press release

Unocal Global Trade, Public Energy Authority of Kentucky sign $120 million, 10-year natural gas deal

Atlanta, Oct. 27, 1998 - Unocal Global Trade, the energy trading and marketing unit of Unocal Corporation, today said it has signed a 10-year natural gas sales agreement to supply 72 billion cubic feet of gas to the Public Energy Authority of Kentucky Trust (PEAK), a Kentucky municipal joint action agency.

PEAK will make a nonrefundable advance payment of $120 million on Jan. 1, 1999. Unocal will also receive a fixed monthly reservation fee from PEAK over the life of the contract.

Under the agreement, Unocal Energy Trading Inc., a Unocal subsidiary, will deliver to PEAK approximately 23 million cubic feet of gas per day (mmcf/d) during the winter season, which extends from November 1 through March 31, and approximately 17.5 mmcf/d during the summer season into the Texas Gas Transmission pipeline.

"Extended forward sales contracts like ours are rare in today's volatile energy market," said Gerald Ballinger, PEAK chairman. "Our relationship with Unocal Global Trade will help us manage that volatility and secure reliable, long-term gas supplies at competitive prices - which translate directly into customer savings."

PEAK provides natural gas supply and related services to its member municipalities, the cities of Carrollton and Henderson, Ky. PEAK is a membership organization open to cities, towns, utility districts, gas authorities and other public entities throughout the state of Kentucky.

"I expect PEAK will undertake similar transactions in the future as new municipalities and utility districts join our organization," Ballinger said.

Marlin Jiranek, Unocal Global Trade director of Natural Gas Growth & Power, said, "We're actively involved in the major energy markets and have a firm grasp and understanding of what's happening in each. This allows us to provide domestic energy consortia like PEAK with the energy resources their customers need at the best possible price."

"Although the gas will be initially sold on a fixed-price basis, Unocal Global Trade and PEAK both plan to execute matched financial swaps that will convert the fixed price to a market-sensitive Inside FERC Gas Report Index pricing structure," said William T. Wilson, president of Unocal Global Trade. "This eliminates long-term market fixed-price risk for both parties."

Unocal Global Trade was formed in September 1997 to consolidate Unocal's worldwide crude oil and natural gas commodity trading activities. In addition to trading and marketing Unocal's crude oil and natural gas production, Unocal Global Trade provides outsourced marketing services to Unocal's joint venture partners, royalty owners, and other unaffiliated oil and gas producers.

During 1998, Unocal Global Trade is marketing about 1.6 billion cubic feet of gas per day in North America and about 200,000 barrels of crude oil worldwide. Unocal Global Trade is headquartered in Sugar Land, Texas, with additional trading offices in Singapore and Calgary. For more information about Unocal Global Trade, visit the unit's web site.

Updated: October 1998