press release

Texaco Press Release - Texaco Signs Agreement to Acquire 45 Percent Interest in Philippine Natural Gas Project

Project Expected to Add 140 Million Barrels of Oil Equivalent to Texaco's Reserves in 1999


WHITE PLAINS, N.Y., Oct. 21 - Texaco announced today it has signed an agreement to acquire a 45 percent interest in the Malampaya Deep Water Natural Gas Project, which is wholly-owned by Shell Philippines Exploration B.V. (SPEX) and Shell Philippines LLC (SPL) and located in the Philippines. Shell will continue as the operator. The transaction is subject to approval by the Philippine Government.

The Malampaya field is located 50 kilometers northwest of the Philippine Island of Palawan. Discovered in 1992, it is estimated that over 3 trillion cubic feet of gas and 120 million barrels of condensate will be recovered from this resource. Malampaya is on schedule to deliver first gas by the end of 2001, and expected to achieve gas production rates of 360 million cubic feet per day by the year 2002. The project is expected to add 140 million barrels of oil equivalent to Texaco's proved reserve base and increase the company's international gas reserves by 30 percent by the end of 1999.

In making the announcement, Texaco Inc. Senior Vice President and President of Worldwide Exploration and Production John J. O'Connor stated, "Malampaya represents a significant addition to Texaco's portfolio of assets. It further underscores Texaco's strategy of pursuing projects that provide for long-term growth, strong near-term earnings, and cash flow performance."

The Malampaya development was designed as an integrated natural gas to power project. Commercial agreements for the project were signed in 1998, launching the largest industrial undertaking in the history of the Philippines. The Shell/Texaco portion of the project includes the installation and operation of deep water gas wells, along with extensive onshore and offshore production facilities and a 500-kilometer subsea pipeline.

Under the terms of 22-year supply agreements, the Malampaya Natural Gas Project will provide gas to three new gas turbine power plants on Luzon Island. Two of the plants are currently under construction and will generate 2,200 megawatts of electricity. Combined the plants will provide 2,700 megawatts of power generation capacity for the Philippines. These supply contracts are an integral part of the Malampaya gas-to-power development. However, Shell and Texaco have no ownership in these power generation projects.

"Both Texaco and Shell have an impressive track record in the successful development and application of deepwater technology. This world-class partnership will dedicate the ingenuity and financial strength needed to provide the Philippines with a clean, indigenous fuel for electrical power generation. The agreement also establishes a strategic partnership between Texaco and Shell providing for commercial alignment for future development of gas related businesses in the Philippines," O'Connor added.

Phil Watts, Managing Director, Royal Dutch/Shell Group of Companies and Chief Executive Officer Exploration and Production said, "Malampaya is a world class, leading edge project, which will provide clean power and strong economic benefits for the Philippines and the Filipino people. We are proud to be the operator of this landmark development. It is a very large project by any standards, which will provide the platform for considerable longer-term gas supply expansion in the Philippines and we have joined with a strong partner in this venture. Texaco is a global player with an established track record in major exploration and production projects around the world, and I am delighted to welcome them on board."

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Faye Cox - Texaco, New York - 914 253-7745
Nicole Hodgson - Texaco, London - +44 171 719 4477
James Herbert - Shell International - +44 20 7934 2713

This press release contains forward-looking statements about expectations for oil and gas reserves and power generation in the Malampaya Project. Actual production and power generation may prove to be smaller than currently estimated, and may be different than currently expected, if business conditions, such as energy prices, world economic conditions, demand growth, and inventory levels, change. For a further discussion of additional factors that could cause actual results to materially differ from those in the forward-looking statement, please refer to the section entitled "Forward-Looking Statements and Factors That May Affect Our Business" in Texaco's 1998 Annual Report on Form 10-K.

Updated: October 1999