Formal Signing of Joint Venture

Altona Energy Plc / Index: AIM / Epic: ANR / Sector: Exploration & Production

20 April 2010

Altona Energy Plc ('Altona' or 'the Company')

Formal Signing of Joint Venture

Altona Energy Plc, the AIM listed Australian based energy company, announces that following the necessary corporate and legal structures for the Arckaringa Unincorporated Evaluation Joint Venture ('the JV') having been put in place, the JV has now been formally signed by the Company's wholly owned subsidiary, Arckaringa Energy Pty Ltd and CNOOC New Energy International (Australia) Pty Ltd ('CNOOC-NEIA'). CNOOC-NEIA is the Australian subsidiary specifically formed for this JV, of CNOOC, one of China's major oil companies. 

Leading up to the signing of the JV, the Company and CNOOC-NEIA 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 programme. The signing of the JV enables CNOOC-NEIA 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 said, "With the BFS being fully funded by CNOOC-NEIA 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-NEIA have been busy working together in Adelaide and Beijing, laying the foundations for the rapid mobilisation of resources and acceleration of the BFS work programme. 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-NEIA's application. Key representatives of CNOOC New Energy Investment Ltd ('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."

Arckaringa Energy and CNOOC-NEIA have agreed the budget for the BFS for the Arckaringa Project to the amount of A$40 million (£24m). 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 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 560MW 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$12m and A$28m 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 pre-feasibility study in relation to at least one other value added project, such as a CTL, SNG and integrated power generation project ('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)

Further to the extensive tender process undertaken, the JV parties have selected one of the world's leading project engineering firms to be the BFS Study Engineer and their appointment is expected to be announced imminently. The Company believes that the BFS can be successfully managed and completed within the budgets agreed under the UEJVA, given the competitive tenders received and the access to the considerable technical resources of CNOOC-NEI. Under the terms of the UEJVA, CNOOC-NEI will meet the full costs of the Stage 1 and 2 works of the BFS up to the agreed budget amounts.

With the formal agreement and structures in place, the JV will accelerate progress with its previously outlined plans for 2010, including:

·; The establishment of an Australian JV office in Adelaide, South Australia

·; Commencement of work on the BFS by the joint operating team

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

**ENDS**

For further information visit www.altonaenergy.com or please contact:

Notes

Altona Energy Plc is an AIM listed Australian based energy company. Its asset is an estimated 7.8 billion tonne coal resource (non-JORC) in the Arckaringa Basin of South Australia (JORC-compliant: 1.287 billion tonnes). This is considered by the Board 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 ('Syngas'), Arckaringa total coal resources (both JORC and non-JORC) would represent respectively 28% and 29% of current North Sea remaining proven reserves of 10,900mb of oil and 114,800 bcf of natural gas.

Altona has already accomplished a number of key phases in its development:

·; The Company has agreed the terms of a joint venture agreement with CNOOC-NEI, a subsidiary of Chinese oil major China National Offshore Oil Corporation, to accelerate the Arckaringa Project towards commercialisation. 

·; Under the terms of the agreement, CNOOC-NEI will fund the bankable feasibility study ('BFS') for a coal mine and an integrated value-added project. 

·; The current base case for the BFS is a 10mb per year CTL plant and 560MW co-generation power facility.

·; CNOOC-NEI will also 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 licences. 

·; It is envisaged that numerous new additional projects may also be opened up to create a multi-project, multi-national business. 

CTL

The quality of the Company's coal is suitable for conversion to synthetic gas ('Syngas'), using existing commercial CTL technologies. The process involves two major stages;

1. gasification to produce Syngas rich in hydrogen and carbon,

2. a liquefication stage where the Syngas is reacted over a catalyst to produce high quality, ultraclean synthetic fuels and chemical feedstocks. 

CTL is a prime example of clean coal technology - the associated combined cycle units produce negligible sulphur oxides, significantly less nitrogen oxides and 10-20% less CO2 per unit of power generated than a conventional coal fired plant, whilst carbon capture and storage offers the potential to reduce the overall greenhouse gas emissions from CTL to below the 'well to wheel' level of fuels derived from crude oil. The technology is best demonstrated in South Africa, where currently 30% of the country's gasoline and diesel fuel needs are met through CTL plants.