Arrow and EIG Plan East Queensland Farm-in

Arrow Energy NL and EIG Energy Infrastructure Group AB of Sweden have signed a letter of intent (LOI) that would allow EIG to farm-in to a portfolio of predominantly exploration coal seam gas assets in the Eastern coastal region of Queensland.

The assets to be subject to the 50:50 joint venture between Arrow and EIG include:

--tenements in the Clarence Moreton and Coastal Queensland basins;
--the Dundee Project; and
--Daandine Power Generation Project.

EIG will contribute $150 million to the joint venture for the rapid exploration, appraisal and, potentially, development of the portfolio of assets. EIG will sole fund joint venture costs until such time as the $150 million of funds is spent, including an upfront reimbursement to Arrow of all costs incurred by Arrow on the assets since March 2006. Subsequent expenditure beyond the $150m will revert to a 50:50 split.

EIG will also pay up to $75 million to Arrow by way of three milestone bonuses of $25 million each on achieving certification of 250 PJ, 500 PJ and 750 PJ (all cumulative) of gross 2P gas reserves on the portfolio of assets.

The tenements represent approximately 1/3 of Arrow's current tenement acreage, the majority of which are still at the exploration and appraisal stage.

EIG is one of Arrow's current joint venture partners in the Indian Coal Bed Methane blocks recently awarded under the CBM III licensing round in late 2006. The LOI also allows for later participation in EIG's farm-in by the other International partners of Arrow and EIG. However, any such participation would not alter the terms of the arrangement from Arrow's perspective.

The LOI targets financial close on the farm in by the end of March 2007 and further details will be released at that time. EIG's investment in the joint venture will be held through a subsidiary to be called Coal Gas Corporation Ltd.

Commenting on the proposed investment by EIG, Arrow's CEO Nick Davies said: "We welcome EIG's involvement in this portfolio of projects and their significant funding commitment will enable an accelerated program of exploration, appraisal and development of a number of project areas and bring forward realization of significant shareholder value for these projects."

EIG is a privately owned energy asset holding company based in Sweden with energy development subsidiaries active in Asia-Pacific. Associate companies are engaged in oil and gas exploration and production (UK North Sea and Africa) specializing in heavy oil extraction and processing of heavy residues using proprietary technologies. EIG is 30-percent owned by International Energy Holdings AG of Switzerland.

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