Indonesia.

Arrow Energy began drilling its first coal seam gas well in Indonesia in November 2009. Consultant studies have estimated vast coal resources throughout Indonesia and the country's natural gas consumption is forecast to increase to 2,000 petajoules a year by 2020.

In Indonesia, Arrow commenced its first coal seam gas well as part of a wider exploration program near the town of Sangatta in East Kalimantan in November 2009. The effective ownership of the Production Sharing Contract (PSC) permit area is Arrow (24 percent), Ephindo (24 percent) and Pertamina (52 percent). Arrow and Ephindo are jointly operating the block.

Further to this project, Arrow is in advanced stages of negotiation for four other potential coal seam gas projects.

The company has also entered into a PSC with the Government of Indonesia over the Tanjung Enim block in South Sumatra. We have the majority contractor share of the PSC at 45 percent participating interest, and will be the operator of the block as agreed between its partners. Our partners in the PSC are PT Pertamina EP and PT Bukit Asam (Persero) TBK, each with 27.5 percent participating interests.

Arrow Energy (Indonesia) Holdings Pte Ltd, an international subsidiary of Arrow Energy and PT Medco Energi CBM Indonesia, a subsidiary of Indonesia’s leading independent oil and gas company PT Medco Energi Internasional Tbk have also signed a Heads of Agreement defining the terms whereby the two companies will cooperate to explore for and develop coal seam gas over Medco’s 1,889km2 conventional oil and gas PSC working area, the SSE1 Block in South Sumatra. Each company shall have a 50 percent participating interest. Under this agreement, which follows on from an earlier Letter of Understanding between the parties, both companies will now jointly work towards expeditiously negotiating a coal seam gas PSC with the Indonesian regulatory authorities aimed at commencing exploration operations as soon as possible.