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January 12, 2006

PGS secures tanker for FPSO conversion

Petroleum Geo-Services ASA (OSE and NYSE: PGS) says that its wholly owned subsidiary PGS Production has entered into an agreement to purchase the shuttle tanker Rita Knutsen from Knutsen OAS Shipping for $ 35 million.

PGS Production has developed plans for a conversion of the ship to a Floating Production, Storage and Offloading Unit (FPSO). The vessel is considered as a possible FPSO solution for several upcoming projects, and a conversion will be started when a firm contract for the ship is secured in the market. Rita Knutsen is a double hull vessel of 124.472 dwt, built by the Daewoo shipyard in Korea in 1986.

Until an FPSO contract is arranged, the ship will be operated by Knutsen OAS Shipping on a bareboat agreement that ensures PGS a satisfactory return of capital on the purchase price.

PGS' Chairman of the Board, Jens Ulltveit-Moe is a major shareholder of Knutsen OAS Shipping. In accordance with good governance the Chairman has not in any way been involved in the Board decision making relating to this transaction.

President of PGS Production, Espen Klitzing said:

"This is an important move in our announced international expansion strategy. In today's FPSO market it is crucial to have secured tanker capacity for conversion prior to bidding on potential projects. PGS Production has in the last months scanned the market for suitable tankers and has found Rita Knutsen as the best candidate. We are currently evaluating various opportunities and will be bidding on projects in the near future."