Arrow's Global March

Sydney, April 4, 2007 (ABN Newswire) - Arrow Energy NL has a three-part strategy which we announced in August last year.

The three elements to that strategy were first of all, to execute an outstanding Australian base business. This means growing our production and business to such an extent that we will be making 60 petajoules per annum by 2010.

I want to emphasise that the real effort of the company at the moment is going into executing that base business.

But we also said that we would look at new business with higher margins, both in product selection – gas to liquids, LNG or CNG – and internationally, where we’re looking at the high-growth, high-population countries of Asia.

We’re seeing high gas prices in those markets. In India they’re in the range of US$6-$11 per MCF, while in Indonesia and China they’re in the $3.50-$4.50 range, compared with something substantially less than that in Australia.

EIG/GAIL/Tata Power Partnership

We announced our deal in India last October, in which we won three CBM [coal bed methane] blocks in the CBM III licensing round. The potential resource in those blocks as assessed by the Indian government is about 10 trillion cubic feet of gas.

We have three partners in our Indian venture: Gas Authority of India (GAIL), Tata Power and Energy Infrastructure Group. These companies have all been considering for some time a reciprocal investment in our assets in Australia.

EIG recently committed to spend up to $225 million on our exploration assets. The logic is that we have a huge exploration portfolio in Australia with 90,000 square kilometres of acreage, and most of it has not had any value attributed to it because it’s still in an exploration phase.

International New Business

Arrow has also announced two deals in Indonesia, which has estimated coal seam gas reserves of over 400 trillion cubic feet of gas - a huge amount of gas. In Sumatra alone there’s probably more than 200 TCF, and in the basin we’ve selected in South Sumatra, perhaps 100 TCF of gas. So the resource is very, very large.

Over the course of the last few months we’ve announced two early deals. One of them is with a holder of coal tenements and one of them is with a holder of oil and gas tenements (petroleum tenements).

Of the two agreements we’ve signed, one of them is with [PT] Sugico Graha, a coal company that owns the coal tenements, and the other is with PT Medco Energi, one of the largest oil and gas independents in Indonesia. Between the three of us we have a fairly powerful grouping in that South Sumatra basin.

China also has recently acknowledged its huge CBM resources and at the moment we’re looking at a number of basins in China.

The great thing about China is that there are many, many demand sources all over the country. Even in the west of China, where we’re looking at some blocks, the major city there has over 4 million people. So there’s local demand everywhere you go, and there’s widespread coal resources too.

We’d like to get exposure of our overseas assets to an overseas market because generally there seems to be more recognition of assets in Asia, particularly for Asian the high-growth countries, on some of the overseas markets. So we think the potential is there to expose a lot of the value that we see internationally by listing on an overseas market.

The Next Growth Drive

Arrow so far has had four stages of growth, and we’re now entering a fifth. The four stages so far have been building land position, which we did during the early years; building reserves, by getting them certified; building projects, and actually getting things online; and then last year the focus was on building size through our merger with CH4 [Gas Limited].

So those are the four stages of growth so far and now we’re just entering the fifth stage of growth which I believe could be the biggest of all, which is our international expansion.

As discussed, we have a number of projects already that are going to fit into that portfolio, and we see that as a huge growth avenue for the future.