Page 8, Oil & Gas Australia, June 2008

NORTHERN TERRITORY SUPPLEMENT

MEO BOSS TALKS UP LNG AND METHANOL PLANS

EXCITING local explorer and developer MEO Australia appears to be making positive strides in its bid to develop innovative methanol and LNG projects in the Timor Sea.

The Melbourne-headquartered company achieved a critical breakthrough in late 2007 and early 2008 with its successful drilling campaign in offshore Northern Territory permits NT/P68

While technical difficulties with the drilling of the Heron-2 well affected MEO Australia’s plans to fully assess the potential of the Heron North location, the company was still able to declare it a discovery following careful analysis of production testing results and electric log data.

Heron-2 was drilled by Seadrill’s “West Atlas” jack-up rig contracted to MEO for two firm wells. The Heron-2 well penetrated the Epenarra Darwin Formation and the deeper Elang/Plover Formation of the Heron North structure.

Electric logging indicated that both of the target reservoirs were gas saturated. Production testing of the Heron North Elang/Plover sandstone unit recorded a maximum interpreted hydrocarbon flow between six and eight mmscf/day before operations were halted due to the approach of Cyclone Helen. Further testing was not successful due to the partial collapse of the well.

Subsequent mud log interpretation has suggested there is the possibility of a significant gross column (164 metres) of Plover gas saturated sands in place.

However, while the discovery of hydrocarbons at Heron-2 was positive news, it was the subsequent Blackwood-1 exploration well which really excited the company.

Also drilled by the “West Atlas”, Blackwood-1 was also declared a discovery after the well recovered hydrocarbons to the surface and MEO found strong electric log evidence of a hydrocarbon column in the Plover sandstone formation of the structure.

MEO was quick to follow-up on that successful drilling programme and hired the PGS Australia seismic acquisition vessel, M/V “Orient Explorer” to acquire 380 sq. km of 3D seismic over the Greater Blackwood structure.

While there is still a lot of work to be done to discern the size of the Greater Blackwood area, indications are that it has the potential to feed the start-up of MEO Australia’s methanol and LNG plans in the Timor Sea.

To find out more about MEO Australia’s plans, Oil & Gas Australia recently questioned the company’s co-founder, Chris Hart. The following is the outcome of that interview.

Oil & Gas Australia: What are MEO’s plans to follow up its NT/P68 gas discoveries?

Chris Hart: MEO is preparing to appraise the two discoveries. We have just acquired 384 sq. km of new 3D seismic over the Blackwood discovery and a large part of the Blackwood east lobe. We believe Blackwood needs two wells, a production test on Blackwood core and one well into Blackwood East to secure sufficient third party reserve certification.

This can all be completed during 2009, leading to initiation of the Methanol Project. As we own 100 per cent of Blackwood, we expect to farmout this resource to secure funding for the appraisal wells.

Oil & Gas Australia: Has a rig been contracted for any follow up drilling?

Chris Hart: Not yet, but a number of jack-up options exist in 2009 with a few rigs coming out of contract.

Oil & Gas Australia: What has the company learned from its drilling activities in NT/P68?

Chris Hart: The subsurface always holds surprises. We had taken the best advice available and designed Heron-2 as a HPHT (High Pressure/High Temperature) well. It was HT, but not HP. This meant that we had unnecessarily acquired 15,000 psi gear, which added US$15 million to the well costs.

Next time, we will drill with conventional mud weights, but still expect to drill with SBM (synthetic-based drilling mud). The actual borehole was well drilled. The other lesson was don’t use a new rig! The shakedown period is costly. Blackwood-1 was drilled very nicely and within budget.

Oil & Gas Australia: Has the company an estimate of the size of the discoveries made in the permit?

Chris Hart: Not yet. The Heron North Plover structure is yet to be fully drilled to a GWC

(gas-water contact). The gas flow recorded was from an isolated upper Oxfordian sand unit, which had the dry, high CO2 gas. We see very exciting indications of reasonable porosity and permeability, and a better quality gas (wetter) than we had originally expected in the deeper Jurassic section. Heron-3 should resolve this.

Pre-drill, we estimated a 50 metre column in Blackwood; we found 49 m. Additionally, we see a transition zone which may push the GWC deeper. Our current Greater Blackwood GIP (gas-in-place) estimate is around 2.5 tcf (trillion cubic feet), but this depends on Blackwood East. However, as Blackwood East spills into Blackwood core, we see little risk in this accumulation.

Oil & Gas Australia: What are the plans to bring other partners into your exploration and development projects in the Timor Sea?

Chris Hart: The NT/P68 farmout process will start in August/September once we have the Blackwood 3D processed and interpreted.

Oil & Gas Australia: Does MEO have a specific reserve target it is chasing in the permit to allow it to fuel its methanol and LNG plans?

Chris Hart: We need around 1.3 tcf (recoverable) of CO2 rich gas for each methanol plant. The three million tonnes per annum (mtpa) LNG plant requires a little over three tcf.

Oil & Gas Australia: What is the current status of the planning for the methanol and LNG projects?

Chris Hart: Both projects are ready to move into FEED (Front End Engineering and Design). One of the main issues at the moment is securing a suitable construction site in South East Asia. This is why we have engaged Arup and Leightons to secure a site for the casing basin. This could be used for either projects, but at this stage given the Blackwood accumulation, the methanol GBS (Gravity Base Structure ) is the most likely starter.

Oil & Gas Australia: With the current demand for LNG across the globe - has LNG displaced methanol as the likely first development option?

Chris Hart: No. Methanol is closely tracking oil; there is nearly a direct link over the past eight years.

Oil & Gas Australia: What benefits does the MEO LNG proposal have over other LNG proposals in the region?

Chris Hart: The LNG module is a complete unit, fully pre-commissioned in the construction yard, so very little HuC (Heavy under Construction) and local cost impacts are noted.

MEO co-founder Chris Hart.

Continued on opposite page

Oil & Gas Australia, June 2008, Page 9

NORTHERN TERRITORY SUPPLEMENT

The big advantage is plot size. We are about six per cent of the size of a similar plant size, say Darwin LNG. This is because the bulk of an onshore plant is fin-fan air coolers. We have none, only vertical titanium seawater heat exchangers. We use two conventional approaches, with the proven Arup ACE platform and Air Products’ proven heat exchangers and technology.

Oil & Gas Australia: Has MEO had any discussions with the NT Government over utilising Darwin as a supply base for its Timor Sea projects?

Chris Hart: Yes.

Oil & Gas Australia: What is the current timeline for development of the company’s methanol and LNG projects?

Chris Hart: 2009 to appraise Blackwood and secure reserve certification, then FEED and FID (Final Investment Decision). Nearly three years

to construct the methanol plant, so late 2012 is possible.

The LNG plant depends on lower CO2 gas. Both the Heron Plover and the Epenarra Darwin formations were gas charged. The Heron Plover must be re-drilled and tested. We now know Heron-2 penetrated Epenarra on the crest of the structure which is the wrong place to test a fractured carbonate.

Additionally, the combination of high drilling mud weights, the cement job for the 9 5/8 inch casing and the acid wash all contributed to limit any gas flow, although some gas was recorded at surface.

More work is needed on the Epenarra play to better identify fracture zones (primarily re-calibration of the p-impedance inversion), but as the anticline structure is close to 1400 sq. km, and the gas quality is good, it is worth resolving.

MEO is moving steadily to secure its own methane molecules and initiate our GTL projects. While we have focused on the Timor Sea, we also see exciting gas prospects in our WA permits.

The Zeus trap is a multi-tcf play, immediately adjacent to and nearly geologically identical to the giant Perseus gas field. Zeus has the same DHI’s (Direct Hydrocarbon Indicators) as Perseus; seismic amplitudes in the gas charged Legendre sandstones and class 3 AVO responses.

The “Songa Venus” has been secured to drill Zeus-1 later in the year providing we secure a farmin partner. However, given the high level of interest in the Zeus play, we are optimistic that this exciting prospect will be drilled in 2008.

ENERGY and mining production and extraction in the Northern Territory is expected to grow by 34.3 per cent during the next financial year to $7.5 billion.

Energy and mining production is currently worth more than 40 per cent of the Top End’s gross state product.

This year economic growth is predicted to hit 6.6 per cent in the Territory, the highest in a decade and most likely the highest in any Australian state or territory.

NT ECONOMY AND ENERGY SECTOR

STATISTICSContinued from opposite page

MEO’s Heron-2 well was drilled by Seadrill’s “West Atlas” jack-up rig.