Bayu-Undan Project Achieves Key Milestones

Santos Limited announces the achievement of two significant milestones at the Bayu-Undan project with the flowing of first gas from the Bayu-Undan gas and liquids field.

The project has successfully opened two wells for production as part of the commissioning and start-up procedures for the Wellhead Platform Number1. In addition, 1000 metric tons each of propane and butane have also been loaded onto the Liberdade Floating Storage Offtake vessel to pre-cool the LPG storage tanks in advance of LPG production from the field.

"The completion of these major events over the holiday period represent important milestones in the offshore completion program," Santos' Managing Director, Mr. John Ellice-Flint, said today.

"Bayu-Undan remains on schedule for first liquids production in April 2004 and this latest achievement gives us increased confidence we will successfully deliver commercial liquids production in coming weeks."

Santos, with a 10.6 percent interest, is the only Australian-owned company involved in the world class project which is located in the Timor Sea. ConocoPhillips with a 56.7% interest operates the Bayu-Undan project.

The project's first stage - due to come on stream in April 2004 at an estimated cost of US$1.8 billion - is the Gas Recycle (Liquids) Project which involves the stripping of Natural Gas Liquids (condensate and LPG) from the Bayu-Undan field's gas stream and re-injecting the residual gas.

The second stage Liquefied Natural Gas (LNG) development involves transporting the residual gas to Wickham Point, Darwin in the Northern Territory and processing into LNG for export to Japan. The LNG project is estimated to cost around US$1.5 billion with production to commence in the first half of 2006.

Interests in the total Bayu-Undan project are ConocoPhillips as operator with56.72%; ENI with 12.04%; Santos Group with 10.64%; INPEX with 10.52%; Tokyo Electric Power Company, Incorporated/Tokyo Gas Co., Ltd. with the remaining10.08%.

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