Australia: LNG Limited Announces March 2011 Quarterly Activities Report

The Company is pleased to advise that the proposed share Placement Agreement (Placement Agreement) and Process Deed (Process Deed) and all other Transaction Documents with China Huanqiu Contracting & Engineering Corporation (HQCEC) are all materially completed and are expected to be executed in early May 2011.

HQCEC is a wholly owned subsidiary of China National Petroleum Corporation (CNPC), a state owned holding company which is China’s largest producer and supplier of crude oil and natural gas.

The Transaction Documents are consistent with the terms of the previously announced Term Sheet, dated 27 January 2011, between HQCEC and the Company.

The proposed Placement Agreement includes the following key provisions:

• HQCEC to subscribe for 53,250,000 shares (~19.9%) in the Company (Placement) at a price which is the lesser of:

– A$0.48 cents (~A$25.6 million), or

– 80% of the volume weighted average market price (as such term is defined in the ASX Listing Rules) of ordinary shares in the Company on the ASX, calculated over the five days in which sales of ordinary shares in the Company are recorded on the ASX prior to the Placement date;

• Application of the Placement proceeds for the development of the Company’s wholly owned 3 million tonne per annum Fisherman’s Landing LNG Project, at the Port of Gladstone, Queensland, Australia;

• Subject to the provision of a waiver by the ASX, under ASX Listing Rule 6.18, HQCEC will have the right to subscribe for additional shares in the Company from time to time, at market share prices, to preserve its % shareholding in the Company if any securities which are convertible into the Company’s shares are converted within 5 years of the Placement date;

• Appointment of HQCEC, or an affiliate of HQCEC or CNPC, as the sole Engineering, Procurement, Construction and Commissioning (EPC) contractor for the Fisherman’s Landing LNG Project, conditional on HQCEC providing a competitive EPC proposal based on the Company’s wholly owned OSMR® LNG process technology;

• Subject to agreement of final terms, HQCEC, CNPC and their affiliates to have a right to use the Company’s OSMR® LNG process technology worldwide on preferential terms;

• Consideration by CNPC, or an affiliate of CNPC, as to their potential involvement in the Fisherman’s Landing LNG Project, including the purchase of all or part of the proposed initial 3 million tonne per annum LNG production capacity and provision, or arranging, of debt financing for the development of the project; and

• The Company’s ongoing pursuit of gas supply for the Fisherman’s Landing LNG Project’s first two LNG trains.

The proposed Process Deed includes the following key provisions:

• Appointment of an Executive Director to the Board of the Company and Co Chief Executive Officer of the Company, to work with the existing Managing Director/Chief Executive Officer, Maurice Brand;

• Appointment of a Non-Executive Director to the Board of the Company; and

• Requirement for the Company to consult with HQCEC and, in prescribed cases, obtain HQCEC’s prior consent to material transactions proposed by the Company.

Completion of the Transaction Documents is conditional on:

• HQCEC obtaining final approval from CNPC; • HQCEC receiving approval from the Ministry of Commerce and the National Development and Reform Commission of the People’s Republic of China;

• The Company obtaining the approval of its shareholders, at a General Meeting of shareholders; and

• The Company’s satisfaction of two conditions in relation to its Gladstone Fisherman’s Landing LNG Project.

HQCEC has obtained Australian Foreign Investment Review Board approval for the Placement and, as previously announced, the Company has obtained a Petroleum Facility Licence for its Fisherman’s Landing LNG Project, both of which were conditions precedent to the Placement in the Term Sheet between HQCEC and the Company.

The Placement remains on schedule for completion in the second quarter of 2011.

PRE-FEED STUDY AGREEMENT SIGNED

The Company has signed a Pre-Front End Engineering Design (Pre-FEED) Study Agreement with “Jemena”, to evaluate the expansion capacity of “Jemena’s” Queensland Gas Pipeline, to transport gas from the Wallumbilla Gas Hub to the Callide Gas Hub at Gladstone. The study is due for completion in June 2011.

As advised in February this year, the Company has received Environmental Approval for a planned 20 km gas pipeline from the Callide region in Queensland (Callide Gas Hub) to the LNG Project site at Fisherman’s Landing.

The existing Queensland Gas Pipeline (QGP), owned and operated by Jemena Queensland Gas Pipeline (1) Pty Ltd and Jemena Queensland Gas Pipeline (2) Pty Ltd (Jemena), currently operates from Wallumbilla to Gladstone, with its route running through the Callide Gas Hub.

Importantly, the Callide Gas Hub is the location where four new pipelines from the Surat Basin and two new pipelines from the Bowen Basin are planned to enter Gladstone, for gas supply to the proposed Curtis Island, LNG projects.

The QGP pipeline is currently operating at close to full capacity between Wallumbilla and Gladstone but may be capable of expansion in order to transport up to 520 TJ/day (180 PJ/Year) of gas supply from Wallumbilla (Wallumbilla Gas Hub) to the Callide Gas Hub, then connecting to the Fisherman’s Landing LNG Project’s planned 20 km gas pipeline to its LNG plant site at Fisherman’s Landing.

The potential establishment of two gas delivery points (refer to project location map above) at Callide and Wallumbilla/Roma, will provide the Company with two gas delivery points in order to progress and finalize its overall gas supply plans for the initial two LNG trains.

The Company remains confident in its ability to secure gas for the project, due to:

• Continually increasing gas reserves in both Queensland and New South Wales which are not committed to one of the proposed large Curtis Island LNG projects, in the Port of Gladstone;

• Potential supply of ramp-up gas from one or more parties; and

• The financial and technical credibility of HQCEC, and the CNPC group, which will provide potential gas suppliers with increased confidence in project delivery.

Fisherman’s Landing LNG Project

The Fisherman’s Landing LNG Project comprises the development of a 3.0 million tonne per annum LNG project, at Fisherman’s Landing (Berth No.5), in the Port of Gladstone, Queensland. The plant design is based on two LNG trains, each of 1.5 million tonnes per annum LNG production capacity.

During the quarter, the Company received:

– A Petroleum Facility Licence in relation to the operation of the LNG plant;

– Confirmation that the project’s stage 1 dredging and reclamation program is included in Gladstone Ports Corporation Limited’s Western Basin Dredging and Disposal Project, which has received approval under the Environment Protection and Biodiversity Conservation Act (1999). The Company will now proceed to finalise all relevant agreements with the Gladstone Ports Corporation; and

– Environmental approval for a 20 km gas pipeline to connect the LNG plant to the Callide Gas Hub.

Metgasco Limited

The Company is the largest shareholder in MEL with a 4.99% shareholding.

MEL has a 100% interest in PEL 16, 13 and 426 in the Clarence Moreton Basin in NSW, where they operate the largest gas acreage position in the Basin. MEL is exploring for gas in coal seam, conventional and shale reservoirs and in 2010 discovered the Kingfisher gas field, the largest conventional discovery in NSW in over a century of exploration in the State. With gas “in place” resources likely to exceed domestic market requirements, MEL is currently investigating LNG project development options. During the quarter MEL and the Company continued to progress a joint feasibility study on the viability of gas production, transportation, liquefaction and sale of LNG, both in NSW and Queensland, including potential supply of gas to the Company’s Fisherman’s Landing LNG Project. It is the Company’s intention to conclude that study in July 2011.

MEL has commenced drilling three coal seam gas multi-lateral pilot production wells (Harrier P01, Harrier P02 and Harrier P03) and one single in-seam lateral well (Corella P18) at Eden Creek.

All of the wells are located near Corella P11, where Metgasco has had its lead pilot production well on continuous gas production for approximately 2 years.

The multi-lateral Harrier wells are being drilled into the Richmond coal seam reservoir in the Walloon Coal Measures and have been designed to achieve increased in-seam exposure to the resource and thereby result in gas production rates above those currently being achieved from Corella P11.

Corella P18 continues to be dewatered. Gas desorption commenced immediately with gas flows to surface and the well head pressure currently above 100 psi.

On the corporate front, Mr Peter Henderson has joined MEL as Managing Director and Chief Executive Officer. He has replaced the Company’s founding Managing Director Mr David Johnson. Mr Henderson brings more than 30 years oil and gas industry experience to MEL and his stated focus is to concentrate on the commercialisation of the substantial resources and reserves that are owned 100% by MEL.

Metgasco Limited “Certified Gas Reserves”

Oil Basins Limited

The Company holds a 7.51% shareholding in OBL, being the largest single shareholder. OBL recently completed a placement of shares that raised $840,000 to “Sophisticated Investors” and “Professional Investors”. The Company participated in the placement to maintain its shareholding level at 7.51%. The placement proceeds are, amongst other things, to assist OBL fund the ongoing Backreef-1 well technical assessment work and pursue other value creating project opportunities.

OBL is involved in the exploration for oil and gas in the offshore Gippsland Basin of south-eastern Australia, the onshore Canning Basin of Western Australia and more recently the offshore waters of the Carnarvon Basin. All areas of interest are situated in proven hydrocarbon regions of Australia and nearby to established infrastructure hubs.

OBL currently has the following assets:

• Operated Assets:

– Oil – 100% R3 (Cyrano Oil Field) and 100% Rights Backreef Area (Shallow Backreef-1 Oil Show).

– CSG – 50% 5/07-8EP (CSG Operator)

– USG – 100% Rights Backreef Area (Backreef-1 Deepening) and 50% 5/07-8EP.

– LNG – 30% Rights to Future Canning LNG Plant

• Non Operated Assets:

– Oil & NGL – 12.5% Rights Vic/P41 and 17% Vic/P66

On the 1 April 2011, OBL announced a major upgrade of the Cyrano Oil Field contained in R3, from a previous 4.36 MMbbl’s of Stock Tank Oil Initially in Place, to the following estimates based on an independent reservoir evaluation and economic report:

P90 5.42 MMbbl’s           P50 10.13 MMbbl’s           P10 18.9 MMbbl’s

Importantly, this estimate is only based on the Mardie Greensland and Airlie Sandstone and does not include either an extension of the nearby Nasutus Oil Field in R3 or analysis for the Fennel prospect also in R3.

The main focus of OBL is the submission of a Renewal Application for R3 to define the evident Nasutus oil field extension into R3 and evaluation of low cost development options.

OBL continues to progress its current discoveries and has identified a number of other potential oil prospects. Further information can be obtained from OBL’s website.

A Strategic Alliance Agreement was signed with OBL, during the December 2010 quarter, to jointly investigate the development of an LNG project in North Western Australia (Kimberley LNG Project). The Kimberley LNG Project is based on utilising the potential large resources of conventional and unconventional gas contained within the Canning Basin, including gas contained within OBL’s acreage and that of its joint venture partners. The proposed Kimberley LNG Project will benefit from the advanced development work undertaken by the Company for its Fisherman’s Landing LNG Project.

Company’s Other LNG Activities

Based on the completion of the Fisherman’s Landing LNG Project front end engineering and design and procurement of fixed EPC pricing, the Company is actively evaluating other LNG project opportunities both in Australia and overseas. While the Fisherman’s Landing LNG Project is based on 1.5 million tonne per annum LNG trains, the LNG plant design and technology is flexible and can be scaled (increased or decreased) to meet the specific requirements of each LNG project.

LNG Technology Pty Ltd LNG Technology Pty Ltd, owned 100% by the Company, is the LNG technology research and development entity within the group and the owner of the Company’s OSMR® LNG process technology. The OSMR® technology is an enhanced LNG liquefaction process which delivers higher operating efficiency and lower greenhouse gas emissions than traditional LNG processes.

The OSMR® technology has been developed and refined over numerous years and was the foundation of the completed LNG plant front end engineering and design for the Company’s Gladstone LNG Project. During, and subsequent to, the development of the OSMR® technology, it has been the subject of numerous satisfactory peer reviews, including endorsement of its cost, reliability and efficiency. These reviews were required to satisfy the Company as to the validity of the technology and the stated benefits, and prior to the Company commencing an active marketing programme.

The Company continues to further its international patent applications, which cover two engineering design features (being the basis of the Company’s OSMR® technology), entitled:

• “A Method and System for Production of Liquid Natural Gas”.

• “Boil-Off Gas Treatment Process and System”.

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Source: Liquefied Natural Gas Limited, May 2, 2011;