Apex Energy - Apex Energy NL

Apex Energy NL (Apex) is an Australian Public unlisted company with its head office in Sydney. Apex is a Coal Seam Gas (CSG) and Coal Mine Gas (CMG) exploration company with a number of Petroleum Exploration Licenses (PELs) and agreements with coal mines in the Illawarra region immediately south of Sydney and the Burragorang region to the south west of Sydney, in total covering almost 500 square kilometres as detailed below.

Tenement / Agreement	Description	Gross Area	Net Area	Apex interest (%) *
Tenements	PEL442	231km²	173km²	100% (5% net profit interest to Ensign)
	PEL444	65km²	32km²	100% (10% net profit interest to Rio Tinto)
	PEL454	285km²	204km²	70% (30% working interest held by Carbon Minerals Limited via Australian Coalbed Methane Pty Ltd)
	Total	581km²	408km²

Note Gross area equates to the graticular area but excludes land below Mean Low Water Mark of the NEW South Wales coastline. Net area is gross area less areas excluded in accord with the title document (viz granted coal leases, national parks etc

* Apex’s interests are held 80% by Apex and 20% by Sydney Basin CBM Pty Ltd, a wholly owned subsidiary of Apex

Joint venture partner	Asset overview	Tenement	Area	Non-Apex interest *
Metropolitan Colliery	Adjacent to Apex's PEL444 The Metropolitan Colliery contains gassy coal	CCL703 CCL379	58km²	20% of mine related and 5% of other gas
HTT Huntley Heritage Pty Ltd	Located within 10km of TRUenergy's 400MW Tallawarra gas power station → a significant marketing opportunity for the joint venture Known to hold coal and gas deposit	CCL700	19km²	15% Net Profit Interest
Sada Services Pty Limited (Burragorang Valley Coal Pty Ltd)	Area previously exised from Apex's PEL 454 (now included) Mine in closure with operating washery and waste dump Area included in PEL454	CCL740	36km²	10% Net Profit Interest
	Total area excluding CCL740 as this is now included in PEL454		39km²

Being on the doorstep of the major population centre, the tenures are close to a choice of infrastructure for gas delivery or electricity production. Currently the vast majority of the regions' gas consumption is supplied from interstate through pipelines, which is both costly and subject to volume constraints and delivery risks.

Apex has quantified an initial large methane gas resource on its tenures of 2.5TJ Gas in Place, for which MHA Petroleum Consultants, Inc of Denver have issued a Reserve/Resource Statement. Apex has also completed one successful pilot well, Darkes Forest #1 and has deepened two core holes for data on the coal sequences and gas quality. Over 2,000 wells, mostly for coal exploration, have been drilled in the area providing a large data base for assessment.

The pictures below show drilling operations at Apex's Darkes Forest #1 well site and the completed well site.

Apex has successfully applied for and been granted a NSW Department of Planning Part 3A Approval to drill up to 15 defined wells on its eastern tenures. The drilling program is designed to produce measured outcomes contributing to an upgrade of the certified Reserves and Resources, in addition to providing well production data which will enable completion of a Commercial Field Development Plan.

Apex Energy Highlights

Independently certified reserves/resource of:

58PJ - 2P
210PJ - 3P
1360PJ - Contingent

Scope for significant short-term increases in reserves/resource

Drilling approval granted (PEL444 & PEL442)

Comprehensive drilling program and operators provisionally selected

Assets located within 40 km of Sydney, close to all major
infrastructure

Assets within the Sydney Basin, host to some of the highest ranking
CSG of any Basin in the world

Successful pilot well completed in 2004

Joint ventures in place with local coal operators

Business Strategy

Commercialisation Options

Considerable pre feasibility work has been undertaken by Apex and its consultants to demonstrate the commercial opportunity to utilise coal seam and goaf system gas produced for power generation
- The most efficient entry level Combined Cycle Gas Turbine has been determined as 15MW (approximately 0.5 PJ per annum requirement)
- A convenient site has been located on Crown Land at Darkes Forest, immediately adjacent to the Integral Energy Substation

Apex's tenements are also within close proximity to TRUenergy's existing 400MW Tallawarra
Power Station (combined cycle gas turbine where feedstock is pumped from Victoria)
- The 2007 Owen Inquiry into NSW electricity supply concluded that NSW requires the equivalent of a new 300MW gas-fired power station each year to keep pace with the state's electricity growth
- TRUenergy has submitted a Part 3A application to the New South Wales government in respect of a second 400MW combined cycle gas turbine power station in the area

The Eastern Gas Pipeline from Victoria passes at the southern boundary of Apex's PEL442
- A spur line supplies Wollongong and Port Kembla with gas supply
- An opportunity exists to deliver locally sourced gas from the Apex areas into these pipelines after appropriate process facilities, to bring the run of well gas to pipeline quality
- Considerable capacity would exist in these pipelines

Other potential gas customers in close proximity to Apex areas include Energy Developments Ltd's 97MW Appin Power Station, AGL's proposed Leafs Gully 300MW Power Station and AGL's Rosalind Park gas process facility

Apex has also investigated utilising its gas for a "mini LNG" project similar to the recently opened Wesfarmers mini LNG plant (175tpd) in Kwinana, Perth

Goaf system gas has attractive commercial characteristics
- High gas content coals
- High methane gas composition
- Low water production → low operating costs
- Shallow gas (<450m) → low well cost
- Minimal compression → lower capital expenditure requirements
- Enhanced permeability → increased production
- Provide a gas storage mechanism, allowing gas to be stored for immediate delivery in peak demand periods
- Close to markets