**ann... gas sales agreement**

Nice announcement just out... read below.

Release Date: 26 May 2005
To: Australian Stock Exchange Ltd No of Pages: 1
From: Eric Streitberg
Re: Major Gas Sales Agreement signed with Western Power

ARC Energy Limited is pleased to advise that it has entered into a Gas Sales Agreement (GSA) with
Western Power Corporation (WPC) for a period of 4 years commencing 1 July 2005.

The gas supplied under the GSA will be for the ultimate use of Austral Bricks (a Brickworks
Company) whom ARC currently supplies direct. ARC’s contract with Austral Bricks expired on 31
December 2004 and the contract was subsequently extended to 30 June 2005. From 1 July 2005,
WPC will perform the retailing, shipping and distribution services for Austral Bricks with ARC
supplying WPC gas from its Perth Basin gas fields. ARC has entered into the GSA with WPC to
utilise the synergies and transportation capability of WPC under both the DBNGP pipeline and the
Parmelia pipeline, together with WPC’s retailing expertise.

Managing Director’s comment:

“The renewal of the Austral Bricks contract is another win for ARC in consolidating its presence as a
competitive and material gas supplier to the southwest market. The total value of the contract over 4
years has a sales value to ARC in excess of $20 million and provides further significant diversification
of the Company’s income streams.
We are also delighted to have formed the alliance with Western Power which will allow us to access
additional customers on the DBNGP together with existing and future customers connected to the
Parmelia pipeline. We hope to be able to supply Western Power with additional gas to fill any new or
existing demand it may require as it develops its position in the retail market.”