Canning Basin – Potential for Downstream LNG Feed

General

Upon award of Canning Basin Permit 5/07-8EP Oil Basins Limited (OBL) will become the Operator of Coal Seam Gas (CSG) exploration and Unconventional Shale Gas (USG) exploration.

• CSG 50% 5/07-8EP (Designated CSG Operator) circa 6 Tcf risked 2P gas potential
• USG 50% 5/07-8EP (Designated USG Operator) circa 250 Tcf unrisked GIP potential

The Permit 5/07-8 EP is a very large permit encompassing some 5,062 km2 and is very much under-explored with only 3 deep petroleum exploration wells in the permit area or nearby todate.

Location

Figure 1:  Oil Basins interests in 5/07-8EP are nearby the Proposed James Price Point LNG Hub

Downstream interests

On 4 August 2010 the Company and Liquefied Natural Gas Ltd (ASX code LNG) signed a non-exclusive Strategic Alliance Agreement (SAA) in respect of natural gas, coal seam gas and shale gas in the Canning Basin, Western Australia for the purpose of evaluation and the appropriate development of projects and in particular an LNG production facility in the Canning Basin Region using feedstock from OBL.

Under the terms of the SAA:

• OBL will have the right, but not obligation, to invest in any such LNG project up to a maximum of 20% on an at cost basis, however this maximum becomes 30% should OBL and its JV consortia deliver certified 2P gas reserves of at least 1.0 TCF (in accordance with SPE definitions) within 4 years of work programs commencing in the field.
  
  This is potentially a significant long-term investment opportunity for the Company and is consistent with its stated strategy of ‘sweating the value of its assets’ nearby existing or future infrastructure.
• The Company is confident that with the SAA in-place the ability to offer potentially export US dollar gas prices will attract farmin interest in the untapped CSG and USG potential of its attractive and strategic exploration portfolio in the Fitzroy Trough, Canning Basin.
• OBL has attractive and unique SAA Rights to attain up to 30% of LNG Plant (circa US$750 million for a 1.5Mtpa plant) which can be shared with a CSG / USG Farminee.

Figure 2: LNG Limited’s Plant technology ideally suited to moderate gas production build-up CSG / USG to LNG Projects.

Summary of Integrated Downstream Exploration Philosophy

• Potentially significant New Oil Play in Backreef Area
• Should future appraisal drilling and/or oil production tests prove successful oil could self-fund the future CSG & USG Projects supplying fraw gas feed to James Price Point or other Projects
• Apart from ‘domgas’ supply potential for large gas to liquid “GtL” Applications (gasoline, diesel, methanol or wax); Gas to Ammonia / Urea & related Petrochemicals
• Oil Basins’ new vision as operator designate CSG & USG Permit 5/07-8EP for range of development options for potentially large volumes of gas attractively located close to established regional infrastructure nearby Derby Export CSG to LNG / USG to LNG
• Uniquely, a Farminee can drill & core for the deeper USG potential and then derisk the USG stratigraphic hole as a CSG well or conventional oil well in Permit 5/07-8EP.