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ASX Announcement 17 July 2009

Carbon Energy signs first commercial contract for power generated from UCG
Carbon Energy announced today the signing of its first commercial contract in Australia, related to energy generated from the Underground Coal Gasification (UCG) process. This represents a major step forward in Carbon Energy’s commercialisation process as it demonstrates that syngas (produced via the UCG process) has the ability to become an important and viable alternative source for Australia’s energy future. Contract with Ergon Energy Carbon Energy has signed a commercial off – take agreement with Ergon Energy, a Queensland Government owned electricity provider. The contract is worth approximately $2million per year and is for electricity produced at Carbon Energy`s 5MW syngas-powered electricity production facility, currently being constructed at Bloodwood Creek in the Surat Basin. The first electricity is expected to flow into the local grid by the end of this calendar year. The planned facility will generate enough power to supply approximately 4,000 homes per year. Carbon Energy sees this contract as a major step forward in the company’s commercialisation plans as it enables the company to monetise a very small part (0.5 PJ per annum) of its massive 7,750 PJ (syngas) recoverable energy. The contract follows the success of Carbon Energy’s world-first trial of the (UCG) technology developed in conjunction with Australia’s CSIRO. “The establishment of the 5MW station is a major step towards full commercial production, said Managing Director Mr Andrew Dash. However, it`s really only the first step. We intend to move forward quickly with plans for an additional 20MW power station at the Bloodwood Creek location in 2010.The 5MW we see as mainly a proof of concept for power generation, and the experience gained will assist with the planned 20MW expansion. Carbon Energy will utilise its experience from the delivery of the planned 5MW and 20 MW stations in Queensland for future projects both in Australia and overseas in key markets such as India and the United States.