|Subject: AU: Darwin gas pipeline back on as
East Timor backs off
See: Phillips Petroleum Press Release http://www.phillips66.com/newsroom/NewsReleases/rel370.html
The Weekend Australian
December 22, 2001, Saturday
Darwin gas pipeline back on as East Timor backs off
DEVELOPMENT of a $1.5 billion gas pipeline to Phillips Petroleum's Bayu-Undan gasfield in the Timor Sea will go ahead after the US energy giant finally reached agreement with East Timorese authorities over project taxes.
Phillips shelved plans for the 550km pipeline to Darwin in July, after East Timor's interim authorities indicated a further $1 billion in taxes would be clawed back over the project's 20 year life.
The project was already set to become East Timor's biggest money spinner, generating $7 billion in royalties over two decades.
The deferral effectively killed plans to co-develop Bayu-Undan with Woodside Petroleum's bigger Sunrise fields and build a $6.8 billion liquefied natural gas plant onshore at Darwin.
It also threatened to sink a memorandum of understanding to supply US energy group El Paso with $US20 billion worth of LNG over 20 years.
But after months of exhaustive talks, Phillips yesterday said East Timor's Council of Ministers had endorsed a tax and fiscal package that would allow Bayu-Undan to proceed.
"This marks an historic day in the establishment of the Timor Sea as an important emerging gas development area," Phillips president Stephen Brand said. "We now await ratification of the agreement by Australia."
The agreement met all the investment criteria sought by the Bayu-Undan partners "at the same time maximising revenues to East Timor" .
Once the agreement has been formalised, the project partners have committed to develop onshore infrastructure needed by the project and the people of East Timor.
In particular, the partners have promised to start work immediately to upgrade the existing airport at Baucau, to make it a suitable as a staging point for work on the Bayu-Undan project, The partners have also committed to building commercial port facilities.
Similarly, training programs for "general needs and community healthy" will be offered to the local population.
Bayu-Undan has estimated reserves of 400 million barrels of condensate and 3.4 trillion cubic feet of gas.
The $2.8 billion phase one gas recycling project remains on track to produce 105,000 barrels of condensate per day from early 2004, while the El Paso agreement calls for 4.8 million tonnes of LNG to be supplied from 2005.
Phillips owns 58.6 per cent of the project, while Santos holds 11.8 per cent, Japan's Inpex owns 11.7 per cent, Kerr McGee Corp has 11.2 per cent, and Agip the remaining 6.7 per cent.
December 21, 2001, Friday
BARTLESVILLE, Okla., Dec. 21, 2001
Phillips Petroleum (91-12) Pty Ltd, a subsidiary of Phillips Petroleum Company (NYSE: P), 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 in relation to:
-- 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 (STO (ASX) and STOSY (NASDAQ: ADR)) (11.8 percent), Inpex (11.7 percent), Kerr-McGee Corp. (11.2 percent), and Agip (6.7 percent).
Cautionary Statement for the Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements about Phillips Petroleum (91-12) Pty Ltd, a Phillips subsidiary, and its agreement with the East Timor government on the tax and fiscal policy for the Bayu-Undan gas development. Where, in any forward-looking statement, the company expresses an estimate, potential expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that the statement of expectation or belief will result or be achieved. The actual results may be affected by a variety of risks, which could cause the stated expectation or belief to differ materially. Some of the important risk factors, but not necessarily all such factors that may cause expectations or results to differ, are: the lack of ratification of the agreement by the government of Australia; the finalization of gas sales agreements on acceptable commercial terms and the timing thereof; construction of pipelines and other facilities required for the gas development; and the price of natural gas. Additional information concerning factors that could cause actual results to differ materially are contained in the company's reports filed with the Securities and Exchange Commission ("SEC"), which are incorporated herein by reference. Copies of the company's filings with the SEC are available free by calling (918) 661-3700. These reports are also available through the Company's web site at http://www.phillips66.com.
CONTACT: Phillips Petroleum Company Australia Media: Jim Godlove, 08-8981-8666 U.S. Media: Rich Johnson, 918/661-9326 Investors: Clayton Reasor, 212/207-1996
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