Triton Energy signs gas sales agreement from Block A-18

Triton Energy Limited announced the signing of a gas sales agreement providing for the sale of natural gas from Block A-18 in the Malaysia-Thailand Joint Development Area (JDA) in the Gulf of Thailand.
The Block A-18 gas reserves represent one of the largest gas discoveries world-wide this decade and are one of Triton's three core assets. The signing in Alor Setar, Kedah, Malaysia was witnessed by the Prime Ministers of Malaysia and Thailand, Dato Seri Dr. Mahathir Bin Mohamad and Mr. Chuan Leekpai, respectively.
Buyers of the gas on a 50/50 basis are the Petroleum Authority of Thailand (PTT), the Thailand national oil company, and Petronas, the Malaysian national oil company. In addition to Triton Oil Company of Thailand, which is equally owned by Triton and Arco, sellers of the Block A-18 gas are Petronas Carigali (JDA) Sdn. Bhd., a subsidiary of Petronas, and the Malaysia-Thailand Joint Authority, the statutory body representing Thailand and Malaysia in JDA petroleum operations.

JamesC. Musselman, President and CEO of Triton, said: "With the gas sales agreement signed, we and our field partners will concentrate our efforts on the development of the first phase of Block A-18's substantial gas resource. In total, we expect the first phase to generate in excess of $ 5 bn in gas sales (gross) over the project's life and produce approximately one fourth of the block's estimated resource base of 10 tcf of natural gas equivalent.
"With strong cash flow coming from our Cusiana and Cupiagua oil fields, the JDA gas sales agreement signed and development underway, and a potentially major discovery in Equatorial Guinea set for fast-track development, I believe Triton is well positioned for dramatic growth," Mr. Musselman added.
The first tranche of gas production, 390 mm cfpd, will be transported onshore via pipeline to Songkhla, Thailand for additional processing and further distribution. The gas purchasers are responsible for the pipelines and onshore processing facilities.

The sales agreement incorporates commercial terms previously agreed to by the parties and specifies a formula for determining the price of gas delivered to the buyers at the offshore production platform. Under the formula, the base price is $ 2.30 per million British thermal units (mm Btu).
The actual sales price, which will be calculated and payable in U.S. dollars, will be adjusted annually by a formula that includes U.S. dollar denominated inflation and fuel-oil price indices. The sellers have granted the buyers a 5 % price discount after the delivery of 500 bn cf. The price discount will be increased to 10 % after a cumulative delivery of 1.3 tcf. The discounts are intended to give the buyers incentives to increase their purchases.

The gas contract calls for first production in the 2nd Quarter of 2002 and will continue for at least 20 years. The exact date will be determined following the approval of an environmental impact assessment associated with the buyers' pipeline and processing facilities. The contract calls for a daily contract quantity of 390 mm cfpd of gas expected to equal approximately 372 bn Btu per day. The agreement includes a take-or-pay provision that specifies that the buyers must take a minimum of 90 % of the annual daily contract quantity and the sellers must be able to deliver a maximum of 110 % of the daily contract quantity.

Initial development plans call for production from the Cakerawala Field, which in 1995 became the first field discovered on Block A-18. The plan includes three wellhead platforms, a living-quarters platform, a processing platform with facilities for gas production, a riser/compression platform, a floating storage and offloading vessel, and 35 development wells. The ultimate configuration of the facilities, however, is subject to the EPC (engineering, procurement and construction) design competition currently underway.
The EPC contract is scheduled to be awarded in the first quarter of 2000. Carigali-Triton Operating Company (CTOC) has begun field development work and awarded several contracts for long lead-time equipment, including CO2 removal, structural steel, refrigeration, power generation and gas compression.
Triton Oil Company of Thailand and Petronas Carigali are each responsible for 50 % of the costs. Arco will carry both Triton's and Arco's share of the project's cost up to $ 377 mm or first gas, whichever comes first.

The gas sales agreement encompasses the purchase of all of Block A-18's natural-gas resource base, which CTOC, the operator of Block A-18, estimates to be approximately 10 tcf of natural gas equivalent, based on discoveries to date. Timing of gas delivery beyond the first phase has yet to be determined. The block's current gas resource base ultimately could support gas production of more than 1 bn cfpd.

In April 1994, Triton and Petronas Carigali signed production sharing and related contracts to explore and develop hydrocarbons on Block A-18 in the Malaysia-Thailand Joint Development Area. The companies formed Carigali- Triton Operating Company (CTOC), a joint operating company that is operator of the Block A-18 project and has drilled sixteen successful wells on the block. Equal interests are held in CTOC by Petronas Carigali (JDA) Sdn. Bhd., an exploration and production subsidiary of PETRONAS, and Triton Oil Company of Thailand.
Block A-18, which covers 295,832 hectares (731,000 acres), is located in the northern Malay Basin, approximately 450 km (280 miles) from Kuala Lumpur, Malaysia, and 750 km (465 miles) from Bangkok, Thailand.