Reduced Production From the Varg Field

Petroleum Geo-Services reports that production from the Varg field, operated by Pertra, a wholly owned subsidiary of PGS, is currently reduced to approximately 15,000 barrels per day. The reduced production results from damage to the main production riser going from the wellhead platform to PGS' floating, production, storage and offloading vessel ("FPSO") Petrojarl Varg that occurred late Friday. Production was then halted, but resumed late Saturday.

Production will continue at a lower rate of approximately 15,000 barrels per day until the main production riser is repaired. PGS has previously announced that oil production on the Varg field was expected to exceed 25,000 barrels per day in the second half of 2004. However, the net effect on PGS income of the reduced revenue from the Varg field will be mitigated by reduced taxes associated with the Norwegian Continental Shelf tax rate of 78%. FPSO Petrojarl Varg producing the Varg field is also expected to receive reduced revenues due to the lower Varg production.

The timing and cost of the riser repairs is currently not known. PGS will provide updated information as it becomes known.

The Varg field is located in Production License 038 (Block 15/12) in the Norwegian sector of the North Sea. Pertra AS is the operator of Production License 038 with 70% interest while co-venturer Petoro AS holds the remaining 30%.