Libya and Petro-Canada Sign Long Term E&P Agreements

Petro-Canada has signed binding heads of agreement with the Libyan National Oil Corporation (NOC) to convert its existing Participation Agreements and old Exploration Production Sharing Agreements (EPSA) to six new EPSA IV agreements.

It is expected that the duration of the new EPSA agreements will be 30 years, well beyond the expiry dates of the existing agreements. This will enable Petro-Canada to design and implement jointly with NOC the redevelopment of major fields and exploration programs in the Sirte Basin. Under the new agreements, Petro-Canada will pay 50% of all development capital and will receive a 12% entitlement share of production.

"Through these agreements we have achieved our long-standing objective of extending our partnership with NOC in Libya," said Ron Brenneman, Petro-Canada's President and Chief Executive Officer. "Aligned with our strategy to invest in long-life assets, we are developing our Libyan asset base and unlocking its considerable potential."

The redevelopment program for existing fields is estimated to require a total investment of $7 billion US gross. Petro-Canada will pay a signature bonus of $1 billion US in three stages, with the first payment due upon ratification of detailed contracts, which is expected some time in 2008. The signature bonus includes $100 million US for social investment and capability development in Libya.

Petro-Canada estimates that there are gross resources of almost two billion barrels of oil associated with the redevelopment program, which includes pipeline and facility upgrades, development drilling and waterflood expansion.

Petro-Canada's Libyan concessions currently produce approximately 100,000 barrels of oil per day (gross). Under the new agreements, production from the redevelopment program is expected to double over the next five to seven years.

In addition to the redevelopment costs and signature bonus, Petro-Canada also proposes to invest $460 million US over the next seven years for an exploration program in the Sirte region, one of the world's most prolific basins. Seven successes have been achieved from the last nine exploration and appraisal wells drilled there by Petro-Canada's joint venture operator. Success from this program could materially add to reserves and production.