good news

Gday BUL holders,

I think these are 2 really good pieces of news for blue. Stuff I have impatitently been waiting for for almost 3 years. unfortunately I am sitting on the sides at the moment but may look for a reentry if the KOGAS MOU starts to shape up.

I am not an expert by any stretch of the imagination, but I will give you my opinion on the announcements.

1/ NSAI resource assessment. We know that NSAI are conservative in their approach to CSG reserves and resource. What I believe the low 2C number represents is consideration only for the data in the immediate vicinity of the Monslatt wells. The 3C represents the wider P1 seam as it extends across the rest of that section of that part of ATP 814 - lets call it the "Monslatt project" or the ATP 814 Far East as I dont think Blue have appropriately delineated that area as yet and it might be confusing to fellow investors. So until they take some more core samples from the greater area in the sub-permit, then the 2C sits where it is.

The 3C numbers also represent the other 25 metres of net coal they intersected. How they have broken up the 3C assessment from the P1 seam to the REST of the coal would have been good to know.

The resource (NOTE: Not reserves) is fairly large, yet it is not surprising considering the excellent drilling results they have had there to date. we know that immediately to the South of it, that Arrow have obtained very good results from the South Walker creek area which really helps narrow down further risk to Blue attaining a very good result out of this area.

The report that they attained very high gas contents (23m3) are EXCEPTIONAL. This is a very very good result. probably indicative of bituminous coals which have the best thermo and biogenically derived gas contents.

The indication that the seam is also fully saturated is another EXCEPTIONAL characteristic for the project and will bodes well for testing the commerciality of the seam. You need to desorb the gas - which is a function of the saturation of the seam. For the ordinary punter (like me) it means you will get gas flowing straight away as soon as you start removing the pressure on the seam by extracting the water. This improves the commerciality as you start flowing(producing) straight away and are not wasting precious exploration money on pumping and treating water with no gas to show for it.

From memory, the monslatt wells were at prime depths for CSG. This is important (but is also basin specific) as it is generally a good high level indicator that the seam will be set in the right environment to allow it to produce. In otherwords, you can have the same coals, but at greater depths, there would be too much downwards force on the coals to allow gas to escape. in a lower pressure environment, i.e at shallower depths, then production can occur.

The depth is something to keep an eye on for their drilling of the Central ATP 814 permit as it is estimated to have both the highest gas in place, but also in the deepest location which could impact producability.

I think the coals are set in what is called a syncline, which means the Arrow/AGL Moranbah project is on the western edge..the coals then dip down through to the trough at ATP 814 central and rise up to outcrop near the ATP814 Far East. This means that if the Monslatt area has a similar setting to the Moranbah project, then we can expect some good results.

The other significant part of the annoucement (but I should add that it is pretty speculative) is that the shales have had a resource allocation. If Blue can tap the right kind of expertise to help them carry out an assessment of the producability or enhancement from these rocks, then this could significantly improve the economics of a project in the area, on top of some pretty good chances of already having a good project in the coals.

2/ The MOU. This is excellent news, and while it is non-binding and all that, it does indicate that KOGAS are getting deeper into bed with blue which is good. I view it as, we will give you a bit of cash for a stake in the action, lets see how it goes, and if it is good, then we will move forward.

KOGAS have firts rights of refusal for ATP 813 and 814 farmins (which expire in July 2010???), so the next natrual step for the maturing of that relationship and MOU will be action on Blue obtaining a possible farmin with KOGAS. That would be a signfificant staging for Blue to progress towards things such as small scale LNG.

We know they are already investigating pipeline routing from both 813/814 to a possible coastal extraction point. This is exciting as blue and KOGAS look to be prepared to blaze their own path which could not be a better way of doing it. You can see it with Arrow and CNPC right now. The customer going direct to the source to get the best value. This is effectively what KOGAS are doing, but on a smaller scale.

A "green highway" is not a small vision, and for a $120m company, it is a pipe dream. But they have been pretty scant on detail there, so it is either just hamming it up for the ministers at the signing to justify the trip, or there are some serious plans to put in place a distribution network for CNG. I would tend to think the former.

To popularise this idea of a Green Highway, I figure they must have to get in bed with some of the bigger trucking companies to setup some dedicated infrastructure to create an intial market as Peter Cockroft standing on the side of the road with a NG tank and a pump in his hand with a sign saying "fill er up, cheap gas!" is not going to cut it :)

Cheers,

SF