Conoco and Petronas Sign Memorandum of Understanding to Acquire Statoil's Share of Malaysia Refinery

Business Wire, Feb 27, 2001

Business/Energy Editors

HOUSTON--(BUSINESS WIRE)--Feb. 27, 2001

Conoco (NYSE:COCA) (NYSE:COCB) and Petronas, the Malaysian state oil company, today announced they signed a Memorandum of Understanding (MOU) with Statoil to acquire the Norwegian state oil company's 15-percent share of the joint-venture Melaka refinery.

Conoco currently holds a 40-percent interest in the 100,000-barrel-per-day refinery, which is south of Kuala Lumpur. Petronas operates the facility and currently holds a 45-percent interest. The split of acquired shares will be announced at a later date. The Sales Purchase Agreement is expected to be signed by the end of March 2001.

"The Melaka refinery is the anchor for Conoco's downstream operations in Asia Pacific," said Jim Nokes, Conoco executive vice president, refining, marketing, supply and transportation. "Acquiring the additional interest in this state-of-the-art facility enhances our overall investment in the region and positions our retail marketing operations for profitable growth as demand increases."

Operational since early 1999, the Melaka refinery produces a full range of refined petroleum products and utilizes Conoco's proprietary delayed coking technology to economically upgrade low-cost feedstocks into higher-margin products, making it one of the most economically competitive refineries in the region. Melaka's refining process is designed to maximize diesel production in response to industry demand, as well as meet market needs for motor fuel and specialty products. The world-class facility is capable of producing fuels that meet the toughest environmental standards, allowing Conoco and its partners to export clean fuels to global markets.

The Melaka refinery significantly improved operations in 2000, and key processing units ran at record production rates. The refinery successfully completed its first major turnaround last November and is set to run the next several years with no interruption. This will enable Conoco and Petronas to further improve yield, energy optimization and reliability, resulting in potential improvement in earnings over the next several years with minimal investment.

"Statoil has been an excellent partner. The three companies have worked well together since the joint venture was formed seven years ago, and we understand Statoil's sale of its interest in the Melaka refinery is part of a strategic shift in the company's portfolio as it prepares for privatization," said George Paczkowski, Conoco president, refining and marketing, Asia Pacific. "As Conoco and Petronas move ahead, we'll explore opportunities for further synergies and improved efficiencies, and we look forward to building on a successful partnership."

Conoco entered Asia Pacific's retail market in 1993 and now owns and operates more than 115 Conoco Jet-branded retail stations in Thailand. Conoco will open several ProJET-branded retail sites in Malaysia in early 2001 as part of a joint-venture with leading Malaysian conglomerate, Sime Darby.

Combined with Conoco's significant upstream presence in Asia Pacific, including offshore assets in Malaysia, Indonesia, Vietnam and Cambodia, the company is positioned to make Southeast Asia a fourth core business area, Nokes said.

Conoco is a major, integrated energy company active in more than 40 countries.

This release contains forward-looking statements about Conoco's operations, business plans and potential earnings. These statements are not guarantees of future performance, involve certain risks, uncertainties, and assumptions that are difficult to predict, and are based upon assumptions as to future events that may not prove accurate. Actual outcomes and results may differ materially from what is expressed herein. Among the factors that could cause such differences are changes in crude oil and natural gas prices; changes in product margins; changes in governmental regulations; potential disruption or interruption of the operation of the company's production facilities due to accidents, technical difficulties or political events; and other matters detailed in Conoco's publicly available filings with the Securities and Exchange Commission.