Project Status

21ST December 2001

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Phillips Announces Agreement with East Timor On Bayu-Undan Gas Development.

Perth, WA, 21 December 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 Understandings 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.”

Dr. 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.”

Dr. 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 formalisation 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).





The contents of this website contain forward-looking statements made by, or on behalf of, Phillips and the other Unit Participants. Neither Phillips nor the other Unit Participants undertake to update or revise any of these forward-looking statements. These include, without limitation, statements relating to operations, plans, strategies, objectives, expectations and limitations. These statements are not guarantees of future performance or result. Rather, due to risks, uncertainties and other factors, actual results may differ materially from those expressed in any such forward-looking statement. The following are certain (but not necessarily all) important risk factors that could cause actual results to so differ:

Plans to drill wells and develop Bayu-Undan are subject to: the ability to obtain agreements or consents between or from co-venturers and governmental authorities; engaging drilling, construction and other contractors; geological, land or sea conditions; world prices for oil, natural gas and natural gas liquids; applicable law and regulatory requirements; and the availability of economical financing.

Estimates of proved reserves, raw natural gas supplies, and project cost estimates have been developed using the latest available information and data, and recognized techniques of estimating, including those prescribed by the U.S. Securities and Exchange Commission, generally accepted accounting principles and other applicable requirements.

Please note that all references to Phillips or Phillips Petroleum on this page refer to Phillips Petroleum (91-12) Pty Ltd as Unit Operator for the Bayu-Undan development, except as specifically mentioned otherwise.

Copyright 2001 Phillips Petroleum (91-12) Pty Ltd. All rights reserved.
Updated 08/06/04