press release

Unocal discovers new oil play in deepwater area offshore Indonesia

El Segundo, Calif., June 1, 1998 - Unocal Corporation today said that a delineation well on the deepwater Merah Besar complex East Kalimantan Production Sharing Contract (PSC) area in Indonesia has discovered a new oil-bearing reservoir at shallow depths.

The Hitam Besar-3 well was drilled to a depth of 7,206 feet (2,300 meters) and established the presence of oil in carbonate reservoirs of Upper Miocene/Pliocene age. The well also discovered natural gas in shallower Pliocene sands, similar in age to gas-bearing reservoirs encountered in several earlier Merah Besar wells.

This latest well recorded 41 feet (12.5 meters) of oil pay and 43 feet (13 meters) of gas pay. The well was located 1.8 miles (2.9 kilometers) northwest of the original Merah Besar-5 discovery well, which tested oil at a daily rate of 9,430 barrels of oil and 7.4 million cubic feet of gas from the deeper Miocene sandstone reservoirs earlier this year.

"The discovery of shallow oil in the carbonate reservoir establishes a new geological oil play and shows there is significant additional potential throughout the deepwater East Kalimantan and Makassar Strait PSC areas," said Timothy C. Lauer, president and managing director of Unocal Indonesia Company. "This well demonstrates the migration of oil into shallow formations (less than 4,000 feet, or 1,200 meters, below sea bottom) and provides a third zone for further exploration in Merah Besar and several adjacent areas." This carbonate zone is a new proven play in the Merah Besar area.

The Hitam Besar-3 well was the fifth exploration/extension well drilled on the Merah Besar complex in 39 days, for an average cost of less than $1.5 million each. "The speed and low cost of this program will allow us to assess the potential of all of our deepwater acreage much more efficiently than industry norms," Lauer said.

One well, Hitam Besar-2, discovered oil in the deeper Miocene sandstones, while another well, Putih Besar-3, discovered gas in the shallower Pliocene sands. Wireline tests and samples indicated good quality reservoirs, but no drill stem tests were conducted on the wells. Two other wells, including an aggressive northern step-out from the original Merah Besar-5 discovery well, encountered non-commercial hydrocarbon deposits.

Lauer said that 15 of the 20 wells drilled so far on the deepwater Merah Besar complex have been successful. The Merah Besar area is located on the East Kalimantan PSC and northern portion of the Makassar Strait PSC. Unocal Indonesia is operator of both PSCs. The company has a 100-percent working interest in the East Kalimantan PSC and a 50-percent working interest in the Makassar Strait PSC. Mobil Makassar, Inc., holds the remaining 50-percent working interest.

Based on the latest drilling information, the estimated gross resource potential for Merah Besar is between 90 and 250 million barrels-of-oil-equivalent. This does not include resource estimates for prospects on the new carbonate oil play.

The company plans 7 to 9 additional wells in the next two months to evaluate further the deepwater resources.

In addition, a second deepwater rig is expected later this month to begin exploration on the Makassar Strait PSC in water depths greater than 3,000 feet (914 meters). The company has identified several prospects with even greater potential than the Merah Besar structures. The first well in this deeper water program will be on the Seno prospect.

With the additional information gained from the drilling program, the company intends to submit a plan of development for the Merah Besar area in the fourth quarter 1998. Production could begin by early 2001.

"Our oil and gas production operations in Indonesia have been unaffected by the recent turmoil in Jakarta," Lauer said. "Moreover, we remain committed to expanding production in Indonesia, which is the most practical way of helping Pertamina and the government during this difficult time."

Forward-looking statements about future exploration activities and resource potential in this news release are based on assumptions concerning geology, regulatory actions, economic, market conditions, operational concerns and other considerations. Actual results could differ materially.

Well Targeted zone Results
Hitam Besar-2 Miocene-Pliocene Oil and gas discovery
43 feet (13 m)of oil pay
14 feet (4.3 m) of gas pay
Putih Besar-3 Pliocene Gas discovery
70 feet (21 m) of pay
Hitam Besar-3 Miocene-Pliocene Oil and gas discovery
41 feet (12.5 m) of oil pay
43 feet (13 m) of gas pay
Hijau Besar-2 Miocene Non-commercial
Merah Besar-13 Pliocene Non-commercial

Updated: June 1998