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Pohokura Project Update

Pohokura Project Update

On Friday 5 September 2003, the Pohokura joint venture, consisting of Shell 48%, OMV 35.9%, and Todd Petroleum Mining 16.1%, met to review the progress of Pohokura gas field development studies, the project plan and work program, plus the recent decision of the Commerce Commission to permit, on a conditional basis, the joint marketing of gas.

The joint venture confirmed the work program proposed by the project operator (Shell Todd Oil Services) to achieve a Final Investment Decision (FID) no later than June 2004. The FID, to be confirmed in mid-2004, would result in the commitment of the project to the procurement and construction stage.

The joint venture currently targets field commissioning and the achievement of plateau gas production by mid-2006. However, this schedule is subject to the usual uncertainties that attach to any one billion dollar engineering project in the early stage of definition. Because of this, there is concern in the joint venture with the imposition by the Commerce Commission of the 30 June 2006 deadline on Pohokura commissioning and completion. A failure to achieve the deadline would void the approval for joint marketing of uncontracted gas after that date, unless an extension is granted. This poses a significant additional project risk for those parties seeking to secure project finance.

In view of this risk, imposed by the conditional approval of the Commerce Commission to the joint marketing of gas, the parties to the joint venture are considering the possibility of an appeal of the Commerce Commission’s decision. An appeal may be on a joint or individual basis. The joint venture will need to ensure that the appeal process can be managed expeditiously and in parallel with other scheduled activities without compromising the June 2006 target date to which they are all committed.

The parties have until 30 September 2003 to determine whether to appeal the decision of the Commerce Commission.

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