Santos Expands into North Africa

Gulf of Suez, Egypt
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Santos Limited has further expanded its global oil and gas search with the Company's first North African exploration venture.

Santos is investing approximately AU$70 million in a joint eight-well exploration venture over three years in the Gulf of Suez, Egypt, with major US petroleum group, Devon Energy Corporation.

It is the first move by Santos into the North African / Middle East region, the world's largest hydrocarbon province.

Santos said its wholly-owned subsidiary, Santos Egypt Pty Ltd, has agreed, by farm-in, to acquire a non-operated equity position in three exploration Concession Agreements (Concessions), totaling 1,350 square kilometers in the Gulf of Suez, Egypt from Devon Energy, subject to the formal consent of the Egyptian government.

Santos' participation will earn equity interests ranging from 20 percent to 50 percent in the three Concessions, which contain exploration opportunities with a gross unrisked mean resource potential of several hundred million barrels of oil and possibly gas.

The Ras Abu Darag Concession and South East July Concession are offshore blocks located in 40-60 meters of water. The North Zeit Bay Concession is an onshore block and contains Devon's East Zeit Production facilities.

The first well, Khefren 1X is planned to spud in mid July, 2004 in the South East July block.

The move into the North Africa/Middle East region is in line with Santos' previously stated intention to diversify operations through a focus on new ventures in proven hydrocarbon basins outside the Group's current production and exploration areas.

It follows other international moves by Santos in the past month, including an expansion of its Indonesian and USA exploration acreage and prospects and the agreement to acquire additional Indonesian oil and gas assets, following PT Medco's bid for Novus Petroleum.

"This is another significant step for Santos and further builds our international exploration interests", Santos Managing Director, Mr John Ellice-Flint, said.

"The Gulf of Suez is a prolific hydrocarbon area with important remaining exploration potential. The joint venture plans an active drilling campaign commencing mid July," he said.

"Importantly, our targets are close to production facilities, which will enable accelerated cycle-times between discovery and production."

Mr. Ellice-Flint said it was particularly pleasing to have formed a joint venture relationship with the Devon Energy Corporation, which is one of the largest Gulf of Suez acreage-holders.

"We hope to develop more strategic ventures with Devon," he said.

The acquisition is conditional upon the consent of the Government of Egypt to the assignment and to the transfer of the total available equity in all three Concessions.

The Joint Ventures participants are:

Ras Abu Darag Concession
Ocean Ras Abu Darag Ltd (a wholly owned subsidiary of Devon Energy Corporation) (Operator) 50%
Santos Egypt Pty Ltd 50%

South East July Concession

Ocean South East July Ltd (a wholly owned subsidiary of Devon Energy Corporation (Operator) 50%
Teikoku Oil Suez SEJ Co., Ltd (a wholly owned subsidiary of Teikoku Oil Co.,Ltd.) 30%
Santos Egypt Pty Ltd 20%

North Zeit Bay Concession

Ocean North Zeit Bay Ltd (a wholly owned subsidiary of Devon Energy Corporation (Operator) 50%
Santos Egypt Pty Ltd 50%

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