Transaction with Premier

Fusion Oil & Gas PLC
28 May 2003





                              Fusion Oil & Gas plc



                          ('Fusion' or 'the Company')



                Multiple Asset Transaction with Premier Oil Plc



Fusion today announces that it has entered into an agreement with Premier Oil
plc ('Premier') in relation to West African licence interests in Mauritania,
Gabon, Saharawi Arab Democratic Republic (SADR) and Guinea Bissau.



This transaction reflects Fusion's strategy to maximise value prior to onset of
development expenditure, whilst simultaneously accelerating its drilling
programme and maintaining shareholder gearing to future exploration success
across the whole portfolio.



The key elements of this transaction, which will be subject to the notification
or approval of the respective Government Ministries and entry into further
documentation, are as follows:



Fusion will receive a royalty interest over all future production from its two
Mauritanian offshore blocks, including existing discoveries, in exchange for
transferring ownership of its Mauritania licence holding companies to Premier.
At an average oil sales price of between US $22 and US $25 per barrel, the
Chinguetti Field alone is expected to generate approximately US $13 million in
royalty revenue over the life of the field.



Fusion will, in addition, receive from Premier an immediate cash consideration
of US $10 million, and additional payments in the event of further commercial
exploration successes in the Mauritanian blocks.



Premier is to acquire an interest in the two Fusion operated Gabon licences in
return for funding near term exploration drilling anticipated in late 2003 or
early 2004.



Fusion is to grant Premier the option to acquire an interest in any exploration
licence awarded to Fusion in the SADR under its existing Technical Co-operation
Agreement in exchange for funding initial exploration activity on a promoted
basis.



Premier is to grant Fusion the option to acquire an interest in two licences
offshore Guinea Bissau after the completion of the next exploration well on each
licence.



Through this and previous transactions, the Company is well positioned for an
active high-impact exploration drilling programme across its portfolio over the
next 18-24 months, during which time it will have direct and indirect
participation in the drilling of at least 6 and possibly more than 15
exploration wells.



Alan Stein, Managing Director of Fusion, commented:



'We are delighted to announce this transaction with Premier.  It enables the
Company to deliver an aggressive forward exploration programme, while at the
same time maintaining direct exposure to future success in Mauritania without
the need for further capital investment.'



'We are particularly pleased to be able to continue our long term involvement in
the development of the Mauritanian PSC's, in a manner which fits with our
overall corporate strategy.  Despite the excitement surrounding the Chinguetti
and Banda discoveries, it is our belief that the real value in this project lies
in the as yet undrilled exploration portfolio.  This agreement provides Fusion
with exposure to the drilling of this portfolio at no cost, whilst extracting
value from the existing discoveries.'



'Subject to various farmin conditions and partner/Government approvals, Fusion's
forward drilling programme to the end of 2005 could now include direct and
indirect involvement in potentially more than 15 wells, with the majority of
these being funded by farmout agreements. This drilling activity is anticipated
to commence shortly with indirect participation in 3 to 4 wells in Mauritania,
followed by at least 1 well in Guinea Bissau and 2 wells in Gabon by late 2003
or early 2004.'





More details of the transaction:



Mauritania



Premier will, under these agreements and subject to conditions being satisfied,
acquire from Fusion its 6% working interest in PSC B, which contains the
Chinguetti discovery, and its 3% working interest in PSC A, which contains the
Banda discovery, in exchange for royalty interests in both permits, a cash
consideration and an entitlement to further cash payments on approval of all
future field developments with reserves greater than 50 million barrels.



  • Fusion will receive a royalty payment from Premier for every barrel of oil
    produced and attributable to the current Fusion net working interest. The
    current working interest may, as described in the relevant licence
    agreements, be adjusted pro rata should the Mauritanian state elect to
    participate in any development.



The royalty to be paid to Fusion on each attributable barrel will be determined
on an escalating scale based on the prevailing sales price achieved, as follows:


Gross Sales Price (US $)                          Per Barrel Payment to Fusion

Up to $16                                         $0.25
>$16 to $19                                       $0.75
>$19 to $22                                       $1.25
>$22 to $25                                       $1.75
>$25 to $28                                       $2.25



Tranches to continue escalating thereafter at a rate of $0.50 for every $3
increase in sales price.



Fusion's current statistical mean estimate of recoverable reserves in the
Chinguetti Field is 142 million barrels (8.5 million net to the Fusion
interest). This reserve, combined with maximum state participation and an
average sales price of US $22 per barrel, would provide an estimated total
royalty income net to Fusion over the life of the field of approximately US $13
million, rising to US $16.8 million if the average sales price were US $25 per
barrel. Production is expected to start in late 2005 at an initial peak rate of
75,000 barrels of oil per day.  The Banda discovery is only 21 km to the east of
Chinguetti and, subject to satisfactory appraisal drilling, could be produced as
part of the Chinguetti development.



  • Further, the royalty will apply to all future discoveries in the
    Mauritanian blocks.  Based on the latest evaluation by the Company the most
    prospective 24 features within the inventory have an unrisked resource
    potential in excess of 170 million barrels net to the Fusion interest. The
    value derived from the royalty over the exploration portfolio will depend
    upon the outcome of future drilling, however the results to date provide
    grounds for optimism regarding the likelihood of discovering significant
    additional reserves.



  • Fusion will receive a cash payment of US $10 million from Premier.  It is
    anticipated that this payment will be received in June 2003.



  • Fusion will receive additional cash payments from Premier on approval of
    all future field development plans for discrete accumulations with reserves
    in excess of 50 million barrels (excluding the existing Chinguetti and Banda
    discoveries). Such additional payments will comprise approximately US $2
    million or US $ 1 million for each future field development plan approved in
    PSC B and PSC A respectively.



  • Exploration and Appraisal drilling in both PSC's is under discussion by
    the respective Joint Ventures, with commencement of a programme anticipated
    in August 2003.



Gabon



Premier will, on implementation of agreements, acquire out of Fusion's existing
38.57% interests an 18% interest in the Iris Marin and Themis Marin production
sharing contracts (PSC's), in exchange for funding 36% of all work programme
costs through to completion of up to 4 exploration wells (2 wells in each PSC).
Fusion will therefore retain a 20.57% interest in both PSC's.  Premier will have
the option to withdraw from each PSC after drilling the first exploration well,
in which case Premier would return its 18% interest to Fusion.  3D seismic
surveys have recently been acquired and Fusion anticipates rapid progress
towards selection of potential drilling targets and an accelerated drilling
schedule in each PSC.



SADR (Western Sahara)



Fusion has granted Premier an option to acquire a 35% interest in any
exploration licence awarded to Fusion in the SADR, in exchange for Premier
funding 35% of all budgeted pre-award costs and 70% of the initial exploration
costs, up to a limit of US $3 million in each of the licences it elects to
participate in. Thereafter Premier will pay its pro rata share of costs. Fusion
has the right to nominate up to three licences and will retain up to 65%
interest in any licence in which Premier elects to participate.



Guinea Bissau



Premier will grant Fusion an option to acquire a 5% working interest in the
Sinapa and Esperanca offshore concessions, at no cost to Fusion, within 60 days
of the completion of the next exploration well on each licence. Should Fusion
elect to exercise this option, Fusion will pay its pro rata share of costs from
the date the option is exercised.  Premier expects to drill at least one well in
Guinea Bissau during 2003.



Each of these agreements is subject to routine government and partner approval
or notification as described in the relevant licence agreements, and entry into
further documentation.





28 May 2003




For further details please refer to the company's web page www.fusionoil.com or
contact:


Fusion Oil & Gas plc

Alan Stein, Managing Director               Tel:       [phone]

Australia                                   Fax:       [phone]

                                            email      [e-mail]


Peter Dolan, Chairman                       Tel:       [phone]

Jon Taylor, Exploration Director            Fax:       [phone]

England                                     email:     [e-mail]

                                                       [e-mail]



College Hill Associates

Justine Hibbert                             Tel:       [phone]

Phil Wilson-Brown                           Fax:       [phone]

                                            email      [e-mail]

                                                       [e-mail]








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