Bayu-Undan Gas Development Plan Approved

ConocoPhillips reports that the gas development plan for the Bayu-Undan project has been approved by the Timor Sea Designated Authority. The project participants have unanimously approved the gas development phase of the project and, with receipt of this final approval, will proceed immediately with engineering, procurement and construction for the three million ton per year Darwin LNG Project.

"This landmark approval by the Timor Sea Designated Authority marks a significant event for the further development of reserves in the Timor Sea area," said Stephen Brand, president of ConocoPhillips 91-12 Proprietary Limited. "This project will have positive impacts for all the stakeholders in the region and specifically for Timor-Leste, Australia and the Northern Territory. ConocoPhillips appreciates the support that all of the stakeholders have provided during this approval process."

Bayu-Undan is a world-class gas condensate field that has been fully appraised and contains estimated recoverable hydrocarbons of 400 million barrels of condensate and liquefied petroleum gas (LPG) and 3.4 trillion cubic feet of natural gas. The field straddles production sharing contract areas 03-12 and 03-13 in the Joint Petroleum Development Area between Timor-Leste and Australia. It is located in 80 meters of water about 250 kilometers south of Suai, Timor-Leste, and 500 kilometers northwest of Darwin, Australia.

The US$1.5 billion gas development project will involve a gas pipeline from Bayu-Undan to Darwin and a liquefied natural gas (LNG) facility located at Wickham Point, Darwin. The LNG plant will utilize ConocoPhillips' proprietary Optimized Cascade LNG Process, which is also used at a company-operated LNG plant in Kenai, Alaska, and in other projects around the world. The first LNG cargo is scheduled for delivery in early 2006.

Darwin LNG Pty Ltd, currently a ConocoPhillips affiliate but soon to be owned by all project participants, signed a Heads of Agreement (HOA) in early 2002 with The Tokyo Electric Power Company, Incorporated (TEPCO) and Tokyo Gas Co., Ltd. (TG) detailing terms for the sale of three million tons per year of LNG. The agreement covers a 17-year period and commits nearly 100 percent of the proven reserves of this field. The approval of the development plan by the Timor Sea Designated Authority satisfies the remaining condition precedent necessary for the HOA to have binding effect and for the project to proceed.

As previously announced in early 2002, ConocoPhillips will sell Phillips Petroleum Timor Sea Inc. to TEPCO and TG, which will result in the Japanese companies owning 22.5 percent in PSC 03-13 which currently equates to a 10.08 percent interest in the unitized Bayu-Undan field, pipeline and the LNG facility.

The project participants previously approved the gas recycle phase of the development in late 1999 and received approval of the original gas recycle project development plan in early 2000. The Bayu-Undan gas recycle project is expected to begin production of condensate and LPG in 2004.

ConocoPhillips is operator of the Bayu-Undan project, with a current controlling interest of 64.2 percent. Co-venturers' current participating interests include: Santos and STOSY, 11.8 percent; INPEX, 11.7 percent; and Eni Australia, 12.3 percent.