Unocal and PTT Reach Agreement on Gas Sales

Unocal Corporation has reached agreement with the PTT Plc. to provide an incentive for incremental natural gas taken above contract production minimums from certain fields in the Gulf of Thailand over a 15-month period.

Unocal Thailand and its co-concessionaires, Mitsui Oil Exploration Co., Ltd., and PTT Exploration and Production Public Company Limited, will pay PTT 638 million Thai baht (US$15 million) as an incentive for PTT to purchase 18.3 billion cubic feet (Bcf) of gas above the contract minimums between July 1, 2001, and Sept. 30, 2002.

The incentive will reduce PTT's cost for these incremental gas volumes by one-third to US$1.66 per thousand cubic feet (Mcf). The incremental gas volumes represent about 4 to 5 percent of the total current production from the Unocal concessions.

Unocal's long-term gas sales contracts will be maintained to ensure that Thailand has a continued supply of low-cost energy.

"This incentive is an effective way to assist the Thai consumer in a period of rising energy prices and great uncertainty," said Randy Howard, president of Unocal Thailand. "At the same time, our long-term contracts maintain an investment climate that enables us to continue the large capital investments required to explore and develop Thailand's oil and gas resources."

The current contract pricing mechanism will continue for all other quantities of gas taken under the contracts. The current daily minimum contract quantity for the four gas sales contracts in Thailand is 905 million cubic feet per day (MMcfd).

The weighted average price for total production, including the incremental volumes, from Unocal's four contract areas for the full-year 2001 is expected to be US$2.38 per Mcf. Gross daily production for full-year 2001 is projected to average 974 MMcfd (Unocal, 571 MMcfd net), versus 1,020 MMcfd (Unocal, 595 MMcfd net) in the first 6 months. Unocal's preliminary net production in the third quarter ending Sept. 30, 2001, was 577 MMcfd, down 74 MMcfd from the previous three months.

The gas sales prices under the contracts are based on the trailing average prices of fuel oil.