Sydney Gas Presentation2004

(ASX Code: SGL)

Domenic Martino, Executive Chairman

&

Steve McNally, Chief Operating Officer

What is Coal Seam Methane?

Natural gas is found in most coal deposits Process by which plant material is converted to coal

over millions of years Methane contained within the coal seam where it is

absorbed or attached to the coal

What is Coal Seam Methane?

Clean burning fuel more environmentally friendly than oil, coal or even conventional natural gas

Contains few, if any, impurities and therefore requires minimal processing

Coal seam methane (also known as coalbed methane) is natural gas extracted from coal

CSM – High Growth Industry Worldwide

Proven technology

CSM represents +10% of US’ gas consumption

CSM represents +25% of Queensland’s gas consumption

SGL has arguably world’s largest CSM acreage controlled by single company

The Growth of US Coalbed Gas Production

Current coalbed gas production represents approx 10% of annual US natural gas production (2002)

Over 18,000 producing coalbed methane wells in 12 states across the US

Source: GTI Gas Resource Database, GTI-01/0136, EIA, Various Public Records

Sydney Gas at a Glance

NSW’s first commercial gas producer from 6 million acre province in the Sydney Basin

NSW project of “State Significance”

Long-term sales contracts with AGL for sales in excess of $450 million

$100 million in funding raised in past 12 months or so via equity, convertible notes and project finance

Opportunity to become a major gas producer with unrivalled proximity to Australia’s largest energy markets

Sydney Gas

Stock Snapshot Ordinary shares on issue 236m Convertible notes 53m

SGLG exp April 2006 SGLGA exp June 2006

12 month trading range $0.23-$0.99 Current market cap (undiluted) $200m approx.

Board Members Domenic Martino, Chairman; Dr Bruce Butcher, CEO and MD; Bob Carroll (ex-Woodside CFO); John Castleman; Artur Birkner; Bruce McKay (ex-Production Manager (Aust) Esso, Chairman AWE).

World-class Resource

Estimates of gas in place: Amoco – 214 TCF University of Sydney – 130 TCF SGL – 107 TCF

Potentially 44 TCF in Sydney Basin By comparison, the North-West Shelf has reserves

of 33 TCF

SGL is working to prove up 1 – 2 TCF from each of three project areas Camden, Wyong and Hunter over the next 5–10 years

Reserve Categories

Proved Reserves – 90% probability will produce amount equal to or more than predicted.

Probable – 50% probability will produce amount equal to or more than predicted.

Possible – 10% probability will produce amount equal to or more than predicted.

PELs 2, 4, 5, 267 and 441, and acreage position

Sydney Gas has a dominant acreage position over Sydney Basin

Hundreds of millions of dollars spent on exploration in Sydney Basin. That data is being accessed by SGL for reprocessing, thus reducing expenditure and lead times

AGL - Research programCore holes

BP Amoco - US$30 million research programCore holes and production wellsCSM prospect delineation

Coal Companies

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-

Thousands of core holes giving data on coal thickness, gas content and composition and permeability Seismic data for reinterpretation

Sydney Gas - Reprocessing of data acquiredGeological surveysDelineation of high production fairwaysCore holesProduction wells and pilot treatment plantIdentified enhancements to geological assessment by previous operators

Coal Seam Methane Exploration on SGL’s Licences

Developing the High Production FairwayUS experience - Powder River Basin

Big George

Anderson/CanyonCook/Wall-Phase 2Development

Buffalo

Sheridan

10 miles

MONTANA

WYOMING

Anderson/Canyon& Equivalents

WYOMING

Area of Intense Phase 1CBM Development

Wyodak

Basin Syncline

Douglas

Gillette

• Similar size to Sydney Basin, but numerous operators and working interest owners

• Developed 5 High Production Fairways

Source: NSAI

High Production Fairway

High production fairway delineated in Camden gives confidence of high drilling success rates

Wells already drilled within high production fairway at Camden are producing at rates above business model rates and industry expectation

High production fairways being established in Wyong and Hunter Valley

Production wells currently being drilled in Wyong for this purpose

Future expansion within Sydney Basin driven by high production fairway approach and the out-performance it has delivered to date

Camden

Rapidly expanding production, based on delineation of the high production fairway

Producing and selling gas to AGL since May 2001

Operations adjacent to major pipelines linking the Eastern States of Australia

First 100 wells should produce initial gas sales of $30-$35 million pa

300 well project should produce initial gas sales of $100 million pa

Typical Bulli Production Profile

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100

200

300

400

500

600

700

0 20 40 60 80 100

Days

0

50

100

150

200

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350

Water-BBL/D

Gas rateMSCFD

Post fracture water production

Formation water production

Gas rate MCFD

Water bbl/day Gas mcf/day

Wyong

Completed Geological modeling

Core hole drilling

Full suit geophysical logging and geological log

Gas desorption test and geochemical analyses on gas and coal samples

In-situ permeability and stress testing

Field geology

Preliminary fracture distribution analysis

Hunter Valley

NSW Government funded feasibility study complete for 100 km2 (24,980 acres) area

Resource of 673 BCF identified, including 424 BCF of gas recoverable

Five coal seams to be targeted for the commercial production of gas High demand for gas in the Singleton - Muswellbrook and Newcastle

regions. Region is currently significantly undersupplied with gas Pilot project to commence calendar 2004 Electricity generation option being modeled

Risk Management

Potential Risks Mitigation – Camden Gas Project

Exploration / Reserve Risk

An independent reserve report by Cawley, Gillespie & Associates over part of the Stage II Camden Gas Project area estimates gross reserves of 61.34 bcf, and assigned a proved (IP) classification to 83% of these reserves and a probable classification to 17% of these reserves.

Production over the last two years has demonstrated reserve and production levels.

Development Risk

Project subcontractors have the expertise and resources necessary to complete the project, Sydney Gas has experienced management on staff.

Straightforward development (drilling, laying polyethylene pipes and constructing a simple processing plant) and experienced fraccing specialists.

Technology Risk Management has extensive CSM industry experience Technology and processing requirements are straightforward and proven in

the field.

Risk Management

Potential Risks Mitigation – Camden Gas Project

Production Risk The company has over 3 years production and sales experience from existing wells.

The wells currently being developed have confirmed the geological model of the area.

Production rates for the high producing wells have exceeded previous expectations.

Market Risk Sydney Gas has gas sales contracts with AGL in excess of $450 million.

Economic Risk Sydney Gas will mitigate economic risk through:-

- establishing, wherever feasible, long-term vendor contracts for goods and

services; and

- obtaining long-term sales contracts.

Risk Management

Potential Risks Mitigation – Camden Gas Project

Environment Gas is an ecologically acceptable fuel with lower carbon emissions than coal. Drilling operations disrupt the land for a minimal period, but once completed and land rehabilitated, the well head is located in a fenced enclosure approximately 32m2 in area with minimal visual impact.

The Camden area produces little water from the coal seams.

Regulatory Risk Leases – Sydney Gas holds several Production Leases and is well versed in the approval process.

Access - Sydney Gas has a right to explore under PEL 2 and negotiates land access with the owners, with an agreed compensation arrangement.

Native Title – Based on a 1999 search of the NSW National Parks and Wildlife Native Titles Claims register, Sydney Gas does not believe that any Native Title claims exist within any of its PEL areas.

Management An experienced team with local and international CSM experience has been appointed to the company to oversee the project.

Financial Perspectives

Strong focus on shareholder returns

Operationally cash flow positive from current Camden 100 well program at full production

First 100 wells – should produce initial revenues of $30-$35 million pa

Each 300 well project – should produce initial revenues of around $100 million pa

Costs per gigajoule for Camden Gas Project around $1.50 including amortisation of capital costs and finance expenses

A targeted capital management program to fund ramp up of gas production via mix of equity, debt and hybrid funding

New opportunities to include Wyong and Hunter Valley projects