Company Information for Independent Resources Plc

AIM-IRG

www.ir-plc.com

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Company Statement

Independent Resources plc was incorporated in June 2005 in the UK to consolidate and fund a number of promising oil and gas projects.

The company's business model is aimed at the construction of an energy trading platform, backed with energy assets, and geographically centered in Italy. The ultimate objective is to integrate sources of gas, storage, and transportation with consumers of gas operating in the wholesale market. Italy is destined to evolve from a major destination market to also become the primary energy land-bridge between North Africa and Europe. Independent Resources intends to participate as a crucial provider of value-added energy solutions to the evolving transalpine Mediterranean energy nexus.

Presently, Independent Resources’ core development activities include a major underground gas storage facility, a major new source of unconventional gas onshore Italy, and a major source of conventional oil in Tunisia. Although the Tunisian projects are not core to the business plan, they are destined to become important sources of future capital to develop the business.

The directors believe that the potential for integration and leverage amongst storage, exploration & production projects and wholesale clients provides the foundation on which to build a profitable, relatively low-risk, high-value business, either stand-alone or embedded into a much larger integrated enterprise.

The directors believe its assets and strategy lend themselves to select partnerships and acquisitions which would allow the company to cautiously capitalize on its base and grow with confidence. On storage development, the company has already partnered with ERG Power & Gas, who are actively developing with Shell a new LNG regassification terminal which incorporates both supply and transportation of gas.

Independent Resources seeks to secure additional oil and gas resources in the Mediterranean region, consistent with its asset-backed marketing strategy. Developing and monetizing energy assets require patience and a long-term perspective, but can be very rewarding.

Operations and Technology

Rivara underground gas storage facility

Independent Resources plans to construct a large underground storage (UGS) facility by storing natural gas in a deep, naturally fractured reservoir in Italy's Po Valley. The Rivara project has been granted a provisional long-term concession by Italy's Ministry of Economic Development (MSE) which is subject to completion of a satisfactory environmental impact assessment and final approval by MSE. MSE and Italy's gas markets regulator (AEEG) are eager to encourage new gas storage capacity in the country to alleviate the well-documented deficit in this sector of the gas supply chain which is a matter of public interest. The company expects to complete this approval procedure in the near term.

Underground natural gas storage is a common feature of almost all gas delivery systems and has been used for many decades. It is a well-understood process that is environmentally benign and involves a low-impact physical profile.

Rivara's working capacity is estimated at approximately 3.2 billion cubic metres (bcm), which would make it one of the largest gas storage facilities in Italy and in Europe. The company anticipates that it will be developed in a commercial partnership, using long term project finance.

The company currently expects to develop Rivara in stages, with the first stage coming on stream in 2014. The project company, ERG Rivara Storage srl, already includes the 15% equity participation of ERG Power & Gas, the power & gas subsidiary of ERG S.p.A, a leading Italian energy business. Independent Resources has traditionally been open to Joint Ventures as a means to both unlock and add value in the short term.

The key potential benefits of the Rivara storage facility are:

the large capacity of the structure
its unique geological features not only allow for faster injection and withdrawal than conventional gas storage facilities, but for constant peak gas deliverability throughout its annual operational cycle
its potential to go a long way towards closing Italy's current storage deficit and meeting the growing demand for gas storage capacity in Italy
its geographical location, in-market and close to a trunkline intersection on the transcontinental "gas highway" and likely future gas trading "hub"
its strategic value in enabling the company to negotiate equity interests in North African gas fields supplying Italy.

Coal Bed Methane
The proposed Fiume Bruna coal bed methane (CBM) project is located in Tuscany. It was awarded to a subsidiary of Independent Resources by the Italian government in June 2005, subject to an environmental impact assessment procedure and final approval by MSE (Ministry of Economic Development), which was subsequently awarded in August 2008. More recently the company has been awarded a large new block immediately to the south of Fiume Bruna, where the CBM resource is interpreted to extend. The Casoni exploration license remains subject to its environmental impact assessment procedure.

CBM technology is a method of producing commercial volumes of natural gas from coal deposits. CBM extraction is currently less common in Europe than it is in the United States, where CBM accounted for over 7% of all the natural gas produced in 2000 and 10% in 2005. To retrieve the methane which is absorbed within the coal, wells are drilled into the seam, and water usually contained within cracks in the coal seam is pumped out. This creates a pressure differential between the bottom of the wells and the surface, allowing the gas to desorb and flow towards the wells where the methane is extracted, dehydrated, compressed and piped to market.

The Fiume Bruna permit area includes the village of Ribolla, where coal was mined for more than a century. After a peak in production of 270,000 tonnes per year during the Second World War, it declined until 1954 when the mine was abandoned following a major explosion.

The prospective recoverable gas resource from the Fiume Bruna block is estimated at 92 BCF or 2.63 BCM. The Rivara UGS facility could give the gas produced from Fiume Bruna valuable added options including storing it there until winter when gas prices are typically higher.

Independent Resources drilled Italy's first CBM well in 2006-7, acquired an initial seismic survey in 2008, followed by more in 2009, drilled the first of several more appraisal wells during the summer of 2009 and will continue with this programme into 2010. It is the company's intention to demonstrate the commercial feasibility of these wells during 2010.

Enhanced CBM recovery
Independent Resources is initially focusing on conventional CBM recovery at Fiume Bruna, but the company believes that there may be opportunities in the longer-term to apply Enhanced CBM technology to significantly increase recoverable reserves.

Enhanced CBM recovery involves the injection of CO2 into a coal bed, resulting in the liberation of additional methane which would otherwise remain trapped in the formation.

CO2 sequestration
There are many ways in which CO2 emissions can be reduced, such as improving the efficiency of power plants or by switching from coal to natural gas. These steps alone, however, will not achieve the required reductions in CO2 emissions. It is increasingly recognised internationally that the capture and long-term storage (or "sequestration") of CO2 in suitable geological formations could play an important part in solving this problem. Geological sequestration is able to remove huge volumes of CO2 from the biosphere, while many renewable energy projects reduce emissions by only small amounts.

Independent Resources' technical director Roberto Bencini is a recognized world expert on CO2 sequestration, and the company believes that the geology of Fiume Bruna offers significant commercial potential in the medium and longer term for both enhanced CBM recovery and CO2sequestration. CO2 injected into the coal seams would remain attached to the coal after it has helped flush out the methane. Significant volumes of CO2 are emitted from a nearby geothermal power station, and the productive use of this CO2 would enable the company to generate additional revenues from emission credit trading activities.

Tunisian oil and gas acreage
Following a recent farm-out, Independent Resources now holds a 18.97 per cent interest in the Ksar Hadada exploration permit covering an area of 5,608 square kilometres onshore south-east Tunisia. The permit was renewed in April 2008 for a further term of three years. The primary targets on the Ksar Hadada block are Cambro-Ordovician quartzites and the Silurian Acacus Sandstone. Several large oil-prone prospects have been mapped; these are sourced by the Silurian Tanezzuft Shale, which is the main source rock for North Africa and the Middle East. Recent light oil discoveries in the Cambro-Ordovician immediately to the south of the block in the adjacent Remada Sud permit have now validated the potential of the Ksar Hadada prospects. Across the border in Libya very high oil production rates have been achieved on test from multiple Acacus wells, providing added attraction to the Acacus play on Ksar Hadada. In addition, significant shale oil prospectivity remains to be mapped and tested.

As a result of the extensive remapping work undertaken by Independent and Petroceltic International plc over the last few years, existing prospects have been better defined and recently several significant prospects have been identified in the Ksar Hadada permit area - Sidi Toui, Oryx and South Salah in the Cambro-Ordovician quartzites. The Gazelle prospect, in the Silurian Acacus sandstone, has recently commanded additional attention. The Sidi Toui structure is formed by a large three-way dip closed fault block and a subsidiary block, with top seal provided by the overlying Ordovician Jeffara and Silurian Tanezzuft shale. It was originally explored in the 1950s with the limited technology available at that time. Two exploration wells were drilled - the first encountered oil, and the second was dry. Subsequent seismic data showed both wells were poorly located - the first clipped the flank of the structure the second missed it altogether.

In 2004, the current permit operator, Petroceltic, drilled a third well into the Sidi Toui structure, but the rig had to be released to another operator before the well could be fully tested. Subsequent analysis of the well results indicates the presence of a live hydrocarbon column.

Pmean Gross Prospective Recoverable Resource Estimates (MMbbls), prior to execution of the 2010 Drilling Programme, for Sidi Toui (main target, plus subsidiary blocks) are currently estimated to be 161 million barrels of oil. Oil from nearby discovery wells is sweet and light at 42° API.

Oryx, which is structurally similar to Sidi Toui, is estimated to have a potential Pmean Gross Recoverable Resource of 47 million barrels.

South Salah is estimated to contain a Pmean Gross Prospective Recoverable Resource of 8 million barrels of oil within the permit area.

The current main Acacus prospect, named Gazelle, is estimated to hold Pmean Gross Prospective Recoverable resources of 31 million barrels oil. In addition to these prospects a further Cambro-Ordovician lead has been identified to the north-west of the Sidi Toui structure and named Kasbah Leguine.

Lastly, given its depth under large areas on the block, the Silurian hot shale is an obvious exploration target for shale-oil, but its extent and potential remains speculative at this stage.

ETAP has approved the farm out of a 51% interest in the exploration permit to Petroasian Energy (Tunisia) Limited, resulting in a carry of up to US$14.5m in favour of the Joint Venture for a defined seismic, drilling, and testing work programme currently underway. 103km of new seismic data have been acquired and processed and two wells are on schedule to be drilled during June and July 2010. A Joint Venture office has been established in Tunis to support and manage this programme.

Any confirmed discovery on the block would be followed-up by a revised Competent Person report, the objective of which would be to provide updated insights into potential recoverable reserves of hydrocarbons from the permit.

The Italian natural gas market
Italy has the third-largest gas market in Europe, with consumption of 85 billion cubic metres (bcm) in 2007, of which almost a third was used to generate electricity. Although the recent economic slowdown has negatively impacted both volumes and spot pricing, the market is expected to resume growing and this poses special and growing structural challenges to ensure Italy's security of supply and market development.

The International Energy Agency (IEA) has estimated that by 2015 gas demand in Italy could reach 100 bcm, with about 40 bcm being consumed in the power sector and 90 per cent of all new generating capacity being gas-fired. Italy's MSE has a growth scenario approaching 108 bcm in 2015. At the same time, Italian domestic gas production continues to decline and imports are expected to account for more than 90 per cent of consumption by 2015.

Gas consumption is mainly concentrated in the northern half of the country, with two thirds being consumed in the winter months. Italy's gas storage infrastructure, while extensive, has come under increasing strain as a result of this seasonality, demand growth and dependence on imports, and the country experienced its first major "gas blackout" during a spell of severe cold weather in March 2006.

In addition, despite some efforts to change this, Italy’s gas market remains structurally fairly primitive, with a relatively small, non-diversified and static spot market. Ample commercial storage has a tendency to foster vibrant and transparent gas markets involving many participants and this is one aspect for which the gas regulator is providing incentives to change.

Independent Resources' Rivara project is the country's largest potential new storage project, and could play a key strategic and commercial role in solving Italy's gas deliverability constraints, security of supply, and market development.

Commercial opportunities from gas storage
Gas storage to meet additional demand during cold weather generally takes two forms: seasonal storage enables delivery of a large volume of gas over an extended period of time to ensure supply/demand matching throughout the winter; while peak-shaving storage makes it possible to deliver extra gas over a short period of time to cover needle peaks.

Storage can also provide a cost-effective alternative to further investment in gas transportation facilities. Installing peak-shaving storage capacity at the extremities of the existing pipeline system reduces the need for additional or larger pipelines.

Research indicates that the introduction of supply competition along with unbundling of pipeline transport in the US, the UK and other countries has led to the development of a significant commercial role for gas storage. Storage facilities are being increasingly used to generate revenue from location- and time-based arbitrage, for example. Storage users take advantage of swings in spot prices by selling gas at high prices and buying at low prices.

These transactions benefit market participants and consumers through greater availability and more efficient pricing of natural gas. A similar unbundling of gas-related activities is now under way in Italy following the enactment of the Letta Decree in 2000.

Independent Resources believes that the Rivara underground gas storage facility will open up a range of valuable commercial opportunities including gas balancing, gas trading and mitigating long-term take-or-pay constraints, as well as enhancing the country's security of gas supplies.

With a potential capacity of 3.2 bcm, Rivara could become one of Italy's largest and highest-performing gas storage facilities that would complement the country's current and projected future storage supply. It will be capable of storing both the company's own production and that of other gas producers and suppliers.

As well as being a major strategic asset in its own right, Rivara could also provide important leverage for the acquisition of additional value-adding E&P assets in the Mediterranean region as it provides a vital key to the high-value Italian gas market for producers outside Italy.

Geographical Spread

Western Europe/ Mediterranean region

Board of Directors and Key Management

Grayson Nash	Executive Chairman
Roberto Bencini	Technical Director
Tim James	Financial Director
Alan Thomas	Non-executive Director

Company Address

Tower Bridge House, St Katherine's Way
London, United Kingdom E1W 1DD


Telephone:	+44 (020) 8557 1135
Facsimile:	+39 (06) 4549 0721
Email:	mailbox[at]ir-plc.com
Website:	http://www.ir-plc.com

Nominated Brokers

Seymour Pierce Ltd
20 Old Bailey
London EC4M 7EN

Nominated Advisors