press release

Unocal replaces 149 percent of 2003 production 'through the drillbit'; finding and development costs average about $6.90 per BOE

El Segundo, Calif., Feb. 2, 2004 - Unocal Corporation (NYSE: UCL) today said it replaced 149 percent of its 2003 natural gas and crude oil production through discoveries and extensions, improved recovery and revisions.

Unocal's drilling program in 2003 not only replaced production, but added almost enough new reserves to offset the sale of 98 million barrels of oil equivalent (BOE).

At year-end 2003, Unocal's preliminary estimate of worldwide reserves totaled 1,765 million BOE, off slightly from 1,774 million BOE at year-end 2002. Total production for the year was 169 million BOE.

For the year, Unocal's preliminary worldwide costs for new reserves measured as both finding and development (F&D) and finding, development and acquisition (FD&A) costs were approximately $6.90 per BOE. This year's performance represents some of the best yearly metrics for Unocal over the past 5 years.

"We were able to replace nearly all of our production plus the 98 million BOE that we sold as part of our North America restructuring program," said Charles R. Williamson, Unocal chairman and chief executive officer.

Williamson went on to say, "Our portfolio of large development projects and deepwater discoveries has now progressed to a stage where we should see continuing bookings as more contracts are signed and discoveries are approved for development.

"This gives us confidence in our ability to continue to generate very competitive, company-wide F&D performance for the foreseeable future."

Unocal's reserve replacement performance reflects continued strength in legacy areas including Thailand, Pure Resources, Northrock Resources, and Alaska. The company also progressed in commercializing the company's large backlog of discovered oil and gas in Bangladesh and Indonesia.

For Unocal's international operations, FD&A was less than $5.00 per BOE. In 2003, Unocal booked new reserves at Moulavi Bazar in Bangladesh upon the signing of a new gas sales agreement and at Ranggas in the deepwater Kutei Basin offshore Indonesia, where field appraisal has led to advancing the project.

FD&A for North America, excluding deep water, was about $9.90 per BOE, which is above the stated goal of $8.00 per BOE for those businesses. The Alaska, Pure Resources and Northrock programs met or exceeded the $8.00 goal, and Unocal will continue to fund those programs at a comparable level in 2004.

"The exploration program in the Gulf of Mexico (GOM) shelf, including the deep shelf program, had unacceptable returns as a result of lower than expected discovery volumes and drilling cost overruns," Williamson said. Overall exploration capital spending for the GOM shelf will be cut by approximately 50 percent from the 2003 level.

Unocal booked 7 million BOE in the deepwater GOM for Mad Dog, which will be on production in 2005, and K2, which is planned for development.

During 2003, the company added proved reserves of 203 million BOE from discoveries and extensions. Unocal also made upward revisions of 43 million BOE because of reservoir performance. This was offset partially by 4 million BOE in negative price revisions attributable to changes in crude oil prices for reserves held under production-sharing contracts (PSCs).

About 50 percent of Unocal's proved reserves are in the Proved Undeveloped (PUD) category. These relate to discovered reserves near existing infrastructure or large development projects that are currently underway. Roughly 40 percent of the PUDs are related to specific projects such as deepwater developments in the GOM and Indonesia, and Unocal's interest in the Azerbaijan International Operating Company (AIOC). The majority of the remaining PUDs relate to Thailand. Unocal delineates undeveloped reserves there to meet the growing long-term sales commitments and to respond to market opportunities as the swing producer. The company does not spend the capital to develop those reserves until deliverability is required by the market (just-in-time development). In 2003, Unocal Thailand, Ltd., reached preliminary agreement to extend the gas sales agreements and increase Unocal's net daily contract quantity by approximately 50 percent to 920 million cubic feet per day beyond 2006.

In addition to its proved reserve base, Unocal Thailand has nearly 3 trillion cubic feet of unbooked discovered gas resources, as well as significant possible volumes.

The company also said that the 2003 reserves did not include resources from a number of previously announced major discoveries - Gehem, Gula and Gendalo in Indonesia; Vietnam; Arthit in Thailand; Bibiyana in Bangladesh; Xihu Trough in China; and the Champlain, Trident, St. Malo, and Puma deepwater GOM discoveries, which are all in active appraisal.

Reserve due diligence

Unocal employs an extensive auditing process to assure quality reserve reporting. Once the reserves are calculated and reviewed by the individual business unit team of degreed engineering and geology professionals, the results are then reviewed by a corporate team. For 2003, more than three-fourths of Unocal's reserves were reviewed by the corporate team, which is composed of individuals who have no management ties to the business units nor do they have any reserve volume goals. In addition, the auditing team includes one member from an independent third party engineering firm.

Unocal's auditing team examines the existing reserve base on a rotating basis once every three years.

All material changes in reserves each year are reviewed by the company's management committee.

As a matter of policy, Unocal does not book reserves without management's commitment to develop the project, which requires an established market for the resource.

Reserve details

Details of Unocal's preliminary year-end 2003 exploration and production segment reserves and cost information are available as an appendix to this news release that is posted on the Unocal web site.

About Unocal Corporation

Unocal is one of the world's leading independent natural gas and crude oil exploration and production companies. The company's principal oil and gas activities are in North America and Asia.

For additional information about Unocal's global activities, visit the company's web site at

Unocal preliminary estimated proved reserves of crude oil and natural gas (MMBOE)

As of December 31, 2002 1,774
Discoveries and extensions 203
Improved recovery 10
Revisions 39
Purchases 6
Sales (98)
Production (169)
As of December 31, 2003 1,765

This news release contains certain forward-looking statements about proved reserves, production and costs. These statements are not guarantees of future performance. Proved reserves, as defined by the U.S. Securities and Exchange Commission (SEC), are the estimated quantities of crude oil, natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved reserve quantities exclude royalty and other interests owned by others. The statements are based upon Unocal's current expectations and beliefs and are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the forward looking statements. Actual results could differ materially as a result of factors discussed in Unocal's 2002 Annual Report on Form 10-K and subsequent reports filed with the U.S. Securities and Exchange Commission. Unocal undertakes no obligation to update the information in this news release.

Investors are urged to consider closely the disclosure in Unocal's 2002 Annual Report Form 10-K and other reports (SEC File No. 1-8483). Copies of the company's SEC filings are available from the company by calling 800-252-2233 or from the SEC by calling 800-SEC-0330. The reports are also available on the Unocal web site.

Updated: February 2004