Lockout on PGS' Petrojarl I Becomes Effective

Petroleum Geo-Services announced today that, as previously reported, its floating production, storage and offloading unit Petrojarl I, producing the Glitne field on the Norwegian Continental Shelf (NCS), was selected by the Norwegian Shipowners Association to be included in a general employee lockout affecting several NCS installations.

Since a resolution to the lockout was not reached by midnight on September 2, 2004, the shut down of the production on the FPSO Petrojarl I has commenced, and the oil production is expected to be shut down completely by early next week.

As previously disclosed, according to the force majure provisions of the Petrojarl I contract, PGS will continue to be compensated, but at reduced levels. Compensation would be reduced up to approximately:

-- $77,000 per day for the first week
-- $95,000 per day from day 8 through day 30
-- $77,000 per day for the following next two months.

Also, as previously stated, PGS could receive a portion of this lost compensation from the Norwegian Shipowners Association's labor conflict compensation program.