Phillips Gets Go-Ahead for Bayu-Undan Development Project

Phillips Petroleum (91-12) Pty Ltd, a subsidiary of Phillips Petroleum Company, and its co-venturers in the Bayu-Undan field welcome the decision by the East Timor Council of Ministers to endorse the understanding on a tax and fiscal package that will allow the Bayu-Undan gas development in the Timor Sea to proceed.

"This marks an historic day in the establishment of the Timor Sea as an important emerging gas development area," said Stephen Brand, president of Phillips Petroleum (91-12) Pty Ltd. "We now await ratification of the agreement by Australia so we can proceed with finalizing gas sales arrangements that will secure project development."

Brand said that the agreement is good for all stakeholders and is especially important to the emerging nation of East Timor.

"It was reached after a number of meetings between representatives of East Timor's newly elected government and Phillips in which the parties developed a shared vision," Brand said. "This agreement meets the Bayu-Undan participants' investment criteria while at the same time maximizing revenues to East Timor."

Brand added: "As long-term partners with East Timor, the Bayu-Undan participants also see their ongoing investment in economic and social infrastructure as a major part of securing a better quality of life for the people of East Timor."

After formalization of the arrangements, Phillips and co-venturers will develop certain onshore infrastructure that can support the operations at Bayu-Undan field and also meet the needs of East Timor. These onshore infrastructures are a multi-user port and airport infrastructure; training programs addressed to general needs; and community health.

The first of several infrastructure initiatives will be implemented immediately with the decision that the airport facility at Baucau, East Timor, will be used as the staging location for offshore air support and transportation for the Bayu-Undan field. The Bayu-Undan co-venturers will focus their initial investment on upgrading terminal facilities, transit accommodations and hangar space.

The Bayu-Undan field contains estimated reserves of 400 million barrels of condensate and liquefied petroleum gas and 3.4 trillion cubic feet of natural gas. The field is located in 80 meters of water about 500 kilometers northwest of Darwin, Australia, and 250 kilometers south of Suai, East Timor. The Bayu-Undan Gas Recycle Project, which was approved by the Timor Gap Joint Authority in early 2000, is expected to begin full commercial production in early 2004.

Phillips is operator of the Bayu-Undan project, with a controlling interest of 58.6 percent. Co-venturers and their initial participating interests include Santos with 11.8 percent, Inpex with 11.7 percent, Kerr-McGee Corp. with 11.2 percent, and Agip with 6.7 percent.