Kerr-McGee Approves Bohai Bay Development

Kerr-McGee Corp. announced that its Board of Directors approved the development plan for its discoveries on Block 04/36 in Bohai Bay, China. The development is subject to approval by the Ministry of Foreign Trade and Economic Cooperation and Kerr-McGee's partners China National Offshore Oil Corporation and Sino-American Energy Corp., a wholly owned subsidiary of Ultra Petroleum. Kerr-McGee operates Block 04/36 with an 81.82% foreign contractor's interest.

The development includes the exploitation of the CFD 11-1, CFD 11-2 and CFD 2-1 fields using a centrally located, leased floating production, storage and offloading (FPSO) facility, along with fixed platforms that will act as drilling locations for the dry wellheads. The FPSO will be located in 75 feet of water, approximately 50 miles from shore. Fabrication of the FPSO, which will have the capacity to process in excess of 60,000 barrels of oil per day and 1 million barrels storage capacity, is expected to take place in China.

"Consistent with our growth strategy, this marks the beginning of the development of a new core area for Kerr-McGee," said Luke R. Corbett, Kerr-McGee chairman and chief executive officer. "With five Bohai Bay discoveries to date and a number of additional identified prospects within our three operated licenses, we are creating an infrastructure that will allow us to develop future discoveries in an expeditious and cost-effective manner."

Kerr-McGee estimates recoverable reserves in the area to be in excess of 150 million barrels. With government and partner approval of the development program, Kerr-McGee expects initial production by the end of 2004, with peak production projected to exceed 50,000 barrels per day by mid-2005.

Kerr-McGee made its first discovery, CFD 2-1 on Block 04/36, in May of 1996. In November of 1999, the company announced the CFD 11-1 discovery on the same block, and the CFD 11-2 discovery was made in May of 2001. The successful exploration program includes two additional discoveries, CFD 12-1 and CFD 12-1S on the adjacent 05/36 block. The company continues to evaluate Block 05/36, which it operates with a 50% foreign contractor's interest, with additional appraisal drilling planned in 2002. In addition, the company expects to drill several exploratory prospects in Bohai Bay in 2002.