Arc and Energy World Form LNG Alliance

Arc Energy Limited and Energy World Corp. (EWC) have entered into a memorandum of understanding (MOU) to develop an LNG business focused on the domestic Western Australian gas market.

Arc is embarking on a regional exploration drilling program in Western Australia's Canning Basin that will be targeting both oil and gas. The discovery of commercially viable gas reserves in the Canning Basin would have the potential to transform the domestic gas supply situation in Western Australia. EWC is a Hong Kong-based developer of "modular" LNG facilities and marine transport systems.

The alliance partners believe that the threshold economic size and time to market for commercialization of gas reserves in the Canning Basin could be substantially reduced by the combination of Arc's upstream operational and exploration skills and EWC's innovative LNG systems.

The alliance will initially investigate the feasibility of the production and marine shipment of LNG from the Canning Basin to markets in the Pilbara and the Southwest of the State. Such a system has the potential to dramatically reduce the time and cost of getting gas to market from any discoveries in the Canning Basin. The impact on WA's domestic gas supply situation could be dramatic.

Eric Streitberg, Arc's Managing Director said:

"We are delighted to have formed an alliance with EWC. EWC have demonstrated their ability to think outside the square in ways that Arc values and encourages. Our Canning Basin exploration program, although high risk, has the potential to find large oil and gas accumulations and as always in Arc we are seeking ways to monetize any discoveries as quickly and cheaply as possible. We are also very focused on helping to find a solution to the Domgas problem in WA in a way that benefits both the State and our shareholders."

Stewart Elliott, Chairman and Managing Director of EWC said:

"The competitively priced modular LNG technology being developed by EWC for its Sengkang gas field developments in Indonesia can be readily utilized for the WA gas business. The Alliance with Arc is a good opportunity for us to expand our business in Australia where we have already announced plans to commercialize EWC owned gas reserves in Queensland by developing modular LNG plants with a capacity of 10,000 tons per annum adjacent to both the Eromanga and Gilmore gas plants. A successful development onshore on the west coast of Australia would further underpin and strengthen our Australian operations. Combining our skills with Arc's has the potential to add significant value all round."

Arc Energy is one of Australia's pre-eminent energy companies, owning and operating oil and gas interests in the Perth Basin, the Bass Basin and internationally. Listed on the Australian Stock Exchange with a market capitalization of over $400 million, Arc has an aggressive onshore and offshore exploration and development drilling program. It continues to drive increased shareholder value by the early adoption of innovative technical and commercial practices.

EWC is an integrated energy company in Hong Kong and listed on the Australian and New Zealand Stock Exchanges with a market capitalization of $1.2 billion. It has primary gas and power operations located in Sengkang South Sulawesi, Indonesia and has the capacity to produce gas, power and LNG in Australia. In addition to its operations in Australia, EWC is in the process of expanding the capacity of its power plant in Sengkang, South Sulawesi from 135MW to 165MW, building a 2 x 500,000 tons per annum LNG facility in South Sulawesi and an LNG Hub receiving terminal in the Philippines.