Unocal Successful Offshore Vietnam

Unocal Corporation (NYSE: UCL) today said that exploration drilling offshore southwestern Vietnam had confirmed the earlier Kim Long natural gas resource in Block B and discovered the Ca Voi (Whale) natural gas field in Block 52/97.

The successful exploration wells are located approximately 175 miles (280 kilometers) west of Ca Mau, Vietnam, in 215-280 feet (65-85 meters) of water.

"The confirmation of a significant gas field at Kim Long gives Vietnam a bright future to fuel development of the Mekong Delta region with clean-burning natural gas," said Randy L. Howard, Unocal's vice president for energy operations for the region. "The additional accumulation at Ca Voi confirms a long-term domestic energy supply and gives Vietnam the confidence to move forward with its gas utilization plans currently under consideration."

Kim Long exploration

Four successful wells in the current drilling program confirmed the natural gas resource in the Kim Long trend, which was discovered in late 1997. Based on this drilling, the Kim Long trend appears to be gas-bearing for more than 21 miles (34 kilometers) over Blocks B and 52/97.

The successful wells drilled on the Kim Long trend so far have averaged net pay of 136 feet (41 meters). Three wells in the trend have been tested: the B-KL-1X flowed 53 million cubic feet of gas per day (mmcfd) from two zones, B-AQ-1X had a maximum calculated flow of 39 mmcfd from three zones and 52/97-AQ-3X flowed 54 mmcfd from five zones.

Ca Voi exploration

A well drilled on the Ca Voi prospect in Block 52/97 resulted in a significant natural gas discovery. The 52/97-CV-1X well encountered 107 feet (32 meters) of net gas pay. This new accumulation is located 10 miles (16 kilometers) west of the Kim Long trend and could be developed in tandem with the Kim Long field, taking advantage of shared facilities.

Future plans

Unocal subsidiaries and the co-venturers recently signed a letter of intent (LOI) with PetroVietnam, the national oil company, that set forth the planned timing of development and anticipated natural gas delivery volumes for Blocks B and 48/95 (also known as Block A) offshore Vietnam. The LOI anticipates gas production from Block B beginning in 2005 at 200 million cubic feet per day and establishes a basis for the negotiation of a gas sales and purchase agreement.

The Kim Long and Ca Voi drilling program confirmed the first trillion cubic feet (tcf) of the total 2-8 tcf in gross unrisked resource potential for the three blocks offshore Vietnam.

Unocal and its co-venturers

Unocal and its co-venturers have signed two production-sharing contracts (PSCs) with PetroVietnam covering approximately 4.15 million acres (16,800 square kilometers) and comprising Blocks B, 48/95, and 52/97 offshore southwestern Vietnam. Unocal subsidiaries serve as operator for all three blocks.

Unocal Vietnam Exploration, Ltd., and its Block B and 48/95 co-venturers are in the process of purchasing the interest originally held by Repsol Exploracion Vietnam S. A. of Spain. PTT Exploration and Production Public Company Limited of Thailand (PTTEP) is also joining the venture. At the conclusion of those transactions, Unocal will hold a 49.86-percent working interest in the PSC; Moeco Vietnam Petroleum Co., Ltd., a subsidiary of Mitsui Oil Exploration Co., Ltd., will hold 30.14 percent; and PTTEP Kim Long Vietnam Co., Ltd., a subsidiary of PTTEP, will hold 10 percent. PetroVietnam PSC Supervising Co., a subsidiary of PetroVietnam, will hold 10 percent once final government approval is received. PetroVietnam has an option to participate with an additional 15 percent interest. If exercised, PetroVietnam's option would reduce all participants' working interests proportionately.

PTTEP also expects to join the investors in the Block 52/97 PSC. Unocal Southwest Vietnam Exploration & Production, Ltd., will hold a 62-percent working interest, while Moeco Southwest Vietnam Petroleum Co., Ltd., will hold 28 percent and PTTEP Southwest Vietnam Co., Ltd., a subsidiary of PTTEP, will hold 10 percent after PTTEP's entry receives final government approval. PetroVietnam has an option for a 30-percent interest. If exercised, Unocal's, Moeco's and PTTEP's interests would be reduced proportionately.