to www.raesystems.com.

About RAE Systems

RAE Systems is a leading global provider of rapidly deployable sensor networks that enable customers to identify safety and security threats in real time. Products include multi-sensor chemical detection, wireless gas diction, radiation and digital video monitoring networks for homeland security and industrial applications. RAE Systems' products enable the military and first responders such as firefighters, law enforcement and other emergency management personnel to detect, provide early warning and record events that involve weapons of mass destruction and other hazardous materials. Industrial applications include the detection of toxic industrial chemicals, volatile organic compounds and petrochemicals. RAE Systems' products are used by many U.S. government agencies, including the Department of Homeland Security, the Department of Justice, and the Department of State, as well as all branches of the U.S. military, and by numerous city and state agencies. Our end users also include many of the world's leading corporations in the airline, automotive, computer and oil industries. Our products are used in civilian and government atmospheric monitoring programs in over 50 countries. For more information about RAE Systems, please visit www.RAESystems.com.

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