May 25, 2010

April 28, 2010

www.Hart Energy Publishing worldfuels.com/GN

GAS TO LIQUIDS & COAL TO LIQUIDS

Altona, CNOOC Finalize JV; Boost to CTL Project

>> Australia-based Altona Energy officials announced April 20 that they’ve now formally signed a joint-venture (JV) agreement with CNOOC New Energy International, a subsidiary of Chinese oil major, CNOOC.

The JV deal is seen as crucial to development of a massive coal-to-liquids (CTL) fuels and chemicals project in Australia.

“Leading up to the signing of the JV, [Altona] and CNOOC-NEI have worked together to bring forward the agreement of the budget for the bankable feasibility study (BFS), facilitating the appointment of the study engineer, establishment of an Australian JV office, and commencement of the BFS work program,” according to Altona.

“The signing of the JV enables CNOOC-NEI to proceed in lodging its formal application to Australia’s Foreign Investment Review Board (FIRB), a decision from which is anticipated within the current quarter.”

Altona chairman Chris Lambert commented that “with the BFS being fully funded by CNOOC-NEI and funding for Altona’s own working capital in place from the recent placing, the formal signing of the JV and subsequent submission to FIRB mark the final stage of the preparation for the full scale escalation of the BFS.

“During this time, our team and CNOOC-NEI have been busy working together in Adelaide and Beijing, laying the foundations for the rapid mobilization of resources and acceleration of the

BFS work program.

“We look forward to progressively reporting on the first phase of the BFS, which will cover key value enhancing activities including mine design and planning, groundwater engineering and environmental studies, all of which will underpin the follow-up engineering of the coal conversion plant, whilst significantly de-risking the project further.

“Given the strong track record of FIRB approvals for Chinese involvement in new Australian energy projects, including the recent approval of CNOOC and BG Group’s US$40 billion,

20-year agreement to supply China with liquefied natural gas, we are confident of the approval of CNOOC-NEI’s application. Key representatives of CNOOC-NEI joined us in Australia for the formal signing and we look forward to working further with them, both on the ground in the joint operating team and also on a long-term strategic level.”

Altona’s Arckaringa Energy and CNOOC-NEI have agreed upon an A$40 million (US$37 million) budget for the BFS for the 10 million barrels/ year coal-to-liquids Arckaringa project, according to the company.

“In undertaking the BFS, the JV benefits from CNOOC-NEI’s position within the industry and its multitude of in-house expertise, coupled with the completion of extensive pre-feasibility studies by Altona and historical expenditure on the Arckaringa Project. The Board believes that the historical expenditure together with the amount invested by Altona in these studies is in excess of A$20 million [US$18.6 million] in today’s terms.

“The base case for the Arckaringa Project is for an integrated coal mine at the Wintinna deposit and a 10 million barrel per year coal-to-liquids plant, with a 560 megaWatts co-generation power facility. The parties have further agreed the budget for Stage 1 and Stage 2 of the BFS in the amount of A$12 million [US$11 million] and A$28 million [US$26 million] respectively:

“Stage 1 involves the completion of a BFS in relation to a project to develop a mine to extract coal from the Arckaringa Leases and a further prefeasibility study in relation to at least one other value added project, such as a CTL, SNG [synthetic natural gas] and integrated power generation project (the

Nominated Project’)..

Stage 2 involves the completion of a BFS in respect of the Nominated Project(s) identified in Stage 1 to enable both parties to secure debt funding for the costs of the Nominated Project (s).

“Key Stage 1 work studies, which will underpin the follow-up engineering of the coal conversion plant, will include key mine planning, groundwater engineering and environmental studies, among other activities.”

Altona holds an estimated 7.8 billion tons coal resource in the Arckaringa Basin of South Australia, considered by the company to be “one of the world’s largest untapped energy banks.

“Per Jacobs Engineering’s study for the company, assuming a 50% conversion of CTL fuels and 50% to synthetic gas, Arckaringa total coal resources would represent respectively 28% and 29% of current North Sea remaining proven reserves of 10.9 billion barrels of and 114,800 billion cubic feet of natural gas.

“CNOOC-NEI will act as the operator and take responsibility for assessing the full potential of the coal resource, in return for a 51% interest in the exploration licenses. It is envisaged that numerous new additional projects may also be opened up to create a multi-project, multi-national business.”

Jack Peckham