North West Group Geological

Society

Coal Bed Methane (CBM) in the North

West – Past, Present and Future

Brent Cheshire (Executive Technical Director)

Dr. Lloyd Boardman (Consulting Geologist)

Certain statements included in this presentation contain forward-looking information

concerning IGas's strategy, operations, financial performance or condition, outlook, growth

opportunities or circumstances in the sectors or markets in which IGas operates. By their

nature, forward-looking statements involve uncertainty because they depend on future

circumstances, and relate to events, not all of which are within the Company's control or can be

produced by the company. Although the Company believes that the expectations reflected in

such forward-looking statements are reasonable, no assurance can be given that such

expectations will prove to have been correct. Actual results could differ materially from those

set out in the forward-looking statements. Northing in this presentation should be construed as

a profit forecast and no part of these results constitutes, or shall be taken to constitute, an

invitation or inducement to invest in IGas, and must not be relied upon in any way in connection

with any investment decision. Except as required by law, the Company undertakes no

obligation to update any forward-looking statement.

Unconventional Gas changing the landscape....

ExxonMobil farmed

awarded licences in

the Warsaw Trough

and Lublin Trough

ExxonMobil and

MOL farmed into

Falcon Energy’s tight

gas plays in the

Mako basin in

Hungary

Source: U.S.

Geological Survey,

2002 plus Barcap

company detail.

Locations are

approximate

Oil field centre

Gas field centre

Cambrian Alum Shale

Shell acquired two mineral exploration

licences in May 2008 in Skåne, valid for

three years

Silurian shale

Lane Energy farm-in:

Conoco Phillips funding

seismic

Cuadrilla have licences

(shale +tight gas) in North

England and in

Netherlands (Graben)

BNKP( south of

Lane); RAG has

farmed-in to its shale

acreage

Total E&P, UK Devon,

Mouvoil SA, Bridgeoil

Ltd., and Diamoco

Energy

Realm Energy (?)

Eurenergy

OMV have

researched Vienna

basin shale (4,500-

6,000m deep)Schuebach / Ascent

UK CBM

Island Gas + Nexen

Green Park + Marathon

Composite Energy + BG

RAG (?)

Independent

Resources have

drilled one failed

CBM well at Fiume

Bruna

CBM Energy have

completed one CBM

well

European Gas CMM

and CBM

Toreador (shale oil)

San Leon

Heritage Petroleum Plc and

Vancast Explotacion SL

rumoured to be seeking

shale in Northern Spain

(rumoured to be awaiting

permitting

Unconventional Gas changing the landscape....

UK

EU

Unconventional gas is changing the landscape…

“….we are transitioning from the oil century

to the gas century…”

“… the source is larger than the leaks…”

Aubrey McClendon

Chairman of the Board and CEO

Chesapeake Energy corporation

June 2010

An Overview of Activities in the North West

• CBM development cycle

• What is CBM

• Prior CBM experience

• Geology of the coals

• Site Selection & data

• Drilling Philosophy

Shale Resource

Extensive Shale resource

across acreage

Known to be hydrocarbon

bearing and significantly

anticipated to be in gas

window

Pressure regime un-known

IGas commissioned

independent study on

potential resource

IGas will seek to core

shale in-situ when possible

Production tests being

carried out by others

elsewhere in

Bowland/Holywell shale

E&P delivery - Acreage

Interests in licences range from 100% to 20%

Partner Nexen Inc.

Licences give rights to all hydrocarbons

PEDL 115-2

PEDL 092-1PEDL145PEDL 116

PEDL 115-1

PEDL 78-1

PEDL 78-2

PEDL 040-1

PEDL 056-1

PEDL 107

110/18, 19 &23

PEDL 184

PEDL 193

E&P delivery - Exploration – Building on success

• Extensive pre-existing data set of boreholes and seismic

• Data set corroborated by drilling of 8 wells covering all licence areas

• 320 boreholes used to substantiate resource calculations

• 890km of pre-existing 2d Seismic being re-interpreted at Point of Ayr

• Evaluating shale and conventional potential in all areas

∆ Pre-existing seismic coverage at Point of Ayr

E&P delivery - Appraisal

• Eight wells successfully drilled at seven sites to appraise resource

• Extensive coring and logging program completed

• All wells were drilled by Nexen

∆ Willoughbridge

∇ Doe Green

∆ Mostyn Quay

∇ Mill Farm

∆ Fox Hill Farm

∇ Fradley

E&P delivery - Production pilot

Doe Green

on test for

>1year,

"commercial"

flow rates

Keele

On test now,

dewatering.

PEDL 115-2

PEDL 092-1PEDL 116

PEDL 115-1

PEDL 78-1

PEDL 78-2

PEDL 040-1

PEDL 056-1

PEDL 107

110/18, 19 &23

PEDL 184

PEDL 193

Point of Ayr

On site by

year end to

production

test

E&P delivery - Full production

• Production start – Targeted for next year, from first full site

• Between 2011-2014 targeting 20-50 sites

• Each site planned to consist of 4-6 wells with 24,000 to 40,000 feet of

lateral in each well

• Each site is expected to produce between 7 and 20 Bcf over 15 years

(gross)

• Production from each site is expected to be peak at between 4 and 10

mmscfd (gross) (650 - 1,500 Boepd per site)

• Stable production curve (much flatter and longer than conventional)

• Production technology – known and demonstrated in other markets

E&P delivery - Surface access

Planning has been obtained for 13 sites to date from variety of land

owners and planning authorities

Land access:

• Peel Environmental agreement gives access to multiple sites in

core licences.

• More than 40 drilling locations identified

• Point of Ayr offshore

Planning:

• King Sturge retained to take multiple drill sites to planning

Water disposal:

• No issues to date because of quality and quantity

• Even local sewer disposal can be possible

Red areas show Peel land holding across

north west

E&P delivery - Market

• IGas operates in a high realisable gas price environment

• Direct access to many large customers

• No material pipeline infrastructure required, legal right to access both

low and high pressure gas networks

• 2011-2012 forward gas prices are ~$7.50mcf (~50p/therm)

• Pricing at National Balancing Point by discounting transportation

achievable

• Sales therefore can be direct or through Grid

Large industrial consumer

in area

What is Coal Bed Methane?

• CBM is the natural gas found in many

coal deposits

• It is used as a fuel in exactly the same

way as conventional gas

• Coal seams can hold large quantities

of gas (six to seven times more than the

equivalent volume of rock in a

conventional gas reservoir)

• Gas is stored within the molecular

structure of the coal, on the surface and

in natural fractures (cleats). Typically

water pressure keeps the gas trapped

• When the water pressure is released,

the gas flows through the fractures into

a well bore where it can be collected

What is Coal Bed Methane?

• CBM – Methane rich gas

• “Firedamp” in mining terms

• Typical composition:

• Methane 80-95%

• Ethane 0-8%

• Propane + 0-4%

• Nitrogen 2-8%

• CO2 0.2-6%

• Low porosity (0-3%)

Three Forms of Methane Extraction

• Coal Bed Methane (CBM)

•from virgin seams

• Coal Mine Methane (CMM)

• From prior workings/abandoned

mines

• Underground Coal Gasification (UCG)

• In situ combustion of virgin

seams

• IGas Energy is focussed on CBM only

Evergreen’s Sealand Wells

Sealand No.3

Evergreen’s Cronton Interactive CBM Wells

Stress, Fracture and

Bed Separation

associated with a

Longwall Panel

Geology of the Coals

Site Selection & Data

• Detailed lithological Log

from NCB Four Oaks

Borehole

Site Selection & Data

Site Selection & Data

• The British Coal (NCB) wireline logs used to locate wells

• Data acquisition is critical, particularly in the early appraisal

stages

• key data include logs, cores ( gas content, desorption

measurements etc)

Four Oak Gamma & Density

Log at Florida horizon

Litholog from recent CBM well

Site selection & Data

• Coal samples from numerous

boreholes enabled contour maps of coal

seam gas to be established

•

• detailed structural maps were

developed by integrating the down dip

exploration with the active coal mine

data

Site Selection & Data

• The abandoned mine plans

provide further data upon

which to select potential

sites.

• This plot shows an area of

working longwall panels that

are completely free from

faulting

• The relatively undisturbed

structure suggests a

promising site to locate

extended horizontal wells

may exist in the vicinity

Typical well Completion

• The well is drilled and lined with a

cemented steel casing – to provide

isolation from aquifers etc

• The casing is perforated in the target

coal seams

• Water and eventually methane gas are

produced through the tubing to surface

• Artificial lift technology is used to pump

the water/gas to surface (PCP’s, ESP’s,

Jet Pumps, Rod Pumps)

2800

2840

2880

2920

2960

3000

3040

3080

3120

3160

3000

3100

3200

3300

3400

3500

3600

3700

3800

3900

4000

4100

4200

4300

4400

4500

4600

4700

4800

4900

5000

5100

5200

5300

5400

5500

5600

Measured Depth (ft)

Tru

e V

ert

ical D

ep

th (

ft)

DG2 HF Perfs

DG2W

DG2Z

DG2V

DG2Y

Higher Florida Seam

- Initial well entry points

Vertical vs Horizontal Wells

• Successful CBM development is a function of

gas rate

• Historically, this required a high (vertical) well

density (see opposite)

• Such an approach is not viable in the UK

(environmental impact, land access etc)

• Alternative solutions have had to be found

• Horizontal or multi-lateral wells allow

comparable areas of coal to be accessed whilst

minimising the surface impact (as opposite)

• Commercial CBM production is attainable

through a combination of technology application

and innovative approaches to reduce the cost

base.

Doe Green: First Pilot

• IGas “test bed” to optimise CBM development

•

• On-site electricity generation since June 2009

• Optimising jet pump performance

• Increased production by 40%

• Planning Consent for 2 further wells applied for

Summary – Positioned for Delivery

• CBM represents a significant energy resource that can benefit the nation

• IGas Mid case sufficient to supply electricity to over 7% of all UK households for 15 years

• Pilot production ongoing with full scale commercial production targeted to start next year

• The North West region is at the forefront of CBM development in the UK

Delivering Secure Gas,

Onshore

Exploration and

appraisal2005-2009

Production pilots in

key areas2009-2011

Full

production

roll-out2011-2014

UK’s first production facility

Glossary

BCF Billion Cubic Feet

B.E Beneficial interest

BOE Barrels of Oil Equivalent

BOEPD Barrels of Oil Equivalent per day

CBM Coal Bed Methane

CPR Competent persons report

CSG Coal Seam Gas (CBM)

D&M DeGolyer and MacNaugton

DECC Department of Energy and Climate Change

EBIT Earnings before interest and tax

EBITDA Earnings before interest, tax, depreciation and amortisation

GIIP Gas initially in place

MMSCFD thousand standard cubic feet per day (measure of production)

PEDL Petroleum exploration and development licence

Scf/tonne Standard cubic feet per tonne

TCF Trillion Cubic Feet

WI Basis Working interest basis